A cautious analysis of the present and a red flag warning of what needs to be done

books:


	• The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream Jacob S. Hacker Oxford University Press, USA, 2008 - 272 pages average customer review:based on 13 reviews view larger image
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Solid argument, short on rhetorical power

I give this book credit for advancing ideas that maybe a lot of people wouldn't have thought of before, and for tying together a lot of strands that people might have seen as elements of different problems. In a word, Hacker brings together much of post-1960 American life under the heading of "risk": increasingly, our economic fates are being thrown back on the cruelties of the market. Getting sick can cost us tens or hundreds of thousands of dollars; losing our jobs can mean economic devastation. The market thrives on Schumpeter's "creative destruction", and it is by common understanding the very hallmark of a dynamic capitalist economy. What it means, though, is that none of us can expect our jobs to be around in 10 years: they may be creatively destroyed just as easily as the next guy's.

Of course most middle- and upper-income readers will immediately try to defend their own sense of self, by supposing that their own level of education insulates them from the shocks of the new global economy: surely creative destruction is creatively destroying manual laborers' lives, not ours. Hacker says no, and submits a mountain of data to prove his point: over time, we're all becoming more subject to economic crises. The standard economic statistics don't point this out; they focus on economic growth or inequality, but not risk. If Hacker's book is valuable for nothing else, it is valuable for focusing attention on risk where previously few people did.

To deal with this risk, we need to return to an insurance society. Like a lot of people, Hacker advocates health insurance similar to Medicare. He advocates not only unemployment insurance, but unemployment insurance that helps people transition from a creatively-destroyed career to a new one. Hacker doesn't have time to build out the argument -- actual policy prescriptions are confined to the final 10% or 15% of the book -- but he says that the economic profession is broadly agreed on the necessity for this kind of insurance.

The broader social impact of American insecurity often goes unremarked. One of my coworkers made an excellent point about it recently: in Europe, he says, you'll find far more little shops run by sole proprietors than you will here. He believes this is because there's a social welfare net that lets you take some risks that you just couldn't take in this country. Most important among the strands of the safety net, of course, is health insurance: insurance for a small business is frightfully expensive, so presumably a lot of small businessmen go without. It would be interesting to test the connection between bad-sense risk (the chance of economic collapse) and good-sense (entrepreneurial) risk.

The move from pensions to 401(k)s is another big thread in The Great Risk Shift. A large body of research suggests that people are terrible at judging their own long-term prospects. We systematically undersave (for that matter, I systematically undersave), we systematically underestimate the likelihood of a major life catastrophe, and we invest too much money in the company we work for. Pensions used to protect against this, by shifting the burden of risk-estimation onto the employer. Workers didn't have to figure out where the money went, they had no choice about whether to invest, and their nest egg was more stable as a result. Even making 401(k)s opt-out rather than opt-in makes a huge difference in how much we use them. Forced savings are good for us. Here's where everyone is obliged to mention Ulysses tying himself to the mast to ward off the allure of the Sirens. He foresaw his own weakness and protected against it. So should we. Government can help.

I think The Great Risk Shift will be mostly valuable in two directions:

1. Helping to guide conversations with non-believers during the health-insurance debate: we're not just talking about poor people getting sick here. We're talking about a much broader economic problem that can only be solved by joining forces with our countrymen.
2. The deeper research in the ample footnotes. I've found a lot of good stuff in there.

It's not a very good piece of rhetoric, though. When Hacker talks to Real People, he sounds like an academic rather than a beat reporter. Indeed, if you read the footnotes, it turns out that most of the Real People conversations are from other people's books. I don't think Hacker has much power as a polemicist: he's not going to talk with real people, or appeal to them very much either.

What I'd like is something like Jon Cohn's Sick: scholarly and yet passionate. (For a taste of Cohn's style, see his essay "Creative Destruction"). Hacker's not quite there, but I'm willing to give his earlier Off Center a shot.

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A cautious analysis of the present and a red flag warning of what needs to be done

Now in a newly revised and expanded edition, The Great Risk Shift: The New Economic Insecurity and the American Dream is a no-nonsense deconstruction of how current American policy has been systematically shifting economic risk from government and businesses onto the backs of individual people. Health coverage has become increasingly expensive and difficult to obtain; social security is relentlessly under attack; job security is a thing of the past; and some of the greatest risks and investments - such as years of expensive college training to prepare for a specific career - can be thoroughly upended with a shift in the labor market. The overused mantra of 'personal responsibility' is all too easily twisted into 'tough cookies for you if your child gets sick and needs expensive hospitalization.' Personal anecdotes are sprinkled throughout, yet the core of The Great Risk Shift is a big-picture analysis supported by the latest statistical trends. From the need to return insurance to its original purpose - protecting the individuals who most need it against catastrophic loss - to the pitfalls of a so-called 'ownership society', The Great Risk Shift is both a cautious analysis of the present and a red flag warning of what needs to be done in the immediate future to fight back against specific policies that are demonstrably harmful to society as a whole. Highly recommended.

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A bit too "academic", but well-done overall

This is not the easiest book to read, but the subject should hit home for a number of Americans and it's well-done.

Hacker shows how over time, government and corporate actions have led us to a point where just about every risk imaginable is being borne by individuals. Once upon a time, the government and corporations shared in the risk, but we're getting towards a point where that is not the case. With the stories he shares and the points he makes, one can see that it's no accident that stories abound of people who have lost just about everything - be it their retirement funds, their homes and any other savings they have. Oftentimes, something as simple as job loss due to a layoff or an injury/illness (not necessarily to the person, either, as a sick or injured child can do this as well) is what triggers it, and Hacker spends a good deal of time talking about health care since that's about as broken as anything in America.

None of this, of course, has been talked about as much as the "prosperity" of the past few years in the American economy, one that was a house of cards and is now in loads of trouble that anyone with common sense could have foreseen.

At the end, Hacker shares some ideas well worth considering. Cynic that I am, I don't expect our elected leaders to do that, especially as they've been bought by corporations left and right.

The book is not always easy to follow, as Hacker makes extensive use of statistics and at times puts several together, and it at times has the feel of an academic paper being presented at a conference of some sort. But that's a relatively small knock, and it's a book every politician needs to read and probably won't (or they will just dismiss it because they're out of touch and don't have to live the lives ordinary Americans do).

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reviews: page 1, 2, 3

America's leaders say the economy is strong and getting stronger. But the safety net that once protected us is fast unraveling. With retirement plans in growing jeopardy while health coverage erodes, more and more economic risk is shifting from government and business onto the fragile shoulders of the American family.
In The Great Risk Shift, Jacob S. Hacker lays bare this unsettling new economic climate, showing how it has come about, what it is doing to our families, and how we can fight back. Behind this shift, he contends, is the Personal Responsibility Crusade, eagerly embraced by corporate leaders and Republican politicians who speak of a nirvana of economic empowerment, an "ownership society" in which Americans are free to choose. But as Hacker reveals, the result has been quite different: a harsh new world of economic insecurity, in which far too many Americans are free to lose.
The book documents how two great pillars of economic security--the family and the workplace--guarantee far less financial stability than they once did. The final leg of economic support--the public and private benefits that workers and families get when economic disaster strikes--has dangerously eroded as political leaders and corporations increasingly cut back protections of our health care, our income security, and our retirement pensions.
Blending powerful human stories, big-picture analysis, and compelling ideas for reform, this remarkable volume will hit a nerve, serving as a rallying point in the vital struggle for economic security in an increasingly uncertain world.

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