|What Gas-Guzzling Dinosaur?||The Travails of Labor and Education|
by Christopher Chantrill
August 27, 2006 at 11:53 am
BACK IN THE late 1940s, The New Yorker wants us to know, Richard Gosser, president of a United Auto Workers local in Toledo, Ohio, wanted to set up a union pension plan for the workers. Ten cents an hour was all it would cost to give the workers a decent retirement, writes Malcolm Gladwell in (http://www.newyorker.com/fact/content/articles/060828fa_fact) The Risk Pool.
The auto companies would have none of it. Instead they offered their own defined-benefit plans, each funded by the company.
Management guru Peter Drucker saw through the whole scheme immediately. In a 1950 article in Harpers he exposed the company pension plan idea as a mirage.
Drucker simply couldnt 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 hasnt been much better. But we dont mention such things at The New Yorker.
The lesson to take from the defined-benefit-plan debacle, according to Gladwell, is the importance of the dependency ratio, the ratio of workers to non-workers. A healthy pension plan depends on a favorable ration of workers to beneficiaries.
It is the job of wise policy experts, he implies, to devise how to spread the risks across society to solve the imbalances caused by the overweening pride of corporate management in the late 1940s and the inevitable swings of the dependency ratio.
Just a minute! Before we sign up for another generation of expert-driven national pension policy, let us step back a moment. Let us look at the whole picture, not the tendentious detail that Malcolm Gladwell wants us to see.
In 1950 the three bigs, Big Business, Big Labor, and Big Government were all offering the American people defined-benefit Ponzi schemes, whether corporate pensions, union pensions, or Social Security.
But all these top-down plans for social welfare have now failed, and failed because of the dependency ratio. Social Security started with a dependency ration of 22-to-1. Now its three-to-one, and soon it will be two-to-one. The unfunded liability amounts to trillions of dollars.
Nobody wants to deny New Yorker readers a breathless tale of proud Big Businessmen and the mysterious dependency ratio. They pay their money and they deserve a rattling good yarn.
You might not realize it from reading The New Yorker, but there is another way. But first, let us take a look at the dependency ratio. Malcolm Gladwell presents it as a fixed, immutable law of society. But of course it isnt.
The dependency ratio is not really fixed. It is only fixed because liberals jammed it. Let us look at how liberals jammed up the works: first of all, children.
Back in the bad old days we had this institution called child labor. Poor parents sent their children out to work. The artisan class sent their children to school to get a basic education for three or four years in literacy and numeracy. Then, at twelve or thirteen, they went out to work as apprentices. The middle class, of course, sent their children to school much longer. They could afford it.
Today, the average western nation keeps its children in government schools by law. Everyone agrees that education is a Very Good Thing for everyone, and child labor a Very Bad Thing. It must be true. One thing is for sure: universal compulsory primary and secondary education certainly messes up the dependency ratio.
In real life, of course, young people start work at different ages, for a host of different reasons.
The other thing that fixes the dependency ratio is the idea of a fixed retirement age. Bureaucrats, whether corporate, labor, or governmental, like one-size-fits-all programs. It makes life so much easier. Big Business wants to shift the bed-blockers out of the way with fixed retirement ages. Big Labor wants to reward their members with 30-years-and-out of their dead-end jobs. And Big Government wants to buy votes with taxpayers money.
In real life, of course, older people retire from work at different ages, for a host of different reasons.
The dependency ratio is meaningful only when you treat people like bumps on a log, as corporate headcount, as union rank-and-file, or as government beneficiaries.
A truly compassionate and sensitive political elite would have used its power back in 1950 to help ordinary people to provide for themselves without a helpless dependence on Big Anything.
Because in real life, its dependency ratio be damned. You retire when you can afford to.
Of course, some-people-through-no-fault-of-their-own-cannot- provide-for-themselves. But that is no excuse for the rest of us.
Buy his Road to the Middle Class.
When we began first to preach these things, the people appeared as awakened from the sleep of agesthey seemed to see for the first time that they were responsible beings, and that a refusal to use the means appointed was a damning sin.
Finke, Stark, The Churching of America, 1776-1990
In 1911... at least nine million of the 12 million covered by national insurance were already members of voluntary sick pay schemes. A similar proportion were also eligible for medical care.
Green, Reinventing Civil Society
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
Law being too tenuous to rely upon in [Ulster and the Scottish borderlands], people developed patterns of settling differences by personal fighting and family feuds.
Thomas Sowell, Conquests and Cultures
The primary thing to keep in mind about German and Russian thought since
1800 is that it takes for granted that the Cartesian, Lockean or Humean scientific and
philosophical conception of man and nature... has been shown by indisputable evidence to be
F.S.C. Northrop, The Meeting of East and West
Inquiry does not start unless there is a problem... It is the problem and its
characteristics revealed by analysis which guides one first to the relevant facts and then,
once the relevant facts are known, to the relevant hypotheses.
F.S.C. Northrop, The Logic of the Sciences and the Humanities
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.
Dorothy L. Sayers, Strong Poison
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
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
[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
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
The recognition and integration of extralegal property rights [in the Homestead Act] was a key element in the United States becoming the most important market economy and producer of capital in the world.
Hernando de Soto, The Mystery of Capital