Social Safety Nets

Otto von Bismarck pioneered the social safety net. He had to find a way to convince rural Volk to move to the cities and factories, to industrialize an emerging Germany, and to create a potent military. What better way than to offer, in return, a guarantee that government would protect you from many of the hazards of life? It was an extremely popular idea and Western governments all jumped on the bandwagon. Most Americans alive today have never experienced a world without workman’s compensation, unemployment insurance, food stamps, Social Security, Medicare, or Medicaid.

Today, there is considerable concern that the safety net is coming apart in Europe and will soon come apart in the US. There are worrying hints that the systems we have constructed are not durable. But, being politically popular, these systems will not go away. Even modest reforms are met with howls of protest. But, if the systems are not durable, and they can’t go away, what will happen?

Complex systems have complex ways of shifting equilibrium. I can’t predict how things will evolve, although I do suspect it will involve inflation. I do know this: if our systems aren’t durable, they will prove inadequate. Already we see Medicaid patients who have insurance coverage but cannot find a doctor. For these people, the system “works” in name only. I expect similar situations to occur throughout our complex safety net.

Maybe some genius will figure out how to fix things – there’s lots of talk about reform, but very little action. A prudent person might want to scale back their standard of living and put something aside for the possibility that the safety net won’t work as hoped. Just saying.

Otto Fürst von Bismarck

Otto Fürst von Bismarck (Photo credit: Wikipedia)


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