The Plight of America's Welfare Populism

The weakening of America’s national power is no good thing for China. As most people know, the U.S. dollar is continuing to weaken, causing China’s large share of U.S. bonds to continuously depreciate. Once America becomes unable to repay this debt, it will generate a devastating blow for the global economy, and the harm done to China will no doubt be extremely grave.

In the early days of May 2012, I attended a two-day conference at Penn State University. On this trip, I visited Philadelphia, Washington, D.C., Princeton and New York and saw a group of old friends from 20 years ago. I attended a Philadelphia Orchestra concert, visited West Point Military Academy and saw New York’s 9/11 Memorial and Manhattan Square.

On the surface, the United States is a pretty nice place, but looking at it from a long-term perspective, I feel that America has already entered a fundamental trend of decline. This seems to be completely unrelated to capitalism, but rather to a common contradiction facing both Europe and the United States. I call this illness “Welfare Populism Syndrome.”

It can be said that social welfare, coupled with populist politics, is the root cause of the predicament faced by developing countries in the 21st century. The proletariat is always a majority; social welfare policies turn them into a vast number of beneficiaries. Universal suffrage has allowed the ballots in their hands to become the majority voice in deciding the fate of society. When the economy sinks into hardship, if the people want to reduce social welfare and affect their actual benefits, they will then use their ballots to take down the candidates advocating reform and let those who support a welfare state rise to power. If one desires enough votes to come to power, then he must pander to these people; however, in so doing there is ultimately no way to resolve social contradictions.

The enormously high welfare expectations of the proletariat have already generated a huge impact on the middle class. While in the United States, I stayed at a Chinese friend’s home. Both he and his wife are university administrators. They settled the account for me: After Obama assumed office, their family, under the pressure of high taxes, has been closing in on becoming part of the poor class. In reality, the “big rice bowl,” or the extreme egalitarianism of Western welfare populism, has already taken a different form to create social inequality.

Greece’s current crisis is a classic manifestation of this sort of predicament. America’s welfare populist problems are further aggravated by racial and immigration issues. In America’s current situation, Hispanic Americans make up 15 percent of the United States’ total population, while African Americans account for 12 percent. Of Asian descendants, the Chinese population has grown from more than 1,000,000 people 10 years ago to 4,000,000 today, not including illegal immigrants. Americans themselves have even said that if things continue like this, in 30 years’ time Caucasians could very well become a minority.

While the social status of America’s ethnic minorities is overall not very high, their population growth is extremely rapid. Pluralist democracy’s tenet of “one person, one vote” allows vulnerable groups to control partisan states, and politicians do not dare to offend them. Freedom, human rights and social democracy all incline toward vulnerable groups; this originally was a good thing, but the burden of this on the middle class is heavy. A friend told me that one-third of his salary is paid to the government in taxes. America’s overall competitive strength has been crippled because of this; the United States is tied down by social welfare and the heavy burden of insurance.

But no one is willing to touch upon this sensitive topic. Of course, America’s current success is historically built upon the tribulations, sacrifices and contributions of minority groups; Caucasians also hold the complex emotions of a guilty conscience. Amongst these lie the difficult “politically correct” issues that concern protecting vulnerable groups.

How does one deal with this welfare populist challenge? Right now, it is difficult to find a solution. This is precisely the location of America’s deep predicament. When I first visited the United States in 1998, the friend accompanying me quietly discussed the gravity of this issue with me. Fourteen years later, friends in four different cities all coincidentally and privately raised this issue with me. The gravity of this visible trend is already receiving the attention and concern of more and more people.

On the last day of my seminar at Penn State, I raised this issue seeking the opinions of American scholars. Amongst those in attendance were top scholars from Penn State’s Wharton School of Business. I asked, in the face of this welfare populism, what are your options? They all replied that there are no options. I jokingly said that if the United States wants to get out of this predicament, there appear to be four options.

The first option is a KKK-style “conservative armed counter-revolution” that would completely break the rules of contemporary democracy. But this, in fact, is simply not possible.

The second option is a high-tech revolution that would support and provide for all vulnerable groups. But this, in fact, is also impossible. Even if it were possible, it would only perpetuate contradictions, not fundamentally resolve the issues. Under the present system, it would also further stimulate a greater influx of immigrants from poor countries to the United States seeking to reap the benefits. Furthermore, the flow of wealth created by this advanced technology would be the same as the flow of wealth created after the Industrial Revolution: It would still primarily flow toward the elite high-tech class, not into the hands of the middle class and the general public. Most people are still unable to reap the benefits of the high-tech revolution.

