Social Democracy & The New Frugality

I’ve been talking about “the New Frugality” for a while and Friday’s consumer credit stats bear out my thesis, that something profound has changed in our desire to live within our means.

Americans borrowed less for a 10th consecutive month in November with total credit and borrowing on credit cards falling by the largest amount on records going back nearly seven decades.

I don’t think we will ever return to the point where the average household will live with a debt to income ration of 160% as they did in 2006. So this will mean a transition towards an economy in which consumer spending plays a smaller part in GDP, kind of like Germany or France.

Which leads me to consider Paul Krugman’s column this morning. To listen to Fox or even many liberal commentators you would think that Europe is an economic basket case.

Europe has its economic troubles; who doesn’t? But the story you hear all the time — of a stagnant economy in which high taxes and generous social benefits have undermined incentives, stalling growth and innovation — bears little resemblance to the surprisingly positive facts. The real lesson from Europe is actually the opposite of what conservatives claim: Europe is an economic success, and that success shows that social democracy works.

As anyone who has walked through Paris’ Gare du Nord to get to the 180 MPH TGV train knows, most of Europe works from a public services point of view. universal health care and first class education are a right not a privilege.

One of two things are happening in this Interregnum. Either we are in a long transition towards an economy in which exports and investment (much of it being government spending on infrastructure) represent a much larger share of our GDP (as in Germany or China) or we are in a transition to an economy where productivity gains are so great that we will exist in a state of permanent underemployment. If the latter is the case and 20% of the working population will always be without work, than a social democracy becomes the only way to avoid civil unrest. If the former is the case (my belief), then the role of government investment in infrastructure and services (health, education and transportation) assumes we are in a European style social democracy anyway. Whatever the outcome, I don’t think we’re going back to 2006.

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38 Responses to Social Democracy & The New Frugality

  1. Bonifer says:

    I agree that gov’t spending on infrastructure can cause a lot of unforeseen good, and buy time to get the wackadoodle banking system realigned. The big question is whether Obama and team can game the political process in Washington ebough to get spending out the black box of the Bush years (after the ‘no box’ of the Clinton years) and into more transparent and productive channels. I just got back from a week of meetings in D.C., and I am optimistic.

    Thanks for the post, Jonathan!

    • Alex Bowles says:

      Moyers has just done an excellent piece on exactly this problem.

      In in, he discusses obstacles to real reform of the financial industry with David Corn and Kevin Drum (both of Mother Jones).

      But as JT points out, individual households are way ahead of the DC curve. Not having been granted any bailouts, they’ve realigned their finances – and more importantly, their ethos – in a very swift, dramatic fashion.

      • len says:

        Sitting on our wallets is the first move. Heads on pikes should have followed but didn’t. As a result, administration credibility is going sub-zero also in a swift dramatic fashion. People wanted justice. They got bailouts for the perps instead.

        A number of cracks are beginning to converge.

  2. Bonifer says:

    p.s. I was at the Roy Disney tribute yesterday, and in all the telling of the corporate history, there was no mention of what very few people know about the regime change at Disney that resulted in Eisner and Wells taking over the company’s management in the mid-1980s. I think your readers here deserve to know, too: J. Taplin, who saw the game before anyone else because he had a production deal with Disney at the time, set in the motion the events that would lead to the company’s resurgence for the next 30 years.

  3. morgan warstler says:

    Civil unrest?

    The only way to avoid civil unrest is to be wary of a tax revolt.

    The way to employ more people is to end corporate taxes, and end the minimum wage.

    You can still provide social services, but if some people don’t have skills to compete globally, we shouldn’t get rid of the jobs here, just because of minimum wage, why not let the people continue to work for less and augment their wages with social support?

  4. Alex Bowles says:

    With regard to improved public services, Treasury-backed digital cash is an especially interesting idea.

    I have no idea how it would work in practice. I just find the banking cartel-busting aspect very appealing.

  5. Larry Taymor says:

    I’ve been in Sweden this winter starting a business and it is very appealing and surprising. It is expensive, taxes are very high, and people are very happy. There is much less focus on material success and more on personal happiness. Stress levels are much lower.

    Our business is small custom home building. Sweden is experiencing one of it’s highest rates of population growth and homes have been underbuilt for many years. Already among the places with the highest quality of life I think it’s likely to be even more so 10 years from now when compared to other countries.

    The social support structure is far more subtle and comprehensive than is understood in America. It is unlikely we can replicate it here. At heart in Sweden it is based on a true feeling that taking care of the basic human needs of fellow Swedes is simply the right thing to do.

