Socialism as Moral Hazard

I was taken aback the other day by a self-revelatory little piece by a college professor in the earlyyears of her career.  She has a doctorate, and things just aren't working out!  I do hope for her sake that the name on the article is a pseudonym, since the tale she weaves and the admissions she makes would bring shame on any mature, self-respecting person, a person she may yet become someday.

Since her "fateful" decision" to accept a tenure track appointment in the fall of 2002, she says,

I have declared bankruptcy, lost a home in a foreclosure/short-sale proceeding, cashed out three modest retirement plans, and been delinquent on my student loans. While I have had the good fortune of being on the tenure track since earning my Ph.D., I would have to argue, from my vantage point, that exactly what that "fortune" consists of is open to debate.

What is apparent in the telling of this sad tale is it was the decisions made by her and her husband, in the attempt to balance their careers and family life -- as all families must do -- that have put them in the position they are in.  Some of the causes she describes were beyond their control -- the funding for her first university position was cut; her husband was laid off due to a poor local economy; and the central piece in the drama, they had a mortgage they could neither afford nor refinance.  The concatenation of outside events drove them to bankruptcy. The scenario is sadly all too common, and bound to get worse if the wizards about to move into the executive branch have their way, which only makes this more worrisome.

A couple of details stick out.  A job she was offered and took involved a $20,000 per year increase in the salary she had; yet she quit that job to move closer to family.  Decisions like this, made for family reasons, are not really open to criticism; the relative value people assign the goods of life, like economic security and familial relations, is completely personal and subjective.  If she values her family life over the increase in salary, that is not only beyond criticism, it would even be considered noble by many.

Another detail.  She knows she could nearly double her income by moving out of academe and into technical writing.  This is not a move she is willing to make, since she feels her true calling is as a teacher.  I say that too is a noble position, showing the quality of character able to eschew Mammon for God.  Yet there is cognitive dissonance here, intimated in the title of her article.

"I Want a Bailout". 

She argues, as surely millions of others have, that if AIG is getting a bailout following some combination of missteps and misfortune, why should her family, equally victimized, not also be bailed out?  The question is a good one, if used to argue that the government ought to stay the hell out of corporate and household business.  One can perhaps interpret her conclusion as ironic, showing the ridiculous pass we have come to.

Basically the government is going to lend AIG enough money so that it won't collapse. The downside for the company is that the government now gets a say in all of its major decisions because the government, in exchange for the loan, becomes the controlling owner.  Maybe some folks at AIG see that as a bad thing, but it sounds like a sweet deal to me.

But I don't think she's being ironic; I think she speaks for many millions of strapped American citizens who would rather have a warm but suffocating Euro-style welfare state take over the control and responsibility for their lives than face the hardships of political liberty, moral autonomy, and the free market of an open economy.  Rather than accept the fact that there are trade-offs involved in the decisions we make in our lives, many people, in a childish lack of understanding of the limits of the moral, political, and economic world, expect to have their preferred life delivered to them without the costs that the real world exacts. Isn't this pretty much what socialism promises?

And this is one aspect of the moral hazard of socialism -- why stand out in the wind all day when you can turn to the shelter of an all-encompassing government?  This is what Friedrich Hayek knew long ago as the Road to Serfdom.  

Harold Kildow blogs at He has taught courses at Fordham University, Westchester Community College, and The Kings College in Manhattan.
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