Viking Economics (25 page)

In turn, the United States has adapted many practices first developed by others. The first modern urban public transportation system probably appeared in Nantes, France, in the early 1800s.
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The foundation of the modern public library system was laid by the British Parliament in the 1850 Public Libraries Act.
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Germany invented the modern social security system in 1883.
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Bullying has become a worrying issue in the United States, and some schools in Pennsylvania and New Jersey scanned the globe looking for best practices. They found the “Olweus Bullying Prevention Program” invented by Norwegians in the 1970s. The American schools tried it out and discovered that the low-cost program made a substantial difference.
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For fifteen years, I crisscrossed the globe as a trainer and consultant and met many international business and nongovernmental consultants who I began to see as honeybees. They were cross-pollinating. Sometimes a policy or best practice did not travel well, they said, but there were plenty of successes.

My conclusion is that because cultural difference does matter, we should let that fact influence the model we create for our country—but not stop exploring the potential of others’ successes. One
advantage of global diversity is that it produces a greater abundance of experiments to assess. As we consider adapting others’ best practices, we would want to improve on them by using our own strengths.

The temptation we need to avoid, however, is diluting others’ proven practices instead of improving them. The example of public health insurance clearly shows the downside of half-measures, and also reveals that the claims of culture can be exaggerated.

Many countries created governmental health insurance programs after World War II, for cultures as different as France and Germany. Within the United Kingdom, the system had to deal with
internal
diversity, since Scotland, Wales, and England were (and are still) very different from one another. No two national health programs were just alike, but they had in common the universal, single-payer approach of relying on their governments to simplify the accounting and meet individual needs in the whole society. According to the numbers gathered by OECD researchers, that approach to health care is much more extensive, and far less expensive, than the approach we are used to in the United States.

President Harry S. Truman proposed the universal governmental approach for the United States in the same period during which other nations were adopting it, after World War II. Special interests groups, including the medical profession, vetoed his proposal.

Two decades later, in 1966, the United States started Medicare, a limited borrowing of others’ successful systems. Surveys tell us that the 50 million Medicare members rate their health insurance satisfaction higher than do people on private insurance plans. Studies by economists and the Congressional Budget Office find
that Medicare is in fact a far more efficient way of providing health care for elders than the private market.
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It was not cultural difference that delayed governmental provision of health insurance for American elders. The satisfaction reported by elders could be matched for everyone if the United States had Medicare for all; it would mean care for everyone, enormous savings, and the United States at last joining the top tier of health practice in the world.
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The reason the United States has failed to adopt universal health insurance is not because it violates our culture, but because special interests prevented the majority from getting what it was ready for.

The same could be said of many Nordic-like policies, which could fit just fine into American culture but were vetoed by special interests. Attacks on smart practices used by others routinely show up in this country for no valid cultural reason, like cutting budgets for building badly needed infrastructure. (Which American cultural value is threatened by modernizing our transportation, or electrical grid?) The educational program Head Start, validated by years of research, is threatened each year not because it is un-American to want the best for our children, nor because we Americans love the increased delinquency and crime when the children grow older without Head Start. Educating poor children simply does not line up with the intention to maximize profit.

In creating our own economic model that supports freedom and equality, I conclude that we can pay attention to culture without allowing “cultural difference” to become a smokescreen hiding the cold interplay of special interests.

I made a startling discovery related to this question on an ordinary day in Oslo. On my way to a conference room to interview Jon M. Hippe and Tone Fløtten at the Fafø Research Foundation, I paused to look at framed photographs on the walls. One of them showed a Chinese delegation meeting with the researchers. Not only is China the most populous nation in the world, but it also contains substantial cultural diversity.

I immediately put the question of scale and homogeneity to my hosts. Fafø director Hippe told me they had raised those issues with their guests. The Chinese economists and policy experts said that sometimes scale matters, and sometimes it doesn’t—it depends on the issue. They believe that they have much to learn from Norway.

I immediately thought of social security, which works in Norway and also in the United States even though our population is sixty-four times bigger. University of Oslo professor Lars Mjøset told me that Norwegians have relied on public banks and credit unions, and in the United States, 100 million people have joined credit unions, thereby saving $10 billion per year on fees and interest rates. According to the American Customer Satisfaction Index, credit unions get higher ratings than banks do from their users “on nearly every aspect of the customer experience.”
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Another example where scale is not a major issue is clean air. The United States used to have famously dirty air, then made huge strides in cleanup through a national program called the Fresh Air Act, enforced by the Environmental Protection Agency. In fact,
our country is well-known for very large-scale government projects that are the envy of many countries, such as the Interstate Highway System started under President Dwight Eisenhower.

Now our infrastructure is falling apart; the McKinsey Global Institute estimates that we need to spend an additional $150 billion a year on infrastructure to meet our needs. The American Society of Civil Engineers gave a grade of D-plus to our infrastructure in 2013, and since then there have been more budget cutbacks, such as the Congressional move to cut back on Amtrak immediately after a fatal, and preventable, crash in Pennsylvania in 2015 for lack of an infrastructure improvement. Europeans typically spend about 5 percent of their gross domestic product on infrastructure, while the United States spends half that!
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A big and wealthy country like ours can take on many projects that are beyond the reach of smaller countries, which makes all the more remarkable the sight of our transportation infrastructure falling behind. The
Los Angeles Times
reports that in 2015 the Central Japan Railway tested magnetic levitation trains that exceeded 350 miles per hour.
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There are many ways in which the United States could use its advantages of scale to
exceed
the achievements of the Nordics; for example, we can end carbon pollution by using our vast access to solar energy.

