This is the 3rd article in a mini-series that started earlier this month on the exceptional nature of American political ideologies --- in particular, the almost total absence of a socialist or Marxist heritage on the left and, on the right, an unique conservatism that is committed to free-markets and hence differs from statist-conservatism found in Japan and everywhere on the West European continent.
The Initial Article
The 1st article in the mini-series, as you might recall, set out a spectrum of ideologies --- on both the left and right --- that runs between two poles of total state dominance of the economy and society: totalitarian Communism on the far left and Nazism (and fascist variants) on the far right. It distinguished between eight kinds of ideologies, all of which emerged in the modern era of industrialization, nationalism and nation-states, democracy, and the counter-reactions to them that materialized with eruptive force by the late 18th century in West Europe and North America and then spread gradually around the world. Then, in that same article, a buggy analysis of the eight different ideologies was unpacked. It tried to clarify the meaning of each, along with some concrete examples: among other things, as it turns out, liberalism and conservatism mean different things in Europe and Japan, or for that matter in the rest of the world, than in the USA.
Liberalism in the rest of the world, just to remind you, means free-market enthusiasm --- what we would call libertarianism in the US --- and hence the pejorative term, neo-liberalism, to depict the anti-statist policies of Ronald Reagan and Margaret Thatcher. In European circles, never mind Latin America or among leftists everywhere, neo-liberalism is a big boo-word; just mentioning it is likely to send shivers racing up and down the spines of left-wing intellectuals, most of them totally ignorant about economics. Conservatism, too, means something different in the EU or elsewhere. It refers to statist-conservatives like the French Gaullist right or the German Christian Democrats or the Japanese Liberal Democratic Party (now in power for the last 50 years).
What follows?
Well, to make sense of how Europeans view US politics, we should regard liberalism in this country as roughly equivalent to very moderate Social-Democracy . . . however misleading that term might be in the American context. As for American conservatiism, small wonder that Milton Friedman --- one of the two or three most influential economists of the last century and an icon of American conservative (and libertarian) thought --- told the German weekly Der Spiegel a few years ago that when he visits West Europe, he always describes himself as a "liberal", not a conservative, to clarify where he stands in European politics.
The 2nd Article
The next article in the mini-series focused strictly on the the unique left-side of the American ideological spectrum. In particular, it sought to clarify what the leftist heritage in the US amounts to --- certainly not socialist or Marxist, despite at times some radical influences in its policy-making. When that clarifying task was finished, the article moved on and surveyed the shifting policies toward activist government that the Democratic Party has pursued, with varying fortunes, since the New Deal days of Franklyn Roosevelt in the 1930s and the Great Society ambitions of Lyndon Johnson three decades later.
The outcome of these varying fortunes?
Well, if we're to believe no one less than the last Democratic president, Bill Clinton, the era of Big Government is now over, period --- even if its current institutional nature still leaves a much more active and costly federal government than existed before FDR's election in 1932. All this, mind you, however limited the American federal system is compared to governments in West Europe and Japan or even Canada these days.
All of Which Brings Us to the Subject of Today's Article
Consider it an extended effort --- which spans a host of causal influences, political and economic as well as social and cultural --- to explain the failure of socialism and Marxist views to ever take root in American politics. The current article, just to make what follows clearer, will probe a host of economic influences in American life, past and present; nothing more, but also nothing less. As for the various political, social, and cultural influences that have shaped the American left's unique nature, they will figure prominently in the next article or two in this series. Eventually, of course, our attention will shift to the right-side of the US ideological spectrum, and at that point we'll begin to examine and weigh the various reasons why no statist-conservatism has ever emerged here.
One more thing, a reminder . . . and then down to today's business.
As buggy visitors will recall, this mini-series on ideological exceptionalism in American politics is itself part of a larger, much more ambitious series on the American economy, always viewed comparatively, to be more precise, with Japan and the EU. That series began last summer, and so far 12 articles on the rangy topic --- with its institutional and cultural thrusts --- have appeared. The current article, then, is the 13 in that series.
PART ONE:
ECONOMIC REASONS WHY SOCIALISM HAS NEVER TAKEN ROOT IN AMERICAN LIFE
By themselves, if we were to add one key political force in American history --- the emergence of a limited democratic form of government with 67% of American (white) males able to vote with no property restrictions in the 1830s: at a time when, in Britain, the corresponding figure was 1/20th --- the economic influences set out here would probably suffice to explain why socialism never had a large appeal to the masses of Americans, whether agrarian or urban workers. Probably, in large part; but not wholly. Keep this qualification in mind as we work our way forward through the economic influences singled out here and in the next article. As you'll eventually see, there were other political influences that offset a socialist or Marxist appeal in the 19th and 20th centuries, and the same is true of social and cultural trends as well. All will be discussed in due time.
In the meantime, keep your attention focused on economic influences . . . with their firmly planted impact on American politics extending back over two centuries now . . . much to the dismay of left-wing radicals these days, not least among the politically correct acolytes in US universities (outside economic faculties) and in certain activist circles in the Democratic party at its grass-roots level?
They're several in number, six of them standing out; and as always in this series on the US economy and the smaller one embedded in it on American ideologies, we need a comparative perspective to make sense of American exceptionalism. Briefly summarized, the six we'll be examining in detail are the following:
1) An unusually high standard of living by world standards as far back as the end of the 18th century, with the US becoming the richest country in per capita income in the 1880s and holding an edge over West Europe today that is 55% higher.
2) Related to this, but also different, unusually high real wages for unskilled labor that were double those in Britain by the 1830s, with Britain itself the richest country by far in Europe at the time. Tens of millions of poor Europeans would eventually flee the oppression of poverty --- or of religious and political oppression --- in order to seek a better life here.
3) Land ownership and a wide distribution of property ownership without parallel in the world in the 18th, 19th, and early 20th centuries --- something that foreign visitors to the United States like the two astute Frenchmen, Jean de Crevecoeur and Alex de Tocqueville marveled at.
4) Historically, down until the end of the 1960s, a much broader middle class and --- no less striking --- an unusually narrow distribution of income compared to Japan and West Europe.
Since then, as we'll see, the vast expansion of the welfare state and its tax and transfer policies in Europe have reversed this 2-century trend, at a huge cost to West Europe and Japan: market-inefficiencies galore, tiny hillocks of them in all directions in their economies, creating less and less competitive economies at a time when the gap in living standards with the United States is now essentially what it was decades ago. Right now, 40% of all Swedes --- who live in the EU's most ambitious welfare state --- would, if Sweden joined the US federation, be ranked in the bottom quintile in income.
