Monday, December 20, 2004

On Risk, Wealth and Poverty

This post from Yglesias about risk resonnates with something I've felt for years but haven't quite been able to put my finger on: I've enjoyed living in America the most when I've been well-equipped to handle risk. Or put in a different way: In order to be happy in America you need to have enough money.

This may be an obvious point to most people, but growing up in Scandiland I was taught the correlation between wealth and happiness is coincidental at best. I now know that is not true.

Although things don't work the way I used to think. I thought the key attraction of wealth was the ability to buy and enjoy things and services. Hence the traditional (and probably religion-inspired) Scandi teachings that if you can purge yourself of material wants then you don't need more money. Of course, that's not the point. The point of having money is basically that you can handle risk much better. You don't have to worry about health insurance, losing your job, being caught by the police, etc. In fact, you can elevate your thoughts to a "higher" level and make long-term investment decisions, career choices and a network of contacts which ensures increased future wealth. And it ain't that hard. On the other hand, as Kevin Drum / LA Times point out, if you're poor and something bad happens then things quickly take a turn for the worse.

So what does this mean? Well for one thing, I think it partially explains why Europeans cherish their social model so much (something I've always struggled to explain to Americans). High taxes, huge redistribution of income, loss of economic efficiency (and hence GDP growth) as a result, social welfare -- why does any "upstanding" citizen who has a job and pays taxes support a system like this? It must be because the "system" removes risk, thereby enabling you to worry less and thus be happier. Europeans worry less than Americans, and I think that's why they work less (1400 hours in Norway vs. 2000 in the US) and take longer vacations. And even though I am personally fairly happy here I'd venture to say that Europeans live happier lives.

Most Americans (especially Republicans) try to sell us on the benefits of the "ownership society". Make a shareholder out of everybody, offer more choice in healthcare, and now: Let people decide for themselves how to invest their social security retirement savings. And for rich people these are worthy causes indeed. For more middle-of-the-road incomes (like mine) it is a mixed blessing -- like I said above, sometimes this system has worked well for me. But at other times I find myself frustrated by the mundane yet important tasks of choosing health insurance, retirement savings and now college savings for my baby boy. Frankly, I wish I didn't have to know the difference between HMO's, PPO's, POS's and HSA's. For people with low or no incomes I can't even imagine what life is like -- one car crash or a minor chronic illness and you're down-and-out for life.

So the grand conclusion? The more capitalist society is; the more benefit you get from having lots of money. I am a genius!

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