I completely agree that prioritizing growth over equality is correct, but I don’t think redistribution is the most important contrast with Europe. In some ways the US tax system is more progressive in terms of distribution than Europe, which funds its more expansive welfare states with broad regressive taxes like the VAT, while the US is more reliant on progressive income taxes. It’s true that in some countries like France the top income tax bracket is so onerous that this discourages work but this is not universally true. In fact some countries in Europe even have flat income taxes !
The main drags on European growth (labor market regulations, precautionary principle type regulations on certain technologies) are not really related to redistribution and I think higher inequality in the US is largely exogenous to the tax system so I don’t think growth vs. redistribution is the most important trade off. I would say growth/dynamism/disruption vs safetyism/stability/stagnation is the more important difference.
Somewhat but I think you can support using the government to materially help poor people while being techno-optimistic and pro-abundance on the one hand and not particularly egalitarian but neurotic & pro-regulation on the other. Some center-left figures in the US fit the former while a lot of people in Europe would fit the latter. You would be surprised at the number of people in Europe who are quite centrist or even right leaning on some issues but still have a neurotic degrowth mentality.
Or maybe Europeans of the center and right also strongly support the goal of equality and government policy that redistribute towards that end. I do not see it as a distinct viewpoint.
And most of those government programs do not materially help poor people in the long run. In many cases, it is exactly the opposite.
Agree to disagree, I think they are somewhat correlated but not the same, safetyism/stability are motivated by neuroticism and conformism that can also lead you to think that poor people are gross and dangerous. Conversely a lot of historical leftists were neither conformist, neurotic nor anti-tech, the Bolsheviks for all their many faults were none of these things.
And my original point about redistribution not being as big of a policy difference as some might think between Europe and the US still stands. The overall tax burden is higher in most European countries but the main tax that Europe has that US doesn’t is the VAT which is regressive from a distributional point of view.
I think there is a significant difference, at least in intent.
A redistribution and egalitarian approach tries to help a larger percentage on the bottom (say bottom 20% or even 30%) and seeks to reduce the wealth at the top, such as through wealth taxes and confiscatory marginal income taxes.
A pro growth, pro abundance approach on the other hand would seek to the bring the bottom 10% to 15% out of poverty as part of the social contract, but the primary goal would be to promote economic growth and opportunity for everyone, without worrying too much about whether some people get extraordinarily wealthy.
I am not convinced that the current Abundance crowd actually would seek to reform the current welfare state in any nation. They do not even talk about the issue, and my guess they would be terrified to even raise the issue given how much opposition within Center-Left voters it would create.
The current Abundance crowd still clearly supports continuation of massive government redistribution. This puts them in line with egalitarians of the past and present, although they may try to expand it less.
Thanks for sharing the link. I very much agree with the author. Maybe our disagreement, to the degree we have one, is little more than semantics. Whatever you call it, abundance or something else, I think there is a big difference between (1) a pro growth economic policy (free trade, expanded immigration) that seeks to increase economic opportunity at all income levels, particularly for those on the lower half of income and wealth, and provide a social safety net for those who fall into or remain in poverty versus (2) an egalitarian policy that is focused on more equality in both opportunities and outcomes.
They have a correlation, but you can be pro-redistribution and anti/more skeptical of safetyism, which is arguably what Abundance is all about. At least that's my personal economic views, "let some people get rich first" and all that jazz.
Of course, but you're ignoring the envy and social disruption that can occur when inequality increases. It's not always about the money you have, it's where you sit in the distribution.
No amount of government redistribution can undo the envy that some people feel towards others that are better off than them.
More importantly, the people who advocate for greater redistribution are exactly the same people who have the envy and cause the social disruption.
So your argument is ultimately circular.
Rampant inequality is the rule in all societies that have evolved past the Hunter-Gatherer societies. At some point, we just need to accept reality and work on our own envy and desire to disrupt society.
It's true that the more evil tendencies of the common populace, like envy, resentment, and in-group bias, can be provoked by good things (like economic growth, free trade, YIMBYism, new technologies, immigration) into causing disruption and strife, but this is not an argument against the good things per se, at most it means we should be tactical in how we work around and minimize these tendencies while promoting the good. Otherwise every good thing would be vetoed by the ressentiment of the longshoremen and their threats of disruption.
Plus society gets more and more segregated by class, and there’s a lot less “fairness” because the rich can pay for better schools, pass on their wealth, etc. In theory this wouldn’t be too bad if there was 1) strong social mobility and 2) very high estate taxes.
Strong social mobility inevitably leads to more class differences in the long run. String social mobility leads to more rapid sorting of people by talent than low social mobility does. That is how we got here in the first place.
