When was it possible to institute social democracy?

Notably, almost all the foreign programs that American social democrats envy were enacted during Europe’s long post-war economic and demographic boom. That meant that the initial cost of these systems was fairly low — young people don’t need much in the way of health care or pensions, and economies at full employment don’t spend a lot on unemployment insurance or job retraining. As incomes soared, it was comparatively easy for government to skim some of the surplus for their new social insurance schemes, because even as their taxes went up, workers still got to take more money home every week. Governments ran into problems when the boom stopped, of course, but by then, political sentiment had cemented those programs in place.

What was easy in 1960 looks herculean as 2020 approaches. Economic growth has slowed, and populations are aging, which raises the cost of any proposed program and requires you to fund heavy losses on someone to fund it, either workers in those industries, or taxpayers. As psychologists tell us, people are “loss averse” — they care much more about losing something they have than about equivalent potential gains. Given the mammoth cost of socializing the U.S. economy now, and the huge number of people who face substantial losses, I’d argue that we should probably change “herculean” to “impossible.”

That is from Megan McArdle at The Washington Post.

Comments

In James Sheehan's "Where Have All the Soldiers Gone?", one argument is basically that the rigors of wartime hardship and production needs were the catalyzing force for the creation of social democracies and welfare state systems. Arguably to put those in place in the US would require a severe national crisis that shifted the equilibrium in favor of redistribution.

Perhaps even more important is that, in Europe, the WW II had much the connotation of a war of the "common man" against the supposed "ubermenschen" - these created an environment ideologically favorable to income redistribution (and the fact that in countries like France sizable portions of the owner class were indeed collaborationist - the Commies, also, at first, but they changed sides in time - helped)

Much European welfare state development happened before WWI.

Exactly, and the paternalistic welfare state introduced by Bismarck (extending Prussian models dating back to as early as the 1840s) was largely a defensive measure by a conservative government against potential social unrest. Likewise, the basis for the UK system was established by the (large-l) Liberal Asquith, creating a bulwark sustained by both Liberals and Conservatives against a potential Labour government which proved successful for decades.

'almost all the foreign programs that American social democrats were enacted' during Bismarck's post war era.

'young people don’t need much in the way of health care or pensions'

Well, considering that the German systems started in the 1880s, absolutely everyone born in 1880 has been dead for decades - though oddly, the systems are still in place, surviving two world wars, and multiple changes in governments, from a monarchy to a democracy to a genocidal totalitarian horror and now back to democracy.

'What was easy in 1960 looks herculean as 2020 approaches'

Hilarious in light of the actual history of social democratic programs in Germany. Particularly with the German government has not been using deficit financing over the last several years.

'Given the mammoth cost of socializing the U.S. economy now'

So effortlessly shifting a discussion is a real talent - though one well practiced when looking at the history of a certain strand of American commentary stretching back to America's post war era, and the opposition to anything resembling 'socialized medicine.'

'Attacks on the NHS, however, are as old as the NHS itself. In fact, by invoking the specter of a bloated, ineffectual and inefficient NHS, conservatives have helped to sink legislative proposals for universal health care in the United States at key turning points in U.S. history.

When the NHS was introduced in 1948, the U.S. was closer than it had ever come to implementing a universal system of health care. President Harry S. Truman, backed by a U.S. labor movement at the peak of its power, incorporated a plan for universal health insurance to be financed through the Social Security payroll tax into his “Fair Deal” agenda. Conservative and corporate interests were fiercely opposed to the proposal, especially the powerful physicians’ trade association, the American Medical Association (AMA). Fearing loss of autonomy over the profession, the AMA invested millions of dollars over the course of the late 1940s and early 1950s in a massive lobbying and public relations campaign to defeat a universal system, using the slogan “the voluntary way is the American way.”

From the beginning of the AMA’s lobbying effort against universal health care, it adopted a comparative approach that highlighted the purported failures of emerging government-managed medical systems abroad. “The long-term objective is to put a permanent stop to the agitation for socialized medicine in this country,” AMA representatives declared in a 1949 speech, “by convincing the people, through a nationwide campaign of education, of the superior advantages of private medicine, as practiced in America, over the state-dominated systems of other countries.

But the AMA misleadingly conflated the tax-funded NHS with U.S. proposals for a payroll-funded system. “The fact of the matter is that the plan for National Compulsory Health Insurance in the United States is dangerously similar to the British system — in its basic outlines, essential features, and administrative complexities,” ran one national AMA radio spot, warning of “all the evils and dangers which are now visible in the British medical extravaganza.” https://www.washingtonpost.com/news/made-by-history/wp/2018/04/28/how-alfie-evans-became-the-latest-weapon-in-the-conservative-attack-on-universal-health-care/

Yeah, I skipped down to the part where you reveal that your source is the WaPo.

