Monday, November 20, 2006

The German-American Economic Collapse

This post will also be submitted to the Carnival of German-American Relations, which I will link to when it comes out. We will have guests.


I have been teaching adult Sunday School off-and-on for 25 years now, first as a Lutheran, then as a Covenanter (for my German guests, that is an evangelical offshoot of the Swedish Lutherans). I learned early that if people are given the textbooks for free, attendance drops off and few people do the homework. If people are required to pay for the materials, they value them more. This went against my principles at first. Is the Gospel not free? Do the just not live by faith and not works? But there it is. What people are given free, they treat as valueless. Unless someone tries to take it, of course. Then they are outraged.

This is not a failing of the poor, or of minorities, or of modern, selfish westerners. This is human nature. Anyone who has brought up children has seen this in action. What children earn, they value, and are happier for it. I am not advocating that four-year-olds be sent out to earn their keep, of course. But children given too much are often ungrateful. Every toy you try and remove brings forth wails. Then the toy sits unused for another six months.

This carries through to adulthood: the more people are given, the less grateful they are. Every one of us receives something unearned, yet feels cheated if it is taken. People treat us well because of a relative of ours whose friendship they wish to keep, even if they don’t like us. In the US, there are types of income one can deduct from taxable income: deductions for charity, or mortgage payments, or education. We did not earn these, but resent anyone trying to take them away, even for a tax structure that might benefit us. They are ours. We deserve them, we think.

I work primarily with people who have government pensions and health insurance. Most of them would not be able to hold a job, no matter how hard they tried. In that sense they deserve the money they are given, in that they are not falsely claiming to be unable to work, but have legitimate disabilities.

In 30 years, I cannot recall anyone who is still grateful for the money after two years of receiving it. They regard it as something society owes them. People who get brief help from their towns often escape this deterioration, and remain grateful for years after. I doubt if they are much different from me in original moral character. I would likely do exactly the same thing. Short term: grateful. Long term: ungrateful

Implications for economic policy

There were riots recently in Hungary, after the government revealed that it had told people the lies they wanted to hear in order to get elected. Half of the protestors were angry because they wanted their candidates to win and change the economy to something that would not soon go bankrupt. The other half was worried that their government checks would be taken. They wanted to go back to the lies.

Americans and Europeans claim to have different models for dealing with poverty, but this is not strictly true. They both have part-capitalist, part-socialist methods. Europeans believe the American method is harsh, leaving too many adrift. Americans believe the European model is unsustainable, and will lead to economic collapse and social upheaval in the long run. Required caveat: this is a great overgeneralization. Many Americans would like to move at least somewhat in the direction of the European model, many Europeans would like to move somewhat in the American direction. But it is the same model. It is a continuum; we occupy mildly different places on it.

Readers familiar with the American-European debates on the subject know the stereotypes. They are tiresome. Some Americans take smug comfort in hearing of European difficulties with unemployment, or medical care, or pension obligations. This strikes me as congratulating ourselves that the sharks will eat you by 2020, but not us until 2030. It seems rather pointless.

The reality is that for both American and European economies, the current obligations, extended forward, cannot be paid for with what we believe we will have then. There will not be enough workers, and the obligations will get more expensive. We all know that, and there are some relatively simple and painless solutions. Yet we cannot do them. We find ourselves frozen and unable to act in our own long-term best interest. This is as true of cutthroat capitalist Americans as it is of squishy socialist Europeans. We find ourselves unable to act.

American conservatives, I believe, think that the collapse of the European economies will be the wake-up call for America, which will then make changes and avoid destruction. I think that is an illusion. We will deny what is happening right in front of us, as usual. To balance our Social Security obligations, the US needs to add one year to the retirement age every three years. If we added one year every sixth year, we might make it. If we added one year to the retirement age every nine years, we would at least postpone the collapse a long time. But we cannot do any of it. We are politically unable to add even a single year to the retirement age. As in the introduction, people feel they have earned a retirement age of 65. It is not earned, it is a gift.

As in Beckett’s “Waiting For Godot” Shall we go? Yes, let’s go. They do not move.