I am skeptical that very high estate taxes would make much of a difference. The vast majority of wealth is not inherited. It is created by each generation. And the rich will always find a way to evade them, if necessary by moving overseas.
This ignores lots of benefits that help the poor remain stable in social democracies. Unemployment insurance pays more for longer. Guaranteed sick leave/generous paternity and maternity leave. Generally better social housing programs. Lots of subsidized child care. There are more probably not off the top of my head.
The point being Americans are richer, even at the bottom, but they stand to lose it all much more easily and certainly lack some quality of life aspects present in European welfare states.
If it were up to me, as a risk averse individual, I would much rather be poor in Denmark than in the US if I had to choose. There's less potential, but also a much larger helping hand to get you back on your feet.
But these programs do not merely “ get you back on your feet.”
Beneficiaries often stay on the program means-tested programs for decades and effectively use them as income substitutes. In the long run, they make the poor worse off by removing work incentives.
So redistribution undermines both economic growth and individual incentives. Both hurt the poor (and everyone else).
True for some, and maybe worse for society overall. But all the same if you were going to put me in the bottom income quartile in the US or an average European welfare state I know which one I'd choose. It seems much less likely that I'd fear ending up on the street.
I think that you are seriously underestimating the amount of money the United States spend per capita on means-tested programs since the 1960s that are focused specifically on helping the poor and the near poor. And also more recently on the homeless.
In most cases, it is significantly more than in Europe. A failure of results is not due to a lack of spending money.
Starting the 1960s, Americans chose to focus social spending on means-tested benefits meant to help the poor and near poor. Europeans chose to focus on social insurance for all.
The American path ended up hurting the poor and near poor, while the European path ended in up in near economic stagnation since 2007.
Maybe if you count eastern and southern Europe, but what I've read shows the US spends far less on this kind of social program than the Netherlands/Germany/France/Belgium/Finland/Denmark/etc. The US does target the very poor for a larger percent of the benefits with programs like Medicaid and EITC, while Europe doesn't target as specifically the extremely poor, so in that sense maybe if you knew you were condemned to the bottom 10% of the income distribution your whole life the US wouldn't be so bad.
But the generous welfare benefits of Europe extending past the very bottom provides much more security for people in between the extremely poor and middle class and actually increases upward mobility at the bottom compared to the US. The US has much greater upward mobility from the middle to the top but very difficult mobility from the bottom to the middle compared to Europe and I believe the social program benefits extending beyond the very poor is part of that story. Losing your job or getting sick or having a kid are much less disruptive to your life in Europe.
I would love to see anything showing that's the case. I can't find any statistics showing the US spends more on social welfare than those countries. Your link above doesn't seem to.
If you want the social safety net to be a couch for you, that is a strong argument for not letting people like you vote. Big whoop that you'd rather be poor in a European welfare state than poor in the U.S. A disincentive to be poor in America is a good thing. Denmark would be thrilled to hear that you'd like to move there and sponge off them.
But it doesn't seem to work that way! Europe has better income mobility than the US from the bottom to the middle. This suggests helping people get back on their feet helps them be more productive than leaving them to their own means at the edge of poverty.
Granted they also do have higher unemployment which I'm sure is driven in good part by generous benefits. Can't have everything.
I'm not sure how higher (structural) unemployment co-exists with higher income mobility from the bottom to the middle....unless benefits are so generous that people move into the middle despite remaining unemployed. (Or are working for cash under the table while drawing benefits, which must be sorely tempting in a high-tax economy.) The highly restrictive work rules particularly in France and Germany where it is almost impossible to lay off a worker who has become redundant when the economy turns down gives employers a strong disincentive to hire workers into permanent contracts especially young people whom they won't be able to let go. This contributes to high youth unemployment. The trade unions seek to protect workers with jobs through iron-clad employment contracts. They don't care about people who would like to work but can't get hired, because non-workers don't pay union dues or contribute to the political muscle of the unions.
This argument is even stronger — much stronger — than RH suggests. The reason is that most people in the bottom decline are there because they are either newly entering the job market, temporarily in a downturn, a new immigrant, or retired and living off assets. IOW, hardly any family stays in the bottom decile for their entire lifespan. Thus they benefit over time from rising floor and by the higher available ceiling.
It is very weird how inconsistent people are when they moralize about sacrificing for future generations. They invoke it when talking about preventing climate change and other environmental problems, but react in horror at the idea in other situations, like raising the birthrate, growing the economy, or donating to longtermist charities.
Marvel's movie, "Eternals" is one of the only movies for mainstream audiences I've seen that tries to take the bull by the horns and address some of these issues head on, while portraying multiple viewpoints sympathetically. I am inordinately fond of it for that reason, even though it isn't a very good movie by most measures.
