We Must Share The Risk But How - Road to the Middle Class

IT’S ALL THE fault of Big Business, writes Malcolm Gladwell in The New Yorker. After World War II Richard Gosser, head of a United Auto Workers Local, proposed a central fund for collecting and paying workers’ pensions, paid for by ten cents an hour from their wages.

But the employers would have none of it. They came up with the company-run defined-benefit pension plan. No way they were going to yield up control of pensions to the unions.

Management guru Peter Drucker, writes Gladwell, saw through this at once. In a 1950 article in Harper’s he exposed the company pension plan idea as a mirage.

Drucker simply couldn’t see how the pension plans on the table at companies like G.M. could ever work. “For such a plan to give real security, the financial strength of the company and its economic success must be reasonably secure for the next forty years,”

And he was right. Of course, the union pension plan hasn’t been much better. But we don’t mention such things at The New Yorker.

It’s all about the “dependency ratio,” writes Gladwell, the ratio of workers to dependents. In a young company like GM in 1950, or a young country like Ireland in the 1990s, there are lots of workers to support dependents like children and old people. So the company, or the economy, booms. But when the baby boom starts to retire, then the dependency ratio turns south. And the company walks away from its promises.

What is needed (and you knew this was coming) is that

if you pooled the obligations of every employer in the country, no company would go bankrupt just because it happened to employ older people, or it happened to have been around for a while.

Good point. But the question is: How? You can see the spirit of “universal government program” hovering above these words. But come on, that’s not going to work. We already know it is not going to work. The federal government has promised trillions in defined-benefit Social Security and Medicare that it cannot pay back.

What is needed is the system that the workers set up for themselves in the nineteenth century before progressives came along and took it away. We need a safety net of mediating structures between individual and the megastructures of Big Business, Big Unions, and Big Government. There are names for such structures: family, church, fraternal association.

In these face-to-face social organizations people really are bonded in a community of common interest that does not obtain with the three Bigs. Big Business executives do not share a common lifetime interest with their employees. Nor do Big Union leaders share a lifetime common interest with their members. And Big Government politicians only care about your vote.

So if you pool the obligations of people with genuine common interest: family members, church members, fraternal association members, then you wouldn’t have to worry about them going bankrupt and skipping town. Parents naturally want to invest in the future of their children. Church members naturally want to help the church member that has encountered misfortune. And fraternal associations were set up precisely to share the risks of the modern economy among solid, trustworthy brothers and sisters at the lodge.

But liberals came along and ripped up this system. They taught the American people instead to trust their compassion and their sensitivity.

The trouble is that liberals really did not have a fellow feeling with the workers. They wanted the votes of the workers so they could obtain political power. And they wanted the workers to be dependent on them. Why else would liberals be resisting the reform of Social Security?

The question on pension and health care defaults is not whether to socialize the risks of life. The question is: How? We’ve tried it with Big Government, Big Business, and Big Labor.

Or we could return to a method that really works.

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Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.

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Action

The incentive that impels a man to act is always some uneasiness... But to make a man act [he must have] the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness.
Ludwig von Mises, Human Action

Chappies

“But I saw a man yesterday who knows a fellow who had it from a chappie that said that Urquhart had been dipping himself a bit recklessly off the deep end.” —Freddy Arbuthnot
Dorothy L. Sayers, Strong Poison

China and Christianity

At first, we thought [the power of the West] was because you had more powerful guns than we had. Then we thought it was because you had the best political system. Next we focused on your economic system. But in the past twenty years, we have realized that the heart of your culture is your religion: Christianity.
David Aikman, Jesus in Beijing

Churches

[In the] higher Christian churches… they saunter through the liturgy like Mohawks along a string of scaffolding who have long since forgotten their danger. If God were to blast such a service to bits, the congregation would be, I believe, genuinely shocked. But in the low churches you expect it every minute.
Annie Dillard, Holy the Firm

Civil Society

“Civil Society”—a complex welter of intermediate institutions, including businesses, voluntary associations, educational institutions, clubs, unions, media, charities, and churches—builds, in turn, on the family, the primary instrument by which people are socialized into their culture and given the skills that allow them to live in broader society and through which the values and knowledge of that society are transmitted across the generations.
Francis Fukuyama, Trust

Class War

In England there were always two sharply opposed middle classes, the academic middle class and the commercial middle class. In the nineteenth century, the academic middle class won the battle for power and status... Then came the triumph of Margaret Thatcher... The academics lost their power and prestige and... have been gloomy ever since.
Freeman Dyson, “The Scientist as Rebel”

Conservatism

Conservatism is the philosophy of society. Its ethic is fraternity and its characteristic is authority — the non-coercive social persuasion which operates in a family or a community. It says ‘we should...’.
Danny Kruger, On Fraternity

Conservatism's Holy Grail

What distinguishes true Conservatism from the rest, and from the Blair project, is the belief in more personal freedom and more market freedom, along with less state intervention... The true Third Way is the Holy Grail of Tory politics today - compassion and community without compulsion.
Minette Marrin, The Daily Telegraph

Conversion

“When we received Christ,” Phil added, “all of a sudden we now had a rule book to go by, and when we had problems the preacher was right there to give us the answers.”
James M. Ault, Jr., Spirit and Flesh

Democratic Capitalism

I mean three systems in one: a predominantly market economy; a polity respectful of the rights of the individual to life, liberty, and the pursuit of happiness; and a system of cultural institutions moved by ideals of liberty and justice for all. In short, three dynamic and converging systems functioning as one: a democratic polity, an economy based on markets and incentives, and a moral-cultural system which is plural and, in the largest sense, liberal.
Michael Novak, The Spirit of Democratic Capitalism

Drang nach Osten

There was nothing new about the Frankish drive to the east... [let] us recall that the continuance of their rule depended upon regular, successful, predatory warfare.
Richard Fletcher, The Barbarian Conversion

Education

“We have met with families in which for weeks together, not an article of sustenance but potatoes had been used; yet for every child the hard-earned sum was provided to send them to school.”
E. G. West, Education and the State

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