  6. bernard says:

    My brother who is 85 years old lives in the south of France with his wife 78 and her mother 99. All their medical bills are paid by the Gov, including a nurse for his mother in law. They all receive their pension and eat a normal French diet that includes wine. Socialism, the European way, is not all that bad.

    • Fentex says:

      Anecdote is not good evidence.

      It’s likely the poor in run down Paris arrondissements aren’t as impressed that some older people live a good life among the luscious pastures of southern France.

      The question is not that France has done well for some but will it continue to be able to?

      It doesn’t have as many natural resources as Scandanavia to back it’s finances.

  7. JTMcPhee says:

    Bernard, NOT paid by “the GOV.” Paid for by general agreement that a part of what they have for national administration, there and in other countries, should use some of the wealth that almost everyone in those “civilized” places believes, with some good general-welfare results, should be spread around and used to TAKE CARE of those basic needs. Unlike here, where the maw of Moloch takes in wealth and excretes acidic shit, after fattening the high priests who have always stolen the best of those sacred offerings made by True Believers.

    I for tiny little one am just puke-sick of hearing about “the government” and “government money.” People, sheeple, are such ignorant dolts that they can be taught to buy into that notion that there’s a Cornucopia spewing out Money, somewhere inside the Beltway or up in Tallahassee or Albany or Caracas. That just is not how the reality is. (Spare me the cant about “printing wheelbarrowsful.” That’s just Funny Munny.) Can’t we all just try to keep the reality in mind? Even though all our lives we have relied on, or railed against, The Government to do Evil, or All That Is Needed? Or in the case of the great mass of insane Nacerima, both at the same time? Without even a blink at the idiocy and cognitive dissonance?

    • Hugo says:

      You’re a powerful writer, JTM, when I agree with you and also when I don’t.

      Maybe you’d like to join me in taking this “educational” house down. It’s ripe for the pickin’, and you’re just the person to spot the B.S. that’s propping it presently.

      Let’s do. The sonsabuzzards ought to get away from children.

  8. doug says:

    Most people on this blog would spend more money if they had it–the american public will keep spending–as the recession ends and companies earn more incomes will go up and with that spending– it always does

  9. Rick Turner says:

    Doug, some of us do not and will not spend in the disposable consumption consumerist fashion so beloved of the MallMart types. I tend to think carefully about quality and about how long I think any product I buy will last or how much good it will do me not only now, but in the long run. Hence I tend to live with a bunch of nice old stuff around me with just enough modern tech to be able to keep up with a medium like this. And I try to make products that could easily last useful lives of well over 100 years. It’s a basic philosophy of how to live amongst material goods that give good value in the long term as well as short.

  10. Jim Flynn says:

    Not to be too picky, but Education is Infrastructure. Highways, railroads, and ports are great for physical objects. Everything else is electrons. What travels on the electronic infrastructure is knowledge. If you can’t explain it on one end and understand it on the other then we have a problem.

    Looking at our educational standing among nations, we have a problem. BFP. A quality education infrastructure is more than just a service.

    Universal pre-school to baccalaureate should right up there with UHC.

    • Hugo says:


      This notion of education as infrastructure, you’re really whittling it down. The idea of masses of other people’s children being exploited as the underpinnings of our existence: now you’re talking turkey.

      What makes us strong?

  11. Valerie Curl says:

    Here is an article worth reading on this issue of conservatism vs social democracies.

  12. Rick Turner says:

    Re. education…

    As I’ve said before here, my youngest son (14) has had a couple of fantastic years of public middle school and is now in an equally great public high school.

    Why aren’t people focusing on those schools that work to learn what to do in those that don’t? There are examples of fine public schools, and it should be possible to learn from the success stories rather than spend all our time hand wringing about the schools that don’t work.

    BTW, he’d previously spent three years in a private school. The first year, 3rd grade, was fantastic. The second two years…4th and 5th…were shit…at a regular tuition of $11,000.00 a year. So don’t think that vouchers and private schools are the answer…

    • JTMcPhee says:

      Is it “the schools that work,” or some small subset of “educators” that make it possible for that other subset of “teachers” to do what teachers ought to do? Pass on the culture and learning and maybe some basic love of and skills for learning, critical thinking, and the parts of science and engineering that have less to do with “profit” and “lethality” and “woohoo, look what we can do that’s really cool, without regard to whether we are doing anything that’s stable or sustainable or what all those old guys like Aristotle and Plato and Erasmus and such would call ‘good'”? There’s a critical mass of certain kinds of people with a certain mindset that makes good schools possible. And there’s a tipping point of the mountain of dreck that submerges the whole populace in what we have now.

