Asymmetrical Information - Megan McArdle


What We Can Learn From Rioting in Sweden

Redistribution may be necessary. It may be good. But it is not enough.

Rioting in Sweden is the sort of phrase that sounds as if it should be oxymoronic, like "Evil in Candyland" or "Violence among Episcopalians". And indeed, the rioting seems rather tame by American or British standards—cars set ablaze, stones hurled at first responders. In the New York of my childhood, not so far from where I grew up, there were neighborhoods that used to call this sort of thing "Saturday night."

Nonetheless, for Sweden, it represents a serious breakdown in civil order. And something of a public-policy crisis. Sweden has a very welcoming immigration policy, and of course, an extremely generous welfare state. These things were supposed to protect Sweden from the class-and-ethnic conflict that has riven the United States, Britain, France. If those things don't work—if you get riots anyway—then something in Swedish policy may need a rethink.  

As often happens, people on this side of the Atlantic view this through the lens of our own policy debates. Does Sweden's experience mean that immigration is dangerous? Or that giving immigrants welfare is bad policy? I'll save those debates for another day. Because I actually think that what is happening in Sweden illustrates a larger problem for both us, and the Swedes: the limits of the neoliberal policy consensus.  

The basic idea of "use market mechanisms for everything, and then redistribute the proceeds" has obvious attractions for a lot of policy wonks.  For one thing, it allows you to protest the unfairness of distributional results without arguing that the government is adept at producing the goods and services that people want to consume. The obvious inefficiencies, and increasingly sclerotic power structures, of the great midcentury government-led industrial combines, made them pretty hard to defend.

For another, it relieves the dilemma of arguing for policies that benefit low-skilled American workers at the expense of even poorer people who happen to live in other countries. Now you can have immigration and trade, which benefits American consumers and foreign workers, without worrying about the effect on low-skilled workers: just nip some of the surplus off the rich, and redistribute.  

This has many features to like, though there is obviously still a great deal of room to quarrel about whether, and when, the gains from trade should be redistributed. But what we see in Sweden, and in the cultural collapse of so many places in America, from inner cities to small towns, is how inadequate redistribution is. Handouts, however generous, are not substitutes for work—for full participation in society.  

I am not arguing either for or against redistribution here. As I say, there are great quarrels to be had about who deserves what, from whom. My point is one that both sides should be able to agree on: whatever we redistribute, the most important task of economic policymaking is to ensure that everyone has the opportunity to get a job which can support them decently, which is to say at the minimum respectable standard of their society. He or she has to be able to obtain, in exchange for their honest labors, what Adam Smith called "the necessaries":

By necessaries I understand not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without. A linen shirt, for example, is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct. Custom, in the same manner, has rendered leather shoes a necessary of life in England. The poorest creditable person of either sex would be ashamed to appear in public without them. In Scotland, custom has rendered them a necessary of life to the lowest order of men; but not to the same order of women, who may, without any discredit, walk about barefooted. In France they are necessaries neither to men nor to women, the lowest rank of both sexes appearing there publicly, without any discredit, sometimes in wooden shoes, and sometimes barefooted. Under necessaries, therefore, I comprehend not only those things which nature, but those things which the established rules of decency have rendered necessary to the lowest rank of people. All other things I call luxuries, without meaning by this appellation to throw the smallest degree of reproach upon the temperate use of them. Beer and ale, for example, in Great Britain, and wine, even in the wine countries, I call luxuries. A man of any rank may, without any reproach, abstain totally from tasting such liquors. Nature does not render them necessary for the support of life, and custom nowhere renders it indecent to live without them.

If that isn't possible for everyone, or can be done only with heroic and unceasing effort, then economic policy is not working, even if the gini coefficient and the tax laws are arranged to everyone's perfect satisfaction.

In too many places, for too many people, the modern industrialized democracies are not working. People can live, but they are cut off from the broader society. And the number of these people seems to be increasing. It's too hard for many people to find a decent job. And taking from the rich to buy them health care and day care and subsidized housing does not repair the hole this leaves in their lives.

It looks to me as if the great task of the next few decades will be to find ways to employ all the people on the margins productively, and with dignity. But this is not, mostly, the question that most public policy debates are engaged in addressing. That question is hard, and no one has a good answer, so instead we debate technical questions about stimulus multipliers and minimum wages, and have the occasional knock down, drag out fight about who has a moral right to how much cash. There's nothing wrong with those debates, and I myself have been a spirited participant. But the harder questions have much more important answers.