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Putting ideology aside,the practical choice isnt between capitalism and 'welfare-state socialism,' Reich writes. Its between a system thats working for a few at the top, or one thats working for just about everyone.

For years Americans have assumed that our hard-charging capitalism is better than the soft-hearted version found in Canada and Europe. American capitalism might be a bit crueler but it generates faster growth and higher living standards overall. Canadas and Europes welfare-state socialism is doomed.

Robert is chancellors professor of public policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Clinton. Time Magazinenamed him one of the 10 most effective cabinet secretaries of the last century. He has written 13 books, including The Work of Nations, his latest best-seller Aftershock: The Next Economy and Americas Future," and a newe-book, Beyond Outrage. His new movie, "Inequality for All," is available on Netflix. He is also a founding editor of the American Prospect magazine and chairman of Common Cause.

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It was a questionable assumption to begin with, relying to some extent on our collective amnesia about the first three decades after World War II, when tax rates on top incomes in the U.S. never fell below 70 percent, a larger portion of our economy was invested in education than before or since, over a third of our private-sector workers were unionized, we came up with Medicare for the elderly and Medicaid for the poor, and built the biggest infrastructure project in history, known as the interstate highway system.

But then came Americas big U-turn, when we deregulated, de-unionized, lowered taxes on the top, ended welfare, and stopped investing as much of the economy in education and infrastructure.

Meanwhile, Canada and Europe continued on as before. Soviet communism went bust, and many of us assumed European and Canadian socialism would as well.

Thats why recent data from theLuxembourg Income Study Databaseis so shocking.

The fact is, were falling behind. While median per capita income in the United States has stagnated since 2000, its up significantly in Canada and Northern Europe. Their typical workers income is now higher than ours, and their disposable income after taxes higher still.

Read more:
How American capitalism is falling behind