Thursday, August 26, 2010

Avoiding Cloward and Pivens

The Cloward and Pivens Strategy is a method where one overwhelms social services with hopes that the disruption would afford an opportunity to grab power and affect change.

The Cloward and Pivens strategy is in vogue these days as people have finally come around to discussing the radical education of our current president.

I've been familiar with Alinsky, Cloward, Pivens and a whole slew of progressive thinkers for decades.

Figuring out how to over come Cloward and Pivens is the single biggest obstacle for a Medical Savings and Loan.

The MS&L helps people pay for their health care with a combination of health savings accounts and guaranteed loans. The money for the loans comes from the savings accounts. The loans are a money loser for the savings accounts. This loss is presented at the premium policy holders pay to have access to guaranteed loans.

Community organizers can overwhelm a Medical Savings and Loan by inducing people to take out large loans that they have no intention of repaying.

The surge in unpaid loans would dry up funds for the rest of the folks in the medical savings and loan and would lead to a business failure.

Community Organizers aren't the only ones aware of Cloward and Pivens. Insurance companies with political clout can engineer regulatory change in ways that make the market unpredictable for small insurance companies. Regulatory changes can allow them to off load high risk patients and structure the regulatory regime in ways that that swamp competitors.

The reason we see so little competition in the insurance market is because the big companies have been able to define the market in ways that drove out competition.

A primary reason that I never tried to set up a Medical Savings and Loan is that I am certain that any attempt to do so will be immediately faced with Cloward and Pivens style attacks.

My fears might be a bit exaggerated. Risks are relative. A medical savings and loaed is better prepared to stave off an attack than a similarly sized insurance company.

In pooled insurance, the insurance company owns the risk. With such a strategy, people place there money in a pool. A Cloward and Pivens attack exhaust the pool making the insurance company unviable. Policy holders simply see their insurance company collapse and they are left without coverage.

In the Medical Savings and Loan, the policy holders own the risk. The money for the loans coming out of the savings accounts in real time. A Cloward and Pivens attack would show in real time. The policy holders would see what is happening to their money and might confront the community organizers orchestrating the attack.

Assuming that knowledge is power, the policy holders of the MS&L would have more knowledge and might be more powerful.

It might be possible to structure the medical savings and loan in ways to reduce ill effects of attacks.

My original business model for the Medical Savings and Loan had one company maintaining both the savings accounts and loans. The single company business model creates a single point of failure.

The best way to solve this problem is to create a distributed model in which the savings and lending accounts are held by different corporate structures. The lending accounts could be held by a different company than than savings accounts.

The distributed model eliminates the single point of failure. Even if the medical savings and loan failed, the clients would have their money safe in a bank of their choosing.

The distributed model reduces the single points of failure. Of course, the Cloward and Pivens attack was designed as an organized systemic attack.

In the Cloward and Pivens attack against the mortgage industry, community organizers corralled a large number of banks into accepting questionable loans.

Although there is no way to stop a Cloward and Pivens attack, a distributed Medical Savings and Loan is better prepared to stave off the attack than a standard insurance company. The MS&L is relatively more secure than insurance.


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