United States is a capitalist nation that has eschewed Scandinavian-style
socialist policies in favor of capitalism and economic growth, right? Wrong.
U.S. is not only one of the largest welfare states in the world, but it is
strong economically precisely because of
its adoption of some socialist policies—with public education as the primary
is a list of myths that we debunk in our book Wealth and Welfare States: Is America a Laggard or Leader, which is
about our country’s commitment to social welfare and the effect these policies
have on our economy.
Myth: The welfare
state undermines productivity, efficiency, and economic growth.
Fact: Welfare state programs complement capitalism and
increase productivity, efficiency, and economic growth. Investment in public
education is the main driver of this; education is so demonstrably productive
that including education in any analysis of social welfare shows that, in general,
welfare state programs enhance rather than retard productivity, efficiency, and
growth in economic well-being.
Myth: The welfare
state is the antithesis of a capitalist nation—and thus wealthy nations are, by
definition, not welfare states.
Fact: All wealthy
nations, including the United States, are welfare states—that is, they are
primarily capitalist states with large, selective doses of socialism.
Capitalist governments socialize select institutions to reduce the economic
insecurity produced by a market economy. The most common areas of targeting
include education, public health, and some forms of insurance. While such
policies require resources, rich nations have figured that the benefits exceed
Myth: The United
States has an unusually small welfare state.
Fact: Welfare state
programs are quite large in the United States—transferring close to one third
of the country’s income from one to another part of the population. When
measuring the size and impact of a welfare state, it is critical to not limit
the analysis to traditional notions of welfare like cash assistance but to
include a broader set of social welfare transfers such as education,
employer-provided benefits, and all in-kind benefits.
Myth: The size and priorities of welfare states in rich
nations are very different.
Fact: The 14 wealthy welfare states that are examined in
the book are strikingly similar in size and structure. In all countries,
including the United States, welfare state transfers are large—around 30 to 40
percent of each country’s total production of goods and services. The domains
socialized are also similar: old age pensions, health, education, and cash
public assistance for the poor are common to all countries. In most, pensions are the most costly, with
health insurance second, education third, and public assistance the least
are two exceptions to this that set the U.S. apart: the U.S. has much higher
spending on health care and much lower spending on cash benefits and early
Myth: The United
States is and always has been a welfare state laggard.
Fact: Although the United States has always spent
comparatively little on social insurance and assistance for the poor, it was a
world leader in providing mass public education during the 19th and 20th centuries.
Other rich welfare states have imitated the American model of investing in
education for the masses.
Myth: The United
States is still dominant in its educational advantage over other countries.
Fact: The United
States has been losing ground and needs to provide additional investments in
education if it is to remain a leader. The U.S. is at the high end of
educational achievement if attainment is measured by high school and college
degrees, but near or at the bottom when measured by enrollments in early
education or achievement test scores.
Myth: The United States pays far less than other rich
countries for health insurance.
Fact: Including the costs of employer-provided health
insurance, the United States pays far more than any other rich country for less
universal health insurance.
Myth: The U.S.
investment in healthcare means we provide the best health care in the world.
Fact: The quality of care for the top fifth of the
population is as good as or better than health care in the rest of the rich
world. But the quality of care for the rest of the population is notably
poorer. While the U.S. does expend a lot of money on health care benefits,
other rich nations achieve the same or greater benefits at lower cost.
Moreover, in terms of both infant mortality and life expectancy for the elderly,
the U.S. ranks last or near last.
Myth: In the U.S.,
most welfare state benefits go to the poor and near-poor.
Fact: The way that benefits for families with children are
distributed in the United States is U-shaped, wherein the poorest and richest
get the largest benefits, and the working poor, lower middle class, and even
the middle class fall between the cracks.
care and housing are the most perversely distributed because the U.S has
separate programs for aiding different income groups—with the poor receiving
means-tested benefits from safety net programs and the middle and upper classes
receiving employer provided and/or tax related benefits.
richest fifth of the population gets health benefits that are almost twice that
of the poorest fifth. The richest fifth receives housing subsidies – through
the mortgage interest tax deduction – that are nearly four times the housing
assistance provided to the poorest fifth and about eight times the assistance
provided to the lower middle and the middle class.
is the Mitchell I. Ginsberg Professor of Contemporary Urban Problems and
co-director of the Columbia Population Research Center at the Columbia
University School of Social Work.
is Arts and Sciences Distinguished Professor of Public Affairs at the La
Follette School of Public Affairs and director of the Institute for Research on
Poverty at the University of Wisconsin-Madison.