When Otto von Bismarck, Germany’s so-called iron chancellor, implemented the world’s first national health program in 1883 and first national accident insurance in 1884, many world leaders thought he had taken leave of his senses and was surely leading Germany into the dark abyss of economic disaster. Bismarck’s utopian ideas were so revolutionary when they first emerged that they were widely regarded as hopelessly impractical and doomed to unabashed failure.
Ironically, during the next ten years, Austria, Italy, Sweden, and the Netherlands adopted versions of the socioeconomic reforms Bismarck pioneered. By the beginning of the twentieth century, most developed countries had implemented them in one form or another. Robert J. Shiller’s vision of a global society whose inequalities are minimized seems as radical to many people today as Bismarck’s reforms initially seemed to a majority of people both within and outside Germany. Workers today almost universally take for granted most of Bismarck’s reforms, regarded as shockingly radical when they first surfaced.
These policies included limiting child labor, providing old age insurance (essentially, Social Security), establishing maximum working hours, providing broad health insurance coverage to all citizens, and offering worker’s compensation for job-related injuries. These ideas, astoundingly radical in the 1880’s, gained widespread acceptance during the first half of the twentieth century.
Shiller, a profound and thoughtful economist, demonstrates an impressive historical and ideological grasp of his field. He confronts head-on salient problems associated with finance and risk management, applying to his thinking many of the ethical concepts of philosopher John Rawls. Management of risk, according to Shiller, is the quintessential subject matter of finance. Finance regards as risks the many forms of human calamity and economic upheaval that people face. In Shiller’s view, global economics cannot be considered without also considering the ethical implications of economic actions and protocols.
Shiller’s brave new financial world envisions global societies that cope effectively with changes occurring so quickly and universally that hordes of people trained to work at various tasks may suddenly discover that their skills are no longer valued, their services no longer required. Unsettling socioeconomic disruptions have occurred throughout the world as large corporations, employing advanced technologies, have downsized labor without reducing productivity.
The human costs of such downsizing are often catastrophic. Dependent children poised to enter college cancel their plans, mortgage payments that were once manageable cannot be met, once-confident and optimistic self-images are quickly shattered. Human relationships in such circumstances gradually crumble as many affected families disintegrate and the environment of the workplace becomes cutthroat.
Downsizing is not the greatest problem in developing nations. Socioeconomic stratification results in closing the door to majorities in populations that have no opportunity to prove and improve themselves. Human potential is quashed as people desperately struggle to survive at a basic subsistence level. Life expectancy is low. Diseases like acquired immunodeficiency syndrome (AIDS) and tuberculosis in developing countries wipe out thousands. Infant mortality skyrockets. The world at large is the loser when this happens, because each death heralds a loss of human potential.
What Shiller postulates is the global elimination of economic inequalities. He refers to this process as a democratization of the world’s financial systems, accompanied by the emergence of a new financial order. Currently, health insurance is funded by payments from all participants, some of whom may never need to avail themselves of it in any major way. This makes it feasible for participants who legitimately require medical care to receive assistance in meeting their medical expenses. Every citizen worldwide in Shiller’s projected new order would contribute to funds earmarked for the protection of everyone from the economic ruin that often threatens people in rapidly evolving societies.
Shiller, in a conversation with Alan Greenspan, chairman of the Federal Reserve...
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