The Anatomy of Social Security Privatization(Archive)
Do we want a market economy or an entire market society? A market economy is a tool to accomplish social goals. A market society is an entire society shaped by the imperatives of the market. In a market economy we allocate some resources via market incentives. In a market society we allocate all our resources via market incentives. Everything is for sale. A recent issue of the Sunday New York Times Magazine reported on the newly emerging international market in human anatomy. Poor people anywhere in the world can be induced to sell kidneys and other vital organs to richer individuals lacking functioning comparable body parts.
The drive to change Social Security so that individuals invest their individual “contribution” in the stock market has the same perverse effects. Poorer people will gamble for the larger gains to offset the larger hardships they face. Not surprisingly through the normal workings of the equities markets some may strike it rich but most will lose their floor of protection. More affluent individuals will tend to be more risk averse in their market choices and be, on average, better protected against downside risk. In the newly invigorated privatization debate over social security, one of the arguments made by proponents is that because poor people do not live as long as their more affluent counterparts they collect less from the existing system in lifetime benefits. Privatization gives them a chance to do better in the stock market. (Of course richer people will do even better, but never mind.)
From a purely market point of view, the logic of these cases is impeccable. Why shouldn’t individuals have a “right” to sell “their” organs? Why shouldn’t individuals have a “right” to invest “their” social security contributions anyway they see fit? What is avoided in posing the questions this way is the fact that the income and wealth context in which these choices are exercised is not the product of random natural forces. It is the outcome of an ongoing economic system in which social inequality always gets worse. The amoral invisible hand merely aggravates the tendency towards inequality. Markets are designed to produce winners and losers. Otherwise what does competition mean?
It means that the most desperately poor among us will dismantle their own bodies to survive. Weren’t you shocked when Fantine sold her hair and then her teeth in Les Miserables? I’ll bet you thought it couldn’t happen today. In terms of the Social Security debate, the relevant issue is not that poorer individuals get less because their lives are shorter. The relevant issue is what we can do to lengthen their life expectancy. In a society governed by universal human values these are the real concerns. But in a market society they are quaint anachronisms. Which side are you on?