Here’s a follow-up to my recent post suggesting that European social democracy may not in fact be in terminal decline, but (Mitt Romney notwithstanding) may offer a model for countries like the US.
The Washington Post’s Harold Meyerson notes that social democracies such as Norway, Finland, Denmark and Germany– besides boasting lower unemployment rates– currently produce more social and economic mobility than the US.
There are, of course, a multitude of reasons the nations of Northern Europe are outperforming us. But if entitlements and social democracy were anywhere near the impediments to enterprise that Romney claims, Germany would hardly be the most successful economy in the advanced industrial world, with those of Scandinavia close behind.
The secrets of social democracy’s successes are in plain view. In Scandinavia, government commitment to worker retraining and job relocation mean that there is no major political pressure to keep failing firms in business; it’s a policy that favors innovative start-ups. In Germany, management and unions cooperate to upgrade their products and their processes — partly because corporate boards consist of equal numbers of management and worker representatives. Germany’s surge in exports may be partly attributable to its union workers agreeing to hold their wages flat (at levels still well above those of their U.S. counterparts). But their workers’ willingness to sacrifice in order to stay competitive is surely increased by the fact that their CEOs on average make just 11 times as much as their workers. In the United States, chief executives make roughly 200 to 300 times (choose your survey) as much as their average employees’ salary.
Which brings us back to Romney’s characterization of our country as a merit-based society and his failure to notice the huge changes in economic rewards over the past three decades. During the 30 years after World War II, the average American family’s income doubled, while chief executives’ income was restrained, increasing by less than 1 percent annually, according to a 2010 paper by economists Carola Frydman and Raven Saks. Beginning around 1980, however, as unions were smashed, industry moved offshore and executive pay skyrocketed, the incomes of most Americans began to flatten or decline, while financiers and corporate leaders were able to claim more and more of the nation’s income for themselves.
Corporate leaders have been rewarded with huge payouts even when their corporation’s performance has been disappointing. Conversely, millions of Americans have maintained or upgraded their skills yet seen their jobs shipped abroad or downgraded. Is this a description of a merit-based society? How does it compare with that of mid-century America, when the rewards for work were distributed more broadly?