In capitalist societies, welfare states exist to protect the public from the impact of unregulated market forces. That is their rationale and, to a significant extent, their principal effect. The poor receive cash and in-kind assistance, the elderly receive tax-subsidized pensions, and the jobless receive unemployment benefits because society has decided that individuals, families, and communities should not be asked to bear the brunt of economic change alone. But societies also vary in the degree to which they use government to counteract free market forces, and these differences matter enormously in people's lives.
The United States stands at one extreme: compared with most other rich capitalist societies, the American welfare state is more market conforming. America has a welfare state, of course; federal, state, and local government spending on social-welfare programs accounts for approximately one-fifth of the nation's gross domestic product (GDP). 1 Many of the things that other welfare states do are done here as well. But according to statistics collected by the Organization for Economic Cooperation and Development (OECD), the GDP share devoted to "social protection" in the United States is two-thirds of the average GDP share spent on similar purposes by members of the European Community and the lowest of any Western industrial society. 2 When the American government does act to shelter individuals and families from economic hardship, it is more likely to do so in ways that conform to market principles, that is, to the idea that an individual's life chances should be determined not by political decisions about where and how firms invest, or how income and wealth are distributed, but by that individual's ability to work, save, and invest, and to compete in labor, commodity, and capital markets. 3
America's failure to provide government-guaranteed health care or universal family allowances is particularly striking. Unlike every other industrialized nation in the world, the United States guarantees neither medical services nor health insurance as a right of citizenship. Government-financed health care targets three narrowly