11/12/2013 05:21 pm ET Updated Jan 23, 2014

Welfare and the States

For most Europeans, the violence of the debate over the Patient Protection and Affordable Care Act (otherwise known as the "Obamacare") in the United Sates seemed quite puzzling. Even if the recourse to a shutdown and the need to raise the debt limit are different issues, both have in common to have been used as leverages in attempts to hinder the Obamacare. This tells how far the opponents to this reform were determined to go. In Europe, a piece of legislation aiming at improving the affordability of health insurance and lowering the uninsured rate would unlikely have raised such a political storm.

Compared to Europe, there is a markedly unequal share of wealth in American society. Moreover, there is a greater acceptance of the principle of inequality as the necessary corollary of merit, labor and risk-taking. How might this startling contrast be explained? Alberto Alesina and Edward L. Glaeser provide an outstanding explanation of this phenomenon. Is it at all likely that Europe will follow the U.S. pattern?

In Europe, public or state spending is considerably higher relative to the size of national economies than it is in the U.S.: while public expenditure in the U.S. represents 40 percent of GDP, it is over 50 percent in France and in the Scandinavian countries. The single greatest cause of this discrepancy lies in social policy: the welfare state is more developed in Europe than in the United States, where a large share of social insurance is borne by the private sector -- just as it is with pension funds. The general difference between the U.S. and European models has fewer implications for the middle classes than for those at the lower end of the social and income spectrum, who are relative beneficiaries of the state redistribution of wealth in Europe.

The different models are inextricably linked to the respective histories of political institutions in Europe and the United States. European institutions evolved constantly over many centuries, while the U.S. maintains a Constitution that embodies late-eighteenth century values, privileging individual freedom and property rights. These values are dogma to the Supreme Court and the U.S. federal system, which ensures that tax and social policies are locally determined, making any national welfare initiatives politically inexpedient. Moreover, at least two factors undermined the effectiveness of the American labour movement and the progress of demands for a redistributive system. The geographical separation between political and industrial centers meant that a strike in Detroit never paralyzed Washington. And, in a country of migrants, different ethnic communities often competing with each other; cultural differences could harden over time, undermining any European-style calls for worker solidarity.

The majority system and bipartisanship also act as brakes to redistribution in the U.S. Historically, proportional representation has favored minority parties and, in general, this has had a direct consequence on the emergence of a stronger welfare state. Alesina and Glaeser cite studies correlating the degree to which a voting system is proportionate to the degree to which social policy is redistributive. This is what occurred in Europe during the twentieth century. In America, proportional representation is not used.

It also appears that the redistribution of wealth seems to be correlated to ethnic homogeneity in nation states. The more the population of a state is heterogeneous, the more its social policy is limited. In the United States, commentators and policy-makers hostile to minorities are reluctant to redistribute wealth. The idea of a common destiny and a sense of solidarity are even more problematic in the United States, where a pioneer culture and Protestant values emphasized a moral understanding of poverty in the context of a culture of self-help and fulfilling God's work on earth with labour and enterprise -- a culture more amenable to private or corporate charity than welfare states. As seen during ongoing health care reforms, political speeches can radicalize different ethnic groups and racial prejudices can be exploited to discredit the idea of the welfare state and income redistribution.

What about Europe? The European welfare states were built in more homogeneous societies. There has been a general consensus across political parties in Europe for welfare states and an acceptance by employees and citizens of social measures that either benefit them directly or benefit people with whom they empathize because of close linguistic, ethnic or cultural ties. Scandinavian societies, in particular, have the most far-reaching welfare systems and the most homogenous populations. But in recent decades European societies have become more heterogeneous, resulting in enhanced regionalist tensions in Italy and Belgium and geographic and economic inequalities in France and the United Kingdom.

The fate of the welfare state in a multicultural Europe is hugely important for the Left because redistribution is central to its social vision. In multi-ethnic European societies today, the idea of a 'common good' is very different and far less self-evident compared to fifty years ago. Lest the principle of redistribution wane, European reflection on fostering a new sense of the "common good" in the face of strong individualism and ethnic "ghettoization" is a matter of urgency.