      And yeah, I know you can’t lay it all off on “the schools,” since so many of us are so proud of our ability to cozen and fuddle our neighbors and fellow consumers… And seeing the whole complex set of behaviors and the stuff that’s built into our hunter-gatherer tribal genes, the wise man would ask where the bitter end of the starting strand of the Gordian knot might be…

      This is the critical time for people to start thinking about the place of humanity in the planetary ecology, before we close off our own niche and strangle ourselves.

      What brings meta-stability, what brings sustainablity, what brings participation in the ecology that’s homeostatically proper? Is there any way to overcome the mess we’ve already made, other than by swinging wildly and just hacking and cutting at that Gordian knot?

  13. bernard says:

    Fentex in France it doesn’t matter if you are poor or not the social benefits work for every Frenchmen. As for the location we have been living there for many generations, same furniture and all these old habits that you don’t need to change like you very well described. They live a very frugal life. To be frugal is an attitude you make fruit jellies in summer and eat them in winter. Frugality doesn’t mean to live like a miser. Why buy a new car every year I still drive the same 1986 Samurai and I refuse to sell it because it is simple mechanics without all the electronics that go bad in the jungle with the humidity. Anyway I catch your drift and I must agree that France is far from having a perfect system ( Taxes red tape etc) but I am sure that you will agree with me that a social democracy is more humane then savage capitalism.

  14. bernard says:

    I remember that Americans in general used to be that way in the sixties. The change of attitude towards excess and instant gratification was born with the credit cards and the television. Buy now and suffer later.

  15. Jim Flynn says:


    The masses of OPC underpinning us is the world we live in now. We keep going the way we are and our kids will be the OPC.

    Not that anyone’s children should be exploited. I’m trying to make the point that less educated adults get exploited and as a nation we’re heading that way. NCLB is just a marker on the path.

    What makes us strong? Lots of things. For me, I’d put knowledge and basic human decency at the top of the list.

    • Hugo says:

      Jim, I’ve argued for 20 years that education is infrastructural, though in so doing I went against my instinct and training, which tell me that education is a quite natural condition. So anyway I agree with you about the infrastructural aspect of what we call Education–meaning, literally, feeding from the breast.

      While I’m well aware of this in the context of what you call “the world we live in now”, frankly just your phrasing causes me to ask you, Are you resigning to the world as found, or are you advising me to do so, or both?

      I simply want to improve conditions for children’s learning. It turns out that to do that one has to clear out thickets sprouted by schools. So much is newly possible.

      I couldn’t agree with you more, about what makes us strong. To your list I might wish to add the USMC, but why quibble over trifles?

  16. Chris Weekly says:

    These links are more a response to the general malaise than a reply to anyone in particular. Apologies if they are slightly off-topic. For me, it’s refreshing to have some degree of counterpoint to the relatively well-informed-and-articulate-but-perhaps-too-certain-of-impending-doom tone found in this community’s writing.

    First, Fallows on American renewal and our unique strengths:

    … and then some optimism from Kurzweil (railing against the linear thinking that mires us in pessimism about our big problems):


    • Valerie Curl says:

      I believe Fallows is the reporter I mentioned in a previous comment whom I had heard. He states in his article exactly what I’ve been trying to say, albeit at far less length.

      Instead of just crying the blues, it’s time for an American renewal. Long long do we have to wait for Jon’s Interregnum to run it’s course? Look, I’m 63 yrs old. If I say it’s time to let go of past ideas and ways of doing things that no longer function efficiently or well or meets the needs of this century, then anyone can. Reinvention has been the dominant feature of American culture since its inception.

      While Mr. Fallows described the ills, it is incumbent upon us to create the change necessary to move forward out of the stagnation which currently exists.

      If you’ve not read the Fallows article, do so! Then, think about what needs to be done and how to do it. Change the gerrymandering that is strangling government – look at CA if you want to see the results of gerrymandering. Lobby for a change in Senate rules that allows 3 obstructionist Southern senators to stop everything – not because they care about the People, but because they care first about their party winning the next election. But winning in America is supposed to be about creating a better life for one’s family and community…and the nation as a whole. Not about a political party! Write blogs. Lobby your state. Demand answers to tough questions. Flood legislative offices with information, reports, articles that demonstrate not just the ills but the prescriptions. Don’t let the media off the hook: call them out when they softball an answer. The Twitter CNN fail campaign changed CNN’s reporting on the Iraq reporting after their election. It can change domestic political reporting too.

      Instead of laughing off and ignoring the Bachmans and Becks, take them seriously enough to reveal their lies and posturing. They influence a great many people right now who are just as angry and don’t see a way forward other than the ones being pronounced by these self-seekers. Give people another view, another vision, and a good dose of the history that moved this country forward. Be like Madison and Hamilton who wrote endlessly to get the Constitution passed by the states.

