People all over the world have concerns about the impact of
economic growth on their societies. There is no question that
people gain from growth. There is also no question that economic
growth changes the institutions of a society in profound ways, some
of which may be very unwelcome. But what is often not fully
appreciated is that strong social institutions improve the ability
of people to take advantage of economic opportunity and to
withstand the turbulence and strains associated with economic
change.
History shows that periods of change and greater access to new
ideas lead people to think differently-not just about economic
opportunity, but also about the social and political structures of
their nation. This rethinking can trigger a welcome surge of
excitement, creativity, and enterprise. People begin to challenge
outdated ideas and social arrangements that previously had been
universally accepted but now act as constraints. However, this
rethinking of institutions can also have a disturbing side. It can
lead to the weakening of institutions that are far more important
than people had realized-institutions that are essential for a
society to deal with and take advantage of the opportunities that
are available by access to the wider world.
Decades ago, people who lived in the more open economies were
not affected by new ideas from the outside to the degree they are
today under globalization. Communication between individuals was
limited and much slower. Ordinary people rarely traveled
significant distances. It is only recently that this has begun to
change. Consider this: Just 20 years ago, overseas calls
represented 5 percent of the U.S. telephone industry's revenues;
today, they represent 20 percent. Over those same 20 years or so,
international air travel literally opened up new vistas to ordinary
people in the advanced countries. And, of course, television has
saturated almost every home in every society with information,
ideas, and different visions of what people's lives could be like.
The outside world influences open societies as never before.
The institutions most under threat today are the family, the
organized practice of religion, and the many organizations that can
be classified as "community." Until recently, it was thought that
the erosion of these institutions was merely an unfortunate
byproduct of economic improvement and change-maybe even a necessary
byproduct. But now we are beginning to recognize that these
institutions actually are crucial to our ability to respond to
economic change. Experience suggests strongly that they play a
critical role in enabling us to take advantage of change rather
than being ground down by it.
While many Western countries display the characteristics I will
discuss here, I will use two particular countries to illustrate
some of my points-the United States and Britain. Both have
undergone changes in recent decades that have been shaped in large
part by the same kind of challenges now facing the newer economies.
The United States, of course, has long experienced the economic and
social changes associated with globalization. The people of the
United States have also been affected by the popular American
culture, which is now being exported through movies and television
to other countries and influencing their cultures. Britain's
experience is relevant because, since World War II, it has
undergone the wrenching changes associated with shifting its focus
from its empire to Europe. This access to continental Europe
triggered similar political and economic changes in countries now
changing their focus to the wider world.
The Family as Foundation for Social
and Economic Stability
In Britain and the United States, it is no exaggeration to say
that the family is on the brink of collapse. Today, the
illegitimacy rates in Britain and the United States are over 30
percent. And remember, that is their average rate. In the
African-American community in the United States, it is a staggering
69 percent. In other words, more than two out of three black
children in America today are born to unmarried women. We now have
black communities in American cities in which virtually every child
grows up without a father in the home. And the white population is
catching up fast; indeed, the white illegitimacy rate in the United
States is near where the black rate was about 30 years ago.
We should be aware that the collapse of family as an institution
can occur quite suddenly. Look at Britain. Between 1550-the time of
King Henry VIII-and 1950, the illegitimacy rate in England never
went above 5 percent, according to the best data available. But
since 1950, it has increased sixfold. Like Britain, the
illegitimacy rate in the United States did not exceed 5 percent
until 1960. Today, it is over 30 percent. And we should not think
we can blame it all on the Protestants. In Catholic Ireland, the
illegitimacy rate was below 1 percent until 1970. It is now 25
percent. Significantly, Chile and other Latin American countries
are also experiencing a rapid increase in their illegitimacy
rates.
There are many reasons for this alarming trend in illegitimacy.
One is ill-considered government policies. Welfare programs for the
poor in many countries have tried to give the greatest help to
broken families for whom the need is perceived to be greatest. This
seems very reasonable. But that help has encouraged family
instability and illegitimate births by effectively rewarding these
conditions. And easing divorce laws has not only increased the
breakup of existing families, but also appears to alter people's
desire to marry by devaluing the institution of marriage. Since
Britain eased its divorce laws in 1969, its first-time marriage
rate has fallen sharply.
