• Democracy, Politics and Institutions
• International Development/International and Global Affairs
• Markets, Business and Government
• Management, Leadership, and Decision Sciences
• Social and Urban Policy

Edward Glaeser on U.S. and European Social Policy

The radical differences in the ways governments approach poverty is the crux of research by Edward Glaeser, director of the Kennedy School 's Taubman Center for State and Local Government. Glaeser's new book, 'A World of Difference,' co-authored with Albert Alesina, examines the oft-noted disparity between poverty reduction efforts and social welfare systems in the United States and Europe. Significant differences exist, Glaeser says, due to countries' economic, social, and cultural structures.

Q: How do differences in economic mobility affect American and European social welfare systems?

Glaeser: The remarkable thing about the U.S. and Europe and economic mobility is how much beliefs about mobility differ from reality. In the U.S., 60 percent of respondents believe that the poor are lazy. Twenty-six percent of Europeans say that the poor are lazy. Twenty-nine percent of Americans believe that the poor are trapped in poverty. Sixty percent of Europeans believe that the poor are trapped in poverty.

There's a remarkable difference between the degree to which Americans and Europeans believe that they live in a land of opportunity. For Americans, there's a very strong, long-lasting belief that they live in a society that is open, where the poor have every opportunity and where if you don't take advantage of those opportunities you are in some sense unworthy of government assistance. Europeans, by contrast, believe that they live in a class-bound society where position is determined by birth. Those beliefs are absolutely critical for understanding the political outcomes that occur in the U.S. and Europe on redistribution.

But at the same time, the realities don't necessarily correspond all that well with the beliefs. In fact, the probability of moving out of poverty is about the same in the U.S. as it is in Europe . If anything, the American poor look more trapped than the European poor do. One study, for example, found over a nine-year period that 60% of the poorest Americans were likely to remain poor whereas only 45 percent of the poorest Germans were likely to remain poor. Comparable intergenerational studies show exit rates out of poverty being higher for the Italians than they are for the U.S. So while beliefs are incredibly different, in fact, both Europeans and Americans live in relatively fluid societies.

Q: How does your research implicate constitutional and voting systems as affecting social welfare policies?

Glaeser: The U.S. has had a very long tradition of checks and balances, of majoritarianism, of federalism, of limits on popular sovereignty, which have at many points in time served as checks on moves towards greater redistribution towards the poor. Take, for example, the role of the Senate or the Supreme Court in blocking FDR's New Deal during the 1930s. Over and over again, checks and balances in various forms have stymied the growth of the U.S. social welfare state. By contrast, Europe has systems that are much more friendly to the poor, particularly proportional representation which make it much easier for labor oriented parties or parties that catered to poor constituents to get a foothold and to eventually rise towards political dominance.

Political institutions are not written in stone. The U.S. has an 18th century Constitution - an exceptionally stable Constitution - and I believe it's been tremendously beneficial for this country to have this Constitution for the last 215 odd years. But at the same time the Europeans have had a much more fluid situation. Europeans governments look radically different than they did 100 years ago and proportional representation systems that have been friendly towards redistribution are really a product of 20th century change. When countries were defeated in war they frequently reshuffled the constitutional deck. In the wake of the chaos of WWI, left wing groups, social democratic groups were generally in power and were able to establish institutions that were friendly towards redistribution.

Q: You have put forward the idea that racial diversity in the U.S. actually leads to lower levels of social welfare spending. Why is that?

Glaeser: There is a great deal of evidence that suggests that racial cleavages make people less sympathetic towards redistributing money towards the poor. This can be seen in the cross-country evidence where measures of racial diversity strongly predict lower levels of redistribution. This is true across a very wide set of countries; it's true holding income constant at the country level. More diverse countries give much less money to the poor.

It's also true across U.S. states. Holding income constant, the states with the highest percentages of African Americans are the least generous to the poor. It's true at the individual level. Erzo Luttmer's work here at the Kennedy School shows that people who live around poor people of different races are much less sympathetic towards welfare whereas people who live around poor people of the same race as themselves are much more sympathetic towards welfare. And it's also true in the anecdotal, historical evidence. The role of racial cleavages in the American South played a crucial role in stopping the rise of populism. Likewise racial cleavages back in the 60s played a major role in the rebirth of the Republican Party and the end of the Democratic consensus that had occurred after the New Deal.

The mechanism for this is not entirely obvious. There are two views, one of which is that people are just inherently less altruistic towards people of different ethnicities. I think the more accurate view is that these cleavages provide an opportunity for political entrepreneurs to vilify the recipients of welfare.

