Life in the United States for many isn't pretty these days. And it seems as if the collective spirit drifts and sags. Daily life, family life, life in Boston's North End, can be quite happy, but there is a serious malaise in the country. And Obama doesn't appear to be the doctor we need. He seems to be a Republican, maybe of the old school, but a school not that old, a Ronald Reagan school, supporting the rich because, perhaps, he believes in that old trickle-down song. It shouldn't be so surprising: he comes to us fresh from teaching at The University of Chicago, that bastion of Milton Friedmanism. Yes, he taught law there, but the economics department must have permeated his soul. I really hope I'm wrong. But one of the problems extremely smart people have is that they think that since they are smarter than a lot of other people, when they finally come to a decision, having poured through mountains of research and opinion, it must be the right one. Anyway, mostly here I offer a reduced version of an article in The New York Review of Books by Tony Judt, an Englishman, a professor of European history in the history department at New York University, and probably as smart as Obama. It is called, "What is Living an What Is Dead in Social Democracy?" I want to use a la-de-da word like seminal to describe it for it takes the assumptions that govern political beliefs in the US and turns them on their heads....and then shows us why it is necessary to reframe our basic conceptions. Below, I provide large ungainly hunks of the article for you and leave out far too much of the historical explanation of why we are where we are. You will have to (and should) read the whole article to get the real deal. This stuff is basic and crucial.
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"Americans would like things to be better. According to public opinion surveys in recent years, everyone would like their child to have improved life chances at birth. They would prefer it if their wife or daughter had the same odds of surviving maternity as women in other advanced countries. They would appreciate full medical coverage at lower cost, longer life expectancy, better public services, and less crime.
"When told that these things are available in Austria, Scandinavia, or the Netherlands, but that they come with higher taxes and an 'interventionary' state, many of those same Americans respond: 'But that is socialism! We do not want the state interfering in our affairs. And above all, we do not wish to pay more taxes.'
"This curious cognitive dissonance is an old story. A century ago, the German sociologist Werner Sombart famously asked: Why is there no socialism in America? There are many answers to this question. Some have to do with the sheer size of the country: shared purposes are difficult to organize and sustain on an imperial scale. There are also, of course, cultural factors, including the distinctively American suspicion of central government. ....A willingness to pay for other people's services and benefits rests upon the understanding that they in turn will do likewise for you and your children: because they are like you and see the world as you do.
"....Why is it that here in the United States we have such difficulty even imagining a different sort of society from the one whose dysfunctions and inequalities trouble us so? We appear to have lost the capacity to question the present, much less offer alternatives to it. Why is it so beyond us to conceive of a different set of arrangements to our common advantage?"
"....We simply do not know how to talk about these things. To understand why this should be the case, some history is in order: as Keynes once observed, "A study of the history of opinion is a necessary preliminary to the emancipation of the mind." For the purposes of mental emancipation... I propose that we take a minute to study the history of a prejudice: the universal contemporary resort to "economism," the invocation of economics in all discussions of public affairs.
"For the last thirty years... when asking ourselves whether we support a proposal or initiative, we have not asked, is it good or bad? Instead we inquire: Is it efficient? Is it productive? Would it benefit gross domestic product? Will it contribute to growth? This propensity to avoid moral considerations, to restrict ourselves to issues of profit and loss—economic questions in the narrowest sense—is not an instinctive human condition. It is an acquired taste.
"....[H]ow did we, in our own time, come to think in exclusively economic terms? ....If we ask who exercised the greatest influence over contemporary Anglophone economic thought, five foreign-born thinkers spring to mind: Ludwig von Mises, Friedrich Hayek, Joseph Schumpeter, Karl Popper, and Peter Drucker.
"....All were profoundly shaken by the interwar catastrophe that struck their native Austria. Following the cataclysm of World War I and a brief socialist municipal experiment in Vienna, the country fell to a reactionary coup in 1934 and then, four years later, to the Nazi invasion and occupation.