The third option is that politicians adopt policies that appear on the surface to be populism, but are essentially conservatism, using left-wing slogans to come to power and acting with a right-wing mentality. We Chinese people would call this “appearing left, acting right.” Some politicians in developed countries are currently taking this route. But because a majority of voters would still block any structural changes, the above-mentioned trend is also very difficult to change.

The final possibility is also the most impossible: The rest of the world becomes more prosperous and more open than the United States, so that all of the black and Hispanic immigrants mass-migrate out of the United States, allowing the U.S. to become a purely white country. Of course, everyone knows that this is impossible. I was only using the logic of “reductio ad absurdum” to justify my point.

America’s misfortune lies in that when the U.S. most needs to extricate itself from this welfare populist trap: Obama — as America’s historically most left, most radical presidential candidate — instead benefited from upholding the welfare populist system through receiving the abundant votes of the masses, took advantage of the situation and rose to power. After he took office, he still largely implemented left-wing policies, causing the issue to further intensify. When America most needed to improve the overall competitive dynamic of society, he instead launched a “big rice bowl”-style comprehensive health care reform program. To put it nicely, this is an idealism of the American dream; to put it bluntly, this is a requirement for Obama to establish his place in history. If you want to achieve Obama-esque personal goals, than you must sacrifice America’s most precious item: its competitive vitality. Furthermore, funding can only be accumulated through increasing taxation on the middle class; this is like adding salt to the wounds of an already plighted middle class. Not one of the deep-seated contradictions has been resolved, yet I estimate that he will still be able to get re-elected. [Translator’s note: Obama was successfully re-elected president in the Presidential Election of Nov. 2012.] It appears that the welfare populist trap will only sink deeper and deeper.

My overall opinion is that American civilization lacks a self-protection mechanism. If a civilization is excessively open to the outside world and allows large numbers of mixed groups to enter its borders, yet does not have the integrated efforts of an institutional culture to integrate them, then the special qualities of this civilization will be watered down, and in the course of time it will turn into another thing entirely. This mode of thinking seems to be not quite politically correct, but it is the reality of the situation.

Perhaps you may think that my realistic impression of the United States is a bit pessimistic. A letter from my friend said that even if elite immigrants are flocking [to the U.S.], the venerated American paradise of “democracy peddlers” will inevitably decline; where is the paragon of social development then?

The weakening of America’s national power is no good thing for China. As most people know, the continuous weakening of the U.S. dollar causes China’s large share of U.S. bonds to continuously depreciate. Once America becomes unable to repay this debt, it will generate a devastating blow for the global economy, and the injury to China will undoubtedly be extremely grave. Thirty years’ worth of hard-earned money belonging to the ordinary people of China has been exchanged for U.S. bonds; today, it could very well become a source of funding for Obama’s national health reform and a stepping- stone for Obama to make his place in history. To think of it makes the heart ache.

Every type of system has its own problems. Americans are currently sinking into “the prisoner’s dilemma,” wherein nobody wants to influence their own interests, yet nobody is willing to fundamentally resolve the new inequality borne out of brotherly love through stimulating social competitive strength. The president is also a beneficiary of this trend.

I certainly do not think that America’s future will necessarily be a bleak one. This mighty nation, having experienced so many tribulations, having offered so many great contributions to humanity, will also explore new routes out of this predicament.

However, for us Chinese people, this matter can allow us to more completely and rationally understand the difficulties and prospects of the United States and the West and it is beneficial to our own self-adjustment; from it we can derive inspiration. From observing this shift, we should search out the elements that cannot emerge in China and look for those that are worth preparing for. We must set aside the century-old romantic thinking of Chinese people, namely that we must find a direction and a model in foreign countries and then blindly follow suit. Often, we first have a blueprint to carry out construction accordingly. The results are neither fish nor fowl; our study of the Soviet Union in the 1950s is a case in point.

This article was written on May 23, 2012. On Oct. 15, 2013, the author added:

Before sending this article for publication, I learned from televised news sources that an English housewife can receive 900 pounds a month in subsistence allowances, through which her family can live a very comfortable life. According to British welfare standards, her family will soon move into a new apartment valued at 500,000 pounds, built through the money of taxpayers. This has caused a public outcry. This type of occurrence is all too common in Western countries. More than a year ago, I discussed the plight of welfare populism. My predictions have unfortunately been realized, and are moreover worsening.

The author is a professor in the history department at Shanghai Normal University. This article has been chosen to be included in the 2014 publication “My Thought Journal, Volume II”; it was originally sent in a letter to a friend.