Welfare State Crash

According to recent reports, the US Social Security system will start paying out more in benefits than it receives in taxes next year. The US is hardly alone in having stresses on its old-age pension programmes. This raises the larger question, can society afford to pay people not to work?

It is ironic to ask this question at a time millions are being thrown out of work, and there doesn't seem to be enough to do. Of course, there always is plenty to do - it's just that it is uncertain what are profitable undertakings, and what are not.

The basic premise of the Welfare State is that those who are lucky enough to stumble upon something profitable to occupy their time should 'share' a portion of their wages (or winnings) with the portion of the populace who are not so lucky. This 'sharing' is enforced through taxation and the coercive power of the State.

During the growthy era from World War II to the end of the last century, there were plenty of profitable occupations in the Industrialised Nations and the dependent class was a minority. In recent years the dependent class has been growing much faster than the productive one. How many non-productives can society support? And at what level?

In a saner world, these questions would be coming to the front of public debate. But as that is not the case, we expect an overburdening of the productive sector and an accelerating economic decline. The end state is likely to involve the OECD nations little better off than the more advanced of the developing nations. In that case, there will be essentially no public resources for the disadvantaged and unmotivated to draw upon. Expect to see shocking poverty once again where it was supposed to have been eradicated.

End of the Workers' Paradise

During the 20th Century, the world stage was dominated by a contest between two great economic and political ideologies. One the hand was Communism, state ownership of large-scale capital, and central planning, on the other was Liberal Democracy. In the non-Communist developed nations, some concessions towards central planning and income redistribution were made. The legacy of these concessions include the Income Tax, Minimum Wage, and the Welfare State.

As everyone knows, Communism failed and Liberal Democracy in its modified form survived. Unfortunately, in its efforts to win the people over, Liberal Democracy encouraged the notion that economic security was an entitlement. People imagined that making lots of money was as simple as following a formula: getting a college degree and a career-for-life would fall in their laps; buying a house and watching its value ascend skyward; or investing in the stock market and get reliable dividends and capital gains.

We opine this desire for stable and predictable economic returns is a vestige of agricultural civilisation. Note that the most important and durable Communist Powers, Russia and China, were still agricultural when they went Red. Industrial civilisation works on a less steady basis. If humanity is to embrace the full benefit of industrialisation, it must acknowledge that it not an especially stable system.

The current Depression is partly a result of attempting to force the industrial system to do something it cannot: supply steady, generous paychecks to the entire population. The Depression will be prolonged by governmental efforts to sustain the unstainable with bailouts, and expansions of both the public payroll and the dole. In a bizarre effort to "save capitalism," a grotesque is being created. This state will not last long, and eventually be seen as a tragic waste of resources.