"....Each, albeit in contrasting keys, drew the same conclusion: the best way to defend liberalism, the best defense of an open society and its attendant freedoms, was to keep government far away from economic life. If the state was held at a safe distance, if politicians—however well-intentioned—were barred from planning, manipulating, or directing the affairs of their fellow citizens, then extremists of right and left alike would be kept at bay.
"The same challenge—how to understand what had happened between the wars and prevent its recurrence—was confronted by John Maynard Keynes. The great English economist, born in 1883 (the same year as Schumpeter), grew up in a stable, confident, prosperous, and powerful Britain. And then, from his privileged perch at the Treasury and as a participant in the Versailles peace negotiations, he watched his world collapse, taking with it all the reassuring certainties of his culture and class....Keynes, too, would ask himself the question that Hayek and his Austrian colleagues had posed. But he offered a very different answer.
"....Indeed, the essence of his contributions to economic theory was his insistence upon uncertainty: in contrast to the confident nostrums of classical and neoclassical economics, Keynes would insist upon the essential unpredictability of human affairs. If there was a lesson to be drawn from depression, fascism, and war, it was this: uncertainty—elevated to the level of insecurity and collective fear—was the corrosive force that had threatened and might again threaten the liberal world.
"Thus Keynes sought an increased role for the social security state, including but not confined to countercyclical economic intervention. ....
"....The common theme and universal accomplishment of the neo-Keynesian governments of the postwar era was their remarkable success in curbing inequality. If you compare the gap separating rich and poor, whether by income or assets, in all continental European countries along with Great Britain and the US, you will see that it shrinks dramatically in the generation following 1945.
".... The paradox of the welfare state, and indeed of all the social democratic (and Christian Democratic) states of Europe, was quite simply that their success would over time undermine their appeal. The generation that remembered the 1930s was understandably the most committed to preserving institutions and systems of taxation, social service, and public provision that they saw as bulwarks against a return to the horrors of the past. But their successors—even in Sweden—began to forget why they had sought such security in the first place.
"It was social democracy that bound the middle classes to liberal institutions in the wake of World War II... They received in many cases the same welfare assistance and services as the poor: free education, cheap or free medical treatment, public pensions, and the like. In consequence, the European middle class found itself by the 1960s with far greater disposable incomes than ever before, with so many of life's necessities prepaid in tax. And thus the very class that had been so exposed to fear and insecurity in the interwar years was now tightly woven into the postwar democratic consensus.
"By the late 1970s, however, [fear of insecurity and inequality faded and with this fading,]…[s]tarting with the tax and employment reforms of the Thatcher-Reagan years, and followed in short order by deregulation of the financial sector, inequality[once again grew and] has once again become an issue in Western society. After notably diminishing from the 1910s through the 1960s, the inequality index has steadily grown over the course of the past three decades.
"In the US today, the "Gini coefficient"—a measure of the distance separating rich and poor—is comparable to that of China. When we consider that China is a developing country where huge gaps will inevitably open up between the wealthy few and the impoverished many, the fact that here in the US we have a similar inequality coefficient says much about how far we have fallen behind our earlier aspirations.
.... In the contemporary United States, at a time of growing unemployment, a jobless man or woman is not a full member of the community. In order to receive even the exiguous welfare payments available, they must first have sought and, where applicable, accepted employment at whatever wage is on offer, however low the pay and distasteful the work. Only then are they entitled to the consideration and assistance of their fellow citizens.
"Why are we so unmoved by the stigma attaching to [those who need assistance]? This 'disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition...is...the great and most universal cause of the corruption of our moral sentiments.' Those are not my words. They were written by Adam Smith, who regarded the likelihood that we would come to admire wealth and despise poverty, admire success and scorn failure, as the greatest risk facing us in the commercial society whose advent he predicted. It is now upon us.