Yes. This is pretty standard economics. But the choice for policy is about *time*. Helping the poor *now* vs. helping *future* poor (and everyone else).
As robots and AI take over the economy, this is going to become a pressing issue - maybe the primary issue (recall Luddites; I expect modern ones).
We can tax the robots to compensate people put out of work, but doing so will cost growth - in the medium run or longer that is going to hurt everyone including the poor.
But if we don't do something like that we may have a Luddite movement wanting to smash the machines, outlaw AI, etc. That can't work either - there are hundreds of countries in the world and any that opt out of AI are going to quickly lose to those who don't.
It's going to be tricky. The best solution I can think of (and it's not very good) is to impose a temporary tax on robots over a period of say 25 years, that gradually ramps down to zero over that period. (Yes I know "temporary" taxes tend to become permanent.)
Doing something like that may be necessary to avoid civil war, but it may also cripple the economy vs. competitors who will grow faster without such a tax.
I basically agree with this post, but upon digging deeper into the lowest decile income data, I feel like you are cherry picking. Austria, Belgium, Ireland, Canada, Denmark, Switzerland, The Netherlands, and Australia (but notably not France), all have higher incomes than the US at the poorest decile. In many cases they are quite a bit higher, with a notable cluster around $20,000 per year, vs the US's $17,000 per year. By comparison, the four rich North-Western European countries that do worse than the US at the poorest decile have closer incomes to the US at $16,000 per year. South-Western countries do so much worse on all measures that they should really be considered a different income bracket. I don’t see evidence of the US on a trend to converge with many of the countries with higher 10th decile incomes.
Like Daniel Sz, I think the biggest picture of this column is correct, but some critical details are incorrect. In particular, redistribution is unlikely to be the factor that cripples growth, but rather highly regulated labor markets. Europe has both, of course, and has low growth. The US has less of both and has higher growth.
Consider California: It is fairly highly taxed, has fairly generous redistribution, and is grossly over-regulated in many ways. It has a high degree of labor freedom. It is known for world-class economic growth and innovation.
Also, consider Massachusetts: It is much like California except that its labor freedom level is lower (though still much higher than Europe). And it is the center of bio-medical innovation.
In neither case is there evidence that relatively high levels of taxation is causing people to work less hard than they do in the rest of the US. (Workers in Europe take a lot of vacation because the state requires them to be given a lot of vacation; they can't trade less vacation for more pay.)
So it seems that the critical variable is not the classical state-driven redistribution -- "welfare" or "social services" -- but what I call "corporate socialism", where the government wants to provide economic security to workers but isn't willing to pay for that itself, and rather compels employers to provide various services (especially employment security) to employees.
And interesting sidelight is that California has *even more* labor freedom than the common law gives -- for 150 years, its legislation has banned non-compete agreements in all but very narrow circumstances. Its laws have moved the freedom to change jobs from an "alienable" right (one that can be contracted away) to an "inalienable" one. The common belief in Massachusetts is that this is the reason that the lead in cutting-edge electronics moved from Boston (in the "Route 128" area near MIT) to Silicon Valley (near Stanford).
This supports an interesting policy proposal: That one can have world-class economic growth and still raise the standard of living of the poor to the European percentage of the median. All you have to do is ensure that employment remains a liquid market.
In this model, what is the income distribution at the beginning? How does the distribution itself change over time? How do these distributions compare to the ones experienced by, say, the US and France? The problem with any model that relies solely on averages or implicitly assumes normal distributions is that it gives misleading answers, especially as the model is iterated over time. Obviously, in general, *on average*, more growth is better than less growth; however, it is not the case that *all* growth is better than *average* growth. This is basic statistics.
>“Some people believe that equality is good for its own sake. I can’t say anything here except that this view is evil. What do we say about someone who is happy when his house is damaged in a tornado just because his neighbor ended up in an even worse situation? Every philosophy built on benevolence toward humanity would say that this reflects bad character. But for some reason, it is considered morally acceptable to adopt such an outlook as a basis for one’s economic and political views. Not sure what I can say about this other than it is bad, and those who think like this are bad people.”
This isn’t right. This only makes sense if you think material wealth is the most important social good. But I doubt you think that.
It’s perfectly feasible to believe that a poorer but more equal society is better off. First pass reasoning would suggest that equality eases stress, relieves envy, and lessens class distinctions resulting in increased social interaction.
I would wonder about commensurate cost of living in those 2 countries with those scenarios as you laid out. Would there be higher inflation in the higher growth country, and would that erode some of the gains you had otherwise assumed? Maybe it means the lines cross later than your base assumptions?
