The Center for American Progress issued a fascinating and important PolicyLink paper early in April 2011: Prosperity 2050: Is Equity the Superior Growth Model?[1] Written by Sarah Treuhaft and David Madland, both its content and its title raised a central question of our time: whether it is “possible that the traditional assumption that there is a tradeoff between growth and equity is wrong, and that broadly shared growth is ultimately better for the economy?” The tentative Treuhaft/Madland answer to this question was that shared growth might indeed be the preferable way forward: so that at the very least, “as a first step, we need to change our collective understanding about what, why and how economic and social inclusion matters.” 

            They are quite right. We do need that change, and we need it now.[2]

            The fact that the Center for American Progress felt the need to ask such a question is proof enough that the route to future U.S. prosperity is no longer clear – certainly not clear to them, and probably not clear to us. The fact that the Center’s authors felt the need to make the case for equality as an economic goal, and not just as a social one, demonstrates that the positive fit between equity and prosperity is not widely understood here in the United States. And the tentative nature of the answer that the authors gave to their own question underscores the extent to which those arguing for a growth model based on social equality are still running against the tide of thinking in Washington DC. What the Center for American Progress’s paper and its title makes abundantly clear is the nature of the conventional wisdom still dominant within the beltway: the belief that if we genuinely want prosperity, the last thing that public policy should pursue is more social leveling.

            The necessary link between economic growth and inequality is something that conservative politicians push at us all the time. It is also something that they regularly wrap in the flag, by claiming that our currently large income spread is not only economically vital but is also a particular strength of the American growth model. Newt Gingrich is a case in point, recently arguing that what makes America exceptional, and inherently superior to otherwise similar societies in Western Europe, is the American commitment to a meritocratic system of financial rewards: plus to what accompanies that –  namely a preference for private philanthropy over public welfare nets, and a disdain for government regulation of private industry. We are supposed to be a nation built upon an antipathy to government – an anti-statist creed that Seymour Martin Lipset once said could “be described in five words: liberty, egalitarianism, individualism, populism and laisser-faire.”[3] It is that creed, we are repeatedly told by leading figures on the American Right, which sustained over two centuries has brought us to our contemporary global greatness. It is also that creed which will keep us great unless liberally-minded politicians bring us to our knees by replacing indigenous American freedoms with some imported version of secular socialism. “Most of us know who we are,” Gingrich has written: “we know that America is an exceptional country with a unique genius for combining freedom and order, strength and compassion, religious faith and religious tolerance.” The threat we face now, he tells us, is an internal one. It “is the danger of losing what defines us as Americans.”[4]

            If it were that simple, our political choices would be entirely straightforward. Who but a fool would vote for anything but a continuation of a successful working relationship between individualistic values, capitalist prosperity and American power? No one, of course: but unfortunately for the American Right, the relationship between values, prosperity and power is not quite as Gingrich would have it.

Values It is entirely legitimate for conservative critics of the Obama administration to point to the greater role of individualism and anti-statism in modern U.S. political culture when contrasted with dominant belief systems in Western Europe. That much at least is true. But it is not legitimate for them to go the extra mile, by presenting some version of Lipset’s five value-orientations as though they were an accurate and exhaustive list of dominant American values, either now or in the past. For such a presentation necessarily leaves out so many other values that are also quintessentially American – some of which are attractive ones, some of which are rather less so. Try telling most African-Americans, for example, that a United States soaked in the racism associated with slavery has a “unique genius for combining freedom and order.” Or try telling American women still struggling against patriarchal patterns of social control that egalitarianism, not sexism, has now become the dominant mind-set of powerful American males. Or again, try telling the owners of small American businesses that the much vaunted anti-statism of which Newt Gingrich is so proud regularly prevents large American corporations from quietly absorbing huge quantities of tax-financed federal largesse. Of course it does not.[5]

            No, treating the American success story as the product of a uniquely unbridled form of individualism is not to provide us with a full and accurate account of American history. It is rather to write out of the American success story the important role that collectivist values and institutions have periodically played in that history, and to do so for distinctly partisan purposes. The New Deal, and the militant labor unions that underpinned it, are equally valid elements in the American story. So too are Lyndon Johnson’s Great Society and the 1960s struggle for civil rights. The values underpinning the institutions which those progressive episodes left behind – primarily Social Security, Medicare and Medicaid – are not individualistic ones; and yet it is Social Security, Medicare and Medicaid whose privatization most Americans regularly reject. And they do so because the dominant culture of contemporary America contains not simply individualism and an antipathy to politics, but also strong strands of fairness and commitments to social justice that Republican lawmakers so often forget. Witness the outrage demonstrated by rank and file Republicans against Paul Ryan’s recent attempts to justify his alternative budget:  the one that would turn Medicare into a voucher system while giving ever larger tax breaks to the already rich. Paul Ryan and his ilk would do well to reflect upon that outrage. They would do well to reflect too upon the findings of the recent Harvard/Duke Universities study of popular attitudes to wealth inequality – the study in which more than nine Americans in ten indicated their preference for “a society with far less income disparity than the U.S., choosing Sweden’s model over that of the United States.”[6] There may well be an American genius for values: but if there is, it is as likely as not to be a genius for fairness as much as for individualism –a fairness that questions the legitimacy of market-induced inequalities, not a fairness that favors them.