      And use blogs like this one to try out potential solutions.

  17. Hugo says:

    Jon, it’s interesting. I think that your California may be becoming France. Perhaps that’s what bothers you. Personally, I’m resigned to it–from a very convenient diststance.

  18. OMER ISMAIL. MD. says:


    In his book, “The Post-American World” author Fareed Zakaria contends that modern history’s third great power shift was indeed here. The previous two changes – the first one was the rise of the West in the 15th century. The second was the rise of America in the 19th century. The third transition he defines is, “less of an American decline than by “the rise of the rest.”

    A polite way of his saying that United States will enter a period of accelerating relative decline in the coming years.

    I don’t why Mr. Zakaria had to put the argument in such euphemistic terms. Because the crash of 2008 originated because of American greed, ramified itself around the globe, expended both American and international resources and continues to resound loudly as ever— malignantly destroying jobs, bankrupting businesses, and displacing homeowners.

    No place in the United States has escaped the long and deep recession. The seismic spell spread outward-bound from New York, will doubtlessly grip some places more than the others. This multiformity implies that some areas will eventually bounce back to normalcy. However it also connotes that other areas may never come back at all (for e.g. the most disturbing question for New York is not how much of its finance industry will move to other places, but how much will simply vanish altogether.) This crisis has deepened enough and with its wrought, it has permanently and profoundly altered America’s economic landscape. I believe it marks the end of a chapter in American economic history, and indeed, the end of a whole way of life.

    For 23 months in row now, the U.S. economy has been haemorrhaging jobs. One in six Americans, 17 percent, is underemployed. That’s nearly 25 million people who are out of work, have given up looking, or been forced to take a part time job.

    This recession has consumed 15 percent of manufacturing jobs. This translates to more than 2 million jobs that have evaporated permanently.

    Consequently the economy and the worker are both in bad shape. Their situ¬ation isn’t likely to improve soon; and economists don’t have pull out their crystal balls, or read the tea leaves to predict that it will be years, not months, before things regain any semblance or token appearance.

    American worker has lost his bargaining power. That’s because this recession’s unexpected ferocity has quickened trends that include:

    • Offshoring or Bangaloring of jobs,
    • Automation,
    • Decline of labor unions’ influence,
    • New and improved management techniques, and
    • Regulatory changes-that will further erode workers’ economic standing.

    Therefore it auspicate for the next foreseeable period:
    • A continued dose of the foregoing points
    • Negligible pay gains,
    • Worsening working conditions, and
    • Little or no job security.

    More jobs in America will be freelancer and temporary in nature. And ostensibly permanent positions will remain at greater risk, as employers will try to eliminate all fixed costs. With this crisis we have come to an era of the disposable worker and all of it will have heavy implications both for employees and employers. It has been proven that chronic unemployment and underemployment induces enduring damage. Economic research has proved that in such circumstances, the experienced and older workers who will lose jobs will be pushed in to premature retirement and the new entrants and younger career makers will end up doing inferior jobs vis-a-vis their qualifications. Consequently take home packets for college graduates in recession will be 2.5% smaller in size compared to if they took the jobs in prosperous times.

    There will decreasing job security, as well as broadening the gap between the highest – and lowest – paid workers. At the top, people with in demand skills can earn more by leaping from appointment to appointment than they can by adhering with one company. However for the less qualified and educated, who have no particular skills the new reapportioning for labor offers nothing but downside.

    Another irony, that economist have been observing, since the early ‘80s, is that the U.S. economy has been taking longer to recover all the jobs lost in a downturn. After employment peaked in February 2001, it took four years to get back to that level. This time it could take even longer.

    America and the world has lately been developing a trend ironically referred as “permatemp” a portmanteau of the words permanent and temporary – used for an employee whose status is somewhere between a temporary employee and a permanent employee. Sort of a tongue-in-cheek textual contrivance poking fun at the dynamics of the New Economy with its characteristic job insecurity and lack of benefits for a considerable portion of the workforce.

    Temp employment in the U. S. sways in rising and falling patterns. The intention is to hire workers who work for the company but in actual are employees by temporary staffing firms so employees are relinquished at will. The number sum of Americans working part – time for economic reasons -that is, because full-time work is unavailable-has doubled since the recession began, to 9.2 million.

    Whatever! Compared to the pre-recession employment rate the American job market today is discrepant of almost 11 million jobs To fill that gaping hole, American economy will need to create 580,000 jobs a month over the next two years. Who in his right mind can predict this kind of job growth by 2011?