Next.

The thread started with post that's basically 90% quote from WaPro source. Why are you inconsistent and didn't skip this whole thing sparing us your comment?

Because it was written by Megan McArdle, who has been for about a dozen years now the most capable producer of topical commentary around. Even the editors at the Bezos Birdcage Liner cannot ruin her work.

McArdle, unlike a certain fired-for-cause quondam Mercatus employee, is concise.

Concise?

Gee. You could summarize the entire column by saying that social welfare programs cost money. Who knew?

Yes that's brilliant of you.

It's not obvious the US missed an opportunity here. One empirical observation is that as countries become richer, the welfare state expands.

On the other hand, welfare states are generally implemented for middle and lower classes- those with sufficient means are capable of self-insuring and taking more risk unto themselves. So, beyond the (quite possibly limited) public good aspects of welfare states, as a country becomes sufficiently rich, maybe the welfare state should become less important.

When my parents were young and everyone was poor, communities banded together to share things that they no longer have to.

I often hear from Europeans about how this or that is "free" in their countries. But then Uncle Miltie whispers something in my ear about lunch.

For either cultural or historical reasons, Europeans seem more inclined to band together around these things, with regular folks paying higher taxes for more generous state-provided programs. I'm not sure this is the future. It will be interesting to see the path the newly-rich Asian countries take, and, if ultimately, the large, expensive welfare states are a net positive.

Re: So, beyond the (quite possibly limited) public good aspects of welfare states, as a country becomes sufficiently rich, maybe the welfare state should become less important.

Except that in the US, the "nation getting richer" has been accompanied by an increasing number of people getting left behind, mired in poverty. The result is the welfare state becomes a vital lifeline for a large minority of the citizen body who had no other realistic options even as those higher up the ladder resent it.

has been accompanied by an increasing number of people getting left behind, mired in poverty.

It hasn't and they aren't. You live in a world where poor people are fat, have central heating, have state-financed schooling and medical care, and have appliances in their home rare or unknown when my mother and father were adolescents.

The problems the impecunious face in this country are species of insecurity, not deprivation.

All you need to know is that the people who talk about permanent poverty would define someone as impoverished if that person had two BMWs, a 5 bedroom home, and a boat, provided that his neighbors had sufficiently greater average wealth or income.

Way to take a perfectly good point and exaggerate it into childish stupidity.

Is it an exaggeration? We already see these articles about people making over $100k who are poor, don't we?

No we don't. A link would be good here if you have one.

And in the very next breath, we are told that AI, automation and global trade are producing more wealth than ever thought possible, and that the average person lives in a manner that medieval kings would envy.

But sorry, kid, universal education/healthcare is beyond our means because we're broke.

"And in the very next breath, we are told that AI, automation and global trade are producing more wealth than ever thought possible, and that the average person lives in a manner that medieval kings would envy."

"Fiorello: Can he live in New York on $3.00?
Driftwood: Like a prince. Of course he won't be able to eat, but he can live like a prince." (from the movie A Night at the Opera)

The average person today has much better education and healthcare than a medieval king.

'All is for the best in the best of all possible worlds'!

The average person today has much poorer education than a Renaissance prince (or, often, princess).

You mean except for the fact that most important things were not yet known by anybody?

So that is it. We were so much richer in 1960... And obviously there is nothing themrichest country in man's histoey can do to help its own suffering populace.

Meanwhile, Chinese communist leader Xi was elected the most influential person in the world, like a Caesar or a Paharaoh. So that is how America dies... not with a bang, but with a whinning about the fiscal burden.

It's too bad I've got no access to eyeroll gifs with this new format.

They may have been instituted after World War 2, but many of them had pre-war antecedents dating to the 1930s or even before (as with the US).

Finish your thought. Explain how that changes McArdle's points about path dependence and these systems having been implemented when medical care was much cheaper.

If there is a chance of instituting social democracy in the US, then, as Megan notes, it will have to be done by raising the taxes on the six figure income HENRYs and DINKs and so forth professional class, which in the end means minimizing the mortgage deduction, minimizing the SALT deduction, and perhaps doing things like putting limits on 529 contributions as the Obama Administration tried to do (e.g., limiting subsidies to inframarginal consumers and means testing.) The various social democracies all tax people in that range a lot more, as she notes.

(The SALT deduction is particularly pernicious because other federal states, like Canada and Australia, go the reverse in not having SALT deduction but instead having equalization payments. Most federal aid to US states is instead in matching funds, which rewards rich states as well. All that could be borne if the richer states built housing and allowed people from the poorer states to move in, but they don't, with the exception of states like Texas.)

