I have seen a fair number of articles suggesting that—if elected—Joe Biden should pattern his economic approach on that of Franklin Roosevelt.
FDR was no ideologue; he was pragmatic. When he assumed office, he was faced with an economic situation for which there were no obvious remedies, and he was willing to try anything that would work under the circumstances. As David Brooks recently reminded us in a column from The New York Times, FDR’s administration had a strong anti-ideological bias, coupled with a willingness to experiment.
One of the things about Biden that I find most reassuring is precisely that lack of rigid ideology—what I perceive as willingness to respond appropriately to the challenges of the moment. Sometimes, a proper response will be ambitious, sometimes cautious.
Americans’ economic battles are being fought between ideologues—who have convinced themselves that their favored economic system is “the” answer to every problem—and those who recognize the inevitable ambiguities and complexities of economic life and have come to terms with the fact that neither capitalism nor socialism is a one-size-fits-all answer to what ails us. Both systems are subject to distortion, and both are destructive when they operate in economic areas for which they are unsuited.
Every successful economy currently operating is a mixed economy. That includes Nordic countries—which on several measures have more robust free markets than does the United States.
A research project called the World Happiness Report has examined why Nordic citizens are routinely found to be exceptionally satisfied with their lives. The project concluded that the answer was related to the quality of institutions, such as reliable and extensive welfare benefits, low corruption, and well-functioning democracy. It further noted that Nordic citizens “experience a high sense of autonomy and freedom, as well as high levels of social trust towards each other.” (Interestingly, the research showed that popular explanations—such as the small population and homogeneity of the Nordic countries—didn’t seem to have much to do with it.)
The comprehensive Nordic welfare state—the “socialism” element—provides citizens with a basic sense of security that research tells us mitigates crime and conflict, among other things. And yes, taxes are high, but citizens get value for that money—they save what Americans must pay for education and health care, for example.
On the other hand, economists will confirm that—aside from their generous social safety nets—Nordic countries are mostly free-market economies that rank high on indexes of economic freedom. Businesses aren’t run by the state, nor are most employment practices dictated by the government.
The lesson to be learned—and not just from the Nordic countries—is that successful economies are a mixture of appropriately-regulated capitalism and judiciously socialized public goods.
Markets require willing buyers and willing sellers, both of whom can access all information relevant to their transactions. In the United States, we “socialize” police and fire protection, among other things, because the markets description doesn’t fit those services. (It doesn’t fit medical care, either.) It does fit the production and purchase of consumer goods.
The challenge facing the next administration, given the current condition of both the economy and social trust, will be to strengthen the social safety net and return a level playing field to a market that has been corrupted by crony capitalism.
Figuring out the optimum “mix” is harder and more complicated than one-size-fits-all economic ideology. It requires an administration that occupies the real world.•
Kennedy is a professor of law and public policy at the Paul H. O’Neill School of Public and Environmental Affairs at IUPUI.