In addition to the messages given by perverse government
policies, people in Western countries have come to think
differently about marriage and family in large part because of
ideas and pressures they encounter in the modern world. One
particularly strong influence is the media: People's customs and
ethics are challenged daily by what they see on television.
The enormous economic opportunities available to women, as well
as to men, in a rapidly growing international economy also place
enormous strains on families. The fact is that being flexible about
family obligations generally makes it easier for people to advance
in a changing economy; putting your family first generally makes it
more difficult to advance.
But so what? Why does this matter? Isn't the decline of family
just a lifestyle change that is the consequence of living in the
modern global economy? Isn't it a change that may upset
traditionalists but has no dire consequences, and may even allow
people to adjust more easily to today's demands and
opportunities?
Regrettably, the facts suggest otherwise. The reason for alarm
is that newer research indicates that children brought up without a
father face a staggeringly high risk of later social and economic
problems. These problems make them much less equipped to deal with
the opportunities and challenges of a growing, open economy.
In case you think I am exaggerating, consider this: Data from
the United States indicate that even after adjusting for family
income, children brought up in fatherless homes experience much
slower cognitive and verbal development; are far less likely to
succeed in school and far less likely to find good jobs and earn
good incomes; and far more likely to commit crimes, far more likely
to abuse their own children, and far more likely to end up on
welfare. In other words, the children of broken families today are
far less likely to succeed tomorrow-especially in a changing and
demanding economy.
Data from Britain and other countries show similar patterns.
These data underscore the critical economic function of families
pointed out by Nobel economist Gary Becker of the University of
Chicago in a recent speech in Venezuela. Becker described the
crucial role of families as a source of investment in the human
capital of the next generation. By human capital, he means not just
the knowledge and skills that parents pass down to their children,
but also the set of beliefs, customs, and ethics that strengthen
the ability of children in later life to withstand the pressures of
economic and social change. All of us know how important our own
parents were in shaping our values and strength of character. But
when the family institution crumbles, the ability of the next
generation to function is severely reduced. That's why, in the
United States and Britain, there is growing alarm about the
economic as well as the social consequences of the decline of the
family. It is noteworthy that those countries having unusually
strong family institutions today, such as the Asian nations, are
experiencing generally faster growth rates in the new global
economy than are the older Western countries. Moreover, within the
United States and Britain, the Asian community-with its stronger
families and lower illegitimacy rates-has been doing far better
economically than the rest of the population.
Not only is the institution of the family at risk in a changing
society, but a foundation of strong families is essential for a
nation to take full advantage of the opportunities presented by
economic change. Intact families are crucial economic units. In
fact, says Gary Becker, the data suggest that the long-term
economic benefits of family stability are so great that the value
to the national economy of a woman staying at home raising children
may, over the long run, actually be greater than the income of her
working husband.
The Relationship Between Organized
Religion and Freedom
What is true of the family is also true to a large extent of the
institution of organized religion. In Britain and the United
States, as in many other Western countries, the perceived value of
religious practice has declined in recent decades. Changes in the
economy and the access of people to new and challenging ideas have
had the effect of causing many people to think of churches and
religious practice as somehow outdated, or at least of little real
value. But one of the results of this attitude, like the growing
absence of two parents in a family, has been to weaken the ethical
and social foundation of these countries. And paradoxically, the
very freedom and opportunity that led people to reduce their
enthusiasm for religious practice has eroded the strong moral
foundation that people need in order to prosper and be happy in the
new era of freedom.
This circular relationship between freedom, strong religious
practice, and the ability to take advantage of freedom is
illustrated in an interesting way by the soul-searching now going
on in the Jewish community in the United States. For centuries,
Jews around the world have reached back to their religious and
ethical roots to help them withstand persecution. But the fear now
in the American Jewish community is that freedom and acceptance in
the United States means Judaism is at risk of disintegrating
through intermarriage and the abandonment of religious observance.
That in turn has made many in the American Jewish community worry
that Jews may begin to experience much of the economic erosion and
social problems that afflict other groups in the society. As a
rabbi put it recently in a synagogue sermon in Washington, D.C.,
"Our existence was threatened in the past because people hated us.
