The ideas of the internet, fiber optics, Amazon and the billionaires they would create were inconceivable to America’s founders. One wonders how the United States constitution might look or whether it would exist at all, had the members of the Constitutional Convention better understood the future. Certainly, western liberalism has produced the greatest economic, political, and military power the world has known. Yet within this system of unbelievable wealth lie vast disparities in circumstances. Indeed, the disparity between rich and poor gave rise to Marxism, Vladimir Lenin, and the Soviet Union. Contemporary western liberals have argued the merits of capitalism from its most radical libertarian extremes to various degrees of welfare state. This essay examines the arguments of the late Northeastern University professor Stephen Nathanson (1998), whose approach, while flawed and at times misleading, arrives at a meritorious conclusion: Social safety nets are the moral obligation of any society that can afford to provide them. Furthermore, this essay argues that understanding the flaws of Dr. Nathanson’s arguments helps advance a more successful version of his ideas.
Welfare State and Nation Building have an improbable commonality. Each is widely despised by various factions of the American demos. In a subjective sense, they share another common thread: Nation building might better describe a government’s obligation to the citizenry and the country it oversees, than the best interpretations of the welfare state. Governments ought to look at social welfare as categorically similar to national defense or infrastructure spending. Investing in, arguably the country’s greatest asset, its people, is not only a morally just cause but also an operationally just expense. In his book, Economic Justice Dr. Nathanson (1998) argues the advantages of such a comprehensive welfare state over the extremes of Socialism and Libertarian Capitalism. However, while he draws some worthwhile conclusions, his reasoning is flawed.
To begin with, Dr. Nathanson (1998) fails to acknowledge the middleclass. He builds his argument on a binary view of extreme wealth and extreme poverty; and, while poverty, in part, drives the need for social safety nets, he leads the reader to the false conclusion that only the conditions of wealth and poverty exist, while overstating privilege and unjust reward. This view obfuscates the much broader problem of shrinking class mobility, and it ignores a critical measure of success in addressing social stability. Instead, Dr. Nathanson uses inheritance as both a means to illustrate the advantages of the rich, and as an example of unjust or undeserved wealth (pp. 57, 64 – 65). However, even a high-level review of the data shows this reasoning to be flawed. For example, according to the Federal Reserve, the average inheritance received by American beneficiaries in 2019, was just $49,200 (Bricker et al., 2020). Even ignoring that this number is inflated by the top 1%, this is still far short of the windfall required to attend college or to retire. Furthermore, according to data published by the Bureau of Labor Statistics, the average age at which inheritance is received is 50 – 60 years old (Wolff & Gittleman, 2011 p. 3). Certainly, far too late to advantage someone at the start of life. Finally, according to the U.S. Census Bureau, over 87% of households earning less than $25,000 a year, used economic stimulus to meet household expenses (Perez-Lopez & Bee, 2020). Even if these households received an average inheritance, that money would likely be spent on basic needs, not college tuition or buying a home. The issue is that Dr. Nathanson is logically conflating inheritance with purchasing power. For example, even if inheritance were made illegal, the families of rich children would still be able to afford the tuitions of elite schools, housing costs, and medical care. Furthermore, by committing this logical indiscretion, Dr. Nathanson overvalues the importance of wealth while simultaneously missing the point of wealth stagnation.
As the data show, simply providing money to the poor won’t result in life-changing circumstances. It is the sustained ability to earn more and change social status that matters. Yet, American’s ability to change classes has dramatically declined over the last fifty years. According to the World Economic Forum (Lu, 2020), middleclass wages are stagnating and the percentage of people who earn more than their parents is plummeting. While 62% of aggregate income went to the middleclass in 1970, by 2018, that number was just 43%. Over the same period, the upper class saw their income increase from 28% to 48%, while lower class income fell by just 1%. In other words, the incomes of the poorest Americans have remained relatively unchanged over the last fifty years while the ability to change income status, for most Americans, has diminished. Class mobility and wage stagnation are somewhat different problems than the issues raised by Dr. Nathanson, but their potential solutions are similar.
In fact, one of Dr. Nathanson’s (1998) more intriguing ideas is the notion of a social inheritance, which would be held in trust until some future date (p. 125). He entertains other ideas as well, hinting at concepts of minimum wage or universal basic income (UBI). While these ideas are attractive, they face significant hurdles in practice and in theory. While the inflationary impacts of minimum wage are muted by the fact that only a subset of workers benefit from a wage increase, a trust or UBI would theoretically be available to everyone. Former presidential candidate Andrew Yang (2020) advocated for a universal basic income that would be available to all Americans regardless of earnings. The issue with UBI and to a lesser extent with minimum wage, is that when everyone has the same basic income, the value of that money decreases. The cost of goods whether bread or apartments increases as a result. In essence, inflation will define UBI as the new poverty level. This doesn’t mean that the idea of social inheritance should be written off, but the inflationary consequences need to be thoroughly understood.
Alternatively, western countries ought to focus on enabling outcomes. As Dr. Nathanson (1998) says, “A comprehensive welfare state could operate in different ways. It could provide specific resources such as food, housing, health care, and education” (p. 106). Indeed, such solutions are not without precedent. For example, according to the European Commission, in 2020 Germany spent over $430 billion euros or 12.8% of gross domestic product on healthcare. Over the same period, France reported total national healthcare costs of 12.2% of GDP (Eurostat, 2022). According to the World Bank (2022), Germany and France spent 4.7% and 5.5% of GDP on education in 2020 respectively. Such programs could manifest in the United States, for instance, as an extension of public education to include college and graduate school. Doing so would enable career development while freeing students of crippling debt. Public transportation is another program with near universal benefits. The United States should commit to building the infrastructure to connect communities to one another and ensure access to services like education. Finally, dissociating health insurance from employment is critical. A person who wishes to advance their status by going back to school, should not have to worry about health coverage while pursuing a career that will likely increase their productivity. In short, these programs should not focus on income status specifically, but on universal access to the tools required to build a more productive citizenry.
Dr. Nathanson correctly concludes that nations who can afford social safety nets, have a moral obligation to provide them. However, he incorrectly defines the problem by ignoring the middleclass and the issue of class mobility. In fact, social safety nets are vital to the people who need them, but they should be focused on promoting wage and opportunity growth for all people, not dependence on a discretionary system.
References
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Eurostat. (2022). Healthcare expenditure statistics. Eurostat: Statistics explained.
Lu, M. (2020). Is the American dream over? Here’s what the data says. World Economic Forum.
https://www.weforum.org/agenda/2020/09/social-mobility-upwards-decline-usa-us-america-economics/
Nathanson, S. (1998). Economic Justice. Prentice-Hall, Inc.
Perez-Lopez, D., & Bee, C.A. (2020). Majority who received stimulus payments spending most of it on
household expenses. The United States Census Bureau. https://www.census.gov/library/stories/2020/06/how-are-americans-using-their-stimulus-payments.html
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https://2020.yang2020.com/what-is-freedom-dividend-faq/