Protracted austerity measures won't solve America's problems

In light of their country's persistent debt (sovereign and private sector) crisis and recession, it should come as no surprise that contemporary Americans would like things to be better. They would like their child to have improved life chances at birth. They would also prefer it if their wife or daughter had the same odds of surviving maternity as women in other advanced countries. They would appreciate full medical coverage at lower cost, longer life expectancy, better public services, and less crime.

But when told that these things are available in Austria, Scandinavia, or the Netherlands, and come with higher taxes and an "interventionary" state, many of those same people respond: "But that is socialism! We do not want the state interfering in our affairs. And above all, we do not wish to pay more taxes."

So, why is it that the United States is having such difficulty even imagining a different sort of society from the one whose dysfunctions and inequalities is troubling its citizens so? Americans, collectively, appear to have lost the capacity to question the present, much less offer alternatives to it. Why is it so beyond people to conceive of a different set of arrangements to your common advantage?

This shortcoming is shared by most other western nations. We in the West simply do not know how to talk about these things anymore. For the last thirty years, in much of the English-speaking world (though less so in continental Europe and elsewhere), when asking ourselves whether we support a proposal or initiative, we have not asked, is it good or bad? Instead we inquire: Is it efficient? Is it productive? Would it benefit gross domestic product? Will it contribute to growth? This propensity to avoid moral considerations, to restrict ourselves to issues of profit and loss-economic questions in the narrowest sense-is not an instinctive human condition. It is an acquired taste.

In the eighteenth century, what Adam Smith called "moral sentiments" were uppermost in economic conversations.

Indeed, even back then, the thought that we might restrict public policy considerations to a mere economic calculus was already a source of concern. The Marquis de Condorcet, one of the most perceptive writers on commercial capitalism in its early years, anticipated with distaste the prospect that "liberty will be no more, in the eyes of an avid nation, than the necessary condition for the security of financial operations." The revolutions of the age risked fostering confusion between the freedom to make money…and freedom itself.

If there was a lesson to be drawn from the depression, fascism, and war that plagued the 20^th century, it was this: uncertainty-elevated to the level of insecurity and collective fear- is the corrosive force that has threatened and might again threaten the liberal world. This was the reason why Keynes sought an increased role for the social security state. What many American tea party republicans blissfully ignore, or are conveniently unaware of, is that one of governments' prime functions is to bulk buy goods and services that are popularly perceived as desirable or essential. As far as German government spending goes, their government provides far greater levels of service and support to citizens. German unemployment assistance, for example is much more generous on the basis that it prevents people from descending into circumstances which will cost even more and further translate into major social ills such as crime and substance abuse. Should we care to compare Germany's poverty related problems with those experienced in America we might understand the efficacy of the former's approach and even gain a modicum of understanding of how infantile and inept the American approach, to date, has been.

The welfare state had remarkable achievements to its credit. In some countries it was social democratic, grounded in an ambitious program of socialist legislation; in others-Great Britain, for example-it amounted to a series of pragmatic policies aimed at alleviating disadvantage and reducing extremes of wealth and indigence. The common theme and universal accomplishment of the neo-Keynesian governments of the post-war era was their remarkable success in curbing inequality. If you compare the gap separating rich and poor, whether by income or assets, in all continental European countries along with Great Britain and the US, you will see that it shrinks dramatically in the generation following 1945.

With greater equality there came other benefits. Over time, the fear of a return to extremist politics-the politics of desperation, the politics of envy, and the politics of insecurity-abated. The Western industrialized world entered a halcyon era of prosperous security: a bubble, perhaps, but a comforting bubble in which most people did far better than they could ever have hoped in the past and had good reason to anticipate the future with confidence.

The paradox of the welfare state was quite simply that their success would over time undermine their appeal. The generation that remembered the 1930s was understandably the most committed to preserving institutions and systems of taxation, social service, and public provision that they saw as bulwarks against a return to the horrors of the past. But their successors began to forget why they had sought such security in the first place.

In the US today, the "Gini coefficient"-a measure of the distance separating rich and poor-is comparable to that of China. More than anything else, the welfare states of the mid-twentieth century established the profound impropriety of defining civic status as a function of economic participation.

In the contemporary United States, at a time of growing unemployment, a jobless man or woman is no longer a full member of the community. In order to receive even the exiguous welfare payments available, they must first have sought and, where applicable, accepted employment at whatever wage is on offer, however low the pay and distasteful the work. Only then are they entitled to the consideration and assistance of their fellow citizens.

This "disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect persons of poor and mean condition…is…the great and most universal cause of the corruption of our moral sentiments." These words were written by Adam Smith, the political right's economic godhead, who regarded the likelihood that we would come to admire wealth and despise poverty, admire success and scorn failure, as the greatest risk facing us in the commercial society whose advent he predicted. It is now upon us.

The U.S, today, has a discredited state with inadequate public resources. Interestingly, they do not have disgruntled taxpayers or, at least, they are usually disgruntled for the wrong reasons. They are, rightfully, disgruntled about the extent of their government's debt problems, yet cannot seem to arrive at a consensus as to precisely what is the most rational and realistic way forward in attempting to solve these issues.

