Welfare State Is Good for Economy

Paul KrugmanPaul Krugman’s column on Monday was, Europe’s Secret Success. It is about how even though the European Union is a monetary mess, its economy is doing rather well. Of course, you would never know that from reading or watching mainstream American news. Because everyone just “knows” that Europe is collapsing because of its generous welfare states. This why Americans so often know things that just aren’t true.

This idea that welfare was destroying Europe never made any sense. The northern nations were doing the best and they were the ones that had the most generous welfare programs. Greece, the country doing the worst in the European Union, had a rather stingy welfare state. The same is true of the other “problem” countries: Italy, Spain, Portugal. I think this all comes back to our Calvinist tendencies that we must all suffer for our sins. So the idea is that having a strong welfare state must be bad because it doesn’t cause people to suffer.

Of course, this just happens to be what the power elites want to hear. They want low taxes and low inflation and high unemployment. All of those things help them because the more desperate the working classes are, the better for the rich. It still amazes me, because we nominally live in a democracy and there are so many poor people.

Let’s consider France, because I love France and for whatever reason, most Americans have a problem with the French. France has a very big welfare state and they have one of the best healthcare systems in the world. But in the past, they didn’t have a terribly vibrant economy. But for the past decade and a half, our economy (in terms of being good for workers) has been going down and their economy has been going up. This great graph is from a Krugman blog post, Cheese-eating Job Creators. It shows that now (and for some time), France is employing a far higher percentage of its working age population than the United States:

Employment: US vs France

What is happening in France is what conservatives in this country claim they want to be happening here. That was what supply side economics was all about, right? It wasn’t supposed to be about making the rich richer; it was supposed to be about growing the pie and making everyone richer; jobs for everyone! Except that it was a resounding failure as I discussed in part recently, Reagan’s Legacy: Tax Cuts for Rich, Tax Hikes for the Rest. But don’t expect them to look at France or Germany or Sweden or the Netherlands and think, “Maybe we should try that!”

For me, this is very personal. My business partner Mikhail and I are working on a great new high tech gizmo that I believe will revolutionize the extreme sports industry. But because of my just scraping by with my various gigs and his enormous workload at a very famous high tech firm I guess I shouldn’t mention, we haven’t even been able to test the system for almost two months. Having something like a guaranteed income would allow us to be more entrepreneurial, not less.

But most conservatives know nothing about business—the closest they come is finance, which is a part of business, but isn’t anything without people like us who are actually making things that people want to buy and use. And they have this idea that the only way to get people to start businesses is to make it like a tightrope act over the Twin Towers: if you succeed, you are set for life; if you fail, you are dead. That’s not the way that works the best, because for one thing, careful people like Mikhail and me, don’t thrive in that environment, even though we have a great deal to offer the world.

Just in terms of creating jobs though, America is terrible. Here is a graph from economist Antonio Fatas that I’ve altered to highlight just how badly America does at keeping its people employed:

Employment to Population Ratio - 2012

The power elite of this country should be embarrassed by this. Most especially the conservatives should be ashamed, and yes, I do include Bill Clinton in this, because like all the New Democrats, he’s an economic conservative. But instead, both parties of the United States stand around and look for better ways to take more money away from the poor who actually spend it and push the economy along, and give it to the rich who just sit on it. In a hundred years, historians will look back and say, “What were they thinking?” But I know what they are thinking: they are thinking that all that matters is taking care of their own class. Keep interest rates low so the stuff they own doesn’t lose value. Keep taxes low so they can keep as much of their money as possible. And keep unemployment high so that workers are so desperate they will work for little and never raise a fuss for fear of losing one of the few jobs around.

That’s modern America. Yesterday, an online friend criticized me for my rhetoric about the “political nonsense that’s tearing us apart.” Wrong! What’s tearing us apart is an ever widening gap between rich and poor that is allowing the rich to call all the shots. We don’t get policy that is best for all of us. We get policy that is best for the power elites. And I don’t care that the Tea Party folk think I’m being mean when I point out that they are a bunch of fools who vote against their own interests because the power elites can play them like a fine violin. This is my country too and the rich are destroying it, just as many of the founders—most notably Thomas Paine—feared.

But at least we still have equality of the kind a great Frenchman once told us:

Equality - Anatole France
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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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