Social Security: Non-Government Solution

Discussion in 'Economy' started by PoliticalChic, Nov 22, 2011.

  1. PoliticalChic

    PoliticalChic Diamond Member

    Oct 6, 2008
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    Brooklyn, NY
    Imagine old age without the state.

    1. Social security systems are heading towards bankruptcy due to rising longevities, low fertility, and declining labour force participation rates. Compulsory PAYGO schemes tend to discourage work (Making Kids Worthless: Social Security's Contribution to the Fertility Crisis - Oskari Juurikkala - Mises Daily) in older ages and penalize larger families. Thus they contribute to their own bankruptcy.

    2. One solution is to get the state out of old-age security. The trouble is that many people cannot imagine old-age security without the state. There will be … much greater abundance, when people are left free to pursue their own ends and satisfy their needs through individual responsibility, joint effort in local communities, and mutually beneficial exchanges in the marketplace.

    3. …because old-age security is a challenging long-term issue, it should not be entrusted to politicians who are more concerned about satisfying the short-term needs of this or that special interest group….Most people would rely on a combination of sources: family, markets, mutual aid, charity, and work.

    4. Family support Before the establishment of the modern welfare state, extended families functioned as a source of informal social insurance. Security in old age was provided on the basis of reciprocal generosity: parents procreated children, supported them and educated them. In return, children supported their elderly parents with money, housing, and care.

    a. In many ways public programs are actually less efficient than the family. They give rise to a range of free-riding and moral-hazard behaviours such as over-early retirement, faked disability, and having too few or no children.

    5. Financial markets Not everyone can have a family, or indeed wishes to have one. These individuals can provide for themselves through the market. Modern financial markets provide a range of pension and savings plans. Even those who invested in a large family would probably save through the market as well.

    a. Many people do not know how to invest, so they can be exploited by rogue dealers. Another criticism is that markets cannot be trusted as funds may go bankrupt. A third kind of worry is that people are too foolish to save enough for retirement. Another major problem here is that we don't actually have free financial markets. (What Has Government Done to Our Money? by Murray N. Rothbard)

    b. …people would also develop investment skills. Presently, the public education system is leaving people so financially illiterate…People could also bundle together and form non-profit investment clubs, which would help them to choose good products and follow the markets.

    c. There is the worry is that people tend to save too little. Compulsory savings are politically more popular than a genuine free market, but not necessarily a good idea. Many doubt the funds will be there when they retire. [In an episode of "Married With Children," Jefferson Darcy tells Al Bundy that he can get fast cash by suing a mall for his stress-related injury. "Malls set aside millions for this type of thing," says Darcy. "If we don't get it, it'll go to Social Security and then no one will get it!" ]The Free Market: Social Security Reform: True and False

    d. Indeed, it is often claimed by academics that, in countries without extensive government social security, people do not have enough retirement income. But the calculations on what is enough are inaccurate because they exclude factors one cannot measure — for example, the support that a mother of large family receives from her children is not captured in any statistics. But that is the most natural and common type of old-age security.

    6. Mutual aid and charities In addition to families and markets, there is a mid-way solution, called mutual aid or fraternal societies (From Mutual Aid to Welfare State: How Fraternal Societies Fought Poverty and Taught Character). Before the advent of governmental welfare programs, mutual aid societies provided practically every kind of welfare service imaginable, including orphanages, hospitals, job exchanges, homes for the elderly, and scholarship programs. They also supplied health insurance at much lower rates than the present-day formal schemes…. they could combine their informality with the benefits of sophisticated financial markets so as to pool their risks better. They could also operate private investment clubs.

    a. Charities would target the needs of the poorest members of the society, those who have no one else to look after them. Charity could also help those whose alternative support is inadequate….charities are more dynamic and adaptable than government welfare agencies.

    b. Charities are also better operated than public welfare programs. They achieve more with fewer resources, and they treat their clients with more humanity and dignity. They are also more concerned about the overall well-being of those in need. Unlike government welfare, private charities and mutual aid societies do not penalize effort and thrift, but encourage initiative and responsibility. Many also help their clients to find work, learn useful skills, and acquire personal virtues. The great advantage of charities is that they are commonly run by people who believe in something greater than the state.

    7. Work Last but not least, people can work in old age. This is not to say they must do so, but they should be free to continue working without being penalized by the disincentives embedded in the social security system.(Jonathan Gruber and David A. Wise (editors), Social Security and Retirement Around the World) In the absence of governmental old-age security, most people would probably work longer, either full time or part time. This would be economically more sound than early once-and-for-all retirement….full retirement causes physical and mental health deterioration. (The Effects of Retirement on Physical and Mental Health Outcomes)
    MercatorNet: Imagine old age without the state

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