Now we are threatened because people love us so much they want to
marry us."
Like the data on families, the data on churchgoing also show
significant economic and social benefits associated with religious
practice. After adjusting for family income, for instance, people
who are regular churchgoers are more likely to be married and to
have stable and happy marriages. They are far less likely to have
problems in life with drug or alcohol addiction, or to commit
crimes, or to suffer illness. People who attend church regularly
also have more stable patterns of employment and experience
stronger income growth over time. The stabilizing influence of
religion is very strong, and it reinforces the stability provided
by the institution of family.
Not only does religious practice seem to help prevent social and
economic disintegration, but it can lead to a dramatic turnaround
for people whose lives have fallen apart. Studies in the United
States and Britain show remarkable successes for religious-based
anti-drug and anti-poverty programs. On the other hand, feelings of
alienation and confusion seem to accompany rapid economic change in
countries where religious institutions have grown weaker, such as
Britain. Consider the remarkable outpouring of public emotion in
Britain during the funeral of Princess Diana. The English are not
exactly known for displays of mass hysteria. What was particularly
interesting were the comments of many ordinary Britons in the
street who tried to explain their depth of emotion. In case after
case, people said that one of the main reasons they were so upset
was that they identified deeply with Princess Diana's sense of
betrayal, anxiety, and alienation in her daily life.
Interestingly, just as a recognition of the importance of the
family has begun to develop in Britain, the United States, and
other similar countries, recognition of the role and value of
religion also seems to be making a strong comeback. The United
States has always been a relatively religious country. But we have
seen a rapid growth of more fundamentalist Christian churches in
recent years, especially among middle-class and lower-income
people. The pace and uncertainty of life have caused many to
embrace churches with strong ethical and moral requirements. In a
recent example of this development, almost a million Christian men
came to Washington in a remarkable display of repentance and
emotion, and expressing their desire to strengthen their own
families and communities through a greater commitment to Christian
values.
So it is that religious practice has a critical economic role,
just like families. It is crucial to the ability of a society to
deal with the strains that accompany economic opportunity.
The Value and Protection of the
Community
The third institution that plays such a role is the collection
of organizations and associations that can be loosely called
"community." What do I mean by the word community? I mean those
formal or informal associations that bind people together in some
way. It can be the neighborhood you live in, with the relationships
and way of life that give the place an identity of its own. It can
be a trade union, in which workers band together. Or it can be a
church, where the institution not only serves a religious purpose,
but also gives a sense of identity and stability to its
members.
These institutions of community fulfill three functions that are
particularly important in a changing world:
First, they enable people to act together for some common
objective or simply to protect each other from the pressures and
uncertainties of a changing world. In this way, they reduce anxiety
and the feeling of being overwhelmed by change. One of the ways in
which communities typically do this is by including a system of
rules or codes of behavior. Often these expected behaviors are not
even put in writing. Think about our own neighborhoods: We have to
behave in certain ways to be accepted, and these invisible rules we
follow strengthen our communities and enable them to function
effectively. The rules and codes provide a strong framework or
skeleton that enables individuals to gain strength from the
structure itself.
Second, the institutions of community serve to reinforce
the general ethics of the society. Thus, in combination with strong
families and a strong sense of religious commitment, communities
are another element in a social system of ethics that provides a
stable foundation helping people to withstand change.
The third related function of the community institution
is that it acts as an intermediary or bridge between the individual
and the larger, more impersonal institutions of a society, such as
government or large businesses. This feature of community
institutions makes them in a sense representative bodies, as well
as organizations that may provide services on a more human scale to
the individuals within those communities. (I will say more about
this in a moment when I talk about how we can strengthen societies
to deal with change.)
The desire of individuals to be part of a community, for the
reasons I mentioned, can lead to community institutions that are
sometimes quite unusual and occasionally very disturbing. Let me
mention three examples to illustrate this point.
