Is America turning into a Scandinavian-style social democracy? Political scientist Lane Kenworthy thinks so and has written a new book, Social Democratic America, that makes the case (summarized here and here). But while there’s a lot to like about Kenworthy’s prediction, it doesn’t quite come to grips with the reality of slow, unequal economic growth since conservative economic theories won the day.
By social democracy, Kenworthy means an economic system featuring “a commitment to the extensive use of government policy to promote economic security, expand opportunity, and ensure rising living standards for all… [I]t aims to do so while also safeguarding economic freedom, economic flexibility, and market dynamism, all of which have long been hallmarks of the U.S. economy.” He calls this “modern” social democracy, contrasting with “traditional” social democracy in that it goes beyond merely helping people survive without employment to also providing “services aimed at boosting employment and enhancing productivity: publicly funded child care and preschool, job-training and job-placement programs, significant infrastructure projects, and government support for private-sector research and development.”
Modern social democracy is most developed in the Nordic countries of Europe — Sweden, Denmark, and Norway, for example. But Kenworthy thinks it’ll eventually reach apple-pie levels of Americanness. He anticipates that over time we will do most of the following:
1) Increase the minimum wage and index it to inflation.
2) Increase the Earned Income Tax Credit while making it available to middle income families and indexing it to GDP per capita.
3) Increase benefit levels and loosen eligibility levels for Temporary Assistance for Needy Families, general assistance, food stamps, housing assistance, and energy assistance.
4) Mandate paid parental leave.
5) Expand access to unemployment insurance.
6) Increase the Child Care Tax Credit.
7) Universalize access to pre-K.
8) Institute a supplemental defined contribution plan with automatic enrollment.
9) Increase federal spending on public child care, roads and bridges, and health care; and mandate more holidays and vacation time for workers.
I hope I didn’t miss anything!
An initial reaction to this list might be: wow, wouldn’t that be really expensive? Darn right it would be. Kenworthy estimates the aggregate price for these changes to be around 10 percent of US GDP — about $1.5 trillion a year. He acknowledges that there is no way we could raise the revenue to support such an expansion of federal government spending by taxing the rich; there’s just not enough money there. Instead, we would have to do what many European countries do, and institute a national consumption tax in the form of a VAT (value added tax).
This is a rather ambitious program, to say the least. The idea that this kind of sweeping change might be possible is hard to wrap your mind around when, today, it’s so difficult to get Congress to provide a measly $6.5 billion for three months of unemployment benefits. But Kenworthy is not claiming that his social democratic program is politically feasible today or at any particular point in the future. His argument is rather that these changes will happen gradually, in fits and starts, just as the social programs we have today evolved. As he puts it:
The lesson of the past hundred years is that as the United States grows wealthier, Americans become more willing to spend more to insure against risk and enhance fairness. Advances in social policy come only intermittently, but they do come. And when they come, they usually last… U.S. policymakers will recognize the benefits of a larger government role in pursuing economic security, equal opportunity, and rising living standards and will attempt to move the country in that direction… Small steps and the occasional big leap, coupled with limited backsliding, will have the cumulative effect of significantly increasing the breadth and generosity of government social programs.
So he’s taking the long view. A gradual, cumulative process will produce American social democracy — a process we can’t really see because we’re so caught up in the political moment, but is happening beneath the surface nonetheless.
How plausible is all this? He is right that today’s American welfare state, however inadequate it is and however peculiar and inefficient its delivery of benefits, is a vast advance over the America of a hundred years ago. By fits and starts we have progressed considerably. And Obamacare, as Kenworthy points out, fits right into the American pattern of eventually addressing big social problems through clumsy and compromised government action that nevertheless expands the social safety net. And as Noam Scheiber has recently argued, it is likely that the ACA will be improved over time, rather than dismantled, and that these improvements will take us closer to the single-payer system many on the left favored from the beginning.
