Libraries As Socialism

I have from time to time heard defenders of socialism use the local library as an example of socialism in practice. The building, utilities, workers and books are paid for mostly by taxes (with some additional funds from books sales and donations). 

Who can say anything bad about the library? It’s available and it’s free. In fact my library’s computer reminds me at checkout how much I have saved by not having to buy the books. 

I am a supporter and big user of my library system. Sometimes I go to the library without anything particular in mind just to pick out an interesting book to read. Sometimes I go with a particular subject in mind and browse through the available books in that section of the stacks. I usually come away with something and never have to pay. (The same can be said of movies on DVD or music, but with everyone streaming, that part of their business has probably fallen off.)

Sometimes, however, I am looking for a particular title that I’ve seen on TV or seen a reference to in my reading. I check the website and the library doesn’t have it. Somebody in charge of ordering books either was not familiar with it or didn’t feel that it should make the cut for what they spend their limited funds on. I have very little control over this centralized decision.

Sometimes when checking the website I do find the book I want, but someone else has it checked out. The computer tells me how many copies they have in the system and where I am on the waiting list should I decide to put the book on hold. I have waited as long as 8 weeks, occasionally longer, for notification that the book is available. I am given 5 days to pick it up during the 60 hours of the week they are open (prior to the shortened COVID hours). Most of those hours are when people are working and kids are in school.

I put up with these inconveniences because getting a particular book to read is not urgent or important to me. The library is fine, but it has its limitations. I can bypass these limitations using available alternatives.

If I really need the book I go the capitalist route – Amazon, for example. I can find almost any book or movie I want on the Internet. I can buy it and download it directly to my phone and begin reading. If the system is working properly, the number of copies available is driven by demand from myself and others rather than by some individual’s taste or guesswork. I can do this 24 hours a day; I never have to wait for another reader to finish and return it. I can mark it up if I choose and can take as long as I want to read it. Because it’s mine, I have that freedom.

Where other services are concerned, such inconveniences are no longer trivial. No one would want to put up with them in important areas like groceries, utilities, transportation, healthcare and many others. 

Why do people in the UK or Canada sometimes have to wait longer for medical procedures? – Because their healthcare is run on the library model. Why do we hear stories of food shortages in places like Venezuela and the former Soviet Union? – Because the food supply is run on the library model. Some central decision maker, not individual consumers voting with their dollars, controls the system. Why does public education in America lag behind so many other countries? – Because as parents become more and more disengaged, it moves closer to the library model where central decision makers dictate methods and judge outcomes.

Most areas run by the government or where the government gets involved are the the epitome of inefficiency: student loans, home mortgages, the court system, the DMV, the post office, Amtrak, and public education (where teachers keep asking to be paid more to teach fewer students with questionable results).

Healthcare in America is already too much like the library model. There is no real competition, and the consumer is separated from the provider by an insurance middleman. So everyone rightly complains about it.

I love libraries, but I wouldn’t want to depend on them or anything like them for the necessities of life. 

Different Cultures, Different Rules

A story about an incident in 2006 is suddenly getting a lot of attention on social media. An American woman temporarily working in Iceland “went from feeling a lump in her breast to getting checked out and assured that it was benign in the space of a single day, and for $3.” She posted the story of her experience on Twitter.

This gets many people stirred up, asking: Why can’t we do this in the United States? Some politicians think we can and are promising changes, but the comparisons are not as straightforward as we’d like them to be.

Iceland is a small, island nation in the North Atlantic with a population of about 350,000. For comparison, the city of Minneapolis has a population about 425,000. The entire country is smaller than many American cities. 

But it’s not just a matter of scale. Taking it a step further, that population is very homogenous. About 91% of the residents of Iceland are Icelandic citizens and only 16% are foreign-born. Unlike the US, the population is concentrated. Ninety-nine percent live in urban areas and 60% live very close to the capital. Furthermore, about 72% belonged to the same religion, the state Evangelical Lutheran Church of Iceland.

Back to our comparison example – where Iceland has homogeneity, Minneapolis has diversity. Its population is approximately 64% white from various heritages, 19% African American, 10% Hispanic and 7% various other ethnicities. It is the home of more than 50 denominations and religions.

How important is this homogeneity in the smooth operation of a more socially oriented society? Denmark believes it is vital to maintain the order and necessary shared values. “Beginning at the age of 1, [mostly Muslim immigrant] ‘ghetto children’ must be separated from their ‘ghetto parents’ for 25 hours per week for mandatory instruction in so-called ‘Danish values,’ which includes learning about the language and the traditions of Christmas and Easter, The New York Times reported in July 2018.”

(Again for comparison Denmark is about 35% larger than Maryland in area with about 5% fewer people. These are much smaller countries whose people share a common background and history.)