How Shall We Then Live?

I am not much interested in discussing here what would be best for us to do. There are a number of plausible scenarios offered in the international discussion. Funding research in hopes of a cheap energy solution; open borders/closed borders; free trade/fair trade/protective trade; negative income tax; hoping economic growth outpaces obligations; Hong-Kong model, Danish model, New Zealand model. Others with more knowledge of economics will make their arguments to us, more persuasive, or less.

I am interested in the question of why we cannot do what we must. Some possibilities:
1. We care what struggles happen to ourselves and to our children. We care somewhat less what struggles happen to our grandchildren. We don’t care much after that at all, whatever we say.
2. We want the world to look a certain way, and to keep the illusion that it will continue. (For example, environmentalists who think return to an earlier state is a good thing)
3. We expect that some technical marvels will rescue us before the problems happen
4. We believe that some group of rich or powerful people has everyone else’s stuff, and that eventually it will be taken from them.


Anonymous said...

Very articulate and thoughtful. I have thought for a long time that the writ for any government should not extend beyond providing security at home and abroad. Now it dabbles in all sorts of things.

Every administration adds to the list of government giveaways. One of the few truths of such activities is that they are called by their real name, 'Entitlements.' As you said, once given they are woven so tightly into the weave of the recipient that they are impossible to extract.

Such spending corrupts the entire society, especially the family and religious associations.

As far as I know no civilization has solved this problem. Once a certain tipping point is reached and a certain number of citizens receive government largesse, decline ensues. Such a decline was recognized by Aristotle, for one.

We reached our tipping point not with FDR but with the institution of the income tax.

Incidentally, all of this was done with those things that pave the road to Hell.

Anonymous said...

Excellent, of course. This, along with the previous post on "not going to rehab," provide food for consideration of our bent thought patterns, the human race's mind virus problem as per Robert Godwin's One Cosmos.

In the rehab post, cheap talk in lieu of thought or action. Pointed up in today's piece, denial, hedonic habituation (ingratitude), and narcissistic entitlement, which is among other things a failure of vision, courage, generosity, and faith.

There may be more, but for starters these are plenty to self-identify, repent and renounce; repeat as necessary.

Anonymous said...

If I was able to retain the ~15% of my income that goes to social security I'd be less likely to believe I've earned its return. At 65, if I live to 85 I will have recieved a less than 3% return on my contributions. 15% on top of income tax and I shouldn't think I am entitled to a return on it? I think not. Then just call it income tax. The problem with social security is not just retirees who have paid in. It's every hand that dips into it who hasn't as well.

Assistant Village Idiot said...

Well that's a fair point, p-w. You are entitled to your own money, whether you take it out at 50 or 75. That type of entitlement I can get behind.

Hiraethin said...

As for why we will not do what we must: fear. The majority of the electorate is like a man on the deck of a slowly foundering ship, eyeing a liferaft meters away across the briny deep. The ship is sinking, true; eventually the water will engulf us; but for right now, for the immediate future, the deck is dry and solid, and the waves are dark, wet, and fearful. The raft just doesn't look worth the risk and discomfort. Yet. It's a shame that the longer we wait, the further we shall have to swim to reach the raft.

The worst thing about social security is that, by existing, it becomes the basis for the decision of many many people not to provide for their own future, as certainly they would if they must.

Assistant Village Idiot said...

Powerful image, well-expressed, hiraethin. Stick around.

Anonymous said...

If I'm lucky this will also be an answer to your central question, but in the end it's only what I would like to see.

I'm dreaming of a global federation of free democrating nations, trekkie style if you like, I'm free, I can dream what I want. Not like the UN, rather like an OPEC for democracy. Instead of the UN. And it would be most important to attract China and Russia into that federation.

We need a replacement for the UN and when I say we I mean us, the democracies and not...them.

Still laughing about trekkie style? He! I didn't laugh about your starship trooper style either! ---Didn't want to miss that. =D

Anonymous said...

Ooops. I really wrote "democrating". Correct that, AVI, or leave it funny.