Not American Capitalism or “Welfare State Socialism” but an Economy
That’s Working for a Few or Many
By
Robert Reich
For years Americans
have assumed that our hard-charging capitalism is better than the
soft-hearted version found in Canada and Europe. American capitalism might be a
bit crueler but it generates faster growth and higher living standards overall.
Canada’s and Europe’s “welfare-state socialism” is doomed.
It was a questionable
assumption to begin with, relying to some extent on our collective amnesia
about the first three decades after World War II, when tax rates on top incomes
in the U.S. never fell below 70 percent, a larger portion of our economy was
invested in education than before or since, over a third of our private-sector
workers were unionized, we came up with Medicare for the elderly and Medicaid
for the poor, and built the biggest infrastructure project in history, known as
the interstate highway system.
But then came America’s
big U-turn, when we deregulated, de-unionized, lowered taxes on the top, ended
welfare, and stopped investing as much of the economy in education and
infrastructure.
Meanwhile, Canada and
Europe continued on as before. Soviet communism went bust, and many of us
assumed European and Canadian “socialism” would as well.
That’s why recent data
from the Luxembourg Income Study Database is so shocking.
It’s difficult to make
exact comparisons of income across national borders because real purchasing
power is hard to measure. But even if we assume Canadians and the citizens of
several European nations have simply drawn even with the American middle class,
they’re doing better in many other ways.
Most of them get free health care and
subsidized child care. And if
they lose their jobs, they get far more generous unemployment
benefits than we do.
(In fact, right now 75 percent of
jobless Americans lack any unemployment benefits.)
If you think we make up
for it by working less and getting paid more on an hourly basis, think again.
There, at least three weeks paid
vacation as the norm, along with paid sick leave, and paid parental leave.
We’re working an
average of 4.6 percent more hours more than the typical Canadian worker, 21
percent more than the typical French worker, and a whopping 28 percent more
than your typical German worker, according to data compiled
by New York Times columnist Nicholas Kristof.
But at least Americans
are more satisfied, aren’t we? Not really. According to opinion surveys and interviews,
Canadians and Northern Europeans are.
They also live longer, their rate of infant mortality is lower,
and women in these countries are far less likely to die as
result of complications in pregnancy or childbirth.
But at least we’re the
land of more equal opportunity, right? Wrong. Their poor kids have a better chance of getting ahead. While 42 percent of
American kids born into poor families remain poor through their adult lives,
only 30 percent of Britain’s poor kids remain impoverished – and even smaller
percentages in other rich countries.
Yes, the American
economy continues to grow faster than the economies of Canada and Europe. But
faster growth hasn’t translated into higher living standards for most Americans.
Almost all our economic
gains have been going to the top – into corporate profits and the stock market
(more than a third of whose value is owned by the richest 1 percent). And into
executive pay (European CEOs take home far less than their American counterparts).
America’s rich also pay
much lower taxes than do the rich in Canada and Europe.
But surely Europe can’t
go on like this. You hear it all the time: They can no longer afford their
welfare state.
That depends on what’s
meant by “welfare state.” If high-quality education is included, we’d do well
to emulate them. Americans between the ages of 16 and 24 rank
near the bottomamong rich countries in literacy and numeracy. That
spells trouble for the U.S. economy in the future.
They’re also doing more
workforce training, and doing it better, than we are. The result is more
skilled workers.
Universal health care
is another part of their “welfare state” that saves them money because healthier
workers are more productive.
So let’s put ideology
aside. The practical choice isn’t between capitalism and “welfare-state
socialism.” It’s between a system that’s working for a few at the top, or one
that’s working for just about everyone. Which would you prefer?
ROBERT B. REICH, Chancellor’s Professor of Public Policy at
the University of California at Berkeley and Senior Fellow at the Blum Center
for Developing Economies, was Secretary of Labor in the Clinton administration.
Time Magazine named him one of the ten most effective cabinet secretaries of
the twentieth century. He has written thirteen books, including the best
sellers “Aftershock" and “The Work of Nations." His latest,
"Beyond Outrage," is now out in paperback. He is also a founding editor
of the American Prospect magazine and chairman of Common Cause. His new film,
"Inequality for All," is now available on Netflix, iTunes, DVD, and
On Demand.