Monica Prasad: Land of Plenty (of Government)

tags: NYT, regulations, income inequality



Monica Prasad, an associate professor of sociology and faculty fellow in the Institute for Policy Research at Northwestern University, is the author of “The Land of Too Much: American Abundance and the Paradox of Poverty.”

Why do European countries have lower levels of poverty and inequality than the United States? We used to think this was a result of American anti-government sentiment, which produced a government too small to redistribute income or to attend to the needs of the poor. But over the past three decades scholars have discovered that our government wasn’t as small as we thought. Historians, sociologists and political scientists have all uncovered evidence that points to a surprisingly large governmental presence in the United States throughout the 20th century and even earlier, in some cases surpassing what we find in Western Europe.

For example, European banks did not have to contend with regulations separating commercial and investment banking, as American banks did under the Glass-Steagall Act of 1933. Until the 1980s taxes on capital income were higher in the United States than in most European countries, where taxes on labor were and still are higher. American bankruptcy law has been harder on creditors and easier on debtors than any of the countries of Europe, even after bankruptcy reform here in 2005. Or consider the famous case of the thalidomide babies in the late 1950s and early 1960s. Thalidomide was a drug given to pregnant women for nausea. It caused devastating birth defects, from stunted limbs to spina bifida, and many babies died. Thalidomide was widely available in Europe and produced thousands of cases of birth defects there. But the Food and Drug Administration kept thalidomide off the American market, successfully using aggressive governmental intervention to protect children from a pharmaceutical company with a dangerous product. They would be in their early 50s now, those babies saved by the F.D.A. I wonder sometimes how many of them are walking around today complaining about big government....




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