But there is no free lunch and no $3 health service without a huge subsidy. Here is a simplified comparison to make the point.

After a $5,145 deduction, Icelanders pay 36.94% of income up to about $85,000 and 46.24% on income above that. On top of that is a value added tax (VAT) of 24% on most goods and services, but a few categories are subject to a reduced rate of 11% (e.g. food, hotels, newspapers, books, and utilities).

Everyone in Iceland pays at least at the same level as the highest tax bracket in the US, 36.94% compared to 37%. They don’t “soak the rich;” they take it from everyone. On the other hand, their corporate tax rate is among the lowest.

In Minneapolis a single taxpayer owes no more than 17% on the first $85,000 after a standard deduction of $12,200 and pays about 8% sales tax, but not on food. (Sales tax and VAT are not identical, but the economic burden of VAT falls on the final consumer.)

Using those numbers, a single taxpayer earning only $20,000 in the US pays $780, whereas for the same situation in Iceland the tax bill would be roughly $5,500. When the money is spent, it is taxed again at a rate up to 16% more.

On another point, access to doctors is slightly better. Iceland has a physician ratio of 3.62 doctors per 1000. In the US it’s 2.3 doctors per 1000.

These and many other considerations are ignored by those who want to make simplistic comparisons, comparisons that in reality are light-years away from apples to apples. It would be nice to have all the benefits and not have to make any of the sacrifices, not have to adapt to an entire new set of values and expectations, not have to live within a completely different culture. (The US cannot even agree to have one official language!) But there are no simple answers.

CEOs and Welfare Cheaters

The subjects I address are based on the premise that behaviors have matching consequences.  Touch a hot stove and get burned.  Be convicted of a crime and have trouble finding a good job.  Fail to save while you’re working and become dependent on the government/charity for a not-very-comfortable retirement.  Graduate from high school and have a better chance at a good job.  There are a few exceptions, and as usual, I want to show surprising similarities between two classes of people not usually associated.

The first group is overpaid CEOs who take money from the owners of the corporation when they have clearly not earned it.  The second group consists of those who accept money from the government when they are not eligible.

We are asked to believe that those who rise to become CEOs have very special talents, and that no one else could do what they do.  They are special, and their time is so valuable that they travel in private jets and chauffeured limousines.  Their special status justifies lavishly decorated offices with thousand-dollar trashcans.  Their decisions affect the lives of thousands, but if they make mistakes and lose their jobs, they have developed a network of contacts to help them find another high-paying position quickly.  (They may have screwed up, but they’re still special).  Others pay the price while boards of directors continue to treat CEOs like rock stars, often ignoring these quirks and errors, while rewarding them at levels hundreds of times the pay of an average worker.  Take for example the ousted JC Penney CEO who made over $53.3 million while putting the company in a position where survival is now questionable.  (Several others a few years ago collected huge bonuses on the heels of a government bailout.)  They play on their status to avoid consequences, while gathering wealth and fame.  Then, in retirement, they consult and write books.  Contrast this behavior with that of Pope Francis who shows everyone, not just Catholics, that a position of power need not be automatically linked to a lifestyle of luxury, privilege and self-indulgence.  This characterization does not apply to all CEOs and top executives, but there are enough of them in the news to give the rest a bad name – a few bad apples but too few exemplary ones.

At the other extreme, dishonest behavior can also lead to favorable consequences.  They haven’t the status, and we find nothing to admire about them; but they seem to use a similar rationale that they are special and deserve to be treated differently.  “Since 2003, there's been a 29% jump in Americans with little or no work experience getting disability payments, according to the Social Security Administration. Over the same time, there's been a 44% increase in disability claims by people formerly in the workplace.”  With no evidence of an epidemic of injury or illness, a reasonable conclusion is that a major proportion of this increase must be attributed to cheaters, people who feel they have the right to continue their cash flow from the government without working, taking the money indirectly from us while ignoring the rules that the rest of us follow.  Last Sunday a 60 Minutes segment showed the depth of the problem.  Again it’s not a majority, but statistics tell a distressing story.

The behaviors and attitudes of these groups from each end of the socio-economic spectrum are so similar.  Except for the level of power, the main difference is that those who benefit by claiming disability, the cheaters, have only an indirect obligation to society, the same obligation shared by the rest of us to act honestly and not take what we don’t deserve.  Their actions are illegal, and if caught, they may be punished.  Those CEOs, on the other hand, have a direct and explicit obligation to shareholders, customers and especially to employees to be faithful stewards of the corporate resources, using them to provide quality products and secure jobs. Irresponsible actions may be unethical, but only in rare cases are they prosecuted and rarely do they act guilty or remorseful.  When things go well, they take credit.  When things go poorly, they blame the economy.  Both groups justify their actions by feeling privileged with a primary obligation to themselves, regardless of the effect on others. Both act without consequences with few mechanisms in the system to correct this misalignment.  It’s the height of irresponsibility, but the appropriate consequences are missing.