Q: You have called the U.S. the most conservative of developed nations. What does that mean and how does that impact social welfare policies?

Glaeser: As a result of American racial heterogeneity and as a result of the stability of American institutions, America is far less generous in welfare spending than other developed countries. It's far less prone to various forms of left-wing regulation; it's far less prone to more generous pension spending towards government employees; it has a far less progressive tax rate. These things may in fact be either good or bad depending on whether or not you care more about economic growth or whether you care more about economic equity. I don't think there's a right answer on this. It is certainly true that higher levels of American productivity and productivity growth in the 1990s owe something to the fact that we have a less redistributive state. At the same time, we accept levels of poverty and inequality that are far higher than in Europe . Those are the ways in which America is conservative.

To sum up, I want to emphasize that my research in this area tries to understand why the U.S. and Europe are different. It does not try to evaluate whether or not one system is better or worse than the other. I think it's important to make sense of these differences without necessarily passing judgment on which one is more or less important. There are three real policy lessons from this that are really pretty crucial. They are that, first of all, political institutions are really, really important. Things like proportional representation, federalism, checks and balances, really matter, and that America is what it is today in large part because it has such exceptionally permanent institutions. Secondly, race is incredibly important and the rise of the strength of American conservatism owes much to the racial, owes much to the desertion of the South from the Democratic Party. Thinking that we are in a world that has moved beyond race, particularly when we think about other countries, is a big mistake. And certainly, even thinking about places like Iraq today where we have ethnic cleavages, is really important.

Third, don't always trust your beliefs. There is a strongly held set of beliefs about America as the land of opportunity and Europe as a class-bound society. Whether or not you believe that we live in a land of opportunity or not - I in fact do - doesn't mean that those differences in beliefs reflect anything about reality. They reflect much more what people have been taught, and as such it makes sense to actually look at the reality of income mobility, or of anything, rather than just trust time-held beliefs.

Answers to questions submitted via e-mail:

Questions submitted via e-mail for Prof. Glaeser:

Q: Having defined the key factors that explain differences in social policy in your study, how do you think those factors determine social policy and thus social reality (high contrasts in income/opportunities and underdevelopment) in Latin America? Can we even say the same factors determine our social reality in Latin America?

— Carlo L.
Mexico City, Mexico

Glaeser: We emphasize two factors: racial heterogeneity and political institutions. My own understanding of the history of Latin America is that racial heterogeneity is quite important in understanding social policy. Certainly, differences between Europeans and native Americans are
important, if often underappreciated, social cleavages that have played a role in limiting the growth of the welfare state. The role of ethnic divisions in American history and the history of Latin American countries often shows strong similarities.

The role of political institutions is quite different in Latin American than in the U.S. and Europe. Over the course of the past 50 years, political institutions in Latin America have been much less permanent than in the U.S. and Europe. Often written institutions have born little resemblance to the effective politics of the region. As such, while politics is critical for understanding the Latin American experience, factors like proportional representation and federalism are much less important. Remember Mexico is technically a federalist country - but little in the country's political realities resembles a true federalist system. This is not unusual to this region - stable political institutions are unusual outside of the richest countries in the world.

And this brings me to my third point - Latin America is historically much poorer than the West. Lower levels of human capital mean that political issues are very different, and as a result, while similar forces are often at work, the Latin American experience has to be treated seriously in its own right. Many thanks for this great question.


Q: In evaluating the amount of assistance to the poor in the U.S. compared to other countries, does it change the result very much if you consider the combination of government and non-governmental assistance (i.e. the contribution of NGOs, churches, private donations)? Is not the U.S. significantly more generous with "private" contributions to social welfare than most other countries?

Bay B.
Boston, MA, USA

Glaeser: We have tried to measure private donations and to incorporate these factors as well. Obviously, all measurement of this kind is highly imperfect, but with this caveat I'll plunge ahead and try to give what I see as our core results in this area.

First, privately, Americans are much more generous than Europeans. Along almost every dimension, we give more with our money and our time. This fact seems to falsify the hypothesis that Americans just don't like poor people. We appear to be perfectly happy to give to poor people when we can choose which poor people get our resources and when the government is not involved.

Second, the dollars involved in private charity to the poor are generally much, much smaller than the size of government programs, especially in Europe. Much American charitable work gives to institutions like churches, hospitals and universities that only indirectly assist the poor. It may be true that we aren't counting all of the in-kind private transfers, but the available data suggests that private gifts are small relative to public transfers.

I think that there is a whole research agenda on private charity - thank you for your terrific question.