Inequality and Prosperity: Social Europe vs. Liberal America
Pontusson, a distinguished political economist now at Princeton University, has done a very fine job of comparing the performances of the liberal market economies (in Ireland, the United Kingdom, and the United States) and the social market economies (in Austria, Germany, Switzerland, the Benelux countries, and the Nordic countries). With a wealth of statistics, he reaches conclusions that undermine many of the oversimplifications that have long encumbered debate. Pontusson shows that the social market model can mitigate the tradeoff between equality and efficiency. Several social market economies have had lower unemployment rates than the average for the liberal market economies, although job creation has been higher in the latter. The postwar welfare state has also, through cash payments and the provision of services, reduced relative and absolute poverty, and there is no evidence that it has undercut economic growth or lowered living standards. Pontusson recommends that European socialists and progressives consider liberalizing measures on employment protection, as long as such measures are accompanied by higher public income support for the unemployed and steps to improve their employability. Market liberals, he concludes, should not be allowed to "define the terms of the economic and social policy debate."
Sign-up for free weekly updates from ForeignAffairs.com.