How Should We Build Safety Nets?

     We hear much about safety nets.  Mostly we hear about
the government safety net.  Some people don't seem to believe
there are other safety nets.  I have heard people excited about
how many millions have been caught by the government safety
net.

     Safety nets are as old as history.  The simplest safety net
is savings.  Store up reserves for use after a fall, whatever the
fall may be.  The next stage of safety nets is family members
catching each other when someone falls.

     Beyond this neighbors catch falling neighbors.  There
may be no formal agreements about how these safety nets work. 
Individuals recognize that they may someday need help.  This
encourages them to help others to keep the safety net working in
case they fall someday.

     Lodges and fraternal organizations provided more
structured safety nets.  Such associations are partly financed by
dues.  Benefit may be limited to members.  At least, members
are likely to get first preference.

     Insurance is another safety net.  Individuals face the risk
of a loss that will not hit most of them.  They all pay in small
amounts.  These premiums provide a pool of funds from which
to reimburse the few who suffer losses.

     We also see organizations, such as The Salvation Army
and Goodwill, that raise funds mainly from donations.  They
provide help to those who didn't land in some other safety net.

     There are spontaneous safety nets.  When disaster strikes
a community or family, donations roll in.  After the Chicago fire
donations flowed to Chicago from around the nation.

     When government moves into an activity it becomes the
600-pound gorilla.  Government drives others from the field. 
Many forms of safety nets live on.  Shaded by the government
tree, many of them withered to slivers of what they would be in
the sunlight of voluntary association and freedom.

     To a large extent dependence on the government safety
net springs from the existence of the government safety net.  It
sucked the life out of the competition.  This is akin to killing
someone's helper and then taking his place.  Should we take the
killer seriously when he brags about providing a service he
claims that only he can provide?

     Are people better off with one all purpose, gargantuan
safety net than with many specialized smaller ones?  If there is
only one safety net and someone misses it, he lands on the
concrete floor.  When there are many safety nets he may be
caught by another.

     What happens if the giant net collapses?  Then everyone
slams down on the floor.  Imagine only one grocery store in the
city, and it burns down.  If there are many stores the loss of one
isn't the end of the world.

     There is also the matter of efficiency.  Up to a point
bigger is usually more efficient.  Beyond that point diminishing
efficiency sets in.  If all we have is one government safety net, it
is guaranteed that it will be big.  Well over 90 percent of
donations to The Salvation Army go to a person in need.  Less
than one third of tax dollars spent on government welfare
programs goes to a needy person.  The rest is consumed by the
bureaucracy.  This seems to suggest something.

     The trapeze artist performing over a net is likely to take
more chances than he would without the net.  People who
believe they live over a big, strong safety net will also take more
chances.  If Social Security didn't exist, How much more would
people have saved for retirement?  If unemployment insurance
didn't exist, How much quicker would the unemployed find jobs
at which they could earn something?  The list goes on.

     If government hadn't ventured into the safety net
business, we would now have a vast, and to us unimaginable,
array of private nets.  One of the most important would be
increased private savings.  No one would miss the government
safety net, when they had a far better system.

aldmccallum@gmail.com
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Copyright 2012
Albert D. McCallum
18440 29-1/2 Mile Road
Springport, Michigan 49284