[p2p-research] US/European post-WWII experiences and social safety nets

[Paul D. Fernhout]

I'd always believed (given two Dutch parents, and having visited the
Netherlands several times) that Western Europe overall having a better
social safety net than the USA (more health benefits, more social payments,
more free education, more public institutions, etc. in general) was somehow
due to Western Europeans being smarter, more compassionate, more
enlightened, wiser, better educated, having more democratic politics, or
something like that. :-) That feeling has always been a bit at odds with the
idea a lot of poor but ambitious (or desperate) Western Europeans moved to
the USA in the past to get a better life (including my parents) --
especially given historically stricter social hierarchies and less
changeable class definitions in Western Europe. How can they both be true?

Here is an alternative perspective to reconcile that conflict. Perhaps it is
too simplistic, but I'll put it down in electron patterns and see what
people think about it. (Maybe I still have the taste of Brink Lindsey's "The
Age of Abundance" of the Cato Institute in my mind, which I am indirectly
trying to get rebut. :-)

After WWII, around 1945, with the rest of the world's industrial
manufacturing infrastructure in ruins, the mostly-untouched USA was the
dominant economic producer in the globe, with huge export market potential.
Also, no other country able in a position to produce for US internal markets
(beyond supplying raw materials). That was an extremely advantageous
situation for many US workers compared to most other workers in the rest of
the world (then or now). It was a situation that lasted at least into the
1970s in a big way, and aspects of that advantage still remain today (even
with parts of the USA in crisis currently).

So, the USA had a lot of internal demand for workers for market production,
relative to other industrial economies without such advantages. With so much
competition for workers, US companies gave generous benefits and salaries to
many workers due to supply and demand issues. The demand for workers was so
large that it seemed to even make sense for all parents to work and put
their kids in institutionalized daycare and for women to joint the workforce
in huge numbers and leave all other social functions like caring for the
elderly to business concerns. Even deciding how to vote could be given over
to business interests, like newspapers, with workers so busy making good
money. It also made sense to import a lot of workers into the USA
(illegally, if needed). It made sense to let private fortunes build public
resources (whether universities or libraries or copyrights or patents on new
ideas). Despite earlier labor union sentiments from earlier unionization
victories, this increasing jobs-based prosperity resulted in a growing
widespread propertarian-libertarian sentiment across the USA that the free
market provides for most people (if they are able-bodied and not "lazy"),
and private charity would help the rest. And, within the USA, that sentiment
really did made sense for a couple of decades in many ways. That economic
prosperity from 1950-1970 has been the basis for lots of conservative media
and economics ever since as a dominant sentiment in the USA, not just among
the wealthy, but among people who materially benefited from these trends
historically.

Obvious to a modern reader, that conservative sentiment ignores long term
issue now obvious like the social effects of child-rearing being
institutionalized, the external costs of an unregulated free market like
pollution, the hidden suffering of the poor, the effects of a neglected and
decaying public infrastructure like railways, the socially corrosive effects
of a military-industrial-schooling-prison complex and a huge rich-poor
divide, the effects on the rest of the world of US industrial-imperial
policies, the implications of advertising persuading voters, and so on.
These are all non-obvious long term problems the USA is now having to
wrestle with, but which were not so obvious in the 1950s.

In contrast with the prosperous post-war USA my parents move to, Western
Europe for decades after WWII had less ability to create good jobs. This was
due to a damaged physical infrastructure in part. But it was also due to the
comparative advantage the USA had to sell stuff cheaper (more paid-for
infrastructure, economies of scale, more military might to keep markets open
and keep supply regions supplying stuff cheaply). Western Europe might have
created jobs, but they did not pay as well, and in general Western European
workers were materially poorer as individuals. (I saw that first hand in a
trip to the Netherlands in the 1970s with smaller cars, smaller houses, and
so on, even as socially people there seemed to have more fun.)

So, within the USA, there appeared to be not much need for most people to
think about unions or social equity, because until at least the 1970s, the
link between having a job and the right to consume worked well enough for
most people in the USA. But, in Western Europe it was a different situation.
Western Europeans were confronted with high quality cheap exports flooding
in from the USA; they were confronted with an inability to create new
markets abroad easily due to a reduced military; they were confronted with
an inability to keep supply colonies by lack of military might; they were
confronted by an obvious wealth disparity with people in the USA; they were
confronted with lingering uncertainty about war and destruction, they were
confronted with new technologies like automation and better design spewing
out of US American private laboratories that were responding to a US labor
shortage. So, out of desperation, Western Europeans demanded of their
governments that what little wealth that there was in Western European
society should be shared more equally, and that some of the wealth should go
into building shared public institutions that would be good communal
investments (getting the most public value for the least dollars compared to
redundant private ownership of books or art or music). And Western Europeans
got it -- whether limits on working hours in France, or socialized medicine
in the UK, or government controls on land speculation in the Netherlands.

