Social Democracy as Recession Insurance
Ezra Klein channels Laura Tyson:
“Think of this from the perspective of individual citizens,” she said. “We’re the ones who are going to see a huge increase in homelessness, in people without health care, in people without unemployment benefits, and in people not getting the education they need. The Europeans are right to say that they have strong automatic stabilizers in effect. From the perspective of Americans, it’s worse for them. They’re undercapitalized, overleveraged, and they don’t have a serious safety net protecting the key things they need to worry about.”
This might, she implied, help explain why America has been so much more aggressive about countering the crisis. They are much more vulnerable to recession than the Europeans. As evidence, she brought up every economist’s favorite bugaboo: Japan’s lost decade. It was bad for growth, she argued, but not particularly devastating to individuals. “The Japanese households, in the last decade and a half, they never experienced the economy the way economists experienced it,” she said. “The economist saw the economy as in dire shape. You asked the average Japanese person if they were in dire shape, they didn’t see it that way.”
James Surowiecki makes a similar point in The New Yorker. Another issue that I think needs to be considered is the direction of political change. Political conversation in recent years in the United States has mostly been about expanding the social safety net (usually in the form of health care reform) and improving the quality of public services (usually education or infrastructure) whereas debate in Europe has predominantly been about paring back the safety net in the name of greater growth. Consequently, I think it’s difficult for European elites to pivot in the direction of additional spending no matter how bad the recession gets.
Meanwhile, it is worth keeping in mind that all the Europeans I’ve spoken to are expecting a U.S.-led or Asian-led recovery; they’re just kind of laying low and figuring that they’re well-positioned to weather the storm.
32 Responses to “Social Democracy as Recession Insurance”
Register
RSSLogin
Topic Cloud
ArchivesBlog RollAbout Matt YglesiasContact Me
Donate
March 26th, 2009 at 5:59 pm
Insulating European households from the adverse effects of the recession/depression through greater short-term social welfare spending will simply delay those adverse effects to future years or generations. There’s no free lunch.
March 26th, 2009 at 6:00 pm
Meanwhile, it is worth keeping in mind that all the Europeans I’ve spoken to are expecting a U.S.-led or Asian-led recovery
Now what does that mean in practice? 90% of European trade is across EU states. Similarly, the US economy still depends mostly on US consumers. Yet we are somehow supposed to believe that China, a third-world country, matters more than the EU or the US for a global recovery.
March 26th, 2009 at 6:10 pm
According to Wikipedia, this is MY’s BGF:
http://www.newamerica.net/people/sara_mead
attractive, in a nerdy kinda way, but doesn’t she look like Yglesias’ sister. Oddly enough she’s probably much smarter (and less hairy) than he is but he probably feels secure that she’s intellectual leagues below him given that Vanderbilt education!
i think she clearly can trade up!
March 26th, 2009 at 6:11 pm
Meanwhile, it is worth keeping in mind that all the Europeans I’ve spoken to…
MY – please tell us who. Since you’ve never interviewed anyone on this blog, I’d like to know who these “Europeans” are? Some dumbass student who sends you an email?
this blog sucks.
BA
March 26th, 2009 at 6:15 pm
ba is a very sad example of our contemporary culture, where some people feel free to drag their ‘opponents’ and anyone associated with them in the mud, for no reason at all. How disgusting is it to post some information about Matt’s private life in a random comment? ba should be IP-banned.
March 26th, 2009 at 6:16 pm
this blog sucks.
I’m sure CAMERA can find you some more to spam.
March 26th, 2009 at 6:16 pm
Re: You asked the average Japanese person if they were in dire shape, they didn’t see it that way.”
This is probably due not so much to any public safety net in Japan (theirs isn’t much better than ours) but to the practice of lifetime employment under which firms do not lay of workers unless they are ready to fold up entirely. Japanese unemployment stayed quite low all through the Lost Decade. The average Japanese wrker may have seen less overtime, and many were bored stiff at work with nothing to do, but they still got regular paychecks and all the workplace benefits.
March 26th, 2009 at 6:22 pm
“The average Japanese worker may have seen less overtime, and many were bored stiff at work with nothing to do, but they still got regular paychecks and all the workplace benefits.”
No doubt there is some liberal idiot somewhere advocating exactly this.
March 26th, 2009 at 6:24 pm
why oh why?
How disgusting is it to post some information about Matt’s private life in a random comment? ba should be IP-banned.
maybe you should ban our host?
http://www.matthewyglesias.com/archives/2007/04/awaken_from_your_dogmatic_slum/
your a moron — there is no privacy on the internet, particularly when one takes his private life and puts it on display
March 26th, 2009 at 6:34 pm
Ba, why do you spend all this time on blog that you think sucks? Don’t let the screen door hit your a*s on the way out.
