Public relief and compulsory insurance are important for helping people who are poor or facing hunger due to situations they can't control. As cities grew and communities changed, local support systems became less effective, making it necessary for the government to provide help on a national level. Public assistance, which has evolved from old poor laws, is essential in industrial societies. It is expected that this help will also support those who could have prepared for emergencies. Because of this, it makes sense for the government to require people to have insurance against common risks, similar to how drivers need car insurance. Additionally, since the government is encouraging everyone to have these protections, it should help build the institutions that provide them, offering temporary financial support to get them started. This approach aims to protect everyone while respecting personal freedom.
The idea of "social insurance" started in Germany in the 1880s. People were required to join a government-run organization to get protection against risks like getting old, having accidents at work, or being unemployed. The goal was to create a system that would be efficient and easy to manage, with the belief that one main organization could help everyone better. However, there are concerns that this single organization might become inefficient over time, as depending on just one system can limit creativity and responsiveness to people's needs.
Initially, supporters of social insurance focused on making it efficient, but they also wanted it to allocate resources based on people's needs. Unlike private insurance, which only pays for specific expected events, a government organization can distribute money and help according to individual situations. Over time, many social insurance systems have changed to focus more on redistributing wealth, which has altered their original purpose.
For example, in the United States, social insurance came to be seen more as a way of providing financial help rather than actual insurance. This new welfare system aims to decide what is "just" for everyone and distribute benefits accordingly. This represents a major change in how government functions, which can be a threat to individual freedom because it gives the government the power to decide who gets what benefits and how much they should receive.
The complexity of social security systems creates a big problem for democracy because many people do not understand them. Although these systems play an important role in the economy, there are beliefs that individuals have a right to the services provided since they have paid into the system. Often, new laws about social security are presented to lawmakers in a way that forces them to accept or reject them without making changes. Even experts like economists and lawyers struggle to understand the details of social security. This has led to the rise of institutional experts who support existing systems and policies. Their opinions shape future decisions, while those who disagree are often not seen as real experts, making it hard for different views to be heard.
There is a conflict between state-controlled development and the natural evolution of institutions, such as insurance. Insurance evolved gradually through numerous contributions over time, rather than from a single design. Relying solely on state authority could hinder innovation and new solutions to issues. In areas like old age support and medical care, spontaneous growth and experimentation flourish where the state isn’t fully in control. As a result, it raises doubts about whether state monopoly is truly advantageous for future progress.
Social security systems give benefits to people, no matter how much they have contributed or whether they need it. This system aims to provide a basic level of welfare to everyone, which can be seen as a legal right. However, it relies on money from wealthier people, making it hard for recipients to know what they should get versus what they have earned.
Moreover, government agencies often use public money to promote and expand social security, which can create bias in how people view it. This raises concerns about how clear and fair the system is, and whether voters really understand what it means for them. Many workers in countries like Italy, France, and Germany might actually prefer to have more money to spend instead of having a large part of their earnings taken for social security. The idea is that people might be better off if they could choose their own insurance providers, instead of depending on a big, government-run social security program. This situation shows the difficulties in how income is distributed and how benefits relate to people’s contributions.
Social security includes various forms of support for different life situations, particularly for old age. The main concern in many countries is how to provide for the elderly and their dependents, especially as economic conditions worsen. Inflation, often caused by government monetary policies, has eroded the savings that the elderly planned for their retirement. This situation has forced many elderly people into poverty, despite their previous efforts to save.
When governments step in to provide pension systems, there are significant consequences. First, pensions are given not just based on contributions made but also to individuals who haven't yet had a chance to contribute. Second, these pensions are funded by current taxpayers rather than from a reserve fund created for this purpose, which can create financial burdens on the working population. This can turn pension systems into political tools, where benefits are increased to attract votes, often at the expense of those still in the workforce.
The public sometimes misunderstands the realities of retirement and pension funding. Many retirees who can support themselves end up receiving pensions that are taken from workers' contributions. As populations age, demands for higher pensions grow, sometimes to unrealistic levels. Plans for pensions often show disregard for personal initiative and suggest that the elderly should depend solely on government support, which risks creating a growing divide between age groups. This dependency could potentially lead to conflicts in society, where younger workers might feel burdened by their financial responsibilities to older citizens. Ultimately, the sustainability of such systems may lead to a dire situation if the younger generation feels unfairly treated and seeks drastic changes.
Managing health care presents many challenges, especially when comparing health insurance to free medical services. People have different needs for medical care, and figuring out how to prioritize these needs without regard to cost is complicated. While health insurance is seen as a positive development, there are strong concerns about having a single government insurance system or a completely free health service. Once such systems are put in place, they are difficult to change, even if they don't work well.
The idea of free health services is based on two main misunderstandings. First, many believe that medical needs can be clearly defined and should be met without considering costs. Second, they think that providing better medical services will save money by improving people's ability to work. However, decisions about health care involve balancing risks and benefits, and even rich people will not receive all possible medical care because they have other priorities in life. This creates debates about who decides how much care a person gets.
A government-run health care system may lead to lower standards of care because it focuses on managing long-term health issues instead of restoring people's ability to work. Another serious concern is that this system can change doctors from independent professionals into government employees. This may weaken patient confidentiality and lead to the misuse of personal health information by the government. This change raises worries about how much control the government has over individual health choices.
Unemployment protection used to be very important, but in recent years, it has become less significant, even though preventing widespread unemployment is still a big concern. It’s unclear if we have truly fixed the unemployment problem or if providing help to those without jobs will become important again. A system that ensures everyone has their basic needs, like food and shelter, is essential, but how much extra help based on previous earnings is what needs to be figured out.
Sudden changes in job demand can cause unemployment, especially during tough economic times. Seasonal jobs and high wages in certain industries can also lead to unemployment. To solve these problems, wages need to be flexible, and workers should be able to move easily between jobs. However, current systems that provide guaranteed payments to the unemployed can make these solutions harder to achieve.
Unemployment compensation systems, which are influenced by labor unions, might create more issues rather than solve them. A better approach would be for the state to provide basic support while encouraging voluntary efforts to maintain workers’ living standards, allowing unions to assist without using their power to force changes.
Social security systems around the world are in trouble because they have changed from helping those in poverty to redistributing income based on unfair ideas of justice. While helping those who cannot support themselves does involve some income redistribution, there is a big difference between providing basic help to those in need and taking money from some people to give to others. The first approach allows people to choose their own jobs, while the second limits their freedom.
Many government-run welfare programs have turned into ways to control how income is shared, as seen with the Beveridge plan, which was meant to be a safety net but got changed to focus on income redistribution. The idea of helping everyone without checking if they really need it creates problems, as it leads to demands for assistance that doesn’t consider individual circumstances.
Some people worry that government welfare is just a temporary fix, but it’s hard to get rid of these systems once they exist. These welfare programs can slow down economic growth and create new issues, like inflation and high taxes. Instead of solving problems, welfare policies might create even bigger ones, making it clear that society needs to deal with the consequences of these policies responsibly.