The assumption that a "more capitalist system" (whatever that means) would necessarily have more growth than a "social democracy" (whatever that means) is specious at best.
The myopic reliance on higher "income growth" ignores the elephants in the room while making the huge mistake of equating "average annual difference of GDP per capita growth between the US and France or Germany over thirty years." to REAL INCOME growth.
GDP growth does not trickle down to income growth. Here is the U.S. we have decades of real world experience that debunks the oft repeated "trickle down" theory used to heap more and more absurd tax cuts for the wealthy and corporations.
Secondly, any comparison of "income growth" ignores the fact hat those counties with more "social democracy" have more of their disposable income because of significantly lower costs for things like health care.
Yes, the European countries Mr. Hanania is basing his lower income growth and lower GDP per capita growth, heath care spending is literally TWICE as high as the U.S.
This is not even getting into the quality of life issues that results in higher life expectancy, better work-life balance and overall better financial security, especially for lower earners.
The U.S. coddles the rich and upper middle class, while the rest are mired in uncertainty, and a decidedly more difficult life because of the dearth of social safety net.
A much weakened social safety net being imposed by a right wing government in the thrall of the most wealthy and billionaire class in order to stuff their pockets with even more tax cuts and government contracts. (See Elon Musk)
Mr Hanania is citing and embracing the wrong metrics.
And what does "literally TWICE as high" even mean? Never mind that the U.S. spends more of GDP per capita on health care than any other country. (Canada is a distant second.) Even if it were true that European countries spend TWICE as much on health care, what is the evidence that this is a good thing? Too much health care is not only wasteful but harmful. Wasteful health care spending comes when the provider has every incentive to provide more low-value but lucrative services while the customer-patient has no incentive to baulk at the price and demand evidence of the value proposition. This market failure is not easily remedied because there is asymmetry of information: doctors really do know more about medicine than even a AI-enabled patient can know.
What a weird question “making a comment or delivering a speech?”
What’s the difference??
Even weirder is after reading my speech or comment how you got to the idea that I suggested in any way, shape or form that higher health care spending is “good thing”.
I am arguing the exact OPPOSITE.
The context of citing the fact that the U.S. spending on health care is twice as much as Europe (or as the Peterson Center on Healthcare and KFF details) https://tinyurl.com/38v6b6e9 “On average, other large, wealthy countries spend about half as much per person on health as the U.S.”
My point is that Mr. Hanania using GDP per capita growth as an metric that American workers are better off in the long run as Europeans in income growth ignores the disparity in health care spending that is a burden on American workers unlike those in Europe and other countries that have various forms of universal health care.
The same goes for all the other benefits of a “social democracy” system that are lacking in the U.S. because of “trickle down” economics constantly reducing government revenue, with unnecessary tax cut after unnecessary tax cut mainly for the rich, and then CUT spending that benefits to the not rich.
What are you arguing against??? Apparently not what I wrote.
You said, "Yes, the European countries Mr. Hanania is basing his lower income growth and lower GDP per capita growth, heath care spending is literally TWICE as high as the U.S." [Caps in your original.]
That's what I was responding to. If you had said, as I now think you meant to say, that European health care spending is literally HALF as high as the US, (which is true), then I think we would have had less to differ on. Europe spends less on a subsidized good which has close to zero utility (as measured by the money that people are willing to spend their own money out of pocket for it) than the US does. That is almost certainly a good thing for Europe (likely because of the price and volume controls you can impose on providers and consumers when you have monopsony power.) I think Europe and Canada would probably spend even less if there was no health insurance (public single payer or private insurance) at all. There would be a lot less health care consumed, obviously, if there was no price subsidy (which is 100% in Canada and in at least some European countries) but we don't know if we would be any worse off as a society for that.
I completely agree that prioritizing growth over equality is correct, but I don’t think redistribution is the most important contrast with Europe. In some ways the US tax system is more progressive in terms of distribution than Europe, which funds its more expansive welfare states with broad regressive taxes like the VAT, while the US is more reliant on progressive income taxes. It’s true that in some countries like France the top income tax bracket is so onerous that this discourages work but this is not universally true. In fact some countries in Europe even have flat income taxes !
The main drags on European growth (labor market regulations, precautionary principle type regulations on certain technologies) are not really related to redistribution and I think higher inequality in the US is largely exogenous to the tax system so I don’t think growth vs. redistribution is the most important trade off. I would say growth/dynamism/disruption vs safetyism/stability/stagnation is the more important difference.
I think safetyism/stability are motivated by the same principles that motivate redistribution. I see them as two different sides of the same coin.
