The social desirability of social democracy

by John Quiggin on May 9, 2004

Recent opinion polls in Australia have shown overwhelming majorities in favour of devoting any additional resources to improvements in public services, particularly health and education, rather than to tax cuts. Discussing these results, Andrew Norton notes that some people may be “giving the socially acceptable answer, rather than what they really want” (see also here)[1]. I think he’s probably right, and I certainly hope so.

The reason I think Norton is probably right is that the majorities are so overwhelming (75-22 in this Nielsen poll and even more in others) that a fair number of people in the majority (people on above-average incomes with below-average needs for services) would almost certainly be worse off in a narrow personal sense. While some of these may be consistently altruistic, others may want to appear altruistic in a poll but might actually prefer the cash. Taking account of these responses would produce a less lopsided majority for services, but still a majority, as is shown by Labor’s electoral dominance at the state level.

The reason I hope he’s right is that it means that social democracy has won the public debate, at least for the moment. After all, if everyone believed that tax cuts would benefit, not merely a subset of high-income earners but the entire community, then the socially acceptable answer would be to support tax cuts. That certainly seemed to be the way things worked during the tax revolt of the 1970s and 1980s. At that time, opposing tax cuts was socially unacceptable. Well into the 1990s, anyone who advocate higher taxes was treated as a heretic (I should know!). Obviously, this has changed, though the political parties have been slower to catch up than the commentariat.

fn1. There are some other issues to do with “status quo bias”. People are more willing to express preferences for change in relation to the allocation of “extra” money than to support a change in the status quo, such as an increase in taxes to fund new services, or a reduction in services to fund tax cuts. But in the terminology of Kahneman and Tversky, this is essentially a quesiton of “framing”.

{ 16 comments }

1

push 05.09.04 at 11:03 pm

the 1992 election defeat for the UK Labour party lost was widely attributed to the Tories’ playing on the public’s fear of high taxation on the back of a perfectly sensible, detailed and costed shadow budget. This experience informed the New Labour project, even though opinion polls through the 80s consistently showed that if you took the proportion of the public that voted for Labour and the LibDems, you had a sizeable majority in favour of tax-raising policies.

The hypothesis that people were in favour of these policies because they thought it would be other people’s taxes that would go up was disproved by some work the IFS did, showing that costed rises for each individual still attracted majority support.

Moreover it was not just a social disinclination to demur from high taxation at work ; for when the Government raised tax by 1p in the pound shortly after the 2000 election there was no protest at all but widespread acceptance that this was necessary.

2

Thomas 05.09.04 at 11:23 pm

I think you’ve misunderstood Norton, and thus take comfort when you shouldn’t.

A parallel situation for your consideration may be the status of the system of racial preferences in the US commonly referred to as “affirmative action.” My recollection of the academic work on the subject is that , for a very long time, the policy maintained considerable support in the opinion polling. But once people realized that not everyone supported it–that there was nothing wrong with expressing opposition to the policy–then support for the policy collapsed, at least in opinion polling.

The danger in the situation in Australia, from your point of view, is that some considerable percentage of those who say they support increased expenditures rather than tax cuts aren’t really persuaded by the merits of the arguments. Rather, they’re expressing what they think is the socially acceptable viewpoint. As circumstances and mores change, they may quickly move to support their real-but-secret preference. (So, the problem is they don’t actually believe what you suggest “everyone believes”.)

3

tbelcher 05.10.04 at 12:58 am

Isn’t it possible that people are saying they want better public services because they want better publics services, as opposed to saying they want better public services because they think eveyone else thinks they want better public services?

Isn’t it possible that people have realised that cuts in public spending cause the quality of essential public services to decline because two decades of cuts in public spending have caused the quality of public services to decline and any nong who walks out their front door can see the problem?

just thought I’d ask…

4

Dave 05.10.04 at 2:19 am

This is similar to the debate going on in the U.S., where many who benefitted from recent tax cuts by the Bush Administration have expressed that the money would be better spent paying down the national debt or put towards things like education or health coverage.

The balance in popularity between low taxes and more government spending seems to oscillate. As it should – there is such a thing as too much social democracy just as there is such a thing as too much conservatism. In the former case, government becomes bloated and wasteful, unemployment increases, and economic growth stagnates. In the latter case, the standard of living for large segments of the population decreses to unacceptible levels.

What you see in all Western democratic nations is a fluctuation in both official policy and public opinion about the quantity and type of government programs that should be available. Furthermore, I think we are seeing different countries following opposite trends. Australia and the U.S. are probably on a progressive swing, but there seems to be a lot of interest in Continental Europe and Japan in cutting back or reforming some of the most expensive government programs, as part of a set of larger economic reforms.

5

Ben Benny 05.10.04 at 2:44 am

Thomas, Gallup polls still show that the majority of Americans are in favour of affirmative action. In fact, support has increased in general and specifically among white people since 2001.

6

Ben Benny 05.10.04 at 2:56 am

Whoops. That was for women only. The poll shown at the top of this page shows affirmative action in general among whites and among non-whites. There’s 47% approval vs. 49% disapproval among white people, but the overwhelming approval among minorities would indicate that the majority of Americans still supports affirmative action. Unless minority votes don’t count.

7

Ben Benny 05.10.04 at 2:57 am

8

h. e. baber 05.10.04 at 3:07 am

Encourage, and suprising about affirmative action. But as for tax cuts in my experience Americans, especially those who benefit most from public services, are adamently opposed to any tax hikes. They don’t get the connection between taxes and public services, imagine that taxes (except where they go to support the military) simply go to line the pockets of corrupt politicians and that any “tax relief” will make them, without qualification, better off.