5) A definition of poverty that differs from all the rest of the industrial countries --- an absolute standard of what's needed to live decently in the US, compared to a relative standard used in Europe and the other industrial countries that guarantees more and more welfare transfers, and hence more and more taxes, at a time when economic growth has sputtered.
What's more, as we'll see, most of those in poverty in this country at any one point quickly move out of it, and --- surprisingly for non-American observers --- we'll also see that if you use what the EU Commision's Eurostat service itself called for in the late 1990s as a better measure of both poverty and income distribution --- namely, actual household consumption as opposed to reported income --- those Americans in the bottom category of pre-tax income (the lowest quintile) turn out in yearly surveys of the Bureau of Labor to spend $2.31. for every dollar that they report earning! As we'll also see, contrary to the image of distraught poverty in the US that flourishes in the EU media, 46% of Americans in poverty --- 12% of the population now, using federal statistics --- own their homes (vs. 69% of all Americans); 73% own a car; 30% own two cars; and 98% own color tvs. We'll give more statistics and the sources later on.
6) Hours worked across income categories reveal an intriguing trend. Historically, in almost every society in the world until the 19th century in the US, the upper class --- invariably, the landed aristocracy plus some urban merchants and bankers --- pursued lives of leisure and conspicuous consumption that, to top it off, almost always entailed a general disdain for hard work and a fathomless contempt for the masses of people . . . considered ignorant, uncouth, and unable to govern themselves. In much of Latin America that life-style of the upper class still persists, much to the harm of their developmental prospects, and it's omnipresent in all the Arab countries without exception.
The US has been generally exempt here on these scores, save for the slaveholding South until 1865, where a semi-militarized plantation elite held economic and political power. These days, history has fully reversed itself, and Americans in the top 20% income category work a good 2 to 3 times more than those in the bottom 20%.
7) Other closely related economic trends --- say, income or social mobility --- are also important, but we'll deal with them in comparative terms later on under the heading of social influences. There, too, as you'll see, there's a huge gulf between the US and the EU when it comes to charitable contributions: on a per capita basis, Europeans contribute $55 annually to charities and Americans $650.
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Thursday, December 16, 2004
Final Version WHY NO SOCIALISM OR MARXISM IN AMERICAN POLITICAL LIFE: 2nd of 3 Articles On The US Left
Each of these economic influences contribute mightily to explaining why Americans --- to the great puzzlement of European radicals and socialists, starting incidentally with Marx himself in the mid- and late-19th century --- never were receptive to socialism, let alone Marxist concepts that capitalism was evil and doomed or that class-conflict and eventually class-warfare would sooner or later erupt in capitalist industrial societies. Each then, needless to say, deserves to be fleshed out and explained.
The first two of these influences are closely related: an unusual living standard compared to almost all of Europe, even Great Britain --- the pioneer industrial country --- after 1880; and long before that, from the very start of the US Republic in 1789, an unusually high wage rate compared to all the rest, Britain included.
1) PER CAPITA INCOME IN THE 19TH CENTURY
Historical Data
Start with the following table, which tracks per capita income in the US, Canada, and Europe from the mid-19th century on.
Per Capita Income in Europe and the US, 19th and 20th Centuries
Source: Angus Maddison,World Population, GDP, and Per Capita Income, 1-2001 A.D. http://www.eco.rug.nl/~Maddison/
Contemporary Per Capita Income
The huge gap between the US and the rest of the world in per capita income --- which had narrowed by the late 1980s, in line with standard convergence catch-up growth theories --- once again has defied mainstream economists here and opened up again the last 14 years. The following table brings this out, based on the latest estimates of projected per capita income growth by The Economist. Note that it also includes the unemployment statistics for the countries involved, which now conver Japan as well.
Untitled Document
A brief clarifying point: Whereas the historical stats in the previous table use a PPP converter based on the 1990 dollar --- Angus Maddison's decision for his impressive work --- the data here rely on a PPP converter based, apparently, on a 2001 or 2002 dollar. Hence the discrepancy in the reported per capita income in the two tables for 2001 and 2004. What matters is the consistency of the differences in each table across countries . . . the whole point of using purchasing power parity conversions.
Quite apart from the gap in per capita income, note how much higher unemployment is in the advanced welfare states on the EU Continent. Essentially, it is running about twice as high as in the USA. Note also that Britain --- whose economy was overhauled drastically by Margaret Thatcher's Conservative governments in the 1980s, with the welfare state largely pruned to the trunk --- is doing much better by way of employment too. As for Japan, one brief caution: for over two decades, both Japanese and foreign specialists on the economy there have been skeptical of officially reported unemployment stats. Among other things, if you've worked 1 day in the last month, then you're counted as employed for the whole of that month. All the same, various international organizations continue to report the official figures.
A Swedish Viewpoint of the Huge Gap:
To drive home just how great this gulf in living standards happens to be, consider the four largest EU countries: Britain, plus Germany, France, and Italy . . . the latter three advanced welfare-and-regulatory states of the sort extolled by the left-wing radicals in US universities and among Democratic Party activists at the grass-roots as a model for this country: a saner, more equitable way to organize an economy, it's claimed. The reality? As a recent study by two Swedish economists showed, if any of these four big EU countries were suddenly to join the U.S. federation, it would be the fifth poorest of the existing 50 states, ranking just ahead of Mississipi, West Virginia, Arkansas, and Montana, and tied with Oklahoma . . . all five of these, please note, overwhelmingly rural states and far below average American per capita income. Sweden itself would be the 7th poorest state. The second richest EU country --- tiny Denmark --- would be the 10th poorest, and Ireland with the highest EU living standard would rank 14th among the poorest U.S. states.
For that matter, according to the same Swedish study, 40% of all of Swedish households "would rank among low-income households in the USA, and an even greater number in the poorer European countries would be classed as low income earnings by the American definition. In an affluent economy, in other words, it is not unlikely that those perceived as poor in an international perspective are relatively
well off."