In Korea and other Asian countries, sophisticated loan
associations developed over the years when banking was primitive in
order to capitalize new ventures. These loan associations had very
strict codes of behavior regarding the obligation to pay back loans
and to lend to the common pool of capital. People from these
countries emigrated to the United States, and in many American
cities they set up the same institutions-with their own codes of
behavior-in the neighborhoods where they had settled. So today, in
many relatively poor parts of American cities, there is an Asian
loan and investment system running in parallel with the official
banking system. Significantly, the strong social obligations on
borrowers mean these associations are quite prepared to lend in
high-risk neighborhoods, unlike the official banks. Thus, in many
American cities, successful Asian enterprises exist in
neighborhoods where other groups that lack this strong community
institution, such as African-Americans, find it extremely difficult
to start and succeed in business.
The second example concerns the American West. Everyone is
familiar with movies showing covered wagons traveling west to open
up the wilderness, and with the stereotype of the rugged,
individualistic American pioneer, depending entirely on his own
efforts to be successful. But in fact, the wagon trains moving west
were very tightly knit communities. Most of these groups actually
had a written constitution and a system of strict rules and
expectations for their members. Everything was extremely formal and
collective. They were very strong communities. They just happened
to be mobile communities. And the pioneers formed these tight
communities with their rules to enable them to deal with unexpected
dangers and to take advantage of vast opportunities. Without these
artificial but strong communities, many of the individuals in those
wagons literally would have perished.
A third example of communities is a very negative one; namely,
the urban gangs. Increasingly, in American cities and in the cities
of other countries, we see gangs of young men exploiting their
neighborhoods. But one of the interesting features of these gangs
is that they have very strong internal rules and codes of behavior.
In fact, when you talk at length to former gang members, as I have
done, you find that many young men gravitate to gangs precisely
because they offer the firm rules and identity that these young men
lack in other parts of their lives. Invariably, the members of
gangs are people whose own families have disintegrated, and the
other institutions around them have eroded or collapsed.
The reason I mention this last example is because it underscores
the fact that people are determined to belong to community
institutions, even bad ones, because they want the value and
protection that comes with structure. So if good community
institutions decline, bad ones will take over.
The problem today in many countries facing change is that the
community institutions that are so important for the reasons I have
mentioned are under enormous pressure. One reason for this is
simply that modern governments and modern people tend to overlook
the importance of communities and community institutions and thus
do not take into account how economic and social change can
undermine them. This often happens in the case of urban
development. All too often, urban planners completely overlook the
subtle but crucial importance of strong neighborhoods and community
institutions when they develop new cities and neighborhoods. As
cities grow, this can lead to alienation and severe social
problems. It means that the people affected are less able to
withstand the pressures of change. This can lead to severe
political and social problems, and sometimes even to a radical
reaction against modernization.
How Policies Promoting Strong Social
Institutions Promote Economic Prosperity
What, then, can be done to make the impact of globalization and
economic growth on society as benign and beneficial as possible?
How can we make sure that economic growth and opportunity can be
reconciled with the maintenance of traditional values and
institutions-and ensure that the institutions are strengthened to
be prepared to take advantage of new economic opportunities? And to
the extent that government is involved in designing policies to
deal with these questions, what are the general principles that
need to be kept in mind?
We should start answering these questions by applying to social
policy the principle that Hippocrates applied to medicine: First,
do no harm. The track record of governments in general shows that
they have ignored Hippocrates' advice. For example, governments all
over the Western world have constructed welfare systems that
undermine the family as an institution. The United States has just
gone through a wrenching debate over welfare reform. As a result of
that debate, it is now generally accepted that when a welfare
system ignores the crucial importance of preserving intact families
and rewarding work, it helps to increase the illegitimacy rate to
the devastating levels I mentioned earlier. But even taking
corrective action now means that the United States is still going
to experience many decades of damage resulting from its
ill-conceived welfare systems of the past.
It is far better, of course, to avoid bad welfare policies in
the first place. There are always calls for a stronger social
safety net to ensure that economic growth does not leave people
behind. But we must make sure that any approach to social services
and social welfare specifically seeks to protect and strengthen the
family unit, rather than focusing on strictly shattered families,
because if it focuses only on broken families, we will simply get
more of such households.
Governments also generally have had a poor record in pursuing
tax policies designed to strengthen the family while spurring
economic improvement. In both Britain and the United States, the
Social Security system is a good example of tax policies that have
resulted in lower savings by ordinary families and a retirement
system that has reduced family wealth creation rather than
increasing it.