Even proposals to tax the wealthy more heavily don’t fly since 17% of Americans believe that they’re in the top 1% of earners, even more believe that they will be one day, and almost all Americans other than those who are begging in the streets believe that they’re haves rather than have nots. How do you deal with that? More interestingly, why is the US anomalous amongst affluent nations in rejecting social democracy

9

Dave 05.10.04 at 8:33 am

I think that your comments regarding Americans are perhaps a little harsh. Americans are by nature optimistic, believe that people succeed due to their own hard work, and have a strong sense of individual responsibility. They would, in general, rather put more money in the hands of individuals who earn it rather than have it be distributed by the government.

Now, I’m not as conservative as many Americans, and I don’t necessarily agree with the way the government is cutting taxes and programs – but at the same time, I don’t see that social democracy is necessarily any better than what the U.S. ends up with under a centrist administration like Clinton’s.

There are many out there who are conservatives or liberals (myself being in the latter category) that see too much social democracy as a path to economic ruin. To prove the superiority of one philosophy over another, however, you’d have to compare the median standard of living in the U.S. and in Europe – and that is a very hard thing to measure, because different cultures value different things.

Also, the U.S. isn’t the only affluent country to “reject” social democratic ideals – Anglo countries in general seem to be more fiscally conservative than nations like France and Germany. The up-and-coming economies in Eastern Europe also follow this pattern.

10

jdsm 05.10.04 at 10:06 am

“To prove the superiority of one philosophy over another, however, you’d have to compare the median standard of living in the U.S. and in Europe”

I’m don’t think this really would be an adequate way to compare the two systems and not simply because of values. Europe has enormous cultural differences between the countries which are equally able to explain differences in standard of living. Most obviously, the performance of the Northern European countries compared to the Mediterranean countries. Several of these countries maintain their social democracies while beating the US on productivity per hour worked. Several of the other countries with similar socially democratic systems fall far behind. The question is why?

I should note that the same question could be asked of various regions of the US (ie why are some much more productive per hour than others?). The answers are unlikely to be the same because the EU and the US are very different places and there are concentrations of people in the US that you don’t get in the EU, due to the labour mobility (which happens much less in the EU because of ties to culture, language, family etc).

For me the question is “why does social democracy work so well in the Nordic countries and can it be emulated elsewhere”. I think I can answer the first question but I’m not sure I can answer the second part affirmatively.

11

Simon Kinahan 05.10.04 at 10:18 am

Isn’t there another problem here ? If Australia is anything like the countries I know more about, people are consistently in favour of spending on public services, but consistently skeptical of the ability of the government to deliver. So although they may answer a question like this one in the affirmitive, they have yet another reason (on top of simple inconsistency) to vote for parties that do not plan to increase spending when elections come around.

12

derrida derider 05.10.04 at 11:04 am

Surely we have to look at revealed preferences here. If there really was a groundswell of support for higher taxes/better services (or, for that matter, lower taxes/worse services) I reckon that even in our flawed democracy the pollies would very quickly adapt.

I reckon there are pretty big constituencies for both approaches – which is why parties offering modest moves in either direction can get elected. But they have to be modest moves because status quo bias is real (politicians say that “the only good tax is an old tax”).

13

John Quiggin 05.10.04 at 11:23 am

dd, as I pointed out in the post, state elections in Australia (where the focus is on these issues) have produced a string of overwhelming victories for Labor – around a dozen in succession, with opinion polls predicting more to come. That looks like revealed preference to me.

The main point of the post is that the revealed preference of the majority has reached a degree of solidity such that support for tax cuts is now socially unacceptable.

The pollies have been slow to adapt, particularly the Liberals at state-level who are saddled with a right-wing Federal government whose success is despite not because of its domestic tax and spending policies.

14

h. e. baber 05.10.04 at 4:58 pm

The taste for tax cuts in the US is locked in by feedback effects: public services such as exist are mediocre to lousy so people demand money back from tax cuts so that they can pay for private services, private insurance schemes and the like. Taxes and services get cut further, public services get worse, urban public schools become last resorts for the poor, so voters demand more money back in “tax relief” to pay for substitutes in the private sector–private school tuition, housing in remote segregated suburbs where the urban underclass hasn’t yet penetrated, etc.

I can think of a number of reasons why this vicious circle started–how do you break it?

15

Steve 05.10.04 at 5:57 pm

After all, if everyone believed that tax cuts would benefit, not merely a subset of high-income earners but the entire community, then the socially acceptable answer would be to support tax cuts.

You’re joking right? This completely ignores a couple of things (right off the top of my head). There is the notion of homo equalis where people actually care about the welfare of others. Also, you are presenting the issue as either taxes cuts or nothing, when in fact the actual choice might be tax cuts, alternatives 1, 2, and 3 as well. When looked at in this way, it isn’t clear that the socially acceptable choice should be tax cuts.

16

The Fool 05.10.04 at 10:57 pm

Talk about projection! Actually, dude, in every other advanced industrial democracy, except America, people are far less likely to have been subjected to Repulican/Supply-side propaganda about the effects of tax cuts and the benefits of social spending and thus are less likely to have been baffled by bullshit.

What an arrogant, provincial moron you have to be to project your own values onto Australians.

BTW: tax cuts are not as popular as so many have fraudulently claimed. Americans have pretty consistently supported spending on things like health care and education over tax cuts. It’s just that the ruling elite doesn’t let them have their way. That has been true throughout Bush’s occupation of the White House. And one commenter above is totally wrong. People LOVE the idea of rolling back tax cuts for the rich.

This is why we do polls — to find out what people really think, not to project our own opinions onto others.

Face reality.

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