Sweden, remember, is the most advanced of the EU welfare states, a country of 9 million. Remember too: at one time --- say, as recently as the start of the 1980s --- Swedes and other West Europeans could console themselves with having a better quality of life than the US. Maybe so, but if that includes violent crime, then there has been a stark reversal. UN studies carried out every four years by a Dutch university team of crime-victims finds that the US ranks in the bottom quarter or so of industrial countries in violent crime, way behind Australia and Britain, behind Germany, France, and Italy, and also behind Sweden. What's more, Americans are found in these surveys to have the most confidence in their police, and to be the least worried about going out into public spaces.
2) REAL WAGES WERE ALWAYS MUCH HIGHER IN THE US, FROM 1789 ON . . . AND ESPECIALLY FOR UNSKILLED LABOR
Historical Data to the Present
Now shift your attention to the next table, which is even more revealing. In particular, if you compare the two tables, you can see how much higher American real wages were in the 19th and early 20th centuries compared not just to wages in West Europe, but compared to per capita income rates in both the US and West Europe. Britain, for instance, had a noticeably higher per capita income in the 19th century down until the 1880s, but American wages for unskilled labor were already towering above British wages . . . not to mention the far lower wages and per capita income levels on the Continent.
Real Wages in the USA, Canada, and West Europe: 19th and 20th Centuries
Representative Years.
Britain's Real Wage Always = 100 Except For The Two Years Singled Out
Real Wages in the USA, Canada, and West Europe: 19th and 20th Centuries
Representative Years. Britain's Real Wage Always = 100 Except For The Two Years Singled Out
Untitled Document
Sources: Jeffrey G. Williamson, "The Evolution of Global Labor Markets Since 1830: Background Evidence and Hypotheses"; Heiner Flassbeck and Friederike Spiecker, "Real Wages and Unemployment; There Is No Trade Off" (for real wage data and trends in the 1980s and 1990s); Conference on Alternative Economic Policy Action: Preparing the European Spring Summit (European Parliament: 23 March 2004), for trends between 1996-2004
How to interpret this table:
(i.) For all 7 years selected, Britain is the base of comparison. In the 20th and 21st centuries, Britain's base level is set to 100 for the years selected: 1905, 1927, 1975, 1988, 2004 . . . the latter a rough buggy estimate, nothing more. Thus in 1905 the US real wage was 67% higher than Britain's, and France's was 75% of it (or 25% lower).
For the two years selected in the 19th century, 1844 and 1872, all comparisons are with Britain's wage level for 1905, set at 100. To make sure you understand this, look at 1872 as an example. In that year, Britain's wage level was 70% of its 1905 level; similarly, the US's wage in that year was 117% of the 1905 British level --- or about 70% higher than Britain's real wage for 1872. Again, in 1872, France's real wage was 49% of the British 1905 level, and hence 70% of the British wage for 1872. 1872, by the way, is just about the first year in the Williamson's tables when all the countries' real wages in the buggy table first appear.
(ii.) Note too that before 1945, real wages refer to the earned income of unskilled workers. After 1945, given the rapid increase in various kinds of skills in industrial capitalist societies --- technicians, engineers, accountants, bureaucrats, marketing specialists, computer analysts, banking and corporate managers, adverstisers, and the like: all of whom earn a wage-income (apart from any investment income they might have) --- Williamson rightly then looks at all wage-income. The striking gap between European and American wages until 1945 for unskilled workers then stands out all the more dramatically.
(iii.) What explains the decline in the gap between American and European wages between 1844 and 1914? The answer: mass immigration.
Between 1850 and 1914, about 35-40 million Europeans (and some Asians) flocked to the US to escape the oppression of misery and poverty or political or religious persecution. The huge influx of foreign immigrants added steadily to the American supply of labor, especially in the unskilled ranks; oppositely, the huge outflow of people from Europe reduced the supply of labor. Williamson estimates that without the immigration, American wages would have been about 35-40% higher by 1914 or --- if capital were free to flow around the globe and follow workers --- 13% or so.
The Significance of of Early High Living Standards and Especially Wages in the
Failure of Socialist Appeals to Americans
The causal significance here can't be over-estimated. To get some sense of it, we need to sketch in some comments about the appeals of Marxist Socialism --- either in the Democratic Socialism that dominates West Europe these days (and since 1945) or in the violent, revolutionary forms of totalitarian Communism that emerged after 1918 in Russia, China, and elsewhere --- in Europe and elsewhere in order to make sense of why, in contrast to the US, socialisms of various kinds (almost all Marxist in origin) have had such a huge appeal.
1) Where and When Marxist Revolutionary Views Emerged in the 19th and 20th Centuries
In those countries where Marxist Socialist parties would emerge with a large following --- which means after the 1870s when the Second Socialist International was organized by Marx and Engels everywhere in industrializing societies except Britain, the US, Australia, New Zealand, and Canada --- they did so early on in those countries' industrial breakthroughs. It is in those periods of unusually rapid urbanization and the modern factory system that the dislocations and social upheavals among the masses of people are the most turbulent. A new working class, usually with poor wages initially and psychological problems of adapting to factory life, emerges; the more the country industrializes, the more peasants flock into strange, rapidly growing cities that are psychologically disruptive too in order to find work --- which usually meant in alienating factory conditions; the fast-growing cities themselves were almost always poorly governed, with poor infrastructure and services --- something found throughout the developing countries these days; and to top it off, given the hostility to trade unions throughout almost all of Continental Europe initially --- in contrast to Britain, the US, and the other English-speaking countries --- workers were unable to legally organize.
Add in that in almost all of Europe, Asia, and Latin America democracy and the democratic vote for the new working classes were usually severely restricted or suppressed, and you have a pretty good idea of why Marxist notions of an alienated, exploited working class could take root everywhere in Europe save Britain and on those other continents.
Come to think of it, one more thing --- very important to boot: except in Britain, fears, mistrust, and resentments across class-lines were rife and influenced the growing attraction of socialism to the new working classes and their intellectual spokesmen (to a man, middle class graduates of universities). As a general thing, the further South you went in Europe --- Spain, Portugal, Italy, Greece --- or the further East from the English channel toward France, Germany, Austria, and all of East Europe and Czarist Russia, the more acute class hostilities were. Small wonder that in all these societies, not only did Marxist socialism take root, but after 1918 so did Communism and various Fascist movements. The exceptions here were Switzerland (very tiny and prosperous) and Holland and Scandinavia. Along with Britain, Holland (plus Belgium), Sweden, Norway, and Denmark had evolved politically as constitutional monarchies, and systems of consensual decision-making muted the tendencies toward class-based fears and hostilities.