But past performance is no guarantee of future results. There are several things that could get in the way of our social democratic future. Most obviously, the political situation is difficult and may remain so. The current Republican party is a huge roadblock, as is our governmental structure that makes obstructionist political tactics particularly effective. And American voters, while they tend to support many specific government programs that have worthy goals, are skeptical of the efficacy of federal spending in meeting these goals. This undermines potential support for the programs Kenworthy advocates.
Kenworthy has replies to all these concerns and they are well worth reading. One is that the Democrats are buoyed by a demographically rising political coalition that should give them enhanced leverage in the future to push through social democratic policies. Another is that this coalition will force the GOP to become more friendly to the welfare state, as they’ll be forced to simultaneously compete for votes among rising constituencies and defend the social safety net that serves the white working class voters who now make up their base.
These are good points; I have made them myself many times. Of course, it is possible that today’s Republicans will fail to respond to obvious political incentives. But if they retain any shred of political rationality, such a response does seem in the cards over the long run.
Another Kenworthy argument might be more problematic. The idea that “as the United States grows wealthier, Americans become more willing to spend more to insure against risk and enhance fairness” assumes solid long-run growth. But what if economic growth remains slow and unequally distributed?
Going back to the 19th century, steady growth has been critical to the progressive project. That’s still true today: rising constituencies — immigrants and minorities, professionals, the highly educated, women, singles, seculars, Millennials, and so on — all need relatively fast and equally distributed economic growth to achieve the levels of economic mobility they are looking for. And poor economic performance is the greatest friend the contemporary right has, as it keeps white working class backlash against progressive governance alive and swells the ranks of the conservative coalition.
Yet over the last several decades, progressives have seemingly become inured to slow and unequally distributed economic growth and poor employment performance, concentrating instead on defending existing welfare state benefits. Contrast the approach of recent decades to the era immediately following World War II, and it’s easy to see how the failure to develop a new growth model could make American social democracy stillborn.
Post World War II, the entire democratic world employed similar theoretical and practical economic models — Keynesian demand management, the provision of public goods, social security measures, and cooperative labor and management structures — to deliver strong, equitably distributed growth. But that world is no more. Starting in the 1970’s, it became increasingly difficult to manage tradeoffs between unemployment and inflation as the complications of a globalizing economy started to bite. Inflationary pressures that had been building up inside the advanced countries could no longer be contained, producing high inflation rates that could not be brought down by high unemployment. This combination of high unemployment with high inflation was termed “stagflation.” Progressives had no answer at the time, and it killed the Keynesian consensus.
This was quickly followed by the conservative counterrevolution. Conservatives, strongly opposed to regular government intervention in the market, never bought into the prevailing Keynesian view. They jumped on the crisis in the 70s as an opportunity to reinstate their views and discredit government’s role, replacing the “discredited” Keynesian consensus with an economic program that emphasized the unregulated workings of the market. Deregulation and privatization became the order of the day, while Keynesian fiscal policy, including the central role of public investment, was shunted aside.
The conservative economic regime has produced economic results far inferior to those of the Keynesian era in every important way. But most importantly for Kenworthy’s purposes, it has been worse at delivering growth. The annual growth rate in the conservative era has been around 2.5 percentage points lower in European countries and a percentage point lower in America as compared to the average during the Keynesian era. A similar slowdown can be observed in real GDP per capita growth, down 2 points a year in Europe and .7 points a year in America.
And, of course, the ultimate failure of the conservative economic regime was its inability to anticipate the financial crisis and Great Recession of 2007-09, whose effects on growth still haunt advanced countries today. Conservative doctrines not only failed to anticipate these events, but also facilitated them through blanket deregulation of the financial sector. And the big contribution to post-crisis recovery efforts, “expansionary austerity,” has proved to be another colossal failure. Their growth model has been tried and re-tried and found utterly wanting.
But where is the progressive growth model to take its place? While there are possibilities out there — “middle-out economics” come to mind — it is fair to say there is no clear plan for to overturning the conservative consensus in the near term. Until there is, a critical piece of Kenworthy’s road map to a social democratic America, sustainable growth, will be missing.