Krugman Watch: Culture Is A Status Economy

The assertion that Europe’s crisis proves that the welfare state doesn’t work comes from many Republicans. … The idea, presumably, is that the crisis countries are in trouble because they’re groaning under the burden of high government spending. But .. the nations now in crisis don’t have bigger welfare states than the nations doing well — if anything, the correlation runs the other way. Sweden, with its famously high benefits, is a star performer… Meanwhile, before the crisis … spending on welfare-state programs … was lower, as a percentage of national income, in all of the nations now in trouble than in Germany… Oh, and Canada … has weathered the crisis better than we have.

( Sweden is a small homogenous protestant germanic country. It is an outlier. )

No one argues that highly redistributive societies are possible. We argue that large redistributive empires are impossible. This impossibility is caused by the fact that the social ‘economy’ that consists of opportunities, habits, manners, ethics and morals consists of a set of ‘costs’ that people must bear by ‘forgoing opportunity for privatization’. This forgone opportunity economy’s currency is status and this status economy rewards people for paying the fees of forgone opportunities. Money is the tool by which people pursue status by competing in the market.

In any economy, racial and cultural (linguistic) diversity creates diverse sets of status signals cause economic competition that discourages redistribution.

Therefore a redistributive economy can only persist in a homogenous society.

And a rich, redistributive economy is only LIKELY to persist in a country where people are homogenous — culturally and racially. So, all external factors being equal, because of signaling, all empires are under constant pressure to fragment into tribes, and all tribes are under pressure to develop competitive institutions. Nationalism then is a prerequisite for wealth and redistribution.

As Taleb states, the Levantines thought they were special too. Until there weren’t enough christians… Germanic protestants resent Northern germanic-italians resent souther greco-italians.

And public intellectuals resent the status of both politicians and entrepreneurs and seek to alther the status economy for their benefit — just as Schumpeter said they would. :)