Thomas, Socialism, Prosperous Market Economy
(Top Posts - Social/Legal - 082908)
> Here's a quote for you...from one of your founding fathers, Norman
> Thomas, the presidential candidate for the socialist party around the
> time FDR introduced socialism into the US government:
> Norman Thomas essentially said there was no need for him to run
> any more, because the Democrat Party had adopted the Socialist
> Party platform. His actual quote was: "The American people will
> never knowingly adopt socialism. But, under the name of 'liberalism',
> they will adopt every fragment of the socialist program, until one day
> America will be a socialist nation, without knowing how it happened."
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October, 2006 in Society & Policy
The Social Welfare State, beyond Ideology
Are higher taxes and strong social "safety nets"
antagonistic to a prosperous market economy?
The evidence is now in
by Jeffrey D. Sachs
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One of the great challenges of sustainable develop-
ment is to combine society's desires for economic
prosperity and social security. For decades econo-
mists and politicians have debated how to reconcile
the undoubted power of markets with the reassuring
protections of social insurance.
America's supply-siders claim that the best way to
achieve well-being for America's poor is by spurring
rapid economic growth and that the higher taxes
needed to fund high levels of social insurance would
Austrian-born free-market economist Friedrich Aug-
ust von Hayek suggested that high taxation would be
a "road to serfdom," a threat to freedom itself.*
Most of the debate in the U.S. is clouded by vested
interests and by ideology. Yet there is by now a rich
empirical record to judge these issues scientifically.
The evidence may be found by comparing a group
of relatively free-market economies that have low
to moderate rates of taxation and social outlays with
a group of social-welfare states that have high rates
of taxation and social outlays.
Not coincidentally, the low-tax, high-income countries
are mostly English-speaking ones that share a direct
historical lineage with 19th-century Britain and its
theories of economic laissez-faire. These countries
include Australia, Canada, Ireland, New Zealand, the
U.K. and the U.S.
The high-tax, high-income states are the Nordic social
democracies, notably Denmark, Finland, Norway and
Sweden, which have been governed by left-of-center
social democratic parties for much or all of the post-
World War II era. They combine a healthy respect for
market forces with a strong commitment to antipov-
Budgetary outlays for social purposes average around
27 percent of gross domestic product (GDP) in the
Nordic countries and just 17 percent of GDP in the
Friedrich Von Hayek was wrong
On average, the Nordic countries outperform the Anglo-
Saxon ones on most measures of economic performance.
Poverty rates are much lower there, and national income
per working-age population is on average higher. Unem-
ployment rates are roughly the same in both groups, just
slightly higher in the Nordic countries. The budget situ-
ation is stronger in the Nordic group, with larger sur-
pluses as a share of GDP.
The Nordic countries maintain their dynamism despite
high taxation in several ways. Most important, they
spend lavishly on research and development and higher
education. All of them, but especially Sweden and Fin-
land, have taken to the sweeping revolution in informa-
tion and communications technology and leveraged it
to gain global competitiveness.
Sweden now spends nearly 4 percent of GDP on R&D,
the highest ratio in the world today. On average, the
Nordic nations spend 3 percent of GDP on R&D, com-
pared with around 2 percent in the English-speaking
The Nordic states have also worked to keep social ex-
penditures compatible with an open, competitive, mar-
ket-based economic system. Tax rates on capital are
relatively low. Labor market policies pay low-skilled
and otherwise difficult-to-employ individuals to work
in the service sector, in key quality-of-life areas such
as child care, health, and support for the elderly and
The results for the households at the bottom of the
income distribution are astoundingly good, especially
in contrast to the mean-spirited neglect that now passes
for American social policy.
The U.S. spends less than almost all rich countries on
social services for the poor and disabled, and it gets
what it pays for: the highest poverty rate among the
rich countries and an exploding prison population.
Actually, by shunning public spending on health, the
U.S. gets much less than it pays for, because its depen-
dence on private health care has led to a ramshackle
system that yields mediocre results at very high costs.
Von Hayek was wrong. In strong and vibrant demo-
cracies, a generous social-welfare state is not a road
to serfdom but rather to fairness, economic equality
and international competitiveness.
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