The Anti - US

At least among western democracies, Finland seems to be everything the United States isn't. Staunchly egalitarian most of all. And their educational system is among the best in the world.

What gives?

Over time, Finland was able to create its "cake" -- and give everyone a slice -- in large part because its investments in human capital and education paid off. In a sense, welfare worked for Finland, and they've never looked back.

"In the Finnish case, this has really been a part of our success story when it comes to economic growth and prosperity," said Susanna Fellman, a Finn who is now a professor of economic history at the University of Gothenburg in Sweden. "The free daycare and health-care has made it possible for two breadwinners -- women can make careers even if they have children. This is also something that promotes growth."

With this setup, Finns have incredible equality and very little poverty -- but they don't get to buy as much stuff.

What types of jobs will be available in the future?

And will these be good jobs? Are face with increased inequality in the future? Here's commentary:

The NYT wonders if the good jobs are gone, and whether governmental policies can address this issue. Can the market - on its own - create the next wave of middle skill jobs that will limit increased inequality?

Richard Posner points out the various ways that technological advances displaces - but does not eliminate - labor. While he mentions jobs that do not require high IQ's he points out that many jobs that are specialized - including the practice of law - are vulnerable.

He has this scary point to make about driverless cars:

Take the case of the driverless car. This technology is advancing very rapidly and has great promise for reducing labor costs (drivers), traffic accidents (for example by eliminating drunk driving), traffic violations, and traffic jams (by optimizing speed, lane usage, and choice of routes and times). There are approximately 4 million truck, taxi, limousine, and bus drivers in the United States, not to mention gas station attendants and traffic policemen. Not all these jobs will be eliminated overnight, but they could go quite fast.

He also points out that these trends - coupled with increased life expectancy - wil lincrease the dependent population:

These trends bear on the current debates over the size of government. Technological advances are increasing longevity, and with it an increase in the dependent population. By reducing demand for workers, and therefore employment and wages, in many labor markets, the same technological advances may be creating a second dependent population, consisting of people of working age and their children who cannot support themselves without public assistance that will either replace or augment wages. Republicans may therefore be tilting against windmills in thinking that the size of government can be reduced.

Gary Becker tells us that the future will not be kind to low skilled workers, and that the rewards for skilled workers may not be as great as they have been in the past:

During the past 30 years the market for workers with few skills has been weak pretty much everywhere. The reason is that economies, including developing economies, have increased their demand for knowledge workers at the expense of low skilled workers. The future is not likely to be any kinder to workers with little education and few other work skills.

Various forces have favored skilled workers during the past several decades; indeed, many of them began much earlier. Technological changes and automation, including the development of computers, the Internet, and electronic controls, have reduced the demand for certain types of skilled workers, such as secretaries and clerical workers. They have increased the demand for workers who command considerable knowledge, and who know how to access any additional knowledge necessary to perform various tasks.

He is critical of governmental policies that impede the incentives for individuals to increase their skill levels, as well as those that limits access to the opportunity to do so.

David Brooks: America is Europe

I recommend a quick read through this David Brooks editorial. His simple point is that the differences between the United States and Europe - specifically the relative size of the government's of each - are very small. While we like to claim that they are the socialists and we are the free-market capitalists is wrong:

The U.S. does not have a significantly smaller welfare state than the European nations. We’re just better at hiding it. The Europeans provide welfare provisions through direct government payments. We do it through the back door via tax breaks.

For example, in Europe, governments offer health care directly. In the U.S., we give employers a gigantic tax exemption to do the same thing. European governments offer public childcare. In the U.S., we have child tax credits. In Europe, governments subsidize favored industries. We do the same thing by providing special tax deductions and exemptions for everybody from ethanol producers to Nascar track owners.

These tax expenditures are hidden but huge. Budget experts Donald Marron and Eric Toder added up all the spending-like tax preferences and found that, in 2007, they amounted to $600 billion. If you had included those preferences as government spending, then the federal government would have actually been one-fifth larger than it appeared.

And this is pretty devastating:

When you include both direct spending and tax expenditures, the U.S. has one of the biggest welfare states in the world. We rank behind Sweden and ahead of Italy, Austria, the Netherlands, Denmark, Finland and Canada. Social spending in the U.S. is far above the organization’s average.

That said - we don't seem willing to accept the fact that we have a large welfare state and develop the means to pay for it.

Is Growing Inequality a Problem?

A ten part series.

Investment v Consumption

Two conservatives debate the role of government.