Since Western Europe was rebuilding after a terrible war, these ideas got
built into the very infrastructure, both socially (laws, customs, norms) and
physically (museums, libraries, public roadways and railways, affordable
urban housing, parks, and so on). After the 1970s, Western Europe had
started to grow again significantly, and so produced more locally, and so
could once again defend internal markets against US imports, and so could
start dominating external markets and supply regions again, But, oven then,
aspects of this communal social sentiment remained that wealth should be
shared to some degree and invested in public endeavors for broad benefits.

So, while Western Europe has continued to enjoy some more equitable wealth
distribution since the 1970s as well as a social safety net, in the USA real
wages for most workers have remained about the same while the rich get
richer and the social safety net frayed from lack of attention (prison in
the USA becoming the main social safety net). And the US citizens find the
whole thing totally confusing, of course, since nothing inside the USA
seemed to change much economically. Globalization (offshoring US jobs in
manufacturing and services, seen from a purely US worker perspective :-) in
that sense has been happening to the USA for forty years, even as the trend
has accelerated in the last ten with the internet. This may be a great idea
for the rest of the world, but it is tough on US workers who built much of
their prosperity on relative global advantage. So, the US sees stagnant (now
falling) real wages as well as increasing unemployment.

Today, with improved design, increasing automation including robotics and
AI, these trends towards less employment or lower wages will affect the
entire world eventually. It may still takes a decade or two for the rest of
the world to produce locally for pent-up demand though. But unemployment
issues are already leading to riots in places like Greece by educated people
in the 20s, given  people in Western Europe may have higher expectations
about social equity, whereas more US Americans will just sit around
bewildered, since everything worked so well for so long, and workers were
promised a service economy to make up for all the jobs lost in agriculture
and manufacturing. But the world only needs so many local nail salons.

And in the rest of the world, the poor see some local growth, so they expect
that trend to continue, unaware of this equation:
"Paid_Jobs = (Demand - (Stockpiled_Supply - War)) / (Automation *
Good_Design)"

But even *China* is spending a lot of money working towards artificial brains:
   "The China-Brain Project Building China’s Artificial Brain Using an
Evolved Neural Net Module Approach "
   http://www.citeulike.org/user/hukkinen/article/4621176
   http://en.wikipedia.org/wiki/Hugo_de_Garis

 From that (oversimplified?) history, it would seem Western Europe may
respond very differently than the USA to the crisis of increasing abundance.
I saw that when I had a French roommate in graduate school at Princeton in
the 1980s. We were talking technology and economics, and I asked, what would
happen if one person made a big machine that could produce anything for
really cheap. (I had read an RA Lafferty story "In Our Block" about a
related theme, of a block of a city with visitors who essentially had
nanotech and could print huge metal pipes or cardboard boxes in tiny sheds
as they were being loaded onto the truck, with very cheap prices for
anything you wanted.)
   http://www.mulle-kybernetik.com/RAL/MT/arcanum.html

My French roommate said essentially that the owner of such a machine would
just be taxed, so everyone could buy what was produced. I disagreed from a
US perspective, suggesting the owner letting everyone starve as the economy
crashed seemed more likely to me than. I see now, he was coming at this from
a Western European perspective of recent history he had grown up in -- in
practice, that is what he saw, the huge machinery of a market coming to life
as it rebooted after WWII, and taxes and other social regulations made that
market work for everybody, even given difficulties from US competition.

Ultimately, as long as we have markets and centralized wealth, some sort of
tax (on income or wealth or both) and other social controls is needed to
make such a system producing cheap abundance work for most people. As one
person pointed out recently on Slashdot, why is it that the USA in many ways
had the most general abundance (and hope) when the marginal tax rate on the
highest incomes was 94%?
   http://www.truthandpolitics.org/top-rates.php

But, higher taxes are the opposite of current US sentiment as reflected in
US politics. This is in part a conflict between aspirational millionaire
wannabees versus people's actual interests (as brought up on the p2p list by
me recently, using terminology from Michel's reply).

Still, even if the USA gets a better social safety net or a basic income,
the more abundance people have, the more they can use that abundance to do
local manufacturing outside the market with 3D printers, local gardens, and
so on. So in the long term, we will see even more upheavals even with high
taxes and a basic income or health-care-for-all in the USA (which seems to
be going down in flames again).