2) Marxist Predictions of Capitalism's Future Shattered
Eventually, at least in West Europe before 1914, trade unions were legalized and the democratic franchise was made available to urban workers. Simultaneously, in Europe and the US, far better infrastructure like streets, street-lamps, sewers, good water delivery systems, and public transportation (initially rail and horse-carriages, later buses and subways) materialized, as did far more honest and effective local government. Public schools were also introduced, and social services --- including welfare and unemployment insurance --- were also introduced by central governments in the Continent, often by conservative political parties hoping to offset socialist appeals.
All these changes combined with improved living standards and rising wages to undermine Marxist predictions and full-blooded socialist appeals in the more industrialized areas of Northern and West Europe by 1914. What happened then?
(3) The Crisis in Marxism Socialism and the Split Between Communists and Democratic Socialists
Between 1900 and 1914, socialist intellectuals debated vigorously, and sometimes violently, the meaning of socialism given all these changes.
Those who dismissed the idea of inevitable socialist revolution --- the workers and masses of people in an industrial capitalist society the inevitable victims of capitalism --- became quickly known as revisionists, a term that emerged in the debates within the German Social Democratic Party, by far the largest in the world by then. Revisionist socialists pointed to Britain as a model, above all its working class evolution into a moderate force with rising living standards, improved work conditions, emerging social welfare benefits, and trade-union protection, followed after 1900 by a working-class party, Labour. On this view, Britain showed the true future for socialists in the more industrialized countries. Sooner or later --- given democracy, trade-unions, and the mass vote --- working class parties would come to dominate government everywhere and transform their societies gradually, peacefully, but continually, into socialism. After 1932, starting in Sweden, the goal would look like something very much resembling the advanced regulatory-and-welfare state that emerged everywhere in West Europe after WWII.
(America, by the way, remained a huge puzzle for even socialist revisionists or the British equivalents. It had no working class party at all by 1914, even of the Labour sort in Britain; it had scarcely any socialist movement at all except for a small party led by Eugene Debs, with an appeal to recent immigrant workers in American urban centers. His biggest success was to pull in 6% of the vote in a presidential election one time.)
4) Lots of Marxist Socialist leaders and intellectuals Furiously Disagreed.
Orthodox Marxists were repelled by these revisionist theses. Unregenerate true-believers who dominated the German Social Democratic Party and the tinier socialist movements that had emerged in the non-democratic, far more backward countries of Southern and Eastern Europe, they furiously assaulted revisionism as a sell-out to capitalism and argued for full-blooded socialist revolution based on the inevitable breakdown of capitalism and socialist revolution. But wait! The workers themselves could no longer be trusted to incorporate the proper revolutionary consciousness, serving as the socialist vanguard. How could they? Look at Britain, look at Northwestern Europe, look at . . .
Or as Lenin noted in a famous reply to the revisionists that he wrote in 1903 --- he headed the Bolshevik (majority) wing of the Russian Social-Democratic Party (outlawed in autocratic Czarist Russia) --- the industrial and political evolution of Britain and the moderate democratic and industrial countries of Northwest Europe showed that, by themselves, the masses could be bought off by the boss-class with trade union legality, the franchise, and tid-bits of welfare. That was it. Exactly like the revisionist spokesmen and politicians in the international socialist movement, the working-class by itself would sell-out to the plutocratic bosses and their make-believe democratic governments . . . the latter, of course, always considered by the radicals as committees of the bourgeoisie with political hats.
On this Leninist view, then --- which would become the basis of Communism in 1917-1918 --- the industrial proletariat was no longer the vanguard of the revolution. Who then was? Quite simply, said Lenin, the leaders of the Socialist (later Communist) parties themselves.
5) The Split on the Left Into Communism and Democratic Socialism After 1918
Abroad, those socialists and radicals who admired the Communist triumph in Russia and yearned for full-blooded socialism of the orthodox Marxist sort broke with their Social Democratic brethren and created local national communist parties. All were totally subservient to the Kremlin. All were filled with spies and hard-line Soviet sycophants, plus a fair number of duped idealists. Where they could in democratic countries in West Europe, they also competed for electoral support and by the mid-1930s were forming Popular Front coalitions with Communists and radical liberals, at any rate in those countries full of intense class-conflicts: above all, Republican Spain and France of the Third Republic. They were also especially strong in pre-Nazi Germany and pre-Fascist Italy. After WWII, the Italian and French Communist Parties were actually the largest parties in the country . . . at any rate into the 1950s. By the end of the cold war, the Italian Communist Party had disappeared, and in France alone a small Communist Party survived, serving in left-wing coalitions in the 1980s and again in the late 1990s.
By contrast, in Scandinavia, Holland, and Britain --- all evolutionary constitutional monarchies --- intense class conflict had always been muted, and Communist Parties remained small and subversive, little else.
On the more moderate Socialist left, to return to 1918, most Socialist leaders criticized the Leninist and later Stalinist dictatorships, refused to join the Comintern (Communist International), and pursued an active democratic line of winning power by means of the ballot. Starting in Sweden in 1933, the Social Democratic parties also renounced their original Marxist goals of totally socializing the economies of their countries. What they now pursued, first in Sweden and later everywhere in West Europe after WWII, was a set of policies that created advanced welfare-and-regulatory states. Only in Britain, under Tony Blair, has one of those parties --- the Labour Party --- turned full-circle and accepted the free-market reforms carried out by conservatives . . . in the British case, during the era of Margaret Thatcher in the 1980s.
Elsewhere, despite some minor reforms to make their economies more competitive globally, democratic Socialist parties continue for the most part to resist the need for fundamental restructuring of the huge network of welfare and regulatory systems they have put in place, with the help of statist-conservatives, over the last 60 years Their great victory? Ending the century old conflict between capitalism and socialism, not to forget creating an era of unprecedented social and political stability in West European life. It's nothing to sneer at. The trouble is . . . will the system still work?
6) The Current Social Democratic Dilemma --- Shared by Statist Conservatism in the EU and Japan
To answer the question left hanging fire a moment ago: Bluntly put, that such statist-led and statist-dominated economies can compete effectively in a world of vast changes --- rapid globalizing forces; the rapid industrializatikon of China, along with Japan, the rest of Pacific Asia; and of course the dynamic technological pace-setter in creating a post-industrial information-based economy, the USA (now 55% richer in per capita income than the EU average) --- seems more and more doubtful, their economies straining under the burdens of cumulative market inefficiencies, a declining work ethos, huge welfare commitments, and the development of large underground economies even in Scandinavia and Holland, not just Latin Europe, as a result of onerous marginal taxes.