Governments in many countries have, in addition, done much to
weaken the institution of marriage through easier divorce laws. It
is very important that we do not fall into this trap of assuming
that a more liberal approach to marriage is somehow the more modern
thing to do. In countries around the world, we are learning the
hard way that making marriage easier to dissolve also makes it
appear a less valuable institution to the young.
Furthermore, governments have tended to weaken the social
function of community institutions and religious organizations,
usually unintentionally and often while actually trying to
strengthen these organizations. A friend of mine has characterized
the typical result of government action in this area as "The
helping hand strikes again." This unintended effect can occur for
several reasons. One of the most common reasons is government's
desire to raise the quality of services provided to the needy.
Governments in Britain, the United States, and elsewhere, for
instance, have introduced licensing and other regulations for
social service providers with the intent of improving standards.
However, the most effective community and religious institutions
providing social services tend to be operated by people without
professional qualifications in those areas. So the result of
regulations is that many successful organizations are actually
barred from helping people-or at least from providing services
through any government program.
Even policies designed to privatize social services can have
this effect. In Britain and in the United States, governments often
have privatized social services through contracts with private
professional organizations with no particular connection to any
community. The result has been the growth of expensive and
impersonal social service businesses-businesses that lack the
values and local identity of traditional community organizations.
Worse still, these private organizations typically lobby government
to increase licensing and other barriers in order to freeze out
competition from the traditional organizations. Just as disturbing,
even when government decides to privatize by contracting with the
traditional community institutions, the usual result is that these
institutions become more and more dependent on government, and the
government's agenda becomes their agenda. Slowly but surely, they
cease to be true community institutions and instead become agents
of the state.
In some cases, government has literally eliminated community
institutions, as in the case of urban development. In city after
city in Western countries, well-meaning attempts to improve
neighborhoods have been accomplished with bulldozers and new
construction. But the bulldozers do not just remove unsightly
buildings. They also destroy the less visible community
institutions that hold a neighborhood together. The result in some
cities has been a distressing paradox: an urban wilderness of
violence and social problems in neighborhoods where the buildings
win architectural awards.
Preserving the Family
What should policymakers do, besides doing no harm? The most
important goal, without question, should be to preserve the family
by strengthening marriage. The family, as I have tried to show, is
the most important institution in dealing with change. It is
important both as a means of protecting moral values and traditions
and as the means of providing children with the human capital they
need to succeed in adulthood. But while preserving the family must
be the primary goal, this can be accomplished only in a society in
which the other institutions I referred to are healthy.
If we think that only the government can accomplish this
objective, or is even the most important tool to do so, we are
likely to fail. The most important way to strengthen all these
institutions is to raise understanding through public discussions
so that ordinary people instinctively understand their importance
and act accordingly. So I would suggest that we take steps to
foster a much more intensive public discussion of the critical
economic and social role of families.
This discussion should include a thorough discussion of the
essential but very different roles of husbands and wives. I don't
want to sound like a male chauvinist, because the role of the
mother in equipping children to survive in the changing world is
vital, but I do think that much of the discussion should now focus
on the role of the father. In recent decades, the father's role has
become less and less understood, with men being seen increasingly
as merely a source of cash for a family. That is one reason why
government policies have unwittingly undermined the role of fathers
and helped to trigger the collapse of families and the institution
of the family in general. Even men often underestimated their own
roles and obligations in contributing to the human capital of their
children, as role models and guides. One of the strong themes of
the Promise Keepers organization is to remind men of their role and
their obligation in holding a family together.
Much of the erosion of understanding of the dynamics of families
stems from the trivialization of the institution on television. So
it is important to force a debate within the media. Look at the
campaign by some public figures, such as former Education Secretary
William Bennett, to embarrass media company executives by
confronting them at stockholders' meetings with examples of the
trivial and destructive programs they are financing. Such efforts
are slowly causing changes in program content without regulation.
Meanwhile, in America we are introducing a system of television
ratings that at least informs parents about the content of
particular programs.
A public discussion should, of course, also examine the role of
religious and community institutions. It is important to study
these institutions and to talk about them so that there is a better
understanding of their importance. Politicians may or may not have
a role in this debate. In Britain during the 1980s, Margaret
Thatcher constantly emphasized the importance of these fundamental
institutions, and did much to trigger the rethinking that is now
continuing. Prime Minister Tony Blair also is not embarrassed to
talk about values and family. In America, on the other hand, while
politicians vigorously discuss these issues, I think it is accurate
to say there is a widespread degree of public cynicism whenever
politicians talk about values.
