Thomas Friedman's 401(k) Agenda

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Wednesday, 01 May 2013 11:51

Thomas Friedman is probably best ignored, but there are people who take him seriously. Today his NYT column touts the "401(k) world" where Friedman says:

"But this huge expansion in an individual’s ability to do all these things comes with one big difference: more now rests on you."

The gist of the argument is that people are more exposed to risk so that means that they can fall farther or, in principle, rise higher than before all the wonderful new technologies that leave Friedman breathless.

Naturally, just about everything Friedman has to say is wrong or misleading. First and foremost, wonderful new technologies are not new. We have been seeing breakthroughs in technology for the last two hundred years. Have the last decade's been more wonderful and awesome than the breakthroughs of prior decades?

How does the Internet compare to development of the telegraph, the telephone, radio, television?  I have a job, so I'll let the Thomas Friedmans of the world worry about that one.

The more fundamental point is that the 401(k) world is a policy choice. Other countries, some of which are doing much better than the United States by most measures (e.g. Germany, Denmark, Canada), have much more extensive social welfare states, providing not only better retirement security, but national health care coverage, and substantial support for child care.

If we go the 401(k) world route it is not because of Friedman's connectivity or even hyper-connectivity; it's a policy choice. There are many good reasons for choosing the social welfare state route. Among others, it saves huge amounts of money because universal programs like Social Security and Medicare are far more efficient than their 401(k) private sector equivalents.

Friedman obviously prefers the 401(k) route, which happens to make some people in the financial and health care sector very rich. But no one should be confused by Friedman's confusion, this is his political preference, it has nothing to do with the type of world given us by technology.