All these are serious deficiencies. There are others.
The worst of them? The huge problem that haunts almost all of the EU when it comes to starting new businesses. The entrepreneurial spirit --- always weak in most of Europe compared to Americans --- has virtually died out, and yet in the US we know for certain that about 70-75% of all new jobs in the last few decades are created by small businesses, not big corporations. According to a very good American-British study published in the late 1990s, about 1 in 11 adults in the US start a new business each year. Some of course grow into huge giants --- 3/4 of the Fortune 500 Biggest Companies didn't even exist in 1975 --- but most remain small, and most don't fail. In the EU, the equivalent figure for start-ups is 1 in 33 Britons and Italians, and at the bottom 1 in 50 Germans and Finns. If this rife aversion to risk-taking continues, where exactly will West Europeans find jobs being created in the years and decades to come?
Amazingly, 70% of young French men and women say that they would like to have a job in the French civil service. Who exactly is going to be taxed to create jobs for them in the public sectors? Who, for that matter, in about 15 years is going to find not just decent jobs but be willing to shoulder the new tax burdens of supporting an ever larger population of retirees on state pensions?
7) The Woes of Reformers
Reform efforts do exist in the EU, but woes here is no exaggeration. Take Germany.
Since 1991, it has rivaled Japan in racking up the worst record of economic growth in the capitalist world since the Great Depression of the 1930s. Faced with economic stagnation, huge welfare burdens that will rapidly multiply with more and more retirees to sustain on state-pensions, and a rapid outflow of German industrial multinational development abroad, the head of the Social-Democratic and Green government --- Gerhard Schroeder --- has had to quit the leadership of the Social-Democratic Party, amid a grass-roots rebellion, in order to concentrate on trying to push through fairly modest regulatory and welfare reforms. It's not clear that he will easily succeed. It's not clear he will succeed at all . . . not without growing social conflicts and violence from all those who resist big changes in the status-quo, whether on the left or right.
France is no better off, note quickly, even though it has been governed by a right-wing conservative coalition since June 2002. The modest reform program it was pursuing the first year was essentially scrapped last spring in the wake of big electoral defeats in regional elections. Meanwhile, the government seems willing to do little more than chip away tentatively at this or that welfare benefit or tax, little else.
The Buggy Analysis as to why there is no socialist or Marxist tradition in American life will continue in the next article in this mini-series. Santa Barbara time, 2:00 PM, December 20th, 2004. That article will look at land ownership --- the source of almost all production and livelihood everywhere until the industrial revolution --- and show that by the 1830s 80% of Americans owned their own land and produced for their families and the market. The corresponding figures in Europe --- where no free land existed after the end of the 17th century --- are 1/10th of that and, in some instances, 1/20th or 1/30th. Small wonder that, meager as the actual market income might be for most farming families in the US and especially along the always migrating frontier, the average American in those days and over the next few decades as the US began to industrialize rapidly would regard themselves as property-owners in a broad middle class, resistant to Marxist class-based appeals.
We'll also look at the distribution of income, past and present in the US, and poverty levels as well.
The first two of these influences are closely related: an unusual living standard compared to almost all of Europe, even Great Britain --- the pioneer industrial country --- after 1880; and long before that, from the very start of the US Republic in 1789, an unusually high wage rate compared to all the rest, Britain included.
1) PER CAPITA INCOME IN THE 19TH CENTURY
Historical Data
Start with the following table, which tracks per capita income in the US, Canada, and Europe from the mid-19th century on.
Per Capita Income in Europe and the US, 19th and 20th Centuries
| Year | Britain | USA | Canada | France | Germany | Italy | Denmark |
|---|---|---|---|---|---|---|---|
| 1850 | 2330 | 1806 | 1330 | 1597 | 1428 | 1350 | 1767 |
| 1872 | 3332 | 2541 | 1705 | 2078 | 1931 | 1475 | 2087 |
| 1905 | 4520 | 4642 | 3562 | 2894 | 3104 | 1984 | 3346 |
| 1927 | 5315 | 6576 | 4847 | 4154 | 3941 | 2838 | 4658 |
| 1975 | 11,847 | 16,284 | 14,205 | 13,251 | 12,041 | 10,742 | 13,621 |
| 2001 | 20,127 | 27,948 | 22,302 | 21,092 | 18,677 | 19,040 | 23,161 |
Source: Angus Maddison,World Population, GDP, and Per Capita Income, 1-2001 A.D. http://www.eco.rug.nl/~Maddison/
Contemporary Per Capita Income
The huge gap between the US and the rest of the world in per capita income --- which had narrowed by the late 1980s, in line with standard convergence catch-up growth theories --- once again has defied mainstream economists here and opened up again the last 14 years. The following table brings this out, based on the latest estimates of projected per capita income growth by The Economist. Note that it also includes the unemployment statistics for the countries involved, which now conver Japan as well.
| Per Capita Income & Unemployment in Big Industrial Countries For 2004 | |||||||
|---|---|---|---|---|---|---|---|
| USA | Canada | Britain | France | Germany | Italy | Japan | |
| Per Capita Income $ | 39,334 | 32,320 | 28,370 | 28,452 | 27,090 | 27,425 | 28,868 |
| Unemployment % | 5.4 | 7.3 | 4.7 | 9.9 | 10.8 | 8.1 | 4.7 |
A brief clarifying point: Whereas the historical stats in the previous table use a PPP converter based on the 1990 dollar --- Angus Maddison's decision for his impressive work --- the data here rely on a PPP converter based, apparently, on a 2001 or 2002 dollar. Hence the discrepancy in the reported per capita income in the two tables for 2001 and 2004. What matters is the consistency of the differences in each table across countries . . . the whole point of using purchasing power parity conversions.
Quite apart from the gap in per capita income, note how much higher unemployment is in the advanced welfare states on the EU Continent. Essentially, it is running about twice as high as in the USA. Note also that Britain --- whose economy was overhauled drastically by Margaret Thatcher's Conservative governments in the 1980s, with the welfare state largely pruned to the trunk --- is doing much better by way of employment too. As for Japan, one brief caution: for over two decades, both Japanese and foreign specialists on the economy there have been skeptical of officially reported unemployment stats. Among other things, if you've worked 1 day in the last month, then you're counted as employed for the whole of that month. All the same, various international organizations continue to report the official figures.
