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James Galbraith, Leo Panitch, Sam Gindin

James K. Galbraith is a professor in the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin and director of the University of Texas Inequality Project.

In the early summer of 1999, libertarian John Stossel from ABC Television interviewed me at length on my views of unemployment and inequality in Europe and the United States. In the end, only a tiny video bite aired. In it, I stated that I did think Europeans might learn something from recent U.S. experience. Stossel portrayed this as a conversion to his own free-market views. It was a gross misinterpretation of the views I actually hold, as was quickly pointed out by the advocacy group FAIR, and eventually also in a story on Stossel by Brill’s Content early this year.

Now come Sam Gindin and Leo Panitch, making exactly the same mistake for Monthly Review (vol 51, no. 10; March 2000). Pedro Conceicao, Pedro Ferreira, and I do end our recent article in the New Left Review with the provocative enjoinder, “Do it the American way.” Gindin and Panitch present this to unwary readers of MR as an endorsement of the views of the Economist and the Wall Street Journal. It is, once again, nothing of the kind.

The point of our article, “Inequality and Unemployment in Europe: The American Cure,” was to attack on empirical grounds the doctrine that U.S. full employment was purchased by rising inequality, alongside the corresponding notion that European unemployment can be cured by cutting minimum wages and dismantling the welfare state. We show, in a fair comparison which includes the large differences in income levels across as well as within European countries, that pay inequalities in Europe taken as a whole are actually higher than in the United States. (Astonishing, perhaps, but true.) Meanwhile unemployment rates across European countries are systematically higher where income levels are low—they are much higher in (say) Spain, with low incomes and a weak welfare state, than in rich and generous Denmark. In short: inequality is bad for unemployment; equality and fuller employment go together.

This finding suggests that instead of chasing the chimera of “flexible labor markets,” Europeans should concentrate on reducing international inequalities, and bringing up income levels, especially in Spain, Italy, Portugal, and Greece. One way to do this would be to emulate the U.S. social security system—extending common pension rights and disability protections across the whole of Europe. A continental version of the U.S. Earned Income Tax Credit would sensibly raise the disposable incomes of the low-paid. So would, eventually, the phased introduction of a common continental minimum wage. And so would a monetary policy aimed at full employment, rather than the ECB’s misbegotten constitutional target of price stability. The United States has achieved a high level of interregional convergence since adopting these policies under the New Deal and Great Society. Our argument is that Europeans should look to these progressive moments in U.S. history, and not to Thatcher and Reagan, for the model they need now.

The NLR paper has attracted attention in Europe: the Guardian gave it a full page, as did Cinco Dias in Madrid; Berliner Debatte translated and republished it, and a story has appeared in a leading Swiss financial magazine, CASH. European progressives see both its common sense and its political edge. For we cut the ground from under the most powerful supposed example that the European right has available to it in its continuing assault on the welfare state.

In North America, though, we are meeting a bipartisan resistance of closed minds. Elements of both right and left here prefer to see the United States as a poster-case for Reaganism, the former to admire it and the latter in order to moan and wring their hands. So it is for Gindin and Panitch. They use us exactly as John Stossel did, as a stage prop, freely misinterpreting our position so as to take a pot shot at the New Left Review. And by failing to give MR‘s readers any idea of what we actually wrote, they do a disservice to all who agree, as we do, that the cause of “international equality” should be an important element of the progressive agenda.

2000, Volume 52, Issue 01 (May)
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