Unfortunately there is little we can do to balance the scales. There is no sense of shame.  Ordinary stockholders have little influence.  Reporting slackers is frowned upon.  As long as enough Americans consider it cool to be a powerful, but self-serving executive or a clever slacker abusing the system, the behavior will continue at a cost to us as customers and taxpayers.  It would take a groundswell of citizens with economic understanding and true feelings of contempt toward such behavior, as well as the lawyers and boards of directors who support them, to begin to right the equation.

Learning from Australia

The wise learn not only from their own errors, but also from the experience of others.  Back in December I suggested learning from Italy, where the citizens became so accustomed to what were described as “lavish social benefits” that they took their outrageously generous government programs for granted, never stopping to be grateful or to wonder where the money was coming from.  The same could be said for several other European countries.  Now the day of reckoning has arrived and they find themselves facing painful consequences.

Continuing with the theme of perspective from last time but looking west, we find a new law in Australia regulating welfare payments.  Rather than sending checks or ordinary debit cards to recipients, the new program offers a special, restricted card that can be used only for priority items such as food, housing, clothing, education and healthcare, and only at approved businesses.  It cannot be used for alcohol, tobacco, gambling or other discretionary expenditures.  This has sparked protests, people marching in the streets objecting to what they perceive as restrictive, paternalistic and embarrassing treatment.

There are two important lessons here for Americans represented by two citizens interviewed for the article.   The first portrays herself as a victim.  It’s not her fault that she must rely on government payments and she resents any interference with how she spends the money.  But if we give up responsibility, in this case the responsibility to provide for ourselves and our families, we may be required to give up the freedom to decide how and where to spend that money.  The second citizen seems grateful for the help.   She recognizes that this is not her money and not something to be expected.  She has not slipped into the faulty assumption of turning a helping hand into an entitlement.  She has the perspective to appreciate the help and not complain about reasonable conditions.

Fortunately, the way their system is set up, it’s possible to get back that lost freedom.  As one government representative puts it, "Welfare should not be a destination or a way of life. The government is committed to progressively reforming the welfare system to foster individual responsibility.”  We all know that change comes only in response to some level of discomfort.

I wonder what the reaction would be to such a program in the US.  Are we long on victimhood and short on gratitude, or vice versa?  The first represents low levels of responsibility; the second, strong perspective.  We can learn from others the importance of gratitude and that responsibility neglected means freedom lost.  We can see living examples of how behavior has consequences.  If we don’t understand these basic facts, we may soon face consequences similar to those challenging other countries around the world today.

Learning from Italy

The wise avoid problems by learning from the mistakes of others.  I pick Italy as the teaching point, although it could be Greece or any of several other counties.  Italy is on the verge of bankruptcy; their country is going out of business, so to speak.  Our country is facing a similar problem, but we are not as deeply in trouble as some of those in Europe.

When we look at Italy we find from one article that it “has financed years of lavish social benefits by borrowing and borrowing.”  From another we learn “that 93 percent of Italians consider cutting the country's huge public debt a top priority but few are willing to make personal sacrifices to do so.”  (Isn’t it refreshing that magic-money-tree thinking is not confined to the US?)  It may be easy to scoff and say that they dug themselves into this hole and are now unwilling to pitch in to dig themselves out, but I’m sure most of them were unaware of the development of the problem or didn’t see it as serious.  They enjoyed their social benefits, which soon became expectations, and that only now, in hindsight are described by outsiders as lavish.  They felt that they had earned, worked for or fought for those perks.

Later in the second article it states that although “there is some hopefulness about the future of the economy -- 55 percent anticipate a better situation five years from now -- the longer-term picture is gloomier: Only 35 percent of Italians think children born today will be better off 20 years from now, while 43 percent anticipate a harder life for the next generation.”  This should not be surprising.  As disinterested observers we can easily see that the lifestyle they were enjoying was not, after all, worked for or fought for or earned.  It was borrowed, supported by debt that their children must someday repay.

Perspective and Economic Understanding are crucial to our success.  America is not yet in the position of Italy, but every day we are moving closer, borrowing from our children to support our lifestyle that we have become so accustomed to that few would be willing to describe it as lavish.  Nonetheless, if lavish means you couldn’t really afford it in the first place, that’s exactly what it is.  When the time comes for all to sacrifice, I hope we are wise enough to learn from Italy and others, and to understand that the pain will be less if we begin sooner.