Somewhat but I think you can support using the government to materially help poor people while being techno-optimistic and pro-abundance on the one hand and not particularly egalitarian but neurotic & pro-regulation on the other. Some center-left figures in the US fit the former while a lot of people in Europe would fit the latter. You would be surprised at the number of people in Europe who are quite centrist or even right leaning on some issues but still have a neurotic degrowth mentality.
Or maybe Europeans of the center and right also strongly support the goal of equality and government policy that redistribute towards that end. I do not see it as a distinct viewpoint.
And most of those government programs do not materially help poor people in the long run. In many cases, it is exactly the opposite.
Agree to disagree, I think they are somewhat correlated but not the same, safetyism/stability are motivated by neuroticism and conformism that can also lead you to think that poor people are gross and dangerous. Conversely a lot of historical leftists were neither conformist, neurotic nor anti-tech, the Bolsheviks for all their many faults were none of these things.
And my original point about redistribution not being as big of a policy difference as some might think between Europe and the US still stands. The overall tax burden is higher in most European countries but the main tax that Europe has that US doesn’t is the VAT which is regressive from a distributional point of view.
Yes, I agree with the first 2/3 of your original comment, and that it is motivated by neuroticism and conformism.
My take on the psychological foundation of radical ideologies is here:
https://frompovertytoprogress.substack.com/p/why-radical-ideologies-riseand-why
I think much the same thing is going on today...
I think there is a significant difference, at least in intent.
A redistribution and egalitarian approach tries to help a larger percentage on the bottom (say bottom 20% or even 30%) and seeks to reduce the wealth at the top, such as through wealth taxes and confiscatory marginal income taxes.
A pro growth, pro abundance approach on the other hand would seek to the bring the bottom 10% to 15% out of poverty as part of the social contract, but the primary goal would be to promote economic growth and opportunity for everyone, without worrying too much about whether some people get extraordinarily wealthy.
I am not convinced that the current Abundance crowd actually would seek to reform the current welfare state in any nation. They do not even talk about the issue, and my guess they would be terrified to even raise the issue given how much opposition within Center-Left voters it would create.
The current Abundance crowd still clearly supports continuation of massive government redistribution. This puts them in line with egalitarians of the past and present, although they may try to expand it less.
For a better option, see here:
https://frompovertytoprogress.substack.com/p/why-progress-and-upward-mobility
Thanks for sharing the link. I very much agree with the author. Maybe our disagreement, to the degree we have one, is little more than semantics. Whatever you call it, abundance or something else, I think there is a big difference between (1) a pro growth economic policy (free trade, expanded immigration) that seeks to increase economic opportunity at all income levels, particularly for those on the lower half of income and wealth, and provide a social safety net for those who fall into or remain in poverty versus (2) an egalitarian policy that is focused on more equality in both opportunities and outcomes.
They have a correlation, but you can be pro-redistribution and anti/more skeptical of safetyism, which is arguably what Abundance is all about. At least that's my personal economic views, "let some people get rich first" and all that jazz.
Try to start a business in the EU. Just try. I dare you.
Of course, but you're ignoring the envy and social disruption that can occur when inequality increases. It's not always about the money you have, it's where you sit in the distribution.
No amount of government redistribution can undo the envy that some people feel towards others that are better off than them.
More importantly, the people who advocate for greater redistribution are exactly the same people who have the envy and cause the social disruption.
So your argument is ultimately circular.
Rampant inequality is the rule in all societies that have evolved past the Hunter-Gatherer societies. At some point, we just need to accept reality and work on our own envy and desire to disrupt society.
https://frompovertytoprogress.substack.com/p/why-achieving-equality-is-an-impossible
https://frompovertytoprogress.substack.com/p/why-progress-and-upward-mobility
It's true that the more evil tendencies of the common populace, like envy, resentment, and in-group bias, can be provoked by good things (like economic growth, free trade, YIMBYism, new technologies, immigration) into causing disruption and strife, but this is not an argument against the good things per se, at most it means we should be tactical in how we work around and minimize these tendencies while promoting the good. Otherwise every good thing would be vetoed by the ressentiment of the longshoremen and their threats of disruption.
Plus society gets more and more segregated by class, and there’s a lot less “fairness” because the rich can pay for better schools, pass on their wealth, etc. In theory this wouldn’t be too bad if there was 1) strong social mobility and 2) very high estate taxes.
Strong social mobility inevitably leads to more class differences in the long run. String social mobility leads to more rapid sorting of people by talent than low social mobility does. That is how we got here in the first place.
https://frompovertytoprogress.substack.com/p/social-mobility-vs-upward-mobility
I am skeptical that very high estate taxes would make much of a difference. The vast majority of wealth is not inherited. It is created by each generation. And the rich will always find a way to evade them, if necessary by moving overseas.
