A “Work State” As Social Model

In Budget Politics, Economic Planning, Economics, European Politics, Financial Crisis, Full Employment, History and Politics, Living Wage, Politics of Policy, Public Policy, Public Works, Social Democracy, Social Policy, Taxes, U.K Politics, Welfare State, WPA on August 18, 2009 at 12:03 pm

Introduction:

Today, we are only beginning to rebuild the U.S’ image in the world, although we are almost entirely reliant on the enormous attraction people feel toward Barack Obama as a symbol, an orator, and a personality. While this has been extremely important in terms of reducing some of the damage, in the long term, we really can’t rely on one individual for America’s standing in the world.

But what if we had a viable social model that could serve, as the New Deal did before, as the surety for America’s moral credit in the world?

Background:

Daniel Rodger’s Atlantic Crossings is perhaps one of the ten most important historical works published in the last ten years, and it’s really one that every progressive (and arguably every American) should read for one reason – it lays out, in vivid and comprehensive detail, how the United States in the Progressive Era really looked to Europe as a social model to emulate, at a time when America as a young and emerging nation still felt a sense of being bypassed by modern European nations in dealing with the “social question” of the 19th century. It tears apart myths about American “exceptionalism” and “isolationism” to show a United States that was involved in a vast transnational debate about social reform and the future of industrial civilization, a United States that was refreshingly unashamed to borrow and experiment with other ways of doing things. Especially at a time when conservatives have tried to use Europe as a bogey-man on universal health care, it’s important to remind ourselves that things were not always thus.

Rodgers’ work is important for another, equally important reason – it also explains when and how the United States has been a social model for the world. As opposed to conservatives, who’ve always maintained a partially-veiled belief that America was chosen by God to be the best nation in the world, and who oscillate between a paternalistic desire to remake the world in America’s image and a xenophobic hostility towards foreigners who can’t emulate American righteousness and who would only pollute us with their presence, America’s standing in the world was consciously constructed by human beings. In the early 19th century, when most of the world was still ruled by monarchies and aristocracies, the newly-independent United States – because of the political and intellectual work done by the Revolutionary Generation, and the way in which figures like Ben Franklin, Thomas Jefferson, and Tom Paine helped to export the idea of America to the rest of the world – was a model for democratic revolutions in Europe and Latin America, and the speed with which America transitioned into democracy with universal (white male) suffrage made it a shining hope for those denied the vote in other nations.

But it wasn’t until WWI and, even more so, WWII that the U.S really began to acquire what is referred to so cavalierly as the U.S’ “moral legitimacy” on the world stage. And what this really means is that, through the U.S’ support for the “right to self-determination of nations” in Woodrow Wilson’s Fourteen Points, or FDR’s “Good Neighbor Policy,” or the Atlantic Charter’s declaration of:

..certain common principles in the national policies of their respective countries on which they base their hopes for a better future for the world.

First, their countries seek no aggrandizement, territorial or other;

Second, they desire to see no territorial changes that do not accord with the freely expressed wishes of the peoples concerned;

Third, they respect the right of all peoples to choose the form of government under which they will live; and they wish to see sovereign rights and self government restored to those who have been forcibly deprived of them;

Fourth, they will endeavor, with due respect for their existing obligations, to further the enjoyment by all States, great or small, victor or vanquished, of access, on equal terms, to the trade and to the raw materials of the world which are needed for their economic prosperity;

Fifth, they desire to bring about the fullest collaboration between all nations in the economic field with the objector securing, for all, improved labor standards, economic advancement and social security;

Sixth, after the final destruction of the Nazi tyranny, they hope to see established a peace which will afford to all nations the means of dwelling in safety within their own boundaries, and which will afford assurance that all the men in all the lands may live out their lives in freedom from fear and want;

Seventh, such a peace should enable all men to traverse the high seas and oceans without hindrance;

Eighth, they believe that all of the nations of the world, for realistic as well as spiritual reasons must come to the abandonment of the use of force. Since no future peace can be maintained if land, sea or air armaments continue to be employed by nations which threaten, or may threaten, aggression outside of their frontiers, they believe, pending the establishment of a wider and permanent system of general security, that the disarmament of such nations is essential. They will likewise aid and encourage all other practicable measures which will lighten for peace-loving peoples the crushing burden of armaments.”

…or FDR’s “Four Freedoms” speech, pledging the U.S to supporting freedom of speech, of conscience, from fear and from want “everywhere in the world,” or the principles of the U.N’s Charter and Declaration of Human Rights, that the United States  managed to capture the imagination of huge numbers of people around the world as a world power, “the arsenal of democracy,” that nonetheless spoke to their ideals and aspirations and sought something other than pure conquest.

And a huge part of what made the efforts of Wilson and Roosevelt work was the United States had a social model that people in the rest of the world found attractive. In the Progressive Era, Europeans especially looked to America as a nation of high wages, cheap land, democratic government (at least for whites), and the kind of social mobility that was impossible at home. The New Deal further raised America’s standing in the world by attracting the imagination of Europeans who saw the U.S as a middle path between European countries faltering in the face of fascist advance and the Soviet Union on the other. Leon Blum, the Socialist Prime Minister of Popular Front France, looked to the New Deal’s jobs programs as a solution to France’s Great Depression; the 20th century’s greatest economist, John Maynard Keynes thought of the New Deal as a living proof of his General Theory.

By establishing a system of job insurance, and linking job insurance to a broader effort to combine low unemployment with low poverty, I believe that we can restore the United States as a social model that could allow us to once again capture the imagination of people around the world as a place they’d like to live in.