    Politicians, everywhere have front-runner remark in pacifying the public, by saying: “Still the fundamentals of our economy are strong” and “Our people are resilient” but where does that leave when internally, 37 million Americans currently “struggle with incredible poverty”, it is the only industrialized country in the world without universal health insurance, 23% of people living in America are functionally illiterate, 25% are a little better than functionally illiterate, the dilapidated infrastructure, reliance on foreign oil, America’s total debt $60 Trillion, the ever widening deficit, deindustrialization of America, Imperial Overstretch, gross aversion to mass transit system, the weakening dollar – and yet it insists on calling itself the richest country in the world. Where do you think that leaves the American worker?


    • JTMcPhee says:

      “accelerating relative decline.” That’s kind of like General Mealymouth telling the fawning press that the Army is not “retreating,” it is “merely making a strategic rearward advance to previously prepared positions.”

      As to where “that” leaves the American worker, if there is such an archetype any more:

      This, from comments on an article in titled LE HOSTAGE!FRENCH PROTEST LAYOFFS WITH A ‘BOSSNAPPING’

      This is just the French, please don’t tar an entire continent with the same brush. Regardless of the French tendency to go a bit over the top, unions aren’t something to be scared of. The benefits enjoyed by workers in Western Europe (longer holidays, shorter working weeks and far superior rights in the workplace to name a few) are a direct result of strong unions and recognition of the effects of allowing employers complete free reign in how they operate. [This last clause is not really even close to true, but don’t let that subtract from the rest.]

      I’m not sure how you define freedom either, it seems the American definition only applies to the USA but the average European would contest that. There are plenty of other “free” nations on Earth, certainly as “free” as the USA is – I don’t see how you could argue that there aren’t? to me the French are more “free” in that they clearly have the power to influence business and government far more than Americans seem to be able to.


  19. Rick Turner says:

    Hugo, if California became the France I visited some years ago, it would be quite nice.

  20. JTMcPhee says:

    Yeah, those seats… and sitting at a stoplight next to a GTO and running the hydro-pneumatic suspension up and down.. Knuckleheads so floored by the performance it took them a whole block to catch up and blow by.

  21. Rick Turner says:

    The acceleration was terrible, but those cars ( D series ) would cruise at 80 on the freeway all day long. I was parked at our local post office one day, and the parish priest knocked on my car window, and in a thick Irish brogue asked, “Would you mind taking me for a ride around the block?” I said, “Sure, father.” and off we went. When we got back to the PO, he said, “Ah, the French…they’re so good at the creature comforts!” So true…

    In the early 1970s there were about eight Citroen D series guitars in the musical crowd I hung out with in Marin and San Francisco, including a very rare convertible with a hand made aluminum body. It was quite the trip to go to a gig or a party and see so many of them lined up outside.

  22. Hugo says:

    Reckon I see the logic dictating that either way, it redounds to Social Democracy. On the frugality front, however, I doubt that American scrimping will put a crimp in the generous outpouring to stricken Haiti. That’s my personal prediction, so perhaps afterward we shall conclude that U.S. citizens save in part for what’s deeply important to them. So maybe it will prove even better than we’d anticipated.

  23. JTMcPhee says:

    Ah, Haiti… That good and devout Christian, Pat Robertson, has just told his flock that the quake is God’s judgment on the people there for having made a pact with the Devil — worship Lucifer in exchange for kicking the French (THEM again) colonialists off the island, 200 years ago. And you see what happened? Same devout Christian who opined the fate of the WTC was a result of abortions and no school prayer, and the tsunami disaster and Katrina flood was due and coming to those who were accursed or had fallen away from his version of rectitude.

    And halfway around the world, a bearded Robertson clone in a funny hat and robe is telling his flock that what’s happened to the US is Allah’s judgment on the accursed… Too bad the flocks don’t have any flockin’ ideas of their own…

    And just an aside, about the impact of fundamentalist evangelical “faith” in the military and political realm, I heard on NPR last evening there was a small group, maybe 10-20, evangelicals down in Haiti for their one-week missiionary penance among the benighted wogs when the quake happened, and that one of our Florida senators and maybe the SOCOM command structure moved heaven and earth to get military aircraft in the air to pick up those preacho-tourists and bring them home so they could be lionized for their suffering and sacrifice… but maybe I’m just being too mean-spirited.

  24. davidbaer says:

    Experts have talked about this before. How many times have you read about the importance of ‘adding value’ for your audience? How many times have you read about ‘building trust’ with your readers/prospects?
    Many, many times. You know it well. Every marketing guru has spoken about this topic. I’m sick of hearing it. But it STILL bears repeating.

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