Who-Built-It Debate Pits the U.S. Against Europe
“We Built It.” That was the Republicans’ rebuke last week to President Barack Obama’s line, “You didn’t build that.” The Democrats will respond this week at their convention.
These phrases don’t imply anything about concrete policy, yet the debate reflects a deep ideological divide that goes back 150 years. And the battle over the relative roles of social collaboration and individual initiative is not limited to the U.S. -- it has played out in Europe, as well.
The president’s defenders claim the Republicans took his words out of context. But if you read the official transcript, Obama’s comments taken as a whole are a coherent statement of a communitarian worldview that emphasizes the power of social influences and the positive role of government.
On substance, both sides are right. Individual entrepreneurs build their own businesses with sweat, perseverance and ingenuity. But every successful entrepreneur also owes much to others, for no great invention since the dawn of time has been a solo achievement.
James Watt built the separate-condenser steam engine, but he was helped by colleagues such as Joseph Black of the University of Glasgow; an ingenious partner, Matthew Boulton; and a supplier of cast iron, John “Iron-Mad” Wilkinson. Sergey Brin didn’t invent Google Inc. (GOOG) single-handed. He had a partner, Larry Page, investors such as Andreas von Bechtolsheim, and excellent teachers such as Terry Winograd.
But the collaborative nature of invention and entrepreneurship implies little about government policy. It certainly doesn’t suggest that marginal tax rates should be higher. Many people who helped Brin are quite wealthy. Should Brin repay his debt to Page by voting to increase Page’s taxes?
Obama is right that American entrepreneurs benefit from the rule of law, decent infrastructure and research funded by the federal government. But this observation also has limited policy bite. Entrepreneurs’ use of existing roads doesn’t imply that we should build more roads, or that entrepreneurs can’t pay for highways and bridges with tolls and gas taxes.
The Republican “We Built It” mantra is similarly free from logical implication. The phrase recognizes the importance of entrepreneurial energy, but that doesn’t mean the public sector should shrink or that marginal tax rates can’t be a bit higher.
Both parties are counting on voters to rely on ideology more than facts. The Republicans are trying not only to defeat Obama but also to ensure the survival of their worldview. In a global opinion poll, only 36 percent of Americans agreed with the statement that “success in life is pretty much determined by forces outside our control,” compared with 72 percent of Germans, for example. Across countries, believing success reflects luck, rather than hard work, is robustly correlated with more income redistribution and a larger welfare state.
Eight years ago, I wrote a book with my colleague Alberto Alesina on why the U.S. has a vastly smaller welfare state than Europe’s. Using history and statistics -- world survey averages from the last two decades of the 20th century -- we argued that American exceptionalism could be traced to two primary causes: political institutions and ethnic fragmentation. Both were ideological in nature.
More ethnically homogeneous places such as Scandinavia have more-generous safety nets, and the U.S. is remarkably heterogeneous. Across the U.S., before the 1996 welfare reform, states with more black residents provided less-generous welfare payments (even controlling for state income). Dartmouth College economist Erzo Luttmer found that individuals who live near poor people of the same race support more redistribution, while those who live near poor people of a different race support less redistribution. Racial divisions in the U.S. helped conservatives defeat populists a century ago and helped Richard Nixon take the South and the White House in 1968.
Yet American diversity can explain only part of the limited welfare state. The nation’s institutions help explain the rest. The U.S. has a majoritarian government, embodied in its powerful chief executive, while systems with proportional representation typically have more redistribution. Proportional representation tends to help parties, such as Europe’s Social Democrats, which specialize in advancing the economic interests of the poor.
The American system also has checks and balances, such as the Supreme Court and the Senate, that have historically limited attempts to expand the welfare state. President Franklin Roosevelt first battled a Republican Supreme Court, and then faced a conservative congressional coalition. Obama had only two years of undivided government. European governments typically face far fewer constraints. America’s more conservative political institutions are no accident. Its founders feared ochlocracy and wanted to check the current whims of the people.
A century ago, Europe was more conservative than the U.S., both in its institutions and in its policies. Kings and courts ruled Germany, Austria-Hungary and Italy, and the franchise was often limited. Over the 20th century, however, after world wars, old governments fell and were replaced with new constitutions, often written by Social Democrats. These constitutions had left- leaning provisions, such as proportional representation.
As European politics lurched leftward, so did European ideology. Schools during the age of conservative monarchs such as Germany’s Kaiser and the second Napoleon taught that hard work brought prosperity. When Social Democrats took power, they conquered classrooms, dominated political discourse, and taught that society and luck, not individual effort, determined success. Meanwhile, the U.S. retained its 19th-century institutions and its older ideology.
After decades of indoctrination, 60 percent of Europeans, but only 29 percent of Americans, believe that the poor are trapped in poverty. Fifty-four percent of Europeans, but only 30 percent of Americans, think that luck determines income. Sixty percent of Americans, but only 26 percent of Europeans, believe that the poor are lazy. Across countries, there is no correlation between the actual hours worked by the poor and the belief that the poor are lazy. The American poor work far harder than their European counterparts.
The European worldview complements a large welfare state, just as the American worldview supports smaller government. When voters believe that the poor are trapped, they are more likely to think that redistribution is just, and when voters believe that the poor are lazy, welfare seems to be rewarding bad behavior.
Obama’s “you didn’t build that” line was hardly a full- fledged statement of the European worldview. He didn’t imply that the poor were trapped or that luck determines income. But his statements did move away from a full-throated belief that effort alone engenders success.
Contrary to Republican claims that he only follows polls, Obama was trying to change American opinion. That challenge led to the Republican response: America remains the land of opportunity.
I wish the president would make the case for specific spending proposals, rather than making empty claims that businesses benefit from some public services. I would prefer the Republicans to explain how they will cut taxes and balance the budget, instead of extolling the virtues of the American entrepreneur. But as long as we base our votes on ideology, rather than facts, politicians will continue giving us ideology. As Cassius says in Shakespeare’s “Julius Caesar,” “The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings.”
Today’s highlights: the editors on the right way to bring manufacturing back and on breaking South Africa’s circle of strife; Clive Crook on why Fed independence is essential and indefensible; Ezra Klein on whether you’re better off than four years ago; Michael Kinsley on how Republicans don’t really care about jobs; Peter Orszag on moving health care from quantity to quality; Naomi Schaefer Riley on the roots of the Harvard cheating scandal; Arun Sundararajan on Facebook’s winning business model.
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