A Swedish Viewpoint of the Huge Gap:
To drive home just how great this gulf in living standards happens to be, consider the four largest EU countries: Britain, plus Germany, France, and Italy . . . the latter three advanced welfare-and-regulatory states of the sort extolled by the left-wing radicals in US universities and among Democratic Party activists at the grass-roots as a model for this country: a saner, more equitable way to organize an economy, it's claimed. The reality? As a recent study by two Swedish economists showed, if any of these four big EU countries were suddenly to join the U.S. federation, it would be the fifth poorest of the existing 50 states, ranking just ahead of Mississipi, West Virginia, Arkansas, and Montana, and tied with Oklahoma . . . all five of these, please note, overwhelmingly rural states and far below average American per capita income. Sweden itself would be the 7th poorest state. The second richest EU country --- tiny Denmark --- would be the 10th poorest, and Ireland with the highest EU living standard would rank 14th among the poorest U.S. states.
For that matter, according to the same Swedish study, 40% of all of Swedish households "would rank among low-income households in the USA, and an even greater number in the poorer European countries would be classed as low income earnings by the American definition. In an affluent economy, in other words, it is not unlikely that those perceived as poor in an international perspective are relatively
well off."
Sweden, remember, is the most advanced of the EU welfare states, a country of 9 million. Remember too: at one time --- say, as recently as the start of the 1980s --- Swedes and other West Europeans could console themselves with having a better quality of life than the US. Maybe so, but if that includes violent crime, then there has been a stark reversal. UN studies carried out every four years by a Dutch university team of crime-victims finds that the US ranks in the bottom quarter or so of industrial countries in violent crime, way behind Australia and Britain, behind Germany, France, and Italy, and also behind Sweden. What's more, Americans are found in these surveys to have the most confidence in their police, and to be the least worried about going out into public spaces.
2) REAL WAGES WERE ALWAYS MUCH HIGHER IN THE US, FROM 1789 ON . . . AND ESPECIALLY FOR UNSKILLED LABOR
Historical Data to the Present
Now shift your attention to the next table, which is even more revealing. In particular, if you compare the two tables, you can see how much higher American real wages were in the 19th and early 20th centuries compared not just to wages in West Europe, but compared to per capita income rates in both the US and West Europe. Britain, for instance, had a noticeably higher per capita income in the 19th century down until the 1880s, but American wages for unskilled labor were already towering above British wages . . . not to mention the far lower wages and per capita income levels on the Continent.
Real Wages in the USA, Canada, and West Europe: 19th and 20th Centuries
Representative Years.
Britain's Real Wage Always = 100 Except For The Two Years Singled Out
Real Wages in the USA, Canada, and West Europe: 19th and 20th Centuries
Representative Years. Britain's Real Wage Always = 100 Except For The Two Years Singled Out
| Year | Britain | USA | Canada | France | Germany | Italy | Denmark |
|---|---|---|---|---|---|---|---|
| 1844 | 60 | 116 | n.a. | 42 | n.a | n.a. | n.a. |
| 1872 | 70 | 117 | 102 | 49 | 69 | 24 | 38 |
| 1905 | 100 | 167 | 174 | 75 | 84 | 44 | 90 |
| 1927 | 100 | 166 | 117 | 62 | 87 | 56 | 147 |
| 1975 | 100 | 157 | 162 | 82 | 110 | 100 | 154 |
| 1988 | 129 | 151 | 166 | 102 | 135 | 129 | 165 |
| 2004 est. | 100 | 140 | n.a. | 95 | 98 | 95 | 125 |
How to interpret this table:
(i.) For all 7 years selected, Britain is the base of comparison. In the 20th and 21st centuries, Britain's base level is set to 100 for the years selected: 1905, 1927, 1975, 1988, 2004 . . . the latter a rough buggy estimate, nothing more. Thus in 1905 the US real wage was 67% higher than Britain's, and France's was 75% of it (or 25% lower).
For the two years selected in the 19th century, 1844 and 1872, all comparisons are with Britain's wage level for 1905, set at 100. To make sure you understand this, look at 1872 as an example. In that year, Britain's wage level was 70% of its 1905 level; similarly, the US's wage in that year was 117% of the 1905 British level --- or about 70% higher than Britain's real wage for 1872. Again, in 1872, France's real wage was 49% of the British 1905 level, and hence 70% of the British wage for 1872. 1872, by the way, is just about the first year in the Williamson's tables when all the countries' real wages in the buggy table first appear.
(ii.) Note too that before 1945, real wages refer to the earned income of unskilled workers. After 1945, given the rapid increase in various kinds of skills in industrial capitalist societies --- technicians, engineers, accountants, bureaucrats, marketing specialists, computer analysts, banking and corporate managers, adverstisers, and the like: all of whom earn a wage-income (apart from any investment income they might have) --- Williamson rightly then looks at all wage-income. The striking gap between European and American wages until 1945 for unskilled workers then stands out all the more dramatically.
(iii.) What explains the decline in the gap between American and European wages between 1844 and 1914? The answer: mass immigration.
Between 1850 and 1914, about 35-40 million Europeans (and some Asians) flocked to the US to escape the oppression of misery and poverty or political or religious persecution. The huge influx of foreign immigrants added steadily to the American supply of labor, especially in the unskilled ranks; oppositely, the huge outflow of people from Europe reduced the supply of labor. Williamson estimates that without the immigration, American wages would have been about 35-40% higher by 1914 or --- if capital were free to flow around the globe and follow workers --- 13% or so.
The Significance of of Early High Living Standards and Especially Wages in the
Failure of Socialist Appeals to Americans
The causal significance here can't be over-estimated. To get some sense of it, we need to sketch in some comments about the appeals of Marxist Socialism --- either in the Democratic Socialism that dominates West Europe these days (and since 1945) or in the violent, revolutionary forms of totalitarian Communism that emerged after 1918 in Russia, China, and elsewhere --- in Europe and elsewhere in order to make sense of why, in contrast to the US, socialisms of various kinds (almost all Marxist in origin) have had such a huge appeal.
