Home > Uncategorized > Who-Built-It Debate Pits the U.S. Against Europe – Bloomberg

Who-Built-It Debate Pits the U.S. Against Europe – Bloomberg

September 17, 2012 Leave a comment Go to comments

Eight years ago, I wrote a book with my colleague Alberto Alesina on why the U.S. has a vastly smaller welfare state than Europe’s. Using history and statistics — world survey averages from the last two decades of the 20th century — we argued that American exceptionalism could be traced to two primary causes: political institutions and ethnic fragmentation. Both were ideological in nature.

More ethnically homogeneous places such as Scandinavia have more-generous safety nets, and the U.S. is remarkably heterogeneous. Across the U.S., before the 1996 welfare reform, states with more black residents provided less-generous welfare payments (even controlling for state income). Dartmouth College economist Erzo Luttmer found that individuals who live near poor people of the same race support more redistribution, while those who live near poor people of a different race support less redistribution. Racial divisions in the U.S. helped conservatives defeat populists a century ago and helped Richard Nixon take the South and the White House in 1968.

American Institutions

Yet American diversity can explain only part of the limited welfare state. The nation’s institutions help explain the rest. The U.S. has a majoritarian government, embodied in its powerful chief executive, while systems with proportional representation typically have more redistribution. Proportional representation tends to help parties, such as Europe’s Social Democrats, which specialize in advancing the economic interests of the poor.

The American system also has checks and balances, such as the Supreme Court and the Senate, that have historically limited attempts to expand the welfare state. President Franklin Roosevelt first battled a Republican Supreme Court, and then faced a conservative congressional coalition. Obama had only two years of undivided government. European governments typically face far fewer constraints. America’s more conservative political institutions are no accident. Its founders feared ochlocracy and wanted to check the current whims of the people.

A century ago, Europe was more conservative than the U.S., both in its institutions and in its policies. Kings and courts ruled Germany, Austria-Hungary and Italy, and the franchise was often limited. Over the 20th century, however, after world wars, old governments fell and were replaced with new constitutions, often written by Social Democrats. These constitutions had left- leaning provisions, such as proportional representation.

via Who-Built-It Debate Pits the U.S. Against Europe – Bloomberg.

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