Job Insurance, European-Style:

Europe stands actually as an example of how a stronger U.S social model could actually complement other social models without trying to homogenize them in the way that the Washington Consensus has tried to homogenize the economies and social welfare states of other nations.  The European social model – based on a foundation of a strong welfare state – is actually one that has a good deal of power in the world, as can be witnessed in the way in which countries along Europe’s periphery have sought entry into the E.U and their willingness to conform to E.U standards on human rights, for example. However, the European social model does have an important weakness – high unemployment.

But what if, by borrowing from our hypothetical American social model, Europe could have its welfare state and jobs?

The United Kingdom:

Workforce – 31 million workers

Unemployment – 8% (2.48 million workers)

In order to create a million jobs at £15k a year (£20k a year total cost per job), you’d need £20 billion, and would drop unemployment down to 4.7%. A job insurance program where premiums ran at £10 a month would create a job insurance fund that generates £3.7 billion per year, and could pre-fund the program after five and a half years (a program that ran at £10 from the worker and £10 from the employer would do it in under three years). Starting up the program right now would cost £16.3 billion from government coffers, or £3.7 billion less than the cost of its current, conventional stimulus program.

France:

Workforce – 28 million workers

Unemployment – 9.4% (2.63 million workers)

France is complicated by the fact that the normal pre-recession unemployment was already really high, and that the French minimum wage is extremely high at €16k a year ($22k a year in the U.S). In order to create 1.2 million jobs at €16k a year (€21k in total costs) and bring unemployment down to 5% (which is lower than it’s been in over a decade by several percentage points), you’d need about €25 billion. A job insurance program where premiums ran to €10 a month (or €10 from the worker and €10) would create a job insurance fund that generates €3.3 billion a year (or €6.6 billion a year), and could pre-fund the program in under eight years (or under four years). Starting the program up right now would cost €21.7 billion from government coffers, or €4.3 billion less than its current stimulus program.

Germany:

Workforce – 44 million workers

Unemployment – 8% (3.52 million workers)

In order to create 1.37 million jobs at €16k a year (€21k in total costs) and bring unemployment down to 5% (which is lower than it’s been in over a decade by several percentage points), you’d need €28.7 billion. A job insurance program where premiums ran to €10 a month (or €10 from the worker and €10 from the employer) would create a job insurance fund that generates €5.3 billion a year (or €10.6 billion a year), and could pre-fund the program in five and a half years (or under three years). Starting the program up right now would cost €23.4 billion from government coffers, or €59 billion less than the current stimulus plan!

Spain:

Workforce – 23 million

Unemployment – 18.1% (4.14 million workers, makes the U.S’ recession relatively pleasant)

Spain is perhaps the most desperate case of any European nation, largely because the housing collapse in Europe centered in Spain the same way that it centered in California in the United States. In order to create 3 million jobs at €10k euros a year (Spain’s minimum wage is only €7.8k a year; €13k a year total cost), and bring Spain’s unemployment rate down to 5% (or about half the usual pre-recession level in Spain) would cost about €26 billion. A job insurance program where premiums ran to €4 a month (or €4/€4, you need to compensate for lower wages) would generate €1.1 billion a year (or €2.2 billion a year). This would obviously take decades to pre-fund, but in general job insurance systems shouldn’t be relied upon to handle 18% unemployment rates on their own – however, given that it would cost normally only €3 billion to lower unemployment rates a percent point in Spain, a pre-funded system could handle most ordinary recessions. Setting the program up now for 3 million jobs would cost €24.9 billion from government coffers, or €15 billion less than the current stimulus package.

Conclusion:

From these rather tiresome calculations (apologies ahead of time if I miscalculated at some point), we can see some really illuminating things. Firstly, all of these programs are well within the fiscal capacities of European states, even those developing and hard-hit states like Spain. Second, in addition to causing a sharp recovery in the job market, job insurance could dramatically re-set the “normal” European level of unemployment by at least 2-3 percentage points, which in turn would have significant impacts on “normal” rates of European economic growth. Third, all of this could be accomplished without following the neo-liberal proscription of dismantling the welfare state and labor protections.

So why not, for once, let us use U.S “soft power” to support something good?

£

Add to FacebookAdd to DiggAdd to Del.icio.usAdd to StumbleuponAdd to RedditAdd to BlinklistAdd to TwitterAdd to TechnoratiAdd to FurlAdd to Newsvine

Advertisements
  1. As usual, I have a numbers-related question. How do you compute “total” cost of a job vs. the real cost. Is it the gross vs net income? If that’s the case, then I believe you have factor in that in some of European countries, gross pay can be twice the net pay (I believe that’s the case in my country). This would add a significant amount to your numbers, wouldn’t it?

    • So here’s how I do the numbers.

      I take the base pay and then add on 30% for non-labor costs (admin, materials, etc.) based on the historical experience of the WPA (the WPA managed a 20% non-labor cost rate, but I’m assuming that the Job Insurance system would pick up more of the tab for materials, land, and the like. It’s a rather raw estimate, but I’m trying to paint things in broad brushstrokes here.

      The bottom line is, when you consider the sums already being spent on stimulus, this is within the fiscal capacity of most European countries.

  2. […] I talked about “a work state as a social model” for Europe and other nations looking to tackle poverty and unemployment, I skimmed over the […]

  3. […] A “Work” State as a Social Model (the potential international implications of jobs policy) […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: