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Home Publications Blogs Beat the Press The United States Already Has Cuddly Capitalism

The United States Already Has Cuddly Capitalism

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Friday, 31 May 2013 07:01

Thomas Edsall devoted his blogpost yesterday to a paper by Daron Acemoglu claiming that the United States can't follow a path like Sweden and have "cuddly capitalism." By this Acemoglu is referring to a welfare state that protects most people from the risks in a market economy.

However what Edsall, following Acemoglu, overlooks in his discussion is that the United States already has cuddly capitalism. The difference between the United States and Sweden is who gets cuddled. While Sweden's welfare state is designed to provide protections to ordinary people, in the United States it is those on the top who can count on the state's help.

For example, if you are an incompetent bank executive at Goldman Sachs or Citigroup whose reckless lending threatens to sink your bank, you can count on the Treasury Department and the Federal Reserve Board to provide trillions of dollars in below market loans to support your bank through the rough times. If you are a drug or medical supply company you can count on the government to grant you patent monopolies so that no one can compete with you in the market for long periods of time. Highly paid professionals like doctors and lawyers can count on a trade policy that is designed to depress the wages of most people who provide you services, while protecting you from the effects of foreign competition.

There are a long list of ways in which the U.S. government gets very cuddly with those at the top as noted in my classic The End of Loser Liberalism: Making Markets Progressive. Of course those at the top would prefer that the only government interventions that are put up for debate are the ones that help more ordinary people, they would rather keep the interventions that benefit the wealthy out of the discussion. Unfortunately both Acemoglu and Edsall follow this path.

 

Comments (12)Add Comment
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written by Chris Engel, May 31, 2013 8:54
It's worth noting that Sweden's inequality has been skyrocketing under neoliberal reforms.

Just because there's a minimum income guarantee, doesn't make Sweden's capitalism "cuddly"...

There are millions in the US who live off food stamps, section 8 and SSI who are better off that immigrant muslims and natives in Sweden and even Norway who get monthly cash asssistance from the government but then they spend 70% of it on rent and utilities!

There was a lot of back and forth about this particular study Edsall refers to, and people really can't help but just laugh, considering how heavily the US subsidizes ag and tech (which is producing fast diminishing returns now) -- and as Dean mentions, how the state coddles the wealthy and leave much of the population desperate and dependent upon an uncertain biweekly check.

Total govt spending (fed, state, local) is about 40% of GDP in the US (higher than Norway's!) -- why? Because we don't just have welfare, but we also have hidden jobs programs in the military industrial complex and the prison industrial complex (private prisons on federal and state levels and the whole judicial system that thrives on having the world's highest prison population) and the healthcare industrial complex now with Obamacare!

The government is picking winners and losers every day, everywhere in the developed world. The US is no more "cut throat" capitalism than Sweden or Norway.

Try to talk to poor people in Scandinavia. The only difference between them and American poor is that they aren't harassed by the police-state as much and they're met with a hell of a lot more compassion. So that means the support they do get from the state goes a lot farther, because they don't have people trying to find ways to throw them in prison or get them deeply in debt with payday loans and crappy jobs. But yes, they're still poor! It's just easier to be poor in a place where you aren't constantly harassed and derided by the government.
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written by Chris Engel, May 31, 2013 9:01
Oh and one more thing. Welfare for the poor is also welfare/subsidization for and of corporations/the wealthy.

What do you think happens when you give poor people money? Goes straight into Wal Mart's coffers, landlords, etc. It's almost as blatant as the IMF loans that are supposedly to developing countries but they really just go directly to Western consultants and engineers to build something.

It's funny that even an MIT economist doesn't understand that American growth rates are sustained not by "cut-throat limited government capitalism" but by huge government subsidies to pseudo private-public corporations.
Keep Your Cuddling Government Hands Off Our Cuddled Nanny State!
written by Last Mover, May 31, 2013 9:46
OMG! All this time we thought those first mover risk taker entrepreneurial waste slashers of creative destruction were heroic pathmakers carving out the frontiers of innovative capitalism.

