The Birth Of Social Security

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Social insurance was first effectively conceived in Bismarck’s Germany, largely by the Iron Chancellor himself, to halt the growth of German socialism. It was “to bribe the working classes … to regard the State as a social institution … interested in their welfare,” as he once said, that Bismarck sponsored a health insurance law in 1883, accident insurance laws in 1884 and 1885, and an old-age insurance law in 1889, all of them compulsory contributory insurance schemes involving the build-up of reserves. From Germany, compulsory social insurance spread to Austria (1888), Hungary (1891), Luxembourg (1901). England’s Old Age Pension Act was passed in 1908 and was followed, in 1911, by a comprehensive National Insurance Act, which instituted national health insurance and unemployment insurance. The British insurance schemes, it should be pointed out, differed from the German in that the British government participated financially in the enterprise: payments were made out of the general tax revenues into insurance funds.

Meanwhile, in the United States, though the Western frontier had ceased to exist by 1900 and the nation had become an industrial power, agrarian frontier attitudes continued to prevail in the popular mind. Self-reliance and private, voluntary charity were deemed morally good; social welfare was deemed morally bad (it “destroyed initiative,” it “weakened character”); and since the frontier placed a premium on youthful hardihood, there was a tendency to neglect the indigent elderly. Not until the second decade of the present century, largely through the activities of the American Association for Labor Legislation (AALL), established in 1906 to lobby for laws beneficial to industrial workers, did America even begin to consider seriously the need for social insurance that an advanced industrialism brings with it.

AALL’s founders, inspired by the German and British examples of social legislation, were mostly academics, of whom two of the most prominent, both from the University of Wisconsin, were political scientist Richard Ely and economist John R. Commons. The latter secured the appointment of a former student of his, John B. Andrews, as the organization’s executive secretary, a post Andrews retained until his death in 1943.

From the outset, therefore, AALL’s operations were greatly influenced by what came to be called the Wisconsin Idea. This involved close collaboration between government and university in the business of the state - an idea born of the physical proximity of capitol and university in Madison, and of the fact that Wisconsin politics were dominated by a great Progressive, the elder Bob La Follette, at a time when the university had an exceptionally able faculty. AALL’s principal founders were practical-minded men of good will, inclined to deal with immediate problems in their own immediate terms, with no great concern for “underlying” principles or “overall” ideas.

But there was also among AALL’s charter members a man, then chief actuary and statistician of a large insurance firm, who greatly differed from the Wisconsin contingent in almost every respect. Isaac M. Rubinow was a socialist by political conviction and an idealist in both the common and philosophical meanings of the term. Born a Russian Jew, he immigrated to New York in 1893, when he was eighteen, graduated from Columbia two years later, took an M.D. from New York University in 1898, and then practiced medicine for several years among New York’s poor. In 1903, having become convinced that the health horrors he daily encountered were at base a socioeconomic problem, not a medical one, he abandoned his medical practice in order to devote himself to what he called the “continuous and obstinate agitation for social insurance.” By the mid-teens he had written two classic books in his special field— Social Insurance (1913) and Health Insurance (1916)—in which he was eloquent in arguments for social approaches to social problems, caustic in his denial that “voluntarism” or “individualism” had validity as other than subsidiary ways of dealing with the welfare needs of an advanced industrial society.

It was inevitable that such a mind often would disagree profoundly with the policy line of Commons and Andrews. Rubinow did so with regard to the first two of AALL’s major campaigns, that for workmen’s compensation, launched in 1911, and that against unemployment, launched in 1914. In both cases, in model legislation pressed upon the states, the Commons Andrews leadership placed its major emphasis on prevention of the evil (industrial accident, sickness, unemploymen t) rather than on compensation of the injured: the compensation provisions were designed to “stimulate both workman and employer to reduce the risk,” as AALL’s official publication put it. This was a mistake, said Rubinow: prevention and insurance were “two distinct social efforts” that, tied into the same package, confused and corrupted one another. Both workmen’s compensation and unemployment insurance ought to be conceived frankly and wholly as insurance schemes, he said, designed to protect the individual worker against risks that are “inevitable” in “economic activity.”