On the other hand, church leaders and business leaders have the
opportunity and platform to push the public debate. In fact, I
believe business leaders may be placed best of all, precisely
because ordinary people do not typically expect them to talk about
anything other than commerce.
Reforming Welfare and Tax Policy
So what should the government do? Several things besides doing
no harm. The first is to make sure the welfare system promotes
marriage and work, not illegitimacy and non-work. If we look at the
evidence, there seems to be three keys to staying out of poverty.
First, finish school. Second, get a job-any job-and stick with it.
Third, get married and have a job, or have a spouse with a job,
before you have children. So for a welfare system to work, it must
have financial incentives and-just as important-social pressures
reflecting these three keys. In practice, this means three policy
directives:
-
First, all benefits for people
with school-age children must be tied to work-ideally, work in the
private sector but, if necessary, public service.
-
Second, government must focus on
achieving a system of sound, basic public education so people
acquire the fundamental skills they need to be trainable in the
workplace.
-
Third, taxes and benefits should
be such that people who marry, have children, and work earn higher
incomes than those on welfare.
Governments also can change tax laws and Social Security
programs to strengthen the ability of working families to build
savings and assets to pass on from one generation to the next. In
the case of Social Security, of course, that is exactly what has
been happening in Chile and Britain, among other countries. The
Chilean and British reforms are a model pertinent to all, and the
work of people like Jose Piñera, the Chilean Minister of
Labor responsible for privatizing the state pension system, has
contributed to a profound change in the public debate in the United
States.
Empowering the Community
The broad way in which government can strengthen families is
by giving them far greater control, especially financial control,
over the design of services they receive and the choice over who
should provide those services. In the United States, we often call
this empowerment. The simple fact is that institutions grow weaker
when they are not able to exercise real power. That has been
increasingly so with the family. But there are ways in which policy
reforms can change the power structure to strengthen the role of
families.
The same is also true of the social role of community and
religious institutions. These institutions can be strengthened by
giving ordinary people the ability to vote with their feet by
deciding, as individuals, which institutions and organizations will
receive money and play a crucial part in their lives.
Let me emphasize that what I am talking about is not the same as
decentralization or privatization, although it may involve both.
Both decentralization and privatization are needed to achieve
democracy and economic improvement. But decentralization can mean
bad government that is merely closer to your community. That
certainly is better than remote government, but it still may not
empower families and stimulate local institutions.
Nor does privatization necessarily strengthen these
institutions, as I mentioned earlier. The key to privatizing social
services is to avoid contracting with organizations as the form of
privatization, and instead to focus on some form of vouchers.
Vouchers put financial power in the hands of ordinary people,
rather than government officials, to decide who will provide the
services. And we know from experience that if they are allowed to,
people will tend to turn to local organizations they know. Just as
important, and unlike contracting, vouchers mean the provider of
services must satisfy the people served, not the government, in
order to prosper. That is why in education, health care, housing,
employment training, and other areas, vouchers-not private
contracting-is the right way to privatize.
Consider some practical examples of what I have described.
One such example is in housing. In addition to vouchers and
housing subsidies to help renters, housing policy designed to
increase ownership among low-income people has been a powerful way
to strengthen community institutions. I have seen several clear
instances of this. In the early 1970s, and more aggressively in the
1980s under Margaret Thatcher, Britain embarked on a policy of
selling public housing to tenants at deep discounts. The effect has
been quite remarkable. You can walk through neighborhoods in
Britain that once were 100 percent public housing and pick out the
houses that have been purchased under this program. The doors are
freshly painted. Gardens are improved and maintenance is
up-to-date. And the neighborhood has taken on a new life because
people now have an ownership stake in the future.
In the United States, we have been experimenting with tenant
management and ownership of public housing. While ownership has
been transferred in only a few instances, control of the
organization and management of buildings has been transferred to
tenants in many cases. One result of transferring the property
right of management is that buildings that were once decaying are
now being properly maintained. Empowering tenants in this way has
given them the incentive to work collectively to improve their
future. In several instances, resident groups have taken steps to
develop businesses and social service organizations within their
neighborhood. In other words, the transference of control itself
has strengthened or actually created the community institutions
that are so crucial in dealing with change.