Along comes Dean Baker who says they're were the cuddlers and cuddled of the nanny state at the expense of the 99%. May this seditious traitor of truth bearing common sense burn in hell. Keep your government hands off our nanny state Mr Who's Your Nanny.
Cuddly capitalism for the working class
written by DV, May 31, 2013 9:49
Cuddly capitalism does something for the working class too. It gets firemen, cops, and truck drivers to watch Fox News and listen to Rush Limbaugh. The Fox News watching working class can blame everything on them liberals and immigrants, deriving a bit of psychological comfort while relying on govt benefits, Medicare and Social Security for subsistence.
cuddling up to the poor since 1968
written by pete, May 31, 2013 1:30
Peak income equality was in 1968 the beginnings of the WAR ON POVERTY. That worked out well. More government and an unrestrained Fed have led to huge gains to capital, not labor. Sigh.
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written by fuller schmidt, May 31, 2013 1:35
Acemoglu's essay was shockingly dumb.
Nordic collaboration
written by David, May 31, 2013 3:40
The Swedes and Norwegians (and Danes and Germans) have a more collaborative society than the US. I know in old Norway that if someone came knocking at your door, it was no small feat to get there, so hospitality and compassion are bred into the culture.

There's a decent article in a late Fall 2012 edition of The Economist that is pretty good (I don't agree with all the conclusions, but that the facts are presented pretty well). If anything, Sweden is beginning to get disrupted by income inequality too (such as highly paid CEOs).

The Swedes don't have cuddly capitalism; the fact is that they know how to work together toward a common cause, but they are a much smaller country (and Norway is half the Swede population). You can't let people starve out on the streets, they die there in the winter. But they have very good job training, very good recovery programs for the imprisoned (obviously some are beyond reach), etc.
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written by j, May 31, 2013 6:43
The referenced article refers to nothing but a nice guys finish last argument couched in obtuse academic language. I noticed two problems to the referenced research. First, it assumes that the US is that only country that can be innovative and has been innovative. It makes you proud as an American but it is a biased assumption that reeks of overconfidence. Second, the research assumes that money is the only thing that motivates people to innovate. This ignores a large section of society that works and innovates to make a difference rather than make an obnoxious amount of money. Is every Silicon Valley engineer more innovative than an engineer that works at DARPA? Cuddly capitalism finances the latter.
innovation
written by pjm, May 31, 2013 7:06
J,
There is a TED talk (I know, I know) from some guy who talks about the relation between incentives and creativity and argues you basically can't incentivize creativity. Interestingly, he also says this is one of the best established results in social science and the most ignored of the solidly demonstrated results in social science.
Also, the idea that the Nordic countries aren't innovative is pretty silly, looked at in either social or technological terms (they do happen to be very small).
PS, I agree with fuller.
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written by liberal, June 01, 2013 3:28
fuller schmidt wrote,
Acemoglu's essay was shockingly dumb.


Not too surprising if you consider that he wrote a book named Why Nations Fail: The Origins of Power, Prosperity, and Poverty where the word "rent" appears twice and "Henry George" appears no times.
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written by liberal, June 01, 2013 3:32
pete wrote,
Peak income equality was in 1968 the beginnings of the WAR ON POVERTY. That worked out well.


Post hoc, ergo propter hoc.
we don't have a market economy
written by mel in oregon, June 01, 2013 12:04
We've never had a market economy. Capitalism is just a more advanced form of feudalism whereby the very wealthy are grifters who by funding politicians are rewarded by all means of subsidies & giveaways. But no economic system truly will ever be fair. Evolution proves that greed is the driving force in all life, not just humans. Liberals point to Reaganomics for the destruction of the American economy which is true. However it was bound to happen even if Reagan hadn't come along. Remember when big labor supported the Viet Nam war, why hell they were making great money. But even farther back during ww2, some people hoped the war would go on indefinitely because they were making so much money. There won't be any meaningful change, because the very powerful won't allow it, witness the hardass response to the occupy movement by virtually all politicians. Liberals should learn to just enjoy life & quit getting so riled up about things that can't be changed.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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