American Power Moreover, the global dominance which Newt Gingrich celebrates as the product of American exceptionalism is now slipping away. And it is slipping away not because of excessive federal intervention into a vibrant U.S. economy, but rather because an under-supported American economy is increasingly unable to compete with state-led industrial economies elsewhere in the global system. Whatever Japan experienced in the 1950s and 1960s, South Korea in the 1970s and 1980s, and now China in the 1990s and after 2000, it was not, and is not, unregulated economic growth. Each Asian “economic miracle” was the product of a close state-business partnership that the U.S. federal government only practices with Big Pharma, Big Finance, Big Oil, Big Farming and within the military-industrial complex. Far from American economic success depending on the maintenance of an arms-length relationship between Washington and the private sector, all the most successful sectors of the contemporary domestic American economy have close links to the U.S. state. It is those which don’t – not least the U.S. auto industry – that have seen their international competitiveness slip away.

            The U.S. is no longer the exceptional capitalist economy whose growth performance outmatches all others. It is no longer the unrivalled world leader to whom other economies look for products and managerial models. If the U.S. economy is now exceptional, it is exceptional for all the wrong reasons. It is exceptional for the scale of its trade deficit with the rest of the industrialized and industrializing world, and for the associated degree of international debt which the U.S. economy now carries. The capacity of the United States to maintain its current levels of public spending and private consumption now depends on the willingness of more successful economies elsewhere in the global system to redirect their surpluses into the purchase of U.S. treasury bonds. That might make us exceptional, but it no longer makes us superior.

Prosperity There was a time, well into the 1970s, when U.S. living standards – for well-unionized workers in U.S. manufacturing industry – were significantly higher than those found anywhere else; but that moment has also now passed. U.S. blue-collar wages now run at over $20 an hour less than those in Norway and Germany. American blue-collar hourly wage rates (after controlling for inflation) remain largely stuck where they were in the 1970s; such that real living standards, for the mass and generality of U.S. workers, have been able to grow over the last three decades only through a systemic increase in the number of family members working, in the number of hours worked, and in the scale of personal credit-card debt accumulated in the process. In 2006 the average annual hours worked in the United States numbered 1,804. The equivalent figure for Germany was 1,436.[7] In March 2010 U.S. revolving debt (98 percent of which was made up of credit card debt) totaled $852.6 billion, with the average US family carrying a credit card debt of at least $8000. The vulnerability of a credit-based growth model to a system-wide collapse of banking confidence is now obvious to us all. We have learned that much from the financial tsunami of 2008, even if we have not learned yet how to escape from its recessionary consequences. It was always a precarious growth model, even before 2008. After 2008, it is certainly not a growth model for which sensible people should claim superiority, or urge emulation.

            Even in the good years, the prosperity of the American model so favored by Newt Gingrich had its dark underside, such that some of the things for which we as Americans remain globally exceptional are not things that sane economies should want to have on their resume. The United States leads the industrialized world in inequality. Our poverty rate is a world beater. So too is in our inability to guarantee adequate health care at a reasonable cost to all our citizens, regardless of their ability to pay. In a generation we have turned ourselves into a long-hours economy now beset with high levels of unemployment. The official unemployment rate in the United States for the fourth quarter of 2010 was 9.6%. In Germany it was 7.3%, in the UK 7.8% and in Japan 4.8%.[8] In the United States, “the inflation adjusted income of the median household [actually] fell by 4.8%”[9] in the first nine years of this new century – the first time it had fallen since the 1930s. In December 2009, nearly one in five Americans was either unemployed or underemployed. One in nine families couldn’t make the minimum payment on their credit cards. One in eight mortgages was in default. One in eight Americans was on food stamps.[10]

            With data like that so readily to hand, you would think that even conservatives would start to have second thoughts about the wonders of American “cowboy capitalism.” After all, you don’t have to be a progressive to recognize the important welfare and development role that a modern state needs to play. Western European conservative parties – from Angela Merkel’s Christian Democrats and Nicholas Sarkozy’s ex-Gaullists to David Cameron’s pale reflection of Margaret Thatcher – all recognize the important role of public policy as a corrective to the deficiencies of private provision. But there is no such conservative openness to economic management and social reform in the contemporary United States. On the contrary, the current Republican Party debate is truly exceptional, characterized as it is by an internationally-unique rigidity of dogma, ignorance of foreign practices, and barely-disguised contempt for foreign models. Nativism, intellectual bankruptcy and self-delusion go hand-in-hand in what passes for intelligent economic discourse in right-wing circles in America these days. The danger is that their folly might yet rub off on the rest of us.

            This is no time to triangulate with idiocy. It is time instead to stress the need for qualitative change, for a complete rupture with a (literally) bankrupt growth model based on rising inequality. The Center for American Progress did us a great service by issuing their PolicyLink document. They did not do us quite such a good service by being so tentative in the presentation of their case. Sane voices across the industrial world have long recognized that an economy built on social justice and income equality is a stronger economy than one built on poverty, inequality and debt.[11] What the United States so desperately needs is not more of the same. Inequality has had its day. What the United States desperately needs is a paradigm shift in economic and social policy; and it is our task as progressives to design and implement that shift.

First posted at www.davidcoates.net