"....In the last thirty years, a cult of privatization has mesmerized Western (and many non-Western) governments. Why? The shortest response is that, in an age of budgetary constraints, privatization appears to save money. If the state owns an inefficient public program or an expensive public service—a waterworks, a car factory, a railway—it seeks to offload it onto private buyers.
"....What we have been watching these past decades is the steady shifting of public responsibility onto the private sector to no discernible collective advantage. In the first place, privatization is inefficient. Most of the things that governments have seen fit to pass into the private sector were operating at a loss: whether they were railway companies, coal mines, postal services, or energy utilities, they cost more to provide and maintain than they could ever hope to attract in revenue.
"For just this reason, such public goods were inherently unattractive to private buyers unless offered at a steep discount. But when the state sells cheap, the public takes a loss. It has been calculated that, in the course of the Thatcher-era UK privatizations, the deliberately low price at which long-standing public assets were marketed to the private sector resulted in a net transfer of £14 billion from the taxpaying public to stockholders and other investors.
"To this loss should be added a further £3 billion in fees to the banks that transacted the privatizations. Thus the state in effect paid the private sector some £17 billion ($30 billion) to facilitate the sale of assets for which there would otherwise have been no takers. These are significant sums of money—approximating the endowment of Harvard University, for example, or the annual gross domestic product of Paraguay or Bosnia-Herzegovina. This can hardly be construed as an efficient use of public resources.
"In the second place, there arises the question of moral hazard. The only reason that private investors are willing to purchase apparently inefficient public goods is because the state eliminates or reduces their exposure to risk. In the case of the London Underground, for example, the purchasing companies were assured that whatever happened they would be protected against serious loss—thereby undermining the classic economic case for privatization: that the profit motive encourages efficiency. The "hazard" in question is that the private sector, under such privileged conditions, will prove at least as inefficient as its public counterpart—while creaming off such profits as are to be made and charging losses to the state.
"The third and perhaps most telling case against privatization is this. There can be no doubt that many of the goods and services that the state seeks to divest have been badly run: incompetently managed, underinvested, etc. Nevertheless, however badly run, postal services, railway networks, retirement homes, prisons, and other provisions targeted for privatization remain the responsibility of the public authorities. Even after they are sold, they cannot be left entirely to the vagaries of the market. They are inherently the sort of activity that someone has to regulate.
"In the US today, we have a discredited state and inadequate public resources....
"...[B]y eviscerating the state's responsibilities and capacities, we have diminished its public standing. The outcome is "gated communities," in every sense of the word: subsections of society that fondly suppose themselves functionally independent of the collectivity and its public servants. If we deal uniquely or overwhelmingly with private agencies, then over time we dilute our relationship with a public sector for which we have no apparent use. It doesn't much matter whether the private sector does the same things better or worse, at higher or lower cost. In either event, we have diminished our allegiance to the state and lost something vital that we ought to share—and in many cases used to share—with our fellow citizens....
"....What, then, will serve as a buffer between citizens and the state? Surely not "society," hard pressed to survive the evisceration of the public domain. For the state is not about to wither away. Even if we strip it of all its service attributes, it will still be with us—if only as a force for control and repression. ....Indeed, the impetus to state-building as we have known it derived quite explicitly from the understanding that no collection of individuals can survive long without shared purposes and common institutions….
In the words of John Stuart Mill, 'the idea is essentially repulsive of a society only held together by the relations and feelings arising out of pecuniary interests.'
"....We have to begin with the state: as the incarnation of collective interests, collective purposes, and collective goods. If we cannot learn to "think the state" once again, we shall not get very far. But what precisely should the state do? Minimally, it should not duplicate unnecessarily: as Keynes wrote, 'The important thing for Government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all.'
"...[Y]ou cannot run trains competitively. Railways—like agriculture or the mails—are at one and the same time an economic activity and an essential public good. Moreover, you cannot render a railway system more efficient by placing two trains on a track and waiting to see which performs better: railways are a natural monopoly...the paradox of public transport, of course, is that the better it does its job, the less "efficient" it may be.
