The Insurance Institution of Last Resort

The insurance protection of last resort

Societies hold together by more or less agreeing on a common myth. By myth I mean broad formulations of common interest and of how the world works, what the future looks like. They are broad and general formulations too abstract to be proven by empirical evidence. Rather, they are useful conventions of public discourse that enable people to make plans together and come to an understanding of how they share common interests. I say “more or less” because some people believe these myths while others are willing to work with them even if they aren’t sure about them, and maybe others work with them simply to get along because in fact they don’t really believe them; to disagree openly creates too much trouble. That’s how societies work, how collectivities of self-interested, self-oriented human beings work together.

The common myth of the Republican Party for some time has been that business – private industry – is more efficient than government. Bureaucracy costs too much, they suppose. Whatever has to be done can be done better, more efficiently, and cheaper than government. So they promote the idea that whenever possible government should be replaced by private industry. This is a proposition too abstract to prove even though a few scholars claim to have gotten results that make this view plausible.

So many people believe it. I even remember hearing Mark Shields on the News Hour a couple of years ago say that the Republican Party doesn’t believe in government. He has never hinted such an accusation since that I know of; I suspect he got some flack for saying it. But even if it is unfairly broad, the charge may be almost true for the most extreme elements on the Far-Far Right.

I don’t know for sure but I believe there were similar opinions among the Wall Street and Banking barons in the 1920s. What seems to have been true, in any case, was the belief that the market could solve most of the problems of the world. In any case, it was flourishing.

The prosperity of the 1920s however masked another rarely stated myth that lies behind most publics in the modern age: When things go wrong people demand that the government do something. When the market crashed and the banks failed the American people demanded that the government do something. And in fact Hoover’s administration started programs for the public that did help, but they came too slowly and too late. FDR became President by running against Hoover for the next four terms. He claimed to be representing the common man and boasted that the fat cats hated him. That was because whatever the myth was in the 1920s, in the 1930s the American people demanded that something be done. By the government.

The government is the insurance institution of last resort.

I fear the Republicans have forgotten that. If things turn bad they may have to pay for it as the Republicans did in the 1930s.