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January 22, 2005

Business Decisions Without Consequence

A recent George Will column makes points advisedly incorporated in the discussion about balancing the market and the government:

Three decades ago sociologist Daniel Bell postulated the "cultural contradictions of capitalism.'' He meant that capitalism, by its success, subverts its cultural prerequisites. At first, capitalism depended on a Protestant asceticism -- thrift, deferral of gratification, industriousness. But capitalism produces wealth, and a shift from production to consumption -- the marketing of hedonism -- as the economy's motor. The banishment of asceticism by acquisitiveness means the systematic inflammation of appetites and the undermining of stern capitalist virtues. ...

Market forces, including the gales of globalization, prod capitalist entities, in their pursuit of efficiencies necessary for survival, to shed pensions. This heightens the entire public's sense of insecurity. But the welfare state exists to assuage insecurities. So this dynamic of capitalism draws the economy deeper into regulation, overruling market forces that make possible capitalism's rational allocation of wealth and opportunity. Hence capitalism's dynamism, a virtue which entails insecurity, reduces capitalism's virtues.

We place a great deal of weight on comfort and security in our society, and our doing so speaks well of us as a people. Nonetheless, in succeeding in our intentions, we're losing a sense of hardship's value. Even as I strive to claw my way out of them, I can see how my own financial difficulties have been to my benefit in other, more-important ways than laying a foundation for economic gain. Assuming my family and its members survive the strain, I've no doubt I'll one day look back on this time as having been for the best.

Apart from general principles, Will's column is particularly relevant to the discussion on Dust in the Light because it deals with the U.S. government's Pension Benefit Guaranty Corporation, which insures companies pension programs:

The PBGC is taking over the pilots' pension plan of United and will soon have all of US Airways' pensions, just as in recent years it took over many from the steel industry. Three other airlines are in bankruptcy court to dissolve imprudent labor contracts. No legacy airline can compete with another that has dumped its pension burdens in the government's lap.

Seeking to protect workers who've invested their lives in organizations that could cease to exist before retirees do, the government has simultaneously protected companies from their own imprudent commitments (and unions from their inclination to push for them). It's probable that there are limitations that mitigate matters somewhat, but from the public's point of view, it appears that companies have essentially negotiated a public benefit.

I've no justification for differing with Will's suggestion that the "PBGC probably is necessary." The difficulties of balance, however, illustrate just how many angles must be considered when attempting to soften that cold, hard marketplace.

Posted by Justin Katz at January 22, 2005 3:30 PM
Business