Naturally, politics, economics, demographics, and history are more complex
than this. I'm just seeing how much explanatory power and predictive power I
can get from this one theme of different responses to post-WWII situations
of the USA vs. Western Europe. :-)

Is this the kind of thing that is obvious to a Western European but has
taken decades for a US American to see? :-)

Still, this may well not fit all the facts, so people can feel free to
disagree with citing unemployment figures and so on (although it is hard to
judge just from unemployment figures aspects about wages or the nature of
the workplace). There were certainly other compounding issues -- a lot of
young men dead, especially in Europe, which meant more jobs per capita for
everyone else, lower expectations for jobs and living conditions in Europe
after the war, and so on. There are historical issues too, like in the
Netherlands about religion and capitalism going back centuries that I am
ignoring. Those facts and many others would complicate thinking about
European unemployment figures (which are surprisingly low at some times).
After a burst of rebuilding, Europeans struggled more with unemployment at
various times, but got it under control, even if it is going up again.
Clearly, European unemployment generally was brought down in the 1960s.
Still, I'd suggest that, had European women moved into the full-time
workforce in huge numbers like in the USA (most Dutch women don't work
full-time when they have young kids), and had there been lots of immigration
like in the USA, and had working hours not been limited like in France, then
European unemployment would have soared much higher. European unemployment
was contained, but only by social controls (or norms, like parents taking
care of their own kids) that were different than in the USA. So, different
economies can be hard to compare, especially, when, as in the case of
Western Europe, there has been social pushback to the worst aspects of them.

Maybe my essay here should be extended to be more about social forces
affecting unemployment (even when unemployment number are low)? For example,
in the USA, everyone being expected to go to college has helped keep
unemployment lower (creating jobs for professors and keeping people out of
the labor pool). In theory, cradle-to-grave schooling could absorb any
amount of excess workers (a trend we see all too much of in the USA
already). So, at some point, we need to talk more about living conditions
than about unemployment figures. Or, to quote John Taylor Gatto who often
talks about how schooling is interwoven with economic assumptions:
   http://www.johntaylorgatto.com/chapters/16a.htm
"Under all its disguises, that is what institutional schooling is, an
abstraction which has escaped its handlers. Nobody can reform it. First you
have to realize that human values are the stuff of madness to a system; in
systems-logic the schools we have are already the schools the system needs;
the only way they could be much improved is to have kids eat, sleep, live,
and die there."

Even the collapse of the Soviet Union, in the face of pressure by a USA with
all those relative advantages in the global market, takes on a new twist,
leading to questions like, if the USA lasted a bit longer than the USSR,
does that really prove anything about economics or the sustainability of a
market approach that relies on captive markets and captive supply regions?

In general, what I am suggesting is that most of mainstream economics one
hears about in the papers is about a very special case, the situation of the
first few decades of a global economy rebooting after a huge war, as seen
from the perspective of the main untouched industrialized survivor of a
global conflict. And so, when the rest of the world looks to mainstream
economists for advice (as opposed to, say, looking to advocates of peer
economies or gift economies or a basic income in a market-economy), the
mainstream economic advice is going to be a very rough fit. EF Schumacher
saw an aspect of this in the 1970s with Small is Beautiful. Aspects of
mainstream economics will be true (since the market can produce wealth,
ignoring external costs and long term erosion of natural capital) but other
aspects of the market, like how the wealth gets distributed, are likely to
be very wrong (even if they worked OK sometimes like in post-WWII USA).
Essentially, pointing to strong growth in 1950-1970 in the USA as an example
of mainstream markets working well (as Brink Lindsey does), and suggesting
how everything before or since then anywhere else in the world is a special
case, or the consequence of bad policy interfering with markets, is a weak
theoretical position. :-)

One might call that last statement a strawman argument, of course, given
mainstream economics has more nuance than that (and Brink Lindsey does not
talk much about the rest of history or the globe, he just ignores that). I'm
sure that statement is too broad.

But, I'd still suggest, that small historical window of the USA 1950-1970 is
at the core of celebrating markets in the modern age, especially as other
countries have tried to emulate the USA's success in that period by those
same methods and failed (given much of the reason the USA succeeded was
relative advantage). They have found it difficult to make much economic
progress at all without all the sorts of social controls. These are the
social controls that many people in the USA decry because, based on
historical experience in the USA, such controls appeared to be not needed
for a time and can have specific negative effects on the functioning of
markets (limiting productivity sometimes, even as most people might be
better off because they get a bigger share of a smaller pie). That time
period is, I'd suggest, an experience at the heart of the US Conservative
movement -- that if only we could get the USA socially back to the 1950s,
everything would be good again (for white males with jobs). But I'd suggest,
with increasing automation and better design, with the internet making more
effective peer production and a gift economy, things will never be the same
as the 1950s again (short of another global war, which would likely be much
worse than WWII given the power of post-scarcity weapons these days).

So, while all countries can learn from each other, the USA may do better to
look at other countries for models of dealing with abundance and
unemployment than other countries may do looking to duplicate the USA's
recent history. And in any case, advancing technology changes the landscape
for everyone.

--Paul Fernhout
http://www.pdfernhout.net/