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A Conservative Accidentally Makes The Case For Social Democracy

Jim Manzi's conservative reform manifesto in National Affairs has attracted all sorts of praise on the right. And Manzi does have some interesting observations and decent proposals. His main premise is that there's an inherent tension between economic dynamism and social cohesion. Conservatives, he argues, must oppose the Democrats' growth-stifling social democratic agenda without going so in the other direction that they allow the the social fabric to rend.

The weakness of Manzi's essay is that it does almost nothing to establish its key premise that President Obama's agenda will stifle growth. Almost all the work of establishing this point comes in this section:

From 1980 through today, America's share of global output has been constant at about 21%. Europe's share, meanwhile, has been collapsing in the face of global competition — going from a little less than 40% of global production in the 1970s to about 25% today. Opting for social democracy instead of innovative capitalism, Europe has ceded this share to China (predominantly), India, and the rest of the developing world.

If you read that passage quickly, or even very slowly and repeatedly, you probably think Manzi is saying that, since Ronald Reagan took office, United States has enjoyed dramatically faster economic growth than European social democracies. (Ross Douthat, citing this passage, reaches that conclusion.) In fact, Manzi isn't showing that at all.

First of all, let's note that while he concludes with a swipe at "social democracy," Manzi is comparing a unit he calls "Europe." I emailed Manzi, and he explained that "Europe" includes, well, all of Europe -- not just social democratic western Europe but eastern Europe, the Ukraine, and Russia, which are not social democracies by any means.

Second, Manzi has an odd description of timing in his first sentence that, even after several readings, I didn't notice until somebody else pointed it out to me. He cites America's economic growth since 1980, but counts Europe starting in "the 1970s." What is the 1970s? Over email, he specified that he meant 1973. So he's comparing The U.S. since 1980 with Europe since 1973 -- which is, to put it mildly, a very unusual way to construct a comparison. Of course, this causes the 1973-1980 economic slowdown to be counted against Europe but not the United States.

And third, Manzi cites total share of of world GDP, which is a measure of population growth along with rising wealth. And, since 1980, the population of the United Stated has grown 35%, compared with 7% in the European Union and 0.7% in Russia. But of course, merely adding more people does not make your population better off. The more common measure of living standards in GDP per capita.

So, let's look at a straight-up measure. How did the United States perform in comparison with European social democracies? Well, since 1980, the original 15 members of the European Union saw their real per capita income grow by 58%. Real per capita GDP in the United States grew by... 63%. And that measure actually overstates the difference. The European Union does not include Switzerland, Norway or Iceland -- three countries that clearly qualify as European social democracies. Those three countries had 71% growth in per capita GDP since 1980 -- thanks to Isha Vij of the Center for American Progress for pointing this out to me -- which, if added to the EU 15, would bring the growth record of the United States and the social democracies even closer to parity.

Interestingly, Manzi concedes in his essay that social democracy provides superior social cohesion. His essay simply assumes that it inherently produces dramatically lower growth. But now that we can see his assumption doesn't hold up, he's actually making the case for social democracy. To be sure, I'm not a social democrat, but Manzi has inadvertently softened my skepticism. If instituting a social democracy in the United States would dampen growth only very slightly, and create greater social cohesion and economic equality (meaning, for people who aren't very rich, higher living standards), why not give it a try?

Update: Kevin Drum points out via email that social democracies rank higher than the United States in GDP/hour worked. I don't think that's a perfect measure, but it does complete the picture. Europeans get more vacation, which is a form on unpaid compensation. Americans work longer hours at a lower rate of pay per hour. On the other hand, there are more opportunities to work more and get paid more in the United States.

Second update: Manzi replies here. I don't think it really answers the main problems.