By eviscerating the state's responsibilities and capacities, America has diminished its public standing in the international community. The domestic outcome of this has been the development of "gated communities," in every sense of the word: subsections of society that fondly suppose themselves exempt from the obligations of the social contract, and functionally independent of the collectivity and its public servants. If you deal uniquely or overwhelmingly with private agencies, then over time you dilute your relationship with a public sector for which you have no apparent use. It doesn't much matter whether the private sector does the same things better or worse, at higher or lower cost. In either event, you have diminished your allegiance to the State and lost something vital to the survival of community-based infrastructure and ensuring its subsequent cohesion.

This process was well described by one of its greatest modern practitioners: Margaret Thatcher reportedly asserting that "there is no such thing as society. There are only individual men and women and families."

But if there is no such thing as society, merely individuals and the "night watchman" state-overseeing from afar activities in which it plays no part-then what will bind our societies together? In the U.S they already accept the existence of private police forces, private mail services, private agencies provisioning the state in war, and much else besides. American society has "privatized" precisely those responsibilities that the modern state laboriously took upon itself in the course of the nineteenth and early twentieth centuries.

What, then, will serve as a buffer between U.S citizens and the state now, and more importantly, into the foreseeable future? Surely not "society," hard pressed to survive the evisceration of the public domain. The state is not about to wither away. Even if you stripped it of all its service attributes, it will still be with us, if only as a force for control and repression. Between state and individuals there would then be no intermediate institutions or allegiances: nothing would remain of the spider's web of reciprocal services and obligations that bind citizens to one another via the public space they collectively occupy. All that would be left is private persons and corporations seeking competitively to hijack the state for their own advantage.

The very notion that private advantage could be multiplied to public benefit was already palpably absurd to the liberal critics of nascent industrial capitalism. In the words of John Stuart Mill, "the idea is essentially repulsive of a society only held together by the relations and feelings arising out of pecuniary interests."

In order to resolve the causes of it's fundamental problems and remain a relevant and respectable nation, in the eyes of the international community, America needs to rethink the devices it employs to define and assess 'costs': social and economic alike.

For example, it is economically cheaper to provide benevolent handouts to the poor than to guarantee them a full range of social services as of right. By "benevolent" I mean faith-based charity, private or independent initiative, income-dependent assistance in the form of food stamps, housing grants, clothing subsidies, and so on. But it is notoriously humiliating to be on the receiving end of that kind of assistance. The "means test" applied by the British authorities to victims of the 1930s depression is still recalled with distaste and even anger by an older generation.

Conversely, it is not humiliating to be on the receiving end of a right. If you are entitled to unemployment payments, pension, disability, municipal housing, or any other publicly furnished assistance as of right -without anyone investigating to determine whether you have sunk low enough to "deserve" help -then you will not be embarrassed to accept it.

To be sure, such universal rights and entitlements are expensive, but what if we treated humiliation itself as a cost, a charge to society? What if we decided to "quantify" the harm done when people are shamed by their fellow citizens before receiving the mere necessities of life? In other words, what if you factored into your estimates of productivity, efficiency, or well-being the difference between a humiliating handout and a benefit as of right?

Witness the recent social disruptions in Britain and its attendant economic and social costs and implications. As a result of thus one might be more tempted to conclude that the provision of universal social services, public health insurance, or subsidized public transportation are actually cost-effective ways to achieve common objectives. You may then ask, well, how do you quantify "humiliation"? What is the measurable cost of depriving isolated citizens of access to metropolitan resources? How much should we be willing to pay for a good society? Answers to these questions remain unclear. But unless we ask ourselves such questions, how can we hope to devise answers to them?

Today, Americans appear assuredly less confident about their collective purposes, their environmental well-being, and personal safety than at any time since World War II. Older Americans have no idea what sort of world their children will inherit, but they can no longer delude themselves into presuming that it must resemble their own in reassuring ways.

America needs to revisit the ways in which my grandparents' generation responded to comparable challenges and threats. Social democracy in Europe, the New Deal, and the Great Society in the US were explicit responses to the insecurities and inequities of those times. Few people are old enough to know just what it means to watch your world collapse.We find it hard to conceive of a complete breakdown of liberal institutions, an utter disintegration of the democratic consensus. But it was just such a breakdown that elicited the Keynes–Hayek debate and from which the Keynesian consensus and the social democratic compromise were born: the consensus and the compromise in which baby boomers grew up and whose appeal has been obscured by its very success.

The rise of the social service state, the century-long construction of a public sector whose goods and services illustrate and promote our collective identity and common purposes, the institution of welfare as a matter of right and its provision as a social duty: these were no mean accomplishments.

That these accomplishments were no more than partial should not trouble us. If we have learned nothing else from the twentieth century, we should at least have grasped that the more perfect the answer, the more terrifying its consequences. Imperfect improvements upon unsatisfactory circumstances are the best that we can hope for, and probably all we should seek. Many western countries have spent the last three decades methodically unravelling and destabilizing those same improvements: this should make us much angrier than we are. It ought also to worry us, if only on prudential grounds: Why have we been in such a hurry to tear down the dikes laboriously set in place by our predecessors? And, in light of the financial crises and social uprisings of recent times, are we so sure that there are no more floods to come?