What do my French-Moroccan friend, Social Security, and American automaker Delphi have in common? These disparate subjects can reveal something about world economics. In a recent article about the U.S. Social Security system, Michael Barone criticizes our current Social Security program as a movement towards French Socialism. However, there are several problems with his arguments. First, the French system is not altogether bad (especially for those receiving French benefits). Second, his use of Delphi as an example of the pitfalls of a welfare state does not take into account the company's poor market strategies; and finally, his proposed solutions do little to fix the problem.

I learned a lot about the French system from my Arab friend, Adil, a Moroccan who had grown up in Paris along with his ten sisters and brothers. In France, having an Arab name can make it difficult to obtain employment, as many French people view Arabs as culturally inferior outsiders. Adil confessed that, although he currently had a job, he had been unemployed for two years. Two years! I couldn't believe my ears. What did he do in that time? Collect benefits, he told me. Ah, yes. French benefits. Where else, except maybe Germany, could that happen? In the United States, he probably could have found a job in that time, but then again, he might have wound up homeless on the streets while he searched.

Which brings us to a paradox. In the U.S., the social welfare system is inadequate, but we have the ability to start up new enterprises with relative ease, and greater mobility within our labor force. Although it's often a simple matter to get a job in America, it's also easier to be fired, even without just cause. In France, on the other hand, it's quite difficult to find a job, but there is greater job security for those who have employment. The French feel free to take a long lunch break without the worry of being fired. It's hard to say which system is better, as each has benefits as well as drawbacks. The French admire our entrepreneurship and wealth, and we would envy them their five weeks of vacation, if only we knew about it. Unfortunately, we Americans are working so much overtime in our cubicles that many of us do not have the time to educate ourselves about the rest of the world.

In his article in US New & World Report titled "Slouching Towards France," Barone suggests that our political system is heading down the same path as theirs. Barone's example of how America is (gasp!) becoming like France is Delphi, the GM spinoff that was teetering towards bankruptcy because, as Barone explained it, it had to pay health benefits and salaries that covered the cost of living for their employees. But is Barone really prepared to get into the weeds of Delphi? Because as he paints you a picture of Francophone socialism, I could show an equally grim picture of American corporate welfare. By heavily subsidizing the American auto industry, our government encouraged manufacturers to produce hideous, gas guzzling automonsters with terrible gas mileage, and even gave Americans economic incentives to buy these environment-killers. The main problem of the American auto industry is not that it has to pay health care for its employees, but that health care is so expensive in the first place, and that the auto industry doesn't produce cars that sell unless oil is at rock bottom prices. By lobbying Congress to take actions that benefited themselves in the short run, the auto manufacturers have sacrificed their long term ability to compete in the world market. The problems besetting the U.S. auto industry have more to do with corporate corruption than socialist health benefits.

Barone claims that he doesn't want our Social Security system to go the route of France or Delphi. However, I certainly wouldn't trust him to come up with a plan to save it. Barone's idea is to replace all entitlements with payments of $10,000 a year to every adult, which could be invested in private accounts. By his logic, the stock market provides larger growth rates over a forty-year period than existing social security accounts. The problem is it depends on which forty years we are talking about. The stock market can also take a nosedive, and seniors could lose their savings just before they retire. The reason we have social security in the first place is to make sure that doesn't happen: that if people don't make wise decisions during their working years, or if unexpected life events occur, they will still have enough income to prevent them from starving. Social Security has been one of our government's most successful programs. The latest "crisis" in social security has more to do with sweeping tax cuts than the inherent nature of the program.

Michael Barone is off the mark with his simplistic "solution" to the problems we face with Social Security. Market policies are not the answer to every issue; especially when the problem is not one that free markets can easily fix. Privatization can introduce competition into stagnating markets, but that is of insufficient benefit to justify eliminating the safety net of the current system.

It's true that there is some market stagnation in France; just ask Adil how hard it is to find a job in their economy. But people like him are not left to rot if they don't find a place for themselves within the economy. Somehow, we must find a balance between dog-eat-dog capitalism and a social welfare state. Following Barone's advice, however, will not take us down that third path.

Source

Barone, M., "Slouching Toward France." U.S. News & World Report ; 4/17/2006, Vol. 140 Issue 14, p41, 1p, 2c.