Resilience of the welfare state flummoxes the free marketeers (best performing economies) [View All]

Nations with generous social welfare programs are the world's best economic performers, writes Fred Block.

The global economic crisis that peaked in 2008-2009 has so far failed to resolve the decades-old battle between two competing political philosophies - "free market" liberalism on the one side and social democracy on the other. Some observers expected that a global financial crisis sparked by lax regulation in US markets would discredit the free market position.

But while the economic crisis did produce Barack Obama's surprising election victory, the continuing weakness of the economic recovery from the Great Recession, especially in America, has given the free marketers a new lease of life.

Their complaints about too much government spending are once again the dominant voices in the global economy. And their voices are about to be heard in Sydney as well.

The Mont Pelerin Society - the elite international group of theorists who have been the main proponents of the free market faith since 1947 - is coming to Sydney for a major meeting next week, where they will be joined by the former Australian prime minister John Howard.

Social democrats, on the other hand, have had a much lower profile; they have been on the defensive for the past 30 years. Even though many of the social democrats were fiercely anti-communist, their cause was also discredited by the fall of communism in Russia and Eastern Europe.

As faith in government declined, Sweden, Norway, and the other Scandinavian social democracies were widely seen as unhealthy societies, burdened by too much government and excessive taxation. It seemed inevitable that they would give up on their old-fashioned ideas and finally jump on the free market bandwagon.

But here is a surprise. While the Scandinavian social democracies have made a few small adjustments in the generosity of their social welfare benefits, most of the welfare state remains in place.

These nations still have the most generous social welfare programs on the planet. Despite the claims of the free market ideologues, these nations have compiled the best economic performance statistics of any nations in the world over the past 20 years. They have the lowest levels of inequality, the fewest children living in poverty, the highest rates of union density, and they have also had more rapid economic growth, more creation of new jobs by small entrepreneurial high-tech firms, and more vibrant innovation sectors than most other advanced nations.

More: http://www.smh.com.au/opinion/society-and-culture/resilience-of-the-welfare-state-flummoxes-the-free-marketeers-20101003-162kg.html