The Land of Too Much

Prasad offers a dramatically new explanation for the weak U.S. welfare state and shows that the conventional wisdom in academic, popular, and journalistic circles-that the U.S. is a liberal, less interventionist state than those in Europe-is wrong. -- Richard Lachmann, University at Albany, State University of New York This engrossing book provides an arresting answer to the questions of why America's welfare state is so weak and why so many Americans live in poverty. Prasad forges an elegant argument using both historical and cross-national evidence to show that countries chose between two strategies for managing income distribution, welfare programs and consumer credit. By the 1940s the U.S. had chosen consumer credit, and has since been using 'mortgage Keynesianism,' which does nothing for the truly poor and invites economic volatility. A startling and ultimately convincing contribution to the most important debate of our times. -- Frank Dobbin, Harvard University This book is a brilliant addition to two divergent literatures: American political development and comparative political economy. Prasad sees credit as the basis of the American welfare state and its robust capitalist economy; but the essential scaffolding of the Credit Welfare State was the remarkable system of regulatory institutions constructed from the late nineteenth to the late twentieth centuries. When regulation and progressive taxation were dismantled while credit continued to expand, the result was inequality and economic meltdown. Not understanding the vital interplay among taxation, credit expansion, and regulation, U.S. politicians did enormous damage to both democracy and the economy. -- M. Elizabeth Sanders, Cornell University

Monica Prasad’s powerful demand-side hypothesis addresses three questions: Why does the United States have more poverty than any other developed country? Why did it experience an attack on state intervention in the 1980s, known today as the neoliberal revolution? And why did it recently suffer the greatest economic meltdown in seventy-five years?

The Land of Too Much presents a simple but powerful hypothesis that addresses three questions: Why does the United States have more poverty than any other developed country? Why did it experience an attack on state intervention starting in the 1980s, known today as the neoliberal revolution? And why did it recently suffer the greatest economic meltdown in seventy-five years?

Although the United States is often considered a liberal, laissez-faire state, Monica Prasad marshals convincing evidence to the contrary. Indeed, she argues that a strong tradition of government intervention undermined the development of a European-style welfare state. The demand-side theory of comparative political economy she develops here explains how and why this happened. Her argument begins in the late nineteenth century, when America’s explosive economic growth overwhelmed world markets, causing price declines everywhere. While European countries adopted protectionist policies in response, in the United States lower prices spurred an agrarian movement that rearranged the political landscape. The federal government instituted progressive taxation and a series of strict financial regulations that ironically resulted in more freely available credit. As European countries developed growth models focused on investment and exports, the United States developed a growth model based on consumption.

These large-scale interventions led to economic growth that met citizen needs through private credit rather than through social welfare policies. Among the outcomes have been higher poverty, a backlash against taxation and regulation, and a housing bubble fueled by “mortgage Keynesianism.” This book will launch a thousand debates.