I won’t bother to summarize all of Reich’s points, because the article should be read in its entirety by any person who truly cares about the future of our country. Suffice to say, Reich believes that the growth of income inequality in the United States has been a disaster for the working classes (no surprise there). But he also maintains that the existence of such radical inequality doesn’t bode all that well for American business either, since there aren’t enough rich people in our country (or in the rest of the world) to purchase all the wonderful tinkers-toys that U.S. corporation love to produce. When the middle class stops consuming—as they are right now—the mighty engines of American capitalism must inevitably come grinding to a halt. In short, the stupid, short-sighted greed of the ruling classes has created a situation where now their own bloated wealth is going to start to be threatened. Tough luck, suckers!
Short of a revolt on the part of the working classes in this country (which is unlikely to happen) there is no easy way out of this fix. Henry Ford understood that he had to at least pay his workers enough so that they could buy his cars; the current ruling elite in this country—and their cronies in Congress—are either too stupid or too venal to grasp this simple fact. And so they squeeze the earning power of the average worker and then are surprised that this is now having a detrimental effect on our economy.
So what does all this have to do with Europe? Certainly that continent has more than its own share of economic problems. The difference is that countries like Germany and France protect their workers and ensure that they receive living wages, decent benefits, generous vacation time, and of course universal health insurance. The relative income equality in almost every European country and the well-designed safety net that these countries have in place means that average Europeans haven’t been devastated during this current economic down-turn the way their American counterparts have.
Let me use one example to illustrate the basic difference between American and European forms of capitalism. When I was in Belgium this summer, a friend of mine, who is an American married to a Belgian woman, had recently lost his job. When he went to the unemployment office in his local city, he was automatically provided with generous unemployment benefits (about 80% of his former salary for the first year) and given outplacement assistance to help him find another job. He didn’t have to worry about his health insurance, because it wasn’t connected to his job, and he also didn’t have to worry about not being able to pay for his daughter’s university education, because it was almost free. Expressing concerns that he was in the job market again at the age of 50, the woman he was dealing with at the unemployment office put things in perspective for him. “Just be glad that you’re not living in the United States,” she said. “You’d really be in trouble then.”
The six years I spent living in Belgium has given me a wonderful appreciation for the kind of well-regulated European-style capitalism that is constantly being mocked by right wing pundits and tea-party politicians in this country. Certainly, it is difficult for Europeans to earn as much as the elite do in the U.S., because of their progressive taxation system. But this means that there is also not as many people struggling to survive every day as there are in this country.
A few years ago I had the opportunity to teach a political philosophy class at Rangsit University in Thailand. The students in the class came from all over Asia, and were naturally fascinated by the United States. Many of them said that they hoped that their own countries would develop along the lines of the United States. When I asked them why they looked to the U.S. as the model for their own countries, the general sentiment was that Americans seemed to have the best lifestyles of any people on earth.
This prompted me to do a bit of research, which I proceeded to share with the class:
1) In terms of economic inequality, our own C.I.A. studies rank the United States as one of the most unequal places on earth (just above Jamaica, Uganda, and the Philippines). The places with the least income inequality, not surprisingly, were in Europe with Sweden, Hungary, and Norway leading the pack.
2) In a recent study of quality of life in major world cities, no American city even made it into the top 30. The top three cities for quality of life: Vienna, Zurich, and Geneva.
3) In terms of overall happiness, once again European countries like Denmark, Switzerland, and Austria lead the pack with the United States ranked 23.
Based upon these and other similar studies (peacefulness ranking, overall health, infant mortality rates, numbers of people incarcerated, educational outcomes, environmental quality, rate of violent crime), life in the U.S. falls well behind that of many European countries. Based upon data like this alone, I told the students in my class that, if they were looking for countries to serve as viable models of development, they might want to study Norway, Sweden, Finland, and Denmark, since, by most standards, the overall quality of life in these countries is much higher then in the U.S.
The recent economic crisis the world is experiencing is showing the fault lines in global capitalism. The question is not whether capitalism itself should be replaced by some other economic system, but which version of capitalism will ultimately prove more resiliant in a period of economic uncertainty, global instability, and resource scarcity--the very period, in other words, that we seem to be living through right now.
I'm putting my money on the European model.