To achieve a social democracy, the fastest way is to keep the limitation on upper middle class deductions from the recent tax bill, while raising the rates.

We already have social democracy. We just don't have it on the French scale. That's not a problem. The French have over done and and misallocated resources in overdoing it.

Exactly. And what we have is close to what Canada has.

Also, what are -- e.g. -- the Nordic countries doing now? (Leaving aside Norway, the fjord sheiks with their oil.) Their social democracies are solidly entrenched. Good. But the last three decades show cuts to the expansive welfare state for which they are famous.

How the fuck would you know?

You've never been outside Utica!

Apathy is a self-defeating characteristic that has become communicable. Is it timidity or pragmatism? I am not sure.

Higher taxes are one part of the equation. How about military spending? Tax subsidies for rent seekers? Inefficiences and fraud inherent in a fractured system? Just bludgeoning us with the same common trope is ineffective.

My grandfather had three books on his shelf, the Bible, Common Sense, and the Communist Manifesto. I saw such irony in this collection. A man sacrificed for the common good and two others who advocated for the common good. The better question for you is why these ideas endure?

She's confused. Every occidental country has an ethic of common provision made manifest through taxing and public spending. We had one prior to 1929, manifest in the work of state and local governments: primary and secondary schools, lunatic asylums, TB sanitoriums, municipal hospitals, poorhouses, &c. At the federal level, we had veterans' hospitals. Only about 6% of each youth cohort attended colleges, universities, &c, but many who did attended state institutions where only modest charges were assessed on matriculants.

It's a question of scale, delivery modes, and sustainability given demographic evolution. There's nothing impossible here due to public expectations. The trouble is that the system recruits and retains politicians who make short term decisions and are responsive to the interests of five bozos waving their arms and not the 95 non-bozos who are not being vulgar and obnoxious. Our particular system is so structured that it's almost impossible to make decisions without larding legislation with cornhusker kickbacks and Louisiana purchases. That's not a social or cultural problem. That is a political legacy.

+5

The trouble is that the system recruits and retains politicians who make short term decisions and are responsive to the interests of five bozos waving their arms and not the 95 non-bozos who are not being vulgar and obnoxious.

https://medium.com/incerto/the-most-intolerant-wins-the-dictatorship-of-the-small-minority-3f1f83ce4e15

Peter Swenson's theory of welfare state development is still underappreciated. He argued U.S. employers are (1) politically decisive on these questions, and (2) far more amenable to welfare state development in bad times than good. https://smile.amazon.com/Capitalists-against-Markets-Making-Welfare/dp/0195142977 To Megan, he would probably say: wages and health insurance contributions are also costs, in bad times and good. Does slow growth somehow mean we can't substitute from wages to social contributions (perhaps of an actuarially sustainable form)?

Housing your parents/grandparents would cost you nothing, so eliminating Social Security and Medicare and making room for them would make you, and the health care and leisure/retirement industries much more profitable, creating millions of new, zero cost jobs. You will happily pay royalties on all the free work you do for your parents to those industries.

I'm against the welfare state, but the politics of it are such that (larger) employers sometimes support it.

Perhaps? You mean 'of course', right?

Even so, the range of uncertainty around such actuarial calculations makes "actuarial soundness" a fairly elastic concept.

For example, with respect to Illinois teacher pensions, we read: "The System funding policy targets full funding after 20 years and is considered actuarially sound under the method called Actuarial Math 2.0. "

Well, that's a relief.

Source:

https://www.trsil.org/sites/default/files/documents/2017-State-Actuary-Rpt-Full_0.pdf

there was now one, like, paulie mccaffree

Economies are zero sum.

The high growth in GDP came from the high growth in costs.

Growth has slowed due to chicken littles like McArdle screaming about high costs and thus a big focus on cost cutting.

Building infrastructure costs a lot. Health care and education cost a lot. Not being forced to house and feed and care for your parents and grandparents in your home costs a lot.

But all costs are someone's wage incomes, except the cost of rent seeking and scarcity profits.

Cutting costs cuts incomes. Incomes grow when costs go up, and go down when costs go down. GDP goes up when incomes goes up, and stalls when incomes stall.

Tanstaafl

Free lunch economics of higher growth and wealth by cost cutting is voodoo economics.

I'm old enough to remember three and four generation households, before Social Security and Medicare freed up most of my parents peers from caring for their parents personally.