March 26th, 2009 at 6:42 pm
Wiley,
To counter your intellectual shortcomings….and those of our host!
or would you prefer an undisturbed circle jerk of an echochamber?
BA
March 26th, 2009 at 6:48 pm
I’m not sure I buy this Japan story. I seem to recall a number of articles which talked about how young people in Japan found things difficult; similarly there was a great increase in temp. workers. And of course those Japanese who invested in the stock money never got their money back, though that’s a different perspective.
March 26th, 2009 at 7:00 pm
No reason to sacrifice yourself on our account. This wasn’t “an undisturbed circle jerk of an echochamber” when you got here, and it won’t be after you leave.
March 26th, 2009 at 7:01 pm
ba,
You should really cut this shit of putting people’s personal info (I think I saw 24Head or whomever also doing this) up on these comment threads. It’s irrelevant, weird, stalkerish, threatening, juvenile, etc. It’s one thing if Matt posts a picture of his girlfriend, it’s another if you do in a creepy sexualizing way.
If you want to seriously act as a conservative voice around here, start behaving with a modicum of decency. You could ask Al about that, who, while annoying, does not act psychotically.
March 26th, 2009 at 7:04 pm
ba,
I vigorously disagree (often w/out the charity of heart my sensei, or my mom, would prefer) with MY and most of those commenting here.
That said, find a rule book for assholes in recovery, and STFU.
March 26th, 2009 at 7:23 pm
i’m sure suicide rate increases in Japan during the “lost decade” had nothing to do with the average Japanese person not feeling themselves in ‘dire’ shape.
March 26th, 2009 at 8:11 pm
You know, I think we’re painting “Europe” with too broad a brush. There’s western Europe that most people think of (Sweden, France, etc.) when they’re bringing up the better support networks.
I really wonder if this is at all true in Eastern European countries and whether the lack of initiative on the part of the Western Europeans might have unfortunate consequences for countries which but twenty years ago were still living under communist dictatorship.
Even beyond the newer members of the EU, what about the other countries that used to lie behind the ‘Iron Curtain’? I’m thinking in particular of Ukraine, the Baltic States, etc.
Bad times aren’t good for nascent democracies. We see how this played out pre-WWII. I’d be very concerned.
March 26th, 2009 at 8:21 pm
Opps, sorry slipped on the Baltic states — they’re part of the EU.
Just the same — exactly how strong is the support structure for these countries and what is the downside of the lackluster EU response?
March 26th, 2009 at 8:22 pm
2 other issues
1. Obama is new in Washington Sarkozy and Merkel are not new in Paris and Berlin (or is it still really Bonn). They have been arguing for budget cuts since forever, and would have to personally pivot, even say they were wrong. In particular a stimulus would require a repeal of the Growth and Stability Pact for exactly the reasons given by opponents back when S and M were arguing for it. Obama never rule out a stimulus and has fewer words to eat.
2. Close to your argument. Policy is very different in different countries, but the debate is similar. Being relatively pro market in France Sarkozy advocates policies which would be considered socialist in the USA. However, the perceived and self perceived issue is that he is less socialist than the French socialists. So a temporary expansion of unemployment subsidies would be France moving further from the USA, but Sarkozy adopting the policies advocated by his political opponents.
Finally, is this weird or what ? Right of center Europeans are to the right of the Labour party and the Democratic party. Isn’t the strange pattern which required explanation the fact that Democrats and Labour went along with Bush’s invasion of Iraq and some right of center Europeans didn’t ? I mean you know they are supposed to be right of center, Obama and Brown are supposed to be left of center (and don’t freak me out asking if I think Chinese communists are supposed to be as far left as Keynes. Hah. Absurd idea).
March 26th, 2009 at 8:54 pm
Dear Morons (that’d be you Wiley, Tao9 and Daniel Shays) –
You accuse me of posting people’s personal info and doing it in a weird way? I did nothing but post the publicly available picture of MY’s GF — from her own bio and from her boyfriend’s (ie, your host’s) blog. I did this after noticing how often he’s blogged about her – at least 3 times. I included a post that HE made about said woman. And, unlike other people on this blog, I did not “sexualize” anything about her. I only said she was “attractive”.
What planet do you live on where using pictures posted on HIS own website is supposedly out of bounds? What planet do you live on where saying someone is attractive is “sexualizing them?
