The Business section of the Dallas Morning News had two great articles Thursday. The first one on the Texas voucher system to get rid of polluter cars I diaried here.
The second - even more compelling - dealt with what the author termed efforts to "mutualize risk".
More below:
This idea - the interconnectedness of government, corporations and citizens to reduce risk for everyone is something that lurks below a lot of the diaries here. The author gets it right:
The Big Crazy-Maker is the disconnect between declining employment security and our debt-driven society.
In the disintegrating world of old corporate America, your employment was secure, you had the promise of a lifetime pension and you had medical insurance. That security made it reasonable to borrow.
We also created institutions to make it easy to borrow to buy a house, buy a car and to borrow for other consumption.
It was safe to do this because our society worked to mutualize risk, an idea that was one of the great advances of modern society. You didn't need to save much because your future was secured by your government (SS and Medicare), your employer and easy access to homeownership.
...
Today the mutualization of risk is being repealed. Employment is insecure, health benefits are crumbling and pensions are passe. The home-appreciation game has been canceled.
Scott Burns scott@scottburns.com
His web page
This is the world that we are seeing. This is the same thing that hit deregulated energy markets. When electricity went crazy the deregulated market discovered that credit risk was a huge and unaccounted for risk. When that risk was discovered, the cost of doing business in the market space increased because there was a need to provide credit security. This "recapitalization" is in the order or hundreds of billions of dollars.
The "so-called" bankruptcy act was the final step in demutualization of risk. It attempted to remove the risk of bad credit decisions from the lenders. It failed. So efforts continue to try to push lifetime economic risk back to the individual while propelling the debt driven society forward.
there is a word for this - a ponzi scheme. In the end, individuals can not afford the debt loads necessary to support the corporate overhead in this country without mutualization of risk.
The meltdown of credit in this country is because the disconnect from the old mutualized risk society and the current world of less shared risk. If you hold all your life risk, then saving more becomes a necessity. But our economy is driven by consumer debt - so there is a self-mutilating need to drive consumers further into debt.
Now I disagree with some of the author's solutions - he calls for a national sales tax (let's get a little more regressive, shall we?). But I do agree with:
Work on dumping the front-running status quo.
Ask candidates about mutualizaiton of risk - how can they recapture it?