Perhaps the most remarkable housing example of all for me came
on a trip I took to the Philippines some 15 years ago. A World Bank
official took me to one of the squatter communities on the edge of
Manila. In this area, the World Bank had merely provided concrete
foundations and water and sewer connections to a number of
individual sites. But crucially, in return the government had given
the squatters either property rights or a 99-year lease on a site.
Those two steps transformed the area. Instead of the typical wooden
shacks, there were three- and four-story buildings. The official
told me, "We used to give housing aid to places like this, and then
I would come back a few years later to see how the housing had
deteriorated. Now we do this and I come back to see how the
neighborhood has improved." The crucial change, of course, was
ownership.
It is also very important to permit people the widest latitude
in controlling not just their own property, but also the use of
buildings in the community in which they live. Such freedom often
leads to a mixture of homes and businesses that urban planners
would consider chaotic. But experience shows this freedom is what
leads to strong communities. By contrast, the gleaming, orderly,
and carefully planned communities built by many governments in
Latin America and elsewhere have rarely led to strong stable
communities.
Another practical example is in health care. Communities can be
strengthened, perhaps surprisingly, by wise health care policies.
One element of a successful health care program is to give much
wider choice and financial control to patients. That has been a
trend in a number of countries, and you have taken steps in that
direction here in Chile. Choice and competition in health care
stimulates innovation and efficiency.
But there is another aspect of reform to consider. I mentioned
much earlier that one of the crucial features of community
institutions is that they act as a humanizing bridge between the
individual and very large impersonal institutions in society. In
health care, there seems to be a desperate need for such
intermediary institutions. In the United States, we have a strong
and competitive health care market, and we have seen the growth of
very competitive medical business organizations. But there is a
growing concern among Americans that these health organizations are
remote and impersonal. Increasingly, people say these organizations
do not take into account the anxiety of ordinary people that stems
from their confusion about health care and their feeling of
vulnerability when they are sick. That has led to increasing
demands for controls and regulations on these private companies. In
other words, ordinary Americans feel increasingly powerless in a
provider-dominated market, and they want the government to protect
them. But needless to say, this regulation will slow down
innovation and increase costs.
A better way to deal with this public concern would be to make
it easier, through deregulation, for intermediary institutions that
are part of the community to act as organizers of health care. By
this, I do not mean they should practice medicine. What I do mean
is that sophisticated and fairly large community institutions, such
as churches and unions, could act as sophisticated buyers of health
care for their own members. The individual would not be locked into
a particular intermediary, but could choose between different
membership organizations.
As it happens, about 10 million government workers and
legislators in the United States are actually under such a system.
In this system, unions and other employee-sponsored organizations
negotiate with insurers, hospitals, and even individual doctors on
behalf of groups of employees. The important point is that these
organizations are part of the community. They are not artificial
structures developed by government, nor are they medical or
insurance organizations. This arrangement has led to a very
different and more harmonious relationship between the employees
and the health care system. Right now, there is great interest
outside the government employee system for organizations such as
churches in the black community to carry out the same intermediary
function.
Conclusion
I have suggested ways to stabilize the institutions and values
of a society in order to take advantage of economic change rather
than being weakened by it. Many developing countries do not yet
face the calamity we are now dealing with in the United States and,
to a lesser extent, Europe. The basic institutions I have
emphasized as critical to dealing with change are largely intact in
these developing countries. If they were as strong in countries
like the United States and Britain, there would be less turmoil and
anxiety today.
To put it another way, although the so-called First World
countries of Europe and North America may have the most advanced
economies, their social institutions are not well-positioned to
deal with a changing world. It is the countries of South America
and Asia, on the other hand, that could be said to have established
a strong "first world" family and community infrastructure.
Stuart
M. Butler, Ph.D., is Vice President of Domestic
Policy at The Heritage Foundation.
He spoke at the ICARE (Instituto Chileno de Administracion
Racional de Empresas) annual conference in Santiago, Chile, on
October 28, 1997.