1) Where and When Marxist Revolutionary Views Emerged in the 19th and 20th Centuries
In those countries where Marxist Socialist parties would emerge with a large following --- which means after the 1870s when the Second Socialist International was organized by Marx and Engels everywhere in industrializing societies except Britain, the US, Australia, New Zealand, and Canada --- they did so early on in those countries' industrial breakthroughs. It is in those periods of unusually rapid urbanization and the modern factory system that the dislocations and social upheavals among the masses of people are the most turbulent. A new working class, usually with poor wages initially and psychological problems of adapting to factory life, emerges; the more the country industrializes, the more peasants flock into strange, rapidly growing cities that are psychologically disruptive too in order to find work --- which usually meant in alienating factory conditions; the fast-growing cities themselves were almost always poorly governed, with poor infrastructure and services --- something found throughout the developing countries these days; and to top it off, given the hostility to trade unions throughout almost all of Continental Europe initially --- in contrast to Britain, the US, and the other English-speaking countries --- workers were unable to legally organize.
Add in that in almost all of Europe, Asia, and Latin America democracy and the democratic vote for the new working classes were usually severely restricted or suppressed, and you have a pretty good idea of why Marxist notions of an alienated, exploited working class could take root everywhere in Europe save Britain and on those other continents.
Come to think of it, one more thing --- very important to boot: except in Britain, fears, mistrust, and resentments across class-lines were rife and influenced the growing attraction of socialism to the new working classes and their intellectual spokesmen (to a man, middle class graduates of universities). As a general thing, the further South you went in Europe --- Spain, Portugal, Italy, Greece --- or the further East from the English channel toward France, Germany, Austria, and all of East Europe and Czarist Russia, the more acute class hostilities were. Small wonder that in all these societies, not only did Marxist socialism take root, but after 1918 so did Communism and various Fascist movements. The exceptions here were Switzerland (very tiny and prosperous) and Holland and Scandinavia. Along with Britain, Holland (plus Belgium), Sweden, Norway, and Denmark had evolved politically as constitutional monarchies, and systems of consensual decision-making muted the tendencies toward class-based fears and hostilities.
2) Marxist Predictions of Capitalism's Future Shattered
Eventually, at least in West Europe before 1914, trade unions were legalized and the democratic franchise was made available to urban workers. Simultaneously, in Europe and the US, far better infrastructure like streets, street-lamps, sewers, good water delivery systems, and public transportation (initially rail and horse-carriages, later buses and subways) materialized, as did far more honest and effective local government. Public schools were also introduced, and social services --- including welfare and unemployment insurance --- were also introduced by central governments in the Continent, often by conservative political parties hoping to offset socialist appeals.
All these changes combined with improved living standards and rising wages to undermine Marxist predictions and full-blooded socialist appeals in the more industrialized areas of Northern and West Europe by 1914. What happened then?
(3) The Crisis in Marxism Socialism and the Split Between Communists and Democratic Socialists
Between 1900 and 1914, socialist intellectuals debated vigorously, and sometimes violently, the meaning of socialism given all these changes.
Those who dismissed the idea of inevitable socialist revolution --- the workers and masses of people in an industrial capitalist society the inevitable victims of capitalism --- became quickly known as revisionists, a term that emerged in the debates within the German Social Democratic Party, by far the largest in the world by then. Revisionist socialists pointed to Britain as a model, above all its working class evolution into a moderate force with rising living standards, improved work conditions, emerging social welfare benefits, and trade-union protection, followed after 1900 by a working-class party, Labour. On this view, Britain showed the true future for socialists in the more industrialized countries. Sooner or later --- given democracy, trade-unions, and the mass vote --- working class parties would come to dominate government everywhere and transform their societies gradually, peacefully, but continually, into socialism. After 1932, starting in Sweden, the goal would look like something very much resembling the advanced regulatory-and-welfare state that emerged everywhere in West Europe after WWII.
(America, by the way, remained a huge puzzle for even socialist revisionists or the British equivalents. It had no working class party at all by 1914, even of the Labour sort in Britain; it had scarcely any socialist movement at all except for a small party led by Eugene Debs, with an appeal to recent immigrant workers in American urban centers. His biggest success was to pull in 6% of the vote in a presidential election one time.)
4) Lots of Marxist Socialist leaders and intellectuals Furiously Disagreed.
Orthodox Marxists were repelled by these revisionist theses. Unregenerate true-believers who dominated the German Social Democratic Party and the tinier socialist movements that had emerged in the non-democratic, far more backward countries of Southern and Eastern Europe, they furiously assaulted revisionism as a sell-out to capitalism and argued for full-blooded socialist revolution based on the inevitable breakdown of capitalism and socialist revolution. But wait! The workers themselves could no longer be trusted to incorporate the proper revolutionary consciousness, serving as the socialist vanguard. How could they? Look at Britain, look at Northwestern Europe, look at . . .
Or as Lenin noted in a famous reply to the revisionists that he wrote in 1903 --- he headed the Bolshevik (majority) wing of the Russian Social-Democratic Party (outlawed in autocratic Czarist Russia) --- the industrial and political evolution of Britain and the moderate democratic and industrial countries of Northwest Europe showed that, by themselves, the masses could be bought off by the boss-class with trade union legality, the franchise, and tid-bits of welfare. That was it. Exactly like the revisionist spokesmen and politicians in the international socialist movement, the working-class by itself would sell-out to the plutocratic bosses and their make-believe democratic governments . . . the latter, of course, always considered by the radicals as committees of the bourgeoisie with political hats.
On this Leninist view, then --- which would become the basis of Communism in 1917-1918 --- the industrial proletariat was no longer the vanguard of the revolution. Who then was? Quite simply, said Lenin, the leaders of the Socialist (later Communist) parties themselves.
5) The Split on the Left Into Communism and Democratic Socialism After 1918
Abroad, those socialists and radicals who admired the Communist triumph in Russia and yearned for full-blooded socialism of the orthodox Marxist sort broke with their Social Democratic brethren and created local national communist parties. All were totally subservient to the Kremlin. All were filled with spies and hard-line Soviet sycophants, plus a fair number of duped idealists. Where they could in democratic countries in West Europe, they also competed for electoral support and by the mid-1930s were forming Popular Front coalitions with Communists and radical liberals, at any rate in those countries full of intense class-conflicts: above all, Republican Spain and France of the Third Republic. They were also especially strong in pre-Nazi Germany and pre-Fascist Italy. After WWII, the Italian and French Communist Parties were actually the largest parties in the country . . . at any rate into the 1950s. By the end of the cold war, the Italian Communist Party had disappeared, and in France alone a small Communist Party survived, serving in left-wing coalitions in the 1980s and again in the late 1990s.