"A bus that provides an express service for those who can afford it and avoids remote villages where it would be boarded only by the occasional pensioner will make more money for its owner. But someone—the state or the local municipality—must still provide the unprofitable, inefficient local service. In its absence, the short-term economic benefits of cutting the provision will be offset by long-term damage to the community at large. Predictably, therefore, the consequences of "competitive" buses—except in London where there is enough demand to go around—have been an increase in costs assigned to the public sector; a sharp rise in fares to the level that the market can bear; and attractive profits for the express bus companies.
[Of course this is exactly why private health insurance companies try to dump sick people from their rolls and why the government ends up seeming to be the most inefficient since it generally is left covering the sickest people. In a society that is functioning, the well pay more so the sicker can get coverage. The assumption is that all will eventually be "the sicker." There is also the fact that a healthy population is better for everyone; being sick is not just a problem for the sick person.]
"A bus that provides an express service for those who can afford it and avoids remote villages where it would be boarded only by the occasional pensioner will make more money for its owner. But someone—the state or the local municipality—must still provide the unprofitable, inefficient local service. In its absence, the short-term economic benefits of cutting the provision will be offset by long-term damage to the community at large. Predictably, therefore, the consequences of "competitive" buses—except in London where there is enough demand to go around—have been an increase in costs assigned to the public sector; a sharp rise in fares to the level that the market can bear; and attractive profits for the express bus companies.
"Trains, like buses, are above all a social service. Anyone could run a profitable rail line if all they had to do was shunt expresses back and forth from London to Edinburgh, Paris to Marseilles, Boston to Washington. But what of rail links to and from places where people take the train only occasionally? No single person is going to set aside sufficient funds to pay the economic cost of supporting such a service for the infrequent occasions when he uses it. Only the collectivity—the state, the government, the local authorities—can do this. The subsidy required will always appear inefficient in the eyes of a certain sort of economist: Surely it would be cheaper to rip up the tracks and let everyone use their car?
"In 1996, the last year before Britain's railways were privatized, British Rail boasted the lowest public subsidy for a railway in Europe. In that year the French were planning for their railways an investment rate of £21 per head of population; the Italians £33; the British just £9.[4] These contrasts were accurately reflected in the quality of the service provided by the respective national systems. They also explain why the British rail network could be privatized only at great loss, so inadequate was its infrastructure.
"But the investment contrast illustrates my point. The French and the Italians have long treated their railways as a social provision. Running a train to a remote region, however cost-ineffective, sustains local communities. It reduces environmental damage by providing an alternative to road transport. The railway station and the service it provides are thus a symptom and symbol of society as a shared aspiration.
" ...We need to rethink the devices we employ to assess all costs: social and economic alike. ...We might conclude that the provision of universal social services, public health insurance, or subsidized public transportation was actually a cost-effective way to achieve our common objectives. Such an exercise is inherently contentious: How do we quantify "humiliation"? What is the measurable cost of depriving isolated citizens of access to metropolitan resources? How much are we willing to pay for a good society? Unclear. But unless we ask such questions, how can we hope to devise answers? ….
"In the past, social democracy unquestionably concerned itself with issues of right and wrong: all the more so because it inherited a pre-Marxist ethical vocabulary infused with Christian distaste for extremes of wealth and the worship of materialism.
What precisely is it that we find abhorrent in financial capitalism, or "commercial society" as the eighteenth century had it? What do we find instinctively amiss in our present arrangements and what can we do about them? What do we find unfair? What is it that offends our sense of propriety when faced with unrestrained lobbying by the wealthy at the expense of everyone else? What have we lost? The answers to such questions should take the form of a moral critique of the inadequacies of the unrestricted market or the feckless state. We need to understand why they offend our sense of justice or equity. We need, in short, to return to the kingdom of ends. ....