What I’ve just said also responds to the question about the assumed advantage that homogeneity gives economies that promote equality and freedom. For example, how does making higher education free depend on homogeneity? For years in the United States, free higher education was offered in the most culturally diverse place in the nation: New York City. The top-ranked college where I taught, Swarthmore, deliberately
increased
the racial and class diversity of its student body because the college knew that
diversity promotes a higher-quality education for all, including for rich white students who otherwise miss an abundance of perspectives. The choice to include class diversity required Swarthmore to offer free education to low-income students—simply good educational policy.

Free education can be offered on a national scale, as was done in the Nordic countries
when they had far less wealth available than we do
. The United States, which once offered free quality higher education in many state institutions, is currently going in the opposite direction, defunding higher education.

Wilkinson and Pickett suggest another way of thinking about the role of homogeneity: compare Portugal and Spain.
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The two countries have many similarities: they share the Iberian peninsula, the Roman Catholic religion, and similar ancient ancestral ethnicities. They are racially seen as the same, have been traders who built empires, and each had a political dictatorship until recently. Compare their societies on equality, however, and it turns out that they are very different: Portugal is one of the most unequal nations in the world, while Spain is average.

The two nations differ in other important respects, but again in ways that contradict the notion that homogeneity and small size pay off in building an egalitarian society. Spain has over four times Portugal’s population size, contains sub-nations that still speak their own language and struggle for autonomy, includes more native-born citizens from its former colonies including racially different Africans and Latin Americans, and has a higher percentage
of recent immigrants. Spain is larger and far more diverse than is Portugal,
yet has been more successful in developing an egalitarian society
.

I pointed out earlier that homogeneity is actually a liability when it comes to economic development; innovation flourishes in the presence of multiple perspectives. And as we saw in the chapter on entrepreneurs, start-ups flourish in Norway not because of historical homogeneity but because of present-day support from an economic system that begets equality and freedom.

The greater cultural diversity in the United States in fact gives us an economic edge over the Nordic countries, if we choose to use it. Those who worry that the U.S. rate of innovation is in trouble might ask about cutbacks in American research and development budgets.

California’s lieutenant governor, Gavin Newsome, tells the story of how proud he was of upgrading governmental computer capacity during his two terms as San Francisco’s mayor. Toward the end of his period as mayor, he crossed paths with Estonia’s premier. Newsome bragged to his guest, describing specifically the breakthrough systems he was installing. The Estonian remarked casually that his government had installed the same capacity years before.

I heard the humbled Newsome tell this story on public radio as his way of inviting fellow Americans out of our nationalistic bubble.

In short, like the Chinese delegation that came to Oslo, we can be open to learn from others as we improve our country. We
also can take account of differences of scale and degree of cultural diversity as we design a new economy that supports freedom and equality. Robert Kennedy put it this way: “There are those who look at things the way they are and ask why … I dream of things that never were and ask why not?”
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Medical epidemiologists Wilkinson and Pickett offer a tantalizing picture for the United States if we were to adopt policies that resulted in reducing our income inequality to the level of the Nordics and produced similar correlations: prison populations reduced by 75 percent, rates of mental illness and obesity cut by almost two-thirds, a 75 percent increase in the number of people who feel they can trust others, and an average increase in longevity while working the equivalent of two months less per year!
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The major political parties have in recent decades backed away from anything close to the Nordic model. The Democratic and Republican policies are reflected in both the economists’ numbers and the daily lives of the American majority.

The trend is clear. Joseph E. Stiglitz has been chief economist of the World Bank and the chair of President Bill Clinton’s Council of Economic Advisers. He observes that “the United States not only has the highest level of inequality among the advanced industrial countries, but the level of its inequality is increasing in absolute terms relative to that in other countries.”
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To find out what most Americans actually want, we need to bypass the politicians and ask the people themselves.

Stiglitz reviewed the opinion research and found that the American majority believes there is too much inequality. These views “were held broadly across very different demographic groups, men and women, Democrats and Republicans, and those at the top and those with lower incomes.” In one of the studies, participants were shown two different income distributions, in the form of pie charts. Without saying so, one chart reflected the distribution in Sweden and the second chart that of the United States. 92 percent said they preferred the first.
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How important is it to the public to change policies regarding inequality? A
New York Times
–CBS News poll reported that 65 percent of Americans believe the gap between rich and poor is a problem that needs immediate attention. In the same poll, 74 percent said corporations have too much influence in American life and politics; only 3 percent disagreed.
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For the past couple of decades, elected officials have been cutting taxes for the wealthy, but a
Washington Post
poll in 2014 showed a majority of people in favor of tax
increases
.
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A study of Asian Americans who earn over $250,000 per year found that 62 percent supported raising taxes on their category to provide more government services.
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A 2014 Gallup poll showed that even among Republicans, 45 percent believe that upper-income people paid too little in taxes.
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