No society has ever created wealth like the United States. And no other society does today. Its dynamic capitalism with freer markets and smaller welfare states than other industrial nations puts its economy consistently in the lead.

In 2022, the U.S. accounted for a full 58 percent of the GDP of the G7 nations, up from 40 percent in 1990. Despite the rise to superpower status of China, the U.S. continues to account for a quarter of global GDP, the same as in 1990. Between 1990 and 2022 American labour productivity increased by 67 percent compared to 55 percent in Europe. The stats are overwhelming.

Of course the U.S. has advantages. It has natural wealth equalled by few if any other countries (or empires) in history. And it has a huge domestic market. Compared to most of its competitors, it has a younger population fed by immigration. Put it all together and the result is economic performance that is dominating.

And yet, as I discussed in a previous post, the country suffers from a certain malaise. Americans, quite aside from being seriously polarized, currently seem to lack confidence and optimism. And looking at the parameters that measure the health of a society—violent crime, drug abuse, obesity, mental illness, etc.—the country compares badly. As does the health of individuals. The longevity of Americans is not only less than comparable countries but is declining rapidly.

How, we might wonder, can this be. We get a clue from the mention above of the country’s “smaller welfare states.” Americans are highly individualistic, a characteristic that adds to the society’s dynamism, but which also results in less concern about one’s neighbours. It’s more of everyone for himself.

The result is another characteristic of American society that is far greater than similar countries: inequality. All Western societies have shown increasing inequality in recent years, but the U.S. much more than others. Technological change, globalization, the decline of unions and the eroding value of the minimum wage have done great mischief.

Studies have increasingly shown a direct relationship between inequality and the characteristics of a healthy society. The greater the inequality the more violent crime, the more drug abuse, and so on.

Furthermore, the condition entrenches itself. Children from poor families are less likely to improve their economic status as adults in countries where income inequality is higher. The World Economic Forum places the U.S. 27th on the scale of a country’s social mobility. Scandinavian countries, not surprisingly, make the top five. As some wag has said, “If you want to experience the American dream, go to Sweden.”

The Scandinavian countries’ greater social mobility reflects healthier societies in general with much lower rates of violent crime, drug abuse, mental illness, and so on.

The greater equality of these countries is very much due to more substantial welfare states, funded by relatively high taxes. The revenues serve two purposes: they pay for strong social services and they redistribute income (the social wage). Both are vitally important in creating an equitable society.

Countries are a little like people. Once you have enough income to pay for your basic needs plus a little extra, every additional bit of income provides a diminishing amount of happiness. Similarly with countries, once your economy reaches a level that all your citizens can live in dignity, additional wealth has diminishing returns. From that point on, the happiness of your citizens depends on equity, on a fair share.

We all want a healthy society, conservatives included. However conservatives, Americans’ and ours, often fail to grasp that what they want economically and politically—low taxes and small government—restricts that very possibility.

Leave a Reply

Your email address will not be published. Required fields are marked *