Are you gloria steinam clones? andrea dworkin? catherine mckinnon?
btw — compare what i said to this —
So I read on the internet that it’s wrong to make naked movies of your girlfriend and then post the results on your blog. Instead, I thought I would make a fully clothed movie of my girlfriend discussing education policy research and post that on my blog. Hot! Hot like neuroscience.
which, idiots, is what our host said about his girlfriend on HIS F*cking blog!
what don’t you understand? you sound like lindsay lohan complaining about the papparazzi?
i’m sure she’s a fine person — intelligent and smart — and i’ll leave her out of future posts to correct any misimpressions…
but you idiots need to get lives!
March 26th, 2009 at 9:28 pm
Japan’s social safety net, aside from health care, is primarily the family. Multiple generations often live together, and did during the crisis.
Also, there are tarp towns full of homeless men in their 50’s-60’s in Tokyo. There isn’t welfare for them and they aren’t old enough for a pension. You can go to any park like Ueno or Yoyogi, or take a ride along the river. You’ll see them. I have no idea how they’d answer Tyson’s question, though.
March 26th, 2009 at 9:33 pm
Wow, Ba. You’re adding so much to the topic I don’t see how we ever got along without you.
March 26th, 2009 at 9:35 pm
i always thought Yglesias was going to marry Sullivan
but I guess the age difference and same sex thing were too great to overcome
March 26th, 2009 at 10:22 pm
I agree with others here that Japan is really not doing as well as implied – The OECD pointed out in 2006:
“Income inequality and relative poverty among the working-age population in Japan have risen to levels above the OECD average. This trend is partially explained by labour market dualism, with an increasing proportion of non-regular workers who are paid significantly less than regular workers, as well as by other factors, including the ageing of the workforce. Social spending as a share of GDP has been expanding in the context of population ageing, although it remains below the OECD average and the proportion received by low-income households is small. Consequently, the impact of social spending on inequality and poverty is weak compared to other OECD countries and inadequate to offset the deterioration in market income. The scope for increasing social spending is constrained by the fiscal situation. Instead, reversing the upward trend in inequality and poverty requires reforms to reduce labour market dualism and better target social spending on low-income households, particularly single parents. This Working Paper relates to the 2006 OECD Economic Survey of Japan (www.oecd.org/eco/surveys/japan).”
March 26th, 2009 at 10:33 pm
You accuse me of posting people’s personal info…
No, go back and read the comment. I accused you of being an asshole.
———————————————————–
BTW: It is very helpful (but galling), when funding social democracy for forty odd years or so, to have a “peace dividend” umbrella held over your increasingly impotent heads by the abominable, mongering Yanks, while a couple 100,000 very fast tanks w/ cyrillic lettering are idling
an hour-and-a-half away from your chalet.
March 26th, 2009 at 10:51 pm
as well as by other factors, including the ageing of the workforce.
…and that is another potentially looming problem for Japan. They have a high life expectancy and a low birthrate, which will make future funding of social programs a strain.
March 26th, 2009 at 11:02 pm
For over 10 years I have been teaching Japanese students hailing from all parts of Japan and pretty well all that time they have been telling me their economy and job prospects were miserable.
March 27th, 2009 at 12:14 am
It’s a bit complex. IIRC Gerald Curtis noted that despite the economy, on average the Japanese people reported feeling most satisfied with life during the 1990’s than any time before (with that said, happiness research is like nailing smoke to a tree).
March 27th, 2009 at 8:31 am
Good advice ba. I’m sure you have one. The only question is, whose?
March 27th, 2009 at 9:59 am
this blog sucks.
then don’t read it.
March 27th, 2009 at 12:53 pm
Buy Propecia…
http://www.folkd.com/user/buypropeciaonline Buy Propecia…
March 27th, 2009 at 10:34 pm
One: European economies are so intertwined that if one country indulges in stimulus spending, most of the positive effects will flow into neighboring countries while the debt solidly remains at home. The French and British wanted to play ball; the Germans said “Go ahead, we’ll watch.” As the largest European country, Germany is a potential sinkhole for French and other EU countries’ spending. It is lack of agreement that motivates European passiveness, not social spending.
Two: the US can risk inflation, because the Fed has a sensible charter. The EU cannot risk inflation, because the ECB’s charter foolishly stipulates that it may take only inflation into account when deciding monetary policy. It may not, for instance, look at the devastating effects a hike in interest rates would mean for an overindebted economy. This was a concession to, once again, the Germans, who also insisted that aforesaid rule be virtually impossible to amend. Funny that no one except me seems to remember the heated debates on this point, and the prescient warnings about how an inflation-only approach might one day lead us over a cliff.