I'm also old enough to remember when a lit of aging, decaying, critical infrastructure did not exist, but was being build with high tax rates, ie, high cost to my parents, grandparents, and to me as a kid and young adult. But I quickly became part of the high costs. My job in computers was funded by a DARPA education grant to the college I dropped out of. Then my job in computer engineering was about 20% funded by government spending, and I was free to move multiple times without thinking about the wellbeing of my grandmother and later my parents, aunts and uncles.

Elon has been in the news recently because of the high cost of building a new car factory in the US. Those costs are all the mostly US workers. He could have gone the Apple route and had China's State economy pay most of those costs, but that would mean China would have both the capital and the jobs, just as China has the capital and workers for producing most of the smart phones in the world. Not the US which imagined and designed the smart phone since the 50s. (Dick Tracey, Star Trek)

The US does not manufacture consumer electronics because it costs too much to have a consumer electronics industry. Trump calls it unfair that China gets all the revenue from exporting high cost consumer electronic products to the US. Of course, we only export low cost products, like low labor cost commodity farm products, while importing lots of high labor cost farm products.

Except for select very high cost products. Products that the capitalists refused to send to China to cut costs. Like making Cat tractors. Made in Peoria, with frequent fights over the high cost of American union labor. I was last in Peoria when the extremely costly Alaska pipeline was keeping Cat sales going, thanks to the extremely costly oil from Saudi and Iranian export restrictions to extract high rents from the world oil consumers.

A decade later, Peoria and Cat were suffering from the major cost cutting of all the high cost oil capital build in the 70s and early 80s producing so much oil all the costly rents to Saudi, Iraq, and Iranian governments were zeroed out, causing the Iraq invasion of Iran.

Of course, the cost cutting from excess oil capital and investment in energy efficiency dumped Texas into a deep recession, bank failures. Texas had been costing American consumers too much!

What helped Texas was the fall out from big government putting the LBJ space center in Texas in the 60s, diversifying the economy with coastal elite scientists and engineers. The race to the Moon was massively costly. But Texas economy got a big boost from those high costs which created its high cost tech workforce. Of course, it's taken coastal elites Musk and Bezos to actually build spaceport in Texas. Texans must consider space industry too costly to pay to build it themselves.

“Economies are zero sum.”

If so, please compare today”s living standards to those in the days of Christ.

The mulp cannot be reasoned with. The mulp cannot be dissuaded, taught, or resisted. Do not engage the mulp.

It was an extraordinary thing to say, wasn't it? Does he even understand what it means?

everyonce in awhile, a big big, chirps up

There is innumeracy on the left, just as innumeracy on the right - as illustrated by the just passed tax bill.

(I suppose I could stop just there and say "see, you don't have to not pass tax and spending bills, just because they are impossible!"

But I will try to do better than that.)

The answer is pragmatic incrementalism. If you think we can be more Danish, you don't have to demand that we jump with both feet. Instead you can pick a problem (homelessness, pensions, higher education) and definite incremental improvements, with achievable funding.

There's a pretty good case to be made that we are past the point of 'achievable funding' for anything new, especially considering the demographic tsunami heading for Medicare Island.

People assume we have to stay an outlier on tax revenues. But that could just be the old boomers, and due for a demographic change.

https://www.taxpolicycenter.org/briefing-book/how-do-us-taxes-compare-internationally

Any increase in taxes is probably needed to cover the tsunami, not new stuff.

The Democrats have always claimed they don't want to raise taxes on the middle class. You're not gonna get Danish level services without Danish level taxes.

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blankD, is the king, il f o's.

has shown up at the party

McArdle didn't hear about the MMT free money tree, apparently.

i can't talk like this, too much, lil f o's . . .

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scary people comment, somtimes, late at night. nevertheless, i m here 4u

Great article, though I disagree with her conclusion. It will be necessary to raise taxes or otherwise extract resources from those six figure "middle class" people, and most likely it'll get done, because no one likes them, not the Democratic base, not the swing voters, and increasingly not the Republican base either.

By the way, if anyone wants to draw lessons from the history of the development of the welfare state, there's an interesting feature to the establishment of the British NHS. When the economist Beveridge proposed an NHS in his report in 1942 the idea was taken up as party policy fairly swiftly by the two anti-socialist parties, the Conservatives and the Liberals. It was rejected by the socialist party, Labour. It was late in the day, shortly before the 1945 general election, that Labour finally adopted the policy. They won the election and introduced a somewhat Stalinist variety of NHS.

When McArdle says something can't be done, that's a pretty good sign that it can and must be done.

When you don't have to field a real military, lots of things are possible. And guess what, even in the Anglophone and European lands of social democratic milk-and-honey it is generally expected that you will get a private sector job, pay your taxes, buy your own food, water and shelter, and get your health care through a combination of public and private funding.

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