Wealth and Welfare States Is America a Laggard or Leader?

Anil Duman (Central European University, Budapest, Hungary)

International Journal of Social Economics

ISSN: 0306-8293

Article publication date: 2 August 2011



Duman, A. (2011), "Wealth and Welfare States Is America a Laggard or Leader?", International Journal of Social Economics, Vol. 38 No. 9, pp. 816-821. https://doi.org/10.1108/03068291111157276



Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited

In the welfare state literature, the USA has almost always been pinned down as the laggard with its minimal intervention and limited social protection policies. Garfinkel, Rainwater and Smeeding contradict this view and persuasively argue that the extent of welfare state is a definitional matter. When the spending on public services, and particularly on education, is considered, the USA appears to be a leader at least up until 1980s (Chapter 5). The other crucial argument of the book is the positive association between welfare states and economic prosperity. In Chapter 2, Garfinkel et al. assert that these policies increase productivity and efficiency by cushioning against economic insecurities generated by the markets. Indeed, the USA's growth success can largely be attributed to the massive positive spillovers of its investments in public education throughout the nineteenth and most of the twentieth century. The authors conclude (in Chapter 8) that there are significant challenges ahead of the US welfare state as education spending has declined consistently since the mid‐1960s, the expensive health insurance system will bring sub‐optimal results, and there is very little cash assistance – thus raising the likelihood of persistent poverty over coming generations. Thus, to restore competitiveness, the USA needs to invest more in these areas, and expand the coverage of its social safety nets.

While Chapter 3 reviews the welfare state spending in 14 advanced nations, Chapter 4 looks at the distributional impact of these policies. The USA has comparable social expenditure levels when education and employer provided benefits are included. Nevertheless, it remains distinctive because, unlike other advanced countries, pensions do not constitute the largest source of expenditures – instead it is health care. Additionally, other wealthy countries aim to cover the majority of the citizens whereas in the USA, the welfare spending is done in the form of “safety nets” and “platforms” (meaning more targeted and exclusionary benefits). For instance, most of the employer provided benefits accrue to the relatively well‐off. The exceptional character of the US welfare state carries on when the distributional outcomes are regarded. In Chapter 4, the authors illustrate the degree of inequalities and to what extent social policies are able to correct these. The USA ranks as the most unequal country even after in‐kind benefits and indirect taxes are added to the calculations. Besides, the education and health outcomes are found to be less equal, and mobility to be similar to other countries indicating that higher inequalities do not translate into more opportunities.

In Chapters 6 and 7, Garfinkel et al. attempt to explain American exceptionalism, and the shift in welfare state spending through the last part of twentieth century. A combination of factors such as Protestanism, religiosity, historical specificities, early democratization, immigration, and lack of a strong left are offered as reasons for US social policy divergence. Although the authors enlist these factors, they do not go beyond the existing literature in establishing a causal link or highlighting their relative importance on the design of specific programs. For instance, it is not obvious why investment into public education versus cash assistance was preferred and whether this holds across all of its states. Many of these underlying determinants are quite static and hence do not fully capture developments over time. The authors also only sporadically assess the possible critical junctures such as great depression and oil crisis. Chapter 7 documents the reduction in welfare state spending, and attributes the greatest responsibility to the political move towards right. Peaking at the Reagan administration, but starting earlier, the right wing policy makers managed to trim down the size and scope of the welfare state. Nevertheless, the chapter does not address why such a swing occurred and whether there were similar developments in the other advanced nations. The dominance of neoliberal ideology did not render welfare state retrenchment in every country as there were fierce oppositions, and lack of it in the USA is not discussed throughout the chapter.

The main strength of the book lies in its critique of the literature and its rich historical summary. Many researchers agree that comparative studies should cover public services yet they ignore education and employer provided services in their analysis. Garfinkel et al. broaden our understanding of social policy and highlight their value in a nation's developmental path. Despite the last critical points, in my opinion the book offers major insights and clear policy recommendations to the scholars and anybody who is keen to learn more on the welfare state issue.

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