Monday, April 02, 2007

Child poverty weakens the Anglo-American model

Child poverty weakens the Anglo-American model
Published: April 1 2007 16:28 | Last updated: April 1 2007 16:28
Copyright The Financial Times Limited 2007

For more than 30 years neoliberals have held up the US and, to a lesser extent, the UK as examples that other countries must follow to achieve economic success and high levels of social well-being. Yet, according to a recent Unicef report on child welfare, these are the worst two industrial countries in which to grow up. Is the Anglo-American model really as successful as neoliberals claim?

Two years ago another United Nations agency, the UN Development Programme, singled out the plight of many children in the US and the UK. Child poverty had doubled in the UK between 1979 and 1998, which it called “a legacy of the 1980s – a decade characterised by a distinctly pro-rich growth pattern that left poor people behind”. A major cause was “the impact of [Thatcher] government policies that cut taxes for higher earners and lowered benefits for the poor”.

The present UK government has reversed some of these policies and reduced the level of child poverty, though it remains higher than in the 1970s and the latest figures show an increase.

In the US the consequences of similar policies and the lack of universal healthcare (unique among advanced countries) have been even more serious. According to the UNDP report: “A baby boy from a family in the top 5 per cent of US income distribution will enjoy a lifespan 25 per cent longer than a baby boy from the bottom 5 per cent.”

Not surprisingly, when you consider the whole population, not just children, the two countries, especially the US, lag behind the nations of “old Europe”, whatever indicators of well-being are used. My own comparisons of economic performance and social well-being in seven countries, representing different models of capitalism, produce rankings that are very similar to Unicef’s – even though I use different indicators.

Swedes and Norwegians enjoy the highest level of social well-being, followed closely by people in the Netherlands. The US is well behind on almost every indicator. Germany and France are in the middle, with the UK between them and the US.

The importance of these comparisons is that they consistently show that countries with social democratic or corporatist models of capitalism have markedly higher levels of social well-being than those, such as the US and UK, with a liberal free-market model.

Equally important, the reason for this is not that they have higher gross domestic product per head but that their social attitudes, objectives and policies are very different. Unlike the US and, since 1979, the UK, these countries attach great importance to social cohesion and, therefore, to equality of opportunity.

As they believe that there is “such a thing as society” rather than “only” isolated, alienated individuals in ruthless pursuit of self-interest, the aim of their institutions and policies is to improve both social and individual welfare. In other words, the goal is to promote a harmony of national interests – not social Darwinism – by ensuring that the whole society shares the benefits of economic growth as well as the costs of the adjustment process that makes it possible.

Consequently, social democracies in particular are committed to those institutions and policies that neoliberals want to change. Employers, employees and government co-operate to solve national problems. Taxes and social expenditure are comparatively high, making generous unemployment and other benefits possible. They spend much more than the US and the UK on retraining those who become unemployed. Inequalities of income are much lower; and so also poverty, economic insecurity, lack of trust in other people and levels of stress and crime.

If these achievements are, as neo liberals believe, a sign of failure, what constitutes success?

Franklin Roosevelt’s definition of socio-political success is as relevant now as in 1937 when he said: “The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”

And what happens if we fail? Freedom and democracy were “not possible” in a country, he warned the US Congress, “if its business system does not provide employment and produce and distribute goods in such a way as to sustain an acceptable standard of living”. Neither, as Europe was soon to show, was peace.


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