Democracy and Redistribution in Europe

Moneybox
A blog about business and economics.
June 5 2012 9:01 AM

Democracy and Redistribution in Europe

To be a little bit crude about it, since there's a lower bound on income the median person always has an income that's below the population mean. Consequently, democratic governance necessarily leads to redistributive policies. This means that even though democracy is widely supported, there are significant tensions around how decision-making units are supposed to be defined. Few Americans are eager to live in a democracy composed of a union between the USA and India.

And yet from the Finnish or Dutch point of view, this is precisely the situation the European Union has blundered into. The median Finn is richer than the European mean, so if democracy means not Finnish democracy but European democracy then redistribution means not that Nokia executives pay for his health care but that he pays for a Spanish person's health care. So there's substantial resistance to European democracy. And yet Europe's economies have reached a level of integration that makes it necessary to reach coordinated decisions on budget policy, bank regulation, and other important matters. If those decisions are made non-democratically—by the European central bank, or by wink-nod agreements between the governments of Germany and France—then they lack legitimacy and will perenially be composed of inadequate half-measures. But democracy would be a real leap. The winners of Northern Europe's welfare states would become losers. And as we see with the politics of racial difference in the United States, solidarity is both a powerful force and a force that tends to have its limits. Recall that taken as a whole there's more income inequality in the European Union than in the United States of America, even as there's very little inequality inside Northern European countries.

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Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.