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Edited Date/Time
5/27/2014 2:15pm
Robert Reich
May 23, 2014
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.
The fact is, we’re falling behind. While median per capita income in the United States has stagnated since 2000, it’s up significantly in Canada and Northern Europe. Their typical worker’s income is now higher than ours, and their disposable income—after taxes—higher still.
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 is 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 bottom among 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?
May 23, 2014
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.
The fact is, we’re falling behind. While median per capita income in the United States has stagnated since 2000, it’s up significantly in Canada and Northern Europe. Their typical worker’s income is now higher than ours, and their disposable income—after taxes—higher still.
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 is 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 bottom among 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?
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Anyway, I'm not sure how familiar you are with Robert Reich but I basically grew up with him without ever knowing him personally. By growing up I mean my own particular learning and understanding of macro economics which started in the late 1980's. Reich is an economist of the least believable kind. There are many like him on both sides of the political and economic divide. They are more politically and philosophically driven than fact driven. That makes this an opinion piece. An opinion piece riddled with falsehoods. Just one example:
He used tax rates rates to complain that since the 80's, tax distribution favored the rich. The truth is entirely opposite. Total income taxes paid by the top 10% in 1980 was 49% vs 7% by the bottom 50%. As of 2009 the top 10% paid 70% of income taxes vs 2.25% by the bottom 50%.
That data can be found here
Notice that I use the amount PAID. Not the tax RATE on the income tax forms. It's a common trick used by people like Reich and Krugman. Their purpose is to persuade, not to inform.
So take this opinion piece for what it's really worth and don't make the mistake of referring to it as true economic information.
There is no way that it would go down well with any states farther south
Pit Row
Money alone is not a producer. Ideas alone are not production. It takes labor to actually produce something. I haven't seen those Koch brothers out in the field recently, have you? What do they produce? They are rich by any definition, yet, without the labor of the poor worker, the Koch brothers are nothing.
I will never understand the peasants who fight for the rich. Rich being defined as the 1-2% of the population that is actually wealthy.
1965 CEO pay 20 times average employee
2000 CEO pay 383 times average employee
From 1978 to 2012 CEO pay increased by 875%........ Average employee over same period less than 10%
Post WWII when a company prospered then everyone who worked there prospered.
Now when a company prospers the execs and shareholders reap all the benefits. Nothing left for the average worker. The rich get richer and the average employee stays stagnant or goes backwards due to inflation.
Post a reply to: Which would you prefer ?