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The strongest argument against a welfare state

Nordic flags via J-O Eriksson/Flickr

Conservatives make a lot of arguments against expanding the welfare state in the United States. But when you push back long enough on them, they often boil down to one claim: The rest of the world might be able to afford a social democracy, but only because the United States makes it possible. 

Our lack of a welfare state, the argument goes, drives innovation and prosperity across the globe. If we were to adopt Swedish-style policies towards healthcare, childcare, and education, it seems the West as we know it would simply collapse.

For example, here is Republican operative Scott Winship arguing against Matt Bruenig’s “Family Fun Pack” universal childcare proposal.

How do you know what the opportunity costs of their policies are? And to the extent that things are good enough by your lights, how much of that reflects the fact that there is a giant dynamic innovative economy that produces improved living standards worldwide?

— Scott Winship (@swinshi) February 15, 2019

This is the strongest argument anyone makes against the welfare state. Why? Because it is the only one that explains why the welfare state should be opposed here despite working so well in Europe. (The argument that welfare states only work in small, homogeneous countries also does this, but it is obviously wrong and barely worth engaging with).

However, this argument is also wrong. My points against the argument are as follows:

Innovation is not lower, and may actually be higher, in economies with stronger welfare states

Even if innovation is lower, it is not clear that U.S. innovation is needed to sustain Western welfare states; anyway, a slightly lower level of innovation may still be enough

Even if it is not enough, another country may be able to step in

Point 1: Innovation is not lower in welfare states

Conservatives act like it is a proven fact that innovation would be lower if the United States had a large welfare state. It is not. It is at best heavily debated, and there is some evidence that welfare states may make countries more innovative. South Korea and Sweden were ranked as the most innovative countries of 2018 in the Bloomberg Innovation Index. The U.S. was not even in the top 10.

Point 2: U.S. innovation is not needed to sustain European welfare states

Again, conservatives act like this is a proven fact. It is not. Trade with the United States typically makes up only a small percentage of the trade of countries with strong welfare states (less than 10%). In fact, Norway trades more with China than with the United States at this point.

A stronger argument is that these countries rely on the military might of the United States to protect them from bad actors like China and Russia. Without the U.S., they would have to put money into defense that currently goes to the welfare state. Even if this is true, it is not an argument against a U.S. welfare state (unless the U.S. welfare state was to be funded by cuts to the defense budget, which is hardly a general feature of a welfare state).

Point 3: Another country may be able to step in

If for some reason the United States no longer provided the economic drive and innovation needed to power Western welfare states, maybe someone else could. The obvious possibility is China, which by some metrics is already the largest economy in the world and growing at a much faster pace than the United States. Despite China’s communist past, its economy has liberalized significantly, and it is already a large trading partner with much of Europe. It grows more innovative every year, and in a few years I suspect we will see Chinese startups overtake U.S. startups as the most innovative and successful in the world. 

For these reasons, and likely for others I have not mentioned, the U.S. innovation argument against the welfare state fails.