Saturday, May 04, 2013

It's Not Just Running Out of Other People's Money; It's the Debauching of Society

I found this NYTimes article about Denmark interesting. Having lived in Scandinavia and having relatives living in and near Denmark, I pay some attention to news from that part of the world, even to the point of regularly perusing the largest Norwegian newspaper. (I read and speak Norwegian.)

Danes, it seems, are starting to realize that their cherished social welfare system is resulting in the debauchery of the nation's citizens. Less than a year and a half ago, a member of parliament that wanted to moderately rein in social spending was challenged to visit a single mother to find out how hard life was for her.
"It turned out, however, that life on welfare was not so hard. The 36-year-old single mother, given the pseudonym “Carina” in the news media, had more money to spend than many of the country’s full-time workers. All told, she was getting about $2,700 a month, and she had been on welfare since she was 16."
Then the story about "Lazy Robert" hit the news. The able bodied man admitted to spending the last dozen years on welfare instead "of taking a demeaning job, like working at a fast-food restaurant." He is quoted as saying, "Luckily, I am born and live in Denmark, where the government is willing to support my life."

It never seems to dawn on these idlers that the money they get from "the government" comes their neighbors that work for a living. They only get this money because they don't have to directly steal from their neighbors. The political apparatus gets producers to support the likes of Carina and Lazy Robert via taxation under threat of imprisonment.

For the idlers the system works like magic. Insert the all powerful state between the workers and the idlers, and the stigma of being a thieving scoundrel magically disappears.

Economist David Friedman explains how this works in this post:
"Start with a society in which individuals are mostly reliant on themselves—if you don't find some way to earn an income you are likely to go hungry, or at least have to rely on charity and lead a much harder life than if you had a job. In that society, someone on charity will be seen as a failure, by himself and others, which is a strong reason to avoid being in that situation.
"Add a reasonably generous welfare state. For a while, perhaps a generation or so, the old attitudes persist. As time passes, it becomes clearer and clearer that going on welfare is not evidence of failure, hence not something to be ashamed of. It may not pay as well as a  job, but it leaves you a lot more leisure and a lot more control over your own life; if you want to go off to Prague or Barcelona for a week or two you are free to  do so, provided you don't mind doing it on the cheap.  As more and more people see welfare as a reasonable choice, attitudes change. Once the old attitudes are entirely gone, you have a society where anyone who prefers a life of leisure with a moderately restricted income takes it, leaving fewer and fewer people to pay the taxes to support that life."
Working Danes have been stunned to discover just how many of their fellow citizens are opting to live on the public dole indefinitely. The NYT article notes that in a dramatic shift from a couple of decades ago, "only 3 of Denmark’s 98 municipalities will have a majority of residents working in 2013."

Danes are also realizing that their ability to afford their system of public benefits is eroding. With steadily fewer people working, the employed working fewer hours, and the population aging, the balance of producers to beneficiaries is swiftly tilting to the point of being unsustainable. Danes are realizing that under socialism you eventually really do run out of other people's money (see Margaret Thatcher quote).

The Danes aren't scrapping their social welfare system, but since the Carina episode came to light they have been trimming programs and developing policies designed to move more people from welfare to work. One legislator says that the social welfare system "has done a lot of good, but we have been unwilling to talk about the negative side. For a very long time it has been taboo to talk about the Carinas."

What is funny is that in the U.S. we are going exactly the opposite direction, expanding our unsustainable social network even as the Danes and others scale back. Or, it would be funny if the eventual results didn't promise so many problems.

We Americans have come to worship the democratic system rather than the liberty that it is supposed to support. We often fall under a spell where we romantically think that people tend to vote according to their highest ideals rather than operating under the same self-interested motivations that pervade most of their other decisions.

In reality, we shouldn't be surprised when people that are beneficiaries of government largess vote according to their own interests, especially when the donors are a mass of faceless others or when the beneficiaries themselves have been forced to pay into the system. You see, we owe it to them. They are entitled to these benefits, regardless of the imbalance of payments to receipts.

A quick look at all of the democratic systems around the globe that are tyrannical should disabuse us of the notion that democracy brings liberty. Rather, democracy can be one symptom of systems that have higher liberty. But since it can obviously also coexist with tyranny, we should not assume that democracy leads to liberty.

As more people become government beneficiaries, more people vote to create and expand government benefits. When the number of beneficiaries voting themselves benefits from others exceeds the number of those whose interests run counter, the system is on its way to collapse. The fact that this is accomplished democratically and without warfare does not mean that it is not tyrannical.

Danes have seen the writing on the wall and are now working to stave off the impending collapse of the social welfare system. The U.S., not so much.

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