Customer Reviews

Growing Public: Volume 1, The Story: Social Spending and Economic Growth since the Eighteenth Century (Vol 1)

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This is a very informative book that clears up lots of misconceptions. It explains why the "wellfare state" is still around, even after so many death notices. The analysis shows that there is no net negative cost for comprehensive and universal social programs, and that there are often significant benefits. For those who can read this book without ideological and political blinders, there is much to learn from Peter Lindert's book.

Peter Lindert has done humanity a great service, settled many scores, and given us both a perspective and a vocabulary with which to address the contentious issue of social spending and wealth transfer.
"Growing Public" is one of the greatest contributions to Economic theory in the past century. Anyone with a social conscience owes it to himself to read this book and make its findings widely known.
One of the book's many virtues (it is based upon very hard historical data) is that it is entirely readable.

The conventional wisdom among the members of the public is that the European welfare state is based on progressive taxation, with the government taking the role of Robin Hood. Lindert totally refutes this notion. He shows convincingly that throughout the modern history, the greater welfare expenditure has always been accompanied by increasingly regressive taxation, contrary to what people--especially American liberals--tend to believe. While the tax on income may appear more progressive, this hides both the fact that most European countries--especially those with high welfare expenditures--rely heavily on indirect taxes which are generally regressive in nature, and that numerous loopholes reduce effective tax rate even for income. The logic driving the study is simple: people pay for what they get; they don't put up with being forced to pay for what they don't get.

This is not a completely new notion--Sven Steinmo has done a similar study, albeit over a much shorter time span and concerning a lot fewer countries, with similar findings, but the study remains rather obscure. One hopes that more people read thes studies--which they probably won't--so that many of the common misperceptions about social policy (even among professional economists!) would go away.

This book is a readable, but quantitative, study on the evolution of modern state social policy from a careful economic historian. In particular, Lindert's focus is on the historical rise of redistribution, social transfers, and taxation--the subject of public economics--across modern industrial nations. Each section is tightly argued and self-contaned, presenting nice counter-factuals to common wisdom, while incorporating current research in taxation and economic history.

Lindert is constantly trying to reconcile larger puzzles and paradoxes in public economic thought. To do so, he both cuts through casual empiricism and folk theories, skillfully applying secondary source material and nice quantitative methodology to explain historical outcomes where other theories fall short. This means paying careful attention to the role of political institutions: in explaining Victorian England's lag in educational provisioning, he turns to the landed elite's grip on central states and local public finances alike. Contrast this to America and Prussia of the same period, where two very different states could meet the educational demand of wealthier subregions through decentralization of local public finance policy. Moreover, Lindert carefully ties patterns in education spending to how and when voting franchise was extended to certain classes. And the story is much more subtle than I imagined.

The most important and compelling chapter is Lindert's attempt at confronting the paradox of taxation, social spending and growth: why have states prone to large social spending not experienced large costs in growth? Lindert nicely summarizes the literature on labor supply elasticities, showing that welfare losses associated with taxing the rich are much lower than once imagined. If so, the economic historian contends, then the GDP losses are also much less severe than thought by past research. In fact, where large welfare states did exist, they did so by utilizing pro-growth tax instruments (like the value added tax) and carefully designed fiscal policy. Moreover, broad, sweeping social policies have proved much less costly than complex, narrow targeted policies of non-Welfarist states. As Lindert shows, there is no clear "Darwinian mechanism" that has punished the modern welfare state--no matter what editorial sections of the business press may contend.

Any social scientist can derive much from this book. Whether or not you agree with Lindert, his approach is subtle and not heavy on ideological frosting. His history of public economic policy offers a valuable, albeit concise, vignette into the development of many fixtures of the modern state. Herein is the value added in the book for any social scientist: Lindert uses economic history to argue beyond both "common sense" and the intuition taught in Microeconomics 101. The world is much more complex...and history matters.