How to Get There

The lesson of the past one hundred years is that as the United States gets richer, we are willing to spend more in order to safeguard against loss and enhance fairness. Advances in social policy come only intermittently, but they do come. And when they come, they usually last. The expansion of public insurance that has occurred over the past century is what we should expect for the future. I consider an array of potential obstacles, including Americans’ dislike of big government, Democrats’ centrism, Democrats’ electoral struggles, the shift to the right in the balance of organized interest group strength, the structure of America’s political system, racial and ethnic diversity, slowing economic growth, and more. None of these is likely to derail America’s slow but steady movement toward an expanded government role in improving economic security, enhancing opportunity, and ensuring decent and rising living standards for all.

Is There an Attractive Small-Government Alternative?

The experience of the affluent democratic nations over the past half century hasn’t been kind to the hypothesis that a small-government approach can do as well as social democratic capitalism. Countries with smaller government haven’t achieved faster economic growth. Families and voluntary organizations sometimes are less effective and efficient than government programs, they by nature aren’t comprehensive in coverage, they’ve been weakening over time, and they are nearly or equally as prominent in nations with a big government as in those with a smaller one. Private provision of services should be welcomed, even embraced, but it is most effective as a complement to public provision rather than a substitute. Relying on heavily targeted government transfers may be politically sustainable only in a country with a strong egalitarian ethos, such as Australia, and even there it hasn’t matched the success of social democratic capitalism.

Is Its Success Generalizable?

Social democratic capitalism’s chief practitioners have been the Nordic nations: Denmark, Finland, Norway, and Sweden. Skeptics discount the Nordics’ success on the presumption that these nations have some unique feature that allows them, and only them, to reap the benefits of social democratic policies without suffering tradeoffs. Versions of this story identify the Nordics’ secret weapon as an immutable work ethic, superior intelligence, trust, solidarity, small population size, racial and ethnic homogeneity, institutional coherence, effective government, corporatism, a willingness to be taxed, tax compliance, strong labor unions, or low income inequality. I examine these hypotheses. None holds up to close inspection.

A Better America

If the United States were to expand some of its existing public social programs and add some additional ones, many ordinary Americans would have better lives. I offer recommendations to add or improve health insurance, paid parental leave, a child allowance, unemployment insurance and wage insurance, sickness insurance, disability assistance, social assistance, pensions, eldercare, housing assistance, early education, apprenticeships, college, affirmative action, full employment, the minimum wage, the Earned Income Tax Credit, profit sharing, infrastructure and public spaces, and paid vacation days and holidays. After outlining the details for each of these, I turn to how much it will cost and how to pay for it.

Why Not a Basic Income?

I don’t think a basic income grant is a good idea for the world’s rich democratic nations at the moment. The likely reduction in employment produced by a basic income—perhaps 15 percentage points—could make it difficult to ensure a tax base large enough to pay for generous social programs and government’s other functions, and it might lead to a polarizing political divide. A basic income very likely would have to replace some existing public insurance programs, and in doing so it would reduce our ability to allocate resources according to differing needs and circumstances. Most important, we know social democratic capitalism yields very good outcomes, whereas basic income’s effects are uncertain. If and when modern societies get to a point where artificial intelligence is producing widespread joblessness, we probably will have no alternative to a basic income. But today we do, and that alternative is an attractive one.

Sources of Successful Societies

The world's twenty or so affluent longstanding-democratic nations have enjoyed rapid economic growth since the middle of the nineteenth century. As countries get richer, their citizens tend to want more public insurance to protect against loss, more policies and rules that boost the capabilities and well-being of the less fortunate, and greater prioritization of personal liberty. Together, affluence, its causes (markets, stable and supportive government, and science), and its consequences (desire for more insurance, fairness, and personal freedom) have produced societies that are not only richer but also more secure, better educated, healthier, fairer, freer, and happier.

America Is Underachieving

A good society will ensure a decent standard of living for its least well-off. It will reduce people’s vulnerability to large income declines and large unanticipated expenses. It will aggressively curtail inequality of opportunity. And it will ensure that economic growth is broadly shared among the population rather than confined to those at the top. The United States isn’t doing as well as it should in meeting these challenges. The incomes and living standards of Americans at the bottom of the socioeconomic ladder are too low. Too many Americans experience significant income declines from year to year or month to month, and too many are vulnerable to a large unanticipated medical expense. Too few who grow up in disadvantaged circumstances are able to reach the middle class. And too few see their boat lifted when the economic tide rises. I detail the nature and extent of these problems.

Social Democratic Capitalism and the Good Society

To this point in history, the most successful societies have been those that feature capitalism, a democratic political system, good elementary and secondary (K–12) schooling, a big welfare state, public services that are conducive to employment, and moderate regulation of product and labor markets. I call this set of policies and institutions “social democratic capitalism.” Social democratic capitalism improves living standards for the least well-off, enhances economic security, and very likely boosts equality of opportunity. It does so without sacrificing the many other things we want in a good society, from liberty to economic growth to health to happiness and much more.