What Social Democracy Delivers
Ted Cruz is wrong. Workers in more social-democratic countries are richer and freer than in the US.
On Tuesday night, Bernie Sanders and Ted Cruz squared off in a CNN debate about the future of health care in the United States. As might be expected from an event pitting the country’s most well-known social democrat against one of the GOP’s most reactionary, Ayn Rand–loving conservatives, the discussion inevitably turned to larger questions of political economy.
Over and over, Sanders admirably stressed issues of distribution and inequality. He noted that, while the Affordable Care Act extended coverage to millions of Americans, many still can’t afford the health care they need. He argued vigorously for expanding Medicare to all Americans and allowing the government to use its negotiating power to lower the prices of pharmaceuticals and other medical goods and services. And, moving the debate beyond health care, he assailed Cruz for his tax plan, which would funnel billions of dollars to the rich.
Cruz’s predictable response to Sanders’s arguments, which contrasted pharmaceutical CEOs raking in millions of dollars and average Americans struggling to afford their prescriptions, was to turn to hoary red-baiting, claiming that Sanders, like all socialists, was really hell-bent on dictating the amount of money every American was allowed to make. The European and Nordic countries that Sanders championed, Cruz insisted, were “not doing nearly as well as America.”
“The per capita income in America is over five times the average per capita income in this world. It’s 50 percent more than the per capita income in Europe,” Cruz claimed. “This is a land of opportunity, because there’s social mobility. . . . The advantage of this country is someone can start out a dishwasher like my dad did, and the free enterprise system in this country let’s people rise.”
Sanders simply responded, “Denmark and Sweden and Finland . . . do pretty well.” (Cruz waxed patriotic: “I choose to live in America.”)
Unfortunately, Sanders’s rejoinder let the elisions and misdirection in Cruz’s comments go unanswered. Cruz’s claims notwithstanding, most Americans have lower incomes and less mobility than their counterparts in more social-democratic countries.
Inequality and Income
The first part of Cruz’s argument, like much growth-centric “free market” rhetoric, leaned heavily on claims about what’s “average” in order to obscure distributional issues. When Cruz mentioned “per capita income,” he was surely hoping most listeners would think about their own incomes and imagine that they would fall were the US to become more like Denmark. But Cruz was really talking about means, not medians or which country is best for those at the bottom of the income ladder.
Even if we ignore the distribution of income, Cruz’s contention is misleading. Whether measured in dollars or Purchasing Power Parity, the US’s Gross Domestic Product per capita lags behind those of a handful of countries (including Norway).
But GDP per capita tells us very little about which country has the most well-off workers or the least deprived poor.
In a country of four people, for example, where one citizen had one million dollars and the other three had nothing, the per capita income would be $250,000. In a country of four people where each citizen had $100,0000, the per capita income would be $100,000. Cruz would have us believe that the first country was more than twice as good as the latter. The three penniless people in the first country, of course, would beg to differ.
Particularly for those in the bottom half of the income distribution, and even for those in the middle, the US doesn’t offer the highest incomes. As poverty researcher Matt Bruenig has explained, the very poorest fare much, much better in other countries — particularly those (like Norway, Denmark, Finland, and Canada, among others) that have more social-democratic political systems and, therefore, stronger unions and more generous welfare states. By a variety of measures, countries like Canada and Norway have also surpassed the US when it comes to median incomes, and a host of other countries are not far behind.
The especially middling fortunes of workers and poor people in the US are largely the result of soaring inequality. While inequality has risen in most industrialized countries since the 1970s, the increase in inequality has been particularly acute in the US, which had a less developed welfare state to begin with and has seen particularly virulent attacks on inequality-reducing labor unions and progressive taxes. As a result, workers in countries that once trailed the US have gained ground in recent decades.
The size of a country’s economy, in other words, tells us very little about the quality of life for most of its citizens. Indeed, as numerous studies have shown, the vast majority of the economic growth in recent years has gone to the very richest, while the incomes of the poor, working, and middle classes have remained stagnant or fallen.
The second half of Cruz’s response, about “social mobility,” attempts to hedge against the reality of inequality in the US. Many people, Cruz’s argument implies, might think that it’s okay if poor and working-class people in the US are worse off than those in other countries if every American has a good chance to become rich.
Here Cruz’s apologetics beggar belief. It’s common sense that parents’ economic resources shape their children’s opportunities, whether through direct cash transfers, better educational opportunities, or social connections (which boost job prospects). So it should come as no shock that research, depicted visually by the “Great Gatsby Curve,” shows that high inequality is associated with low social mobility. The more resources parents have to help their kids get ahead, the less likely it is that those kids will fall down the income ladder or poor kids will move up.
So where does that leave the exceptionally unequal US? America performs even worse on measures of mobility than it does on incomes for the poor and working class. According to numerous studies, relative intergenerational mobility — the ability of a child to move up or down the income ladder, regardless of his or her parents’ incomes — is much lower in the US than in nearly every other European and Nordic country.
Only a few countries, such as the notoriously class-bound Britain, compete with the US for the unenviable title of least mobile industrialized democracy. So rigid is the US’s class structure that one study found “that the most mobile region of the U.S. is still less mobile than the least mobile regions of Norway and Sweden.”
According to several studies, relative intergenerational mobility has fallen in recent decades in the US. But even if it hasn’t, that’s no reason to celebrate.
New research shows that a more foundational metric of mobility — absolute mobility, which measures how much money children make compared to their parents, adjusted for inflation — has collapsed in the US in recent decades.
As the Washington Post summarized, “only half the children born in the 1980s grew up to earn more than their parents did, after adjusting for inflation. That’s a drop from 92 percent of children born in 1940.” This fall in absolute mobility is even more directly related to soaring inequality.
In short, rising inequality — spurred on by the capital-friendly policies that Cruz and his ilk champion — has systematically undermined the already-pollyannaish “free market” arguments favored by Cruz and company.
On one measure of wellbeing after another, ordinary people in countries that Cruz derides enjoy more economic security than the average American worker. They enjoy more freedom — despite the decades-long erosion of social democracy — than their American counterparts.
And no amount of “average”-invoking obfuscations or chest-thumping economic patriotism will change that.