Monday, April 18, 2005

Social Security Reform is more than a political debate

Avoid the chattering classes and go for the classics

There is alot of debate today in the USA about reform of our national government pension regime called Social Security. In the usual way, it is a dialogue between our two main duopolist political parties, an argument over details and not ideas. Like the great Los Angeles musical group X sang during the cold war, "Both sides are right, but both sides murder". The discussion around reform of Social Security is not about murder, but it is about two sides stuck in a dogmatic stalemate.

I am commenting on this current debate as it is about the largest non-military government program created in the history of mankind. In order to help frame my own thinking on the matter I am going back to some of the great thinkers.

F.A. Hayek might say that institutions exist for a reason, whereas Frederick Engels said that the state was created to keep the powerful powerful and the common man and woman common. John Kenneth Galbraith might say that the wealthiest country should spend more of its private money on public goods, whereas Adam Smith said that this private wealth increases the common good. Alexis DeTocqueville put a fine American point on Smith's theory and observed of the uniquely American cooperative relations between government, business and the non-profit sectors, and amongst people themselves at a local level for mutual aid.

So why is the current debate around how to tweak the existing system to ensure its longevity? Why arent we evaluating whether government-supplied pensions should exist in the first place? Do they exist because of some Kantian or Hayekian 'what is should be' reasoning?

Lets look at political economy once again:

Karl Marx wanted to see the means of production owned by all, not by the few select powerful. To achieve this he proposed the nationalization of a country's businesses (communism) then the turning of these assets over to the people (socialism) so that all would share in a country's wealth. In true capitalism (not state capitalism), the means of production are manifested in the shares of stock of the corporations which make up the economy. Currently more than 50% of Americans own shares of stock, so it could be said that more than 50% of the economy is already socialist with the ownership of the means of production in the hands of the people, and all of this without Social Security privatization.

It would seem that the way to fulfill Marx's vision would be to take the government Social Security funds and allow more people to own stock. If stock ownership has increased over the past few generations from a minority to a majority of individuals, will this not continue to include a further number of individuals? Or is mandatory wealth redistribution by the state required to achieve this?

Charles Darwin wrote of the survival of the fittest. If one is addicted to government programs one does not survive on his or her own, but is then dependent on others. The self-reliance of the family unit and of caring friends neighborhoods 'dies out' and is replaced by goverment pensions. I propose that this is not healthy, that our debate should not be about reform around the margins, but should now be moved towards how to do we ween the rational expectations of Americans away from dependence on the state. To be fair to Engels, in addition to the state being a means for supression, he said the same about the family and property rights. However, I love my partner and my family, which is a voluntary exchange, unlike, oftentimes if not mostly, the state. (See the Fifth Estate anarchy collective posting here on Workers of the World Relax for a discussion of the property rights issue).

Utilitarianism is a philosophy which prescribes a society where the greatest number receives the greatest good, and deontology where no harm is done to others. Government taxation harms those who have their earnings taken from them, whereas a state-mandated US Dollar-based system enforces participation of those who do not wish to participate in a cash economy, living alternative lifestyles or through barter. The answer is not partial privatization or re-upping the public funding of a philosophically and (arguably) monetarily bankrupt government program. The answer is a gradual weening - defunding - of the program altogether.

An important footnote to the above reasoning is that not all economic entities are available for public ownership. There are family-owned businesses and those that are closely-held and not publically traded. On the one hand it could be argued that these are already owned by the people, however, if the state has granted these businesses monopoly rights or special privileges then Engles fear of a state-enforced power structure is fulfilled. Therefore, it is best to get government out of economic activity. If so then these closely-held economic entities will grow to the point where public financing and therefore public ownership is needed, or, they will 'die out' if not providing a service . The alternative is nationalization, which results in, as is shown by Adam Smith's reasoning, a decline in wealth for everyone. Joseph Schumpeter wrote of creative destruction and natural economic evolution. It is best to be patient and let natural communism - public ownership - run its course without the politically-entrenched ruling classes benefiting in the short-term over the common good in the long-term. Now is a good time to re-evaluate the American project.