This ignores lots of benefits that help the poor remain stable in social democracies. Unemployment insurance pays more for longer. Guaranteed sick leave/generous paternity and maternity leave. Generally better social housing programs. Lots of subsidized child care. There are more probably not off the top of my head.
The point being Americans are richer, even at the bottom, but they stand to lose it all much more easily and certainly lack some quality of life aspects present in European welfare states.
If it were up to me, as a risk averse individual, I would much rather be poor in Denmark than in the US if I had to choose. There's less potential, but also a much larger helping hand to get you back on your feet.
But these programs do not merely “ get you back on your feet.”
Beneficiaries often stay on the program means-tested programs for decades and effectively use them as income substitutes. In the long run, they make the poor worse off by removing work incentives.
So redistribution undermines both economic growth and individual incentives. Both hurt the poor (and everyone else).
True for some, and maybe worse for society overall. But all the same if you were going to put me in the bottom income quartile in the US or an average European welfare state I know which one I'd choose. It seems much less likely that I'd fear ending up on the street.
I think that you are seriously underestimating the amount of money the United States spend per capita on means-tested programs since the 1960s that are focused specifically on helping the poor and the near poor. And also more recently on the homeless.
In most cases, it is significantly more than in Europe. A failure of results is not due to a lack of spending money.
Starting the 1960s, Americans chose to focus social spending on means-tested benefits meant to help the poor and near poor. Europeans chose to focus on social insurance for all.
The American path ended up hurting the poor and near poor, while the European path ended in up in near economic stagnation since 2007.
https://frompovertytoprogress.substack.com/p/oh-lbj-what-have-you-done-to-my-party
(the relevant section starts with the header "So when did it all go wrong?")
Maybe if you count eastern and southern Europe, but what I've read shows the US spends far less on this kind of social program than the Netherlands/Germany/France/Belgium/Finland/Denmark/etc. The US does target the very poor for a larger percent of the benefits with programs like Medicaid and EITC, while Europe doesn't target as specifically the extremely poor, so in that sense maybe if you knew you were condemned to the bottom 10% of the income distribution your whole life the US wouldn't be so bad.
But the generous welfare benefits of Europe extending past the very bottom provides much more security for people in between the extremely poor and middle class and actually increases upward mobility at the bottom compared to the US. The US has much greater upward mobility from the middle to the top but very difficult mobility from the bottom to the middle compared to Europe and I believe the social program benefits extending beyond the very poor is part of that story. Losing your job or getting sick or having a kid are much less disruptive to your life in Europe.
No, my reply applies to Northwest Europe just as much (including Netherlands/Germany/France/Belgium/Finland/Denmark).
You don't understand how social programs in those nations or in the USA actually work. Unfortunately, that is very common.
I would love to see anything showing that's the case. I can't find any statistics showing the US spends more on social welfare than those countries. Your link above doesn't seem to.
If you want the social safety net to be a couch for you, that is a strong argument for not letting people like you vote. Big whoop that you'd rather be poor in a European welfare state than poor in the U.S. A disincentive to be poor in America is a good thing. Denmark would be thrilled to hear that you'd like to move there and sponge off them.
But it doesn't seem to work that way! Europe has better income mobility than the US from the bottom to the middle. This suggests helping people get back on their feet helps them be more productive than leaving them to their own means at the edge of poverty.
Granted they also do have higher unemployment which I'm sure is driven in good part by generous benefits. Can't have everything.
I'm not sure how higher (structural) unemployment co-exists with higher income mobility from the bottom to the middle....unless benefits are so generous that people move into the middle despite remaining unemployed. (Or are working for cash under the table while drawing benefits, which must be sorely tempting in a high-tax economy.) The highly restrictive work rules particularly in France and Germany where it is almost impossible to lay off a worker who has become redundant when the economy turns down gives employers a strong disincentive to hire workers into permanent contracts especially young people whom they won't be able to let go. This contributes to high youth unemployment. The trade unions seek to protect workers with jobs through iron-clad employment contracts. They don't care about people who would like to work but can't get hired, because non-workers don't pay union dues or contribute to the political muscle of the unions.
This argument is even stronger — much stronger — than RH suggests. The reason is that most people in the bottom decline are there because they are either newly entering the job market, temporarily in a downturn, a new immigrant, or retired and living off assets. IOW, hardly any family stays in the bottom decile for their entire lifespan. Thus they benefit over time from rising floor and by the higher available ceiling.
It is very weird how inconsistent people are when they moralize about sacrificing for future generations. They invoke it when talking about preventing climate change and other environmental problems, but react in horror at the idea in other situations, like raising the birthrate, growing the economy, or donating to longtermist charities.