By contrast, in Scandinavia, Holland, and Britain --- all evolutionary constitutional monarchies --- intense class conflict had always been muted, and Communist Parties remained small and subversive, little else.
On the more moderate Socialist left, to return to 1918, most Socialist leaders criticized the Leninist and later Stalinist dictatorships, refused to join the Comintern (Communist International), and pursued an active democratic line of winning power by means of the ballot. Starting in Sweden in 1933, the Social Democratic parties also renounced their original Marxist goals of totally socializing the economies of their countries. What they now pursued, first in Sweden and later everywhere in West Europe after WWII, was a set of policies that created advanced welfare-and-regulatory states. Only in Britain, under Tony Blair, has one of those parties --- the Labour Party --- turned full-circle and accepted the free-market reforms carried out by conservatives . . . in the British case, during the era of Margaret Thatcher in the 1980s.
Elsewhere, despite some minor reforms to make their economies more competitive globally, democratic Socialist parties continue for the most part to resist the need for fundamental restructuring of the huge network of welfare and regulatory systems they have put in place, with the help of statist-conservatives, over the last 60 years Their great victory? Ending the century old conflict between capitalism and socialism, not to forget creating an era of unprecedented social and political stability in West European life. It's nothing to sneer at. The trouble is . . . will the system still work?
6) The Current Social Democratic Dilemma --- Shared by Statist Conservatism in the EU and Japan
To answer the question left hanging fire a moment ago: Bluntly put, that such statist-led and statist-dominated economies can compete effectively in a world of vast changes --- rapid globalizing forces; the rapid industrializatikon of China, along with Japan, the rest of Pacific Asia; and of course the dynamic technological pace-setter in creating a post-industrial information-based economy, the USA (now 55% richer in per capita income than the EU average) --- seems more and more doubtful, their economies straining under the burdens of cumulative market inefficiencies, a declining work ethos, huge welfare commitments, and the development of large underground economies even in Scandinavia and Holland, not just Latin Europe, as a result of onerous marginal taxes.
All these are serious deficiencies. There are others.
The worst of them? The huge problem that haunts almost all of the EU when it comes to starting new businesses. The entrepreneurial spirit --- always weak in most of Europe compared to Americans --- has virtually died out, and yet in the US we know for certain that about 70-75% of all new jobs in the last few decades are created by small businesses, not big corporations. According to a very good American-British study published in the late 1990s, about 1 in 11 adults in the US start a new business each year. Some of course grow into huge giants --- 3/4 of the Fortune 500 Biggest Companies didn't even exist in 1975 --- but most remain small, and most don't fail. In the EU, the equivalent figure for start-ups is 1 in 33 Britons and Italians, and at the bottom 1 in 50 Germans and Finns. If this rife aversion to risk-taking continues, where exactly will West Europeans find jobs being created in the years and decades to come?
Amazingly, 70% of young French men and women say that they would like to have a job in the French civil service. Who exactly is going to be taxed to create jobs for them in the public sectors? Who, for that matter, in about 15 years is going to find not just decent jobs but be willing to shoulder the new tax burdens of supporting an ever larger population of retirees on state pensions?
7) The Woes of Reformers
Reform efforts do exist in the EU, but woes here is no exaggeration. Take Germany.
Since 1991, it has rivaled Japan in racking up the worst record of economic growth in the capitalist world since the Great Depression of the 1930s. Faced with economic stagnation, huge welfare burdens that will rapidly multiply with more and more retirees to sustain on state-pensions, and a rapid outflow of German industrial multinational development abroad, the head of the Social-Democratic and Green government --- Gerhard Schroeder --- has had to quit the leadership of the Social-Democratic Party, amid a grass-roots rebellion, in order to concentrate on trying to push through fairly modest regulatory and welfare reforms. It's not clear that he will easily succeed. It's not clear he will succeed at all . . . not without growing social conflicts and violence from all those who resist big changes in the status-quo, whether on the left or right.
France is no better off, note quickly, even though it has been governed by a right-wing conservative coalition since June 2002. The modest reform program it was pursuing the first year was essentially scrapped last spring in the wake of big electoral defeats in regional elections. Meanwhile, the government seems willing to do little more than chip away tentatively at this or that welfare benefit or tax, little else.
The Buggy Analysis as to why there is no socialist or Marxist tradition in American life will continue in the next article in this mini-series. Santa Barbara time, 2:00 PM, December 20th, 2004. That article will look at land ownership --- the source of almost all production and livelihood everywhere until the industrial revolution --- and show that by the 1830s 80% of Americans owned their own land and produced for their families and the market. The corresponding figures in Europe --- where no free land existed after the end of the 17th century --- are 1/10th of that and, in some instances, 1/20th or 1/30th. Small wonder that, meager as the actual market income might be for most farming families in the US and especially along the always migrating frontier, the average American in those days and over the next few decades as the US began to industrialize rapidly would regard themselves as property-owners in a broad middle class, resistant to Marxist class-based appeals.
We'll also look at the distribution of income, past and present in the US, and poverty levels as well.
Replies: 2 comments
I will be pleased to thank you for the references of this comparative swedish study I found today in your site http://www.thebuggyprofessor.org/archives/00000237.php
Posted by michel sautelet @ 01/12/2005 06:52 PM PST
Is the emphasis on wage levels corresponding to presence or absence of a strong Marxist/Socialist tradition really warranted, given that Marxist and Socialist movements have more often than not originiated not from the bottom, but instead from fairly well-off, well-educated segments of a population?
It's an observation made by Joshua Muravchik in his book Heaven on Earth. Those who clamour most for Socialism, those most likely to adhere to Marxist views, are rarely the poorest. They're most often a educated - if politically disempowered - class. The members of the Bolshevick movement weren't from poor backgrounds. Neither were the founders of the British Labour movement.
Muravchik believes that what made America distinctive was the nature of our own Labour movement, and its leaders, from Gompers to Meany, who rejected Socialistic/Class-warfare solutions. The focus on America's PCI relative to that of other nations as an explanation for the lack of a strong Marxist movement seems - well, almost Marxist in its Materialism.
THE BUGGY REPLY
Thank you for the comments, all stimulating. See the next article for some extended replies to them.
Posted by James Ruhland @ 12/21/2004 04:31 PM PST