Shared Responsibility, Shared Risk: Government, Markets and Social Policy in the Twenty-First Century

Shared Responsibility, Shared Risk: Government, Markets and Social Policy in the Twenty-First Century

Shared Responsibility, Shared Risk: Government, Markets and Social Policy in the Twenty-First Century

Shared Responsibility, Shared Risk: Government, Markets and Social Policy in the Twenty-First Century

Synopsis

The collapse of the financial markets in 2008 and the resulting 'Great Recession' merely accelerated an already worrisome trend: the shift away from an employer-based social welfare system in the United States. Since the end of World War II, a substantial percentage of the costs of social provision--most notably, unemployment insurance and health insurance--has been borne by employers rather than the state. The US has long been unique among advanced economies in this regard, but in recent years, its social contract has become so frayed that is fast becoming unrecognizable. Despite Obama's election, the burdens of social provision are falling increasingly upon individual families, and the situation is worsening because of the unemployment crisis. How can we repair the American social welfare system so that workers and families receive adequate protection and, if necessary, provision from the ravages of the market?

In Shared Responsibility, Shared Risk,Jacob Hacker and Ann O'Leary have gathered a distinguished group of scholars on American social policy to address this most fundamental of problems. Collectively, they analyze how the 'privatization of risk' has increased hardships for American families and increased inequality. They also propose a series of solutions that would distribute the burdens of risks more broadly and expand the social safety net. The range of issues covered is broad: health care, homeownership, social security and aging, unemployment, wealth (as opposed to income) creation, education, and family-friendly policies. The book is also comparative, measuring US social policy against the policies of other advanced nations. Given the current crisis in America social policy and the concomitant paralysis within government, the book has the potential to make an important intervention in the current debate.

Excerpt

The financial crisis of 2008 drew attention to the extent to which some private actors could create enormous public risks. Banks engaged in proprietary trading (that is, for their own and not their customer’s benefit), hedge fund managers traded credit default swaps, finance companies issued dubious mortgages then bundled them into securities that ostensibly more prudent investors not only bought but used as collateral for leveraged purchases. Ironically, much of this explosion in financial activity was actually done in the name of risk management. Instruments were created for trading risk and for trading on market fluctuations. The marketization of risk actually enhanced vulnerability in certain ways, however, notably by making actors in the financial system highly interdependent, reducing the transparency of trades and asset values, and scaling up demands for liquidity. When this highly leveraged and minimally transparent financial system crashed, governments stepped in, using public funds to shore up the markets and those institutions deemed “too big to fail.”

There has been a great deal of attention to how ordinary taxpayers bore the consequences of risk-taking by large firms and wealthy individuals. But it is not only as taxpayers that individual citizens and families are vulnerable to economic upheavals, risks created by highly volatile markets or new technologies, or indeed the frauds of big investors who break the rules. They also bear the consequences through unemployment, lost health care, lost pensions, mortgage foreclosures, and escalating university costs. And, indeed, they are more vulnerable because during the same recent decades when the scale and influence of the finance industry was expanding dramatically and neoliberal governments were reducing regulations, long-standing systems of shared responsibility, mutual support, and social security were being undermined.

Privatization of risk thus has two faces. On the one hand, deregulation and concentrated control over private wealth allow some private actors to create risks that affect their many fellow citizens and also the government, as custodian of the public good. On the other hand, sharp cuts in programs to help ordinary citizens mean that more and more face risks privately, as individuals and families . . .

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