Marvel's movie, "Eternals" is one of the only movies for mainstream audiences I've seen that tries to take the bull by the horns and address some of these issues head on, while portraying multiple viewpoints sympathetically. I am inordinately fond of it for that reason, even though it isn't a very good movie by most measures.
Yes. This is pretty standard economics. But the choice for policy is about *time*. Helping the poor *now* vs. helping *future* poor (and everyone else).
As robots and AI take over the economy, this is going to become a pressing issue - maybe the primary issue (recall Luddites; I expect modern ones).
We can tax the robots to compensate people put out of work, but doing so will cost growth - in the medium run or longer that is going to hurt everyone including the poor.
But if we don't do something like that we may have a Luddite movement wanting to smash the machines, outlaw AI, etc. That can't work either - there are hundreds of countries in the world and any that opt out of AI are going to quickly lose to those who don't.
It's going to be tricky. The best solution I can think of (and it's not very good) is to impose a temporary tax on robots over a period of say 25 years, that gradually ramps down to zero over that period. (Yes I know "temporary" taxes tend to become permanent.)
Doing something like that may be necessary to avoid civil war, but it may also cripple the economy vs. competitors who will grow faster without such a tax.
I basically agree with this post, but upon digging deeper into the lowest decile income data, I feel like you are cherry picking. Austria, Belgium, Ireland, Canada, Denmark, Switzerland, The Netherlands, and Australia (but notably not France), all have higher incomes than the US at the poorest decile. In many cases they are quite a bit higher, with a notable cluster around $20,000 per year, vs the US's $17,000 per year. By comparison, the four rich North-Western European countries that do worse than the US at the poorest decile have closer incomes to the US at $16,000 per year. South-Western countries do so much worse on all measures that they should really be considered a different income bracket. I don’t see evidence of the US on a trend to converge with many of the countries with higher 10th decile incomes.
https://ourworldindata.org/grapher/incomes-across-distribution-lis?country=USA%7EAUS%7ECAN%7EBEL%7EAUT%7EITA%7EDNK%7EFRA%7EFIN%7EDEU%7EIRL%7EGRC%7ENLD%7EESP%7ESWE%7ECHE%7EGBR&indicator=thr&decile=_1&welfare_type=dhi&period=year
Like Daniel Sz, I think the biggest picture of this column is correct, but some critical details are incorrect. In particular, redistribution is unlikely to be the factor that cripples growth, but rather highly regulated labor markets. Europe has both, of course, and has low growth. The US has less of both and has higher growth.
Consider California: It is fairly highly taxed, has fairly generous redistribution, and is grossly over-regulated in many ways. It has a high degree of labor freedom. It is known for world-class economic growth and innovation.
Also, consider Massachusetts: It is much like California except that its labor freedom level is lower (though still much higher than Europe). And it is the center of bio-medical innovation.
In neither case is there evidence that relatively high levels of taxation is causing people to work less hard than they do in the rest of the US. (Workers in Europe take a lot of vacation because the state requires them to be given a lot of vacation; they can't trade less vacation for more pay.)
So it seems that the critical variable is not the classical state-driven redistribution -- "welfare" or "social services" -- but what I call "corporate socialism", where the government wants to provide economic security to workers but isn't willing to pay for that itself, and rather compels employers to provide various services (especially employment security) to employees.
And interesting sidelight is that California has *even more* labor freedom than the common law gives -- for 150 years, its legislation has banned non-compete agreements in all but very narrow circumstances. Its laws have moved the freedom to change jobs from an "alienable" right (one that can be contracted away) to an "inalienable" one. The common belief in Massachusetts is that this is the reason that the lead in cutting-edge electronics moved from Boston (in the "Route 128" area near MIT) to Silicon Valley (near Stanford).
This supports an interesting policy proposal: That one can have world-class economic growth and still raise the standard of living of the poor to the European percentage of the median. All you have to do is ensure that employment remains a liquid market.
In this model, what is the income distribution at the beginning? How does the distribution itself change over time? How do these distributions compare to the ones experienced by, say, the US and France? The problem with any model that relies solely on averages or implicitly assumes normal distributions is that it gives misleading answers, especially as the model is iterated over time. Obviously, in general, *on average*, more growth is better than less growth; however, it is not the case that *all* growth is better than *average* growth. This is basic statistics.
>“Some people believe that equality is good for its own sake. I can’t say anything here except that this view is evil. What do we say about someone who is happy when his house is damaged in a tornado just because his neighbor ended up in an even worse situation? Every philosophy built on benevolence toward humanity would say that this reflects bad character. But for some reason, it is considered morally acceptable to adopt such an outlook as a basis for one’s economic and political views. Not sure what I can say about this other than it is bad, and those who think like this are bad people.”
This isn’t right. This only makes sense if you think material wealth is the most important social good. But I doubt you think that.
It’s perfectly feasible to believe that a poorer but more equal society is better off. First pass reasoning would suggest that equality eases stress, relieves envy, and lessens class distinctions resulting in increased social interaction.
It is, of course, a matter of degree.
You make a strong case.
I would wonder about commensurate cost of living in those 2 countries with those scenarios as you laid out. Would there be higher inflation in the higher growth country, and would that erode some of the gains you had otherwise assumed? Maybe it means the lines cross later than your base assumptions?
GDP growth is always presented as real growth net of inflation, not nominal growth, in order to account for questions such as what you ask.
Subtract the average annual cost of health care per person in Country A vs B
The assumption that a "more capitalist system" (whatever that means) would necessarily have more growth than a "social democracy" (whatever that means) is specious at best.
The myopic reliance on higher "income growth" ignores the elephants in the room while making the huge mistake of equating "average annual difference of GDP per capita growth between the US and France or Germany over thirty years." to REAL INCOME growth.
GDP growth does not trickle down to income growth. Here is the U.S. we have decades of real world experience that debunks the oft repeated "trickle down" theory used to heap more and more absurd tax cuts for the wealthy and corporations.
Secondly, any comparison of "income growth" ignores the fact hat those counties with more "social democracy" have more of their disposable income because of significantly lower costs for things like health care.
Yes, the European countries Mr. Hanania is basing his lower income growth and lower GDP per capita growth, heath care spending is literally TWICE as high as the U.S.
This is not even getting into the quality of life issues that results in higher life expectancy, better work-life balance and overall better financial security, especially for lower earners.
The U.S. coddles the rich and upper middle class, while the rest are mired in uncertainty, and a decidedly more difficult life because of the dearth of social safety net.
A much weakened social safety net being imposed by a right wing government in the thrall of the most wealthy and billionaire class in order to stuff their pockets with even more tax cuts and government contracts. (See Elon Musk)
Mr Hanania is citing and embracing the wrong metrics.
Are you making a comment or delivering a speech?
And what does "literally TWICE as high" even mean? Never mind that the U.S. spends more of GDP per capita on health care than any other country. (Canada is a distant second.) Even if it were true that European countries spend TWICE as much on health care, what is the evidence that this is a good thing? Too much health care is not only wasteful but harmful. Wasteful health care spending comes when the provider has every incentive to provide more low-value but lucrative services while the customer-patient has no incentive to baulk at the price and demand evidence of the value proposition. This market failure is not easily remedied because there is asymmetry of information: doctors really do know more about medicine than even a AI-enabled patient can know.
What a weird question “making a comment or delivering a speech?”
What’s the difference??
Even weirder is after reading my speech or comment how you got to the idea that I suggested in any way, shape or form that higher health care spending is “good thing”.
I am arguing the exact OPPOSITE.
The context of citing the fact that the U.S. spending on health care is twice as much as Europe (or as the Peterson Center on Healthcare and KFF details) https://tinyurl.com/38v6b6e9 “On average, other large, wealthy countries spend about half as much per person on health as the U.S.”
My point is that Mr. Hanania using GDP per capita growth as an metric that American workers are better off in the long run as Europeans in income growth ignores the disparity in health care spending that is a burden on American workers unlike those in Europe and other countries that have various forms of universal health care.
The same goes for all the other benefits of a “social democracy” system that are lacking in the U.S. because of “trickle down” economics constantly reducing government revenue, with unnecessary tax cut after unnecessary tax cut mainly for the rich, and then CUT spending that benefits to the not rich.
What are you arguing against??? Apparently not what I wrote.
You said, "Yes, the European countries Mr. Hanania is basing his lower income growth and lower GDP per capita growth, heath care spending is literally TWICE as high as the U.S." [Caps in your original.]
That's what I was responding to. If you had said, as I now think you meant to say, that European health care spending is literally HALF as high as the US, (which is true), then I think we would have had less to differ on. Europe spends less on a subsidized good which has close to zero utility (as measured by the money that people are willing to spend their own money out of pocket for it) than the US does. That is almost certainly a good thing for Europe (likely because of the price and volume controls you can impose on providers and consumers when you have monopsony power.) I think Europe and Canada would probably spend even less if there was no health insurance (public single payer or private insurance) at all. There would be a lot less health care consumed, obviously, if there was no price subsidy (which is 100% in Canada and in at least some European countries) but we don't know if we would be any worse off as a society for that.
This above comment is so riddled with errors and straw man arguments that it is not even worth responding to.
ROFL!! But yet, you are responding to it.
Sorry, no errors, no straw man arguments.