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Many left-liberals have a real thing about the social democracies of Scandinavia. As University of Arizona sociologist Lane Kenworthy has put it, “Over the course of the next half century, the array of social programs offered by the federal government of the United States will increasingly come to resemble the ones offered by [the Nordic welfare states].” And he might be right, if Democrats have their way. No sooner the arrival of universal healthcare did Democrats move into their next project: universal preschool. And next perhaps a universal basic income. (Hey, where is the VAT to pay for all this stuff?) There are fans in the media, too. Again, here is New York Times reporter Neil Irwin on what lessons America can learn from Scandinavia’s high labor force participation rates in creating a pro-work safety net:
In short, more people may work when countries offer public services that directly make working easier, such as subsidized care for children and the old; generous sick leave policies; and cheap and accessible transportation. If the goal is to get more people working, what’s important about a social welfare plan may be more about what the money is spent on than how much is spent. If correct, it could have broad implications for how the United States might better use its social safety net to encourage Americans to work. In particular, it could mean that more direct aid to the working poor could help coax Americans into the labor force more effectively than the tax credits that have been a mainstay for compromise between Republicans and Democrats for the last generation.
I’m quoted in an article in the New York Times on the paper, and as the article reports I do think that we can learn some things from Scandinavia — better transportation, better public education — and I oppose expanding the government’s role in child care (we have enough middle-class entitlements, thank you very much). … I would make two other points as well. Americans might be willing to fork over more of their hard-earned cash to the government if they had more confidence that the government would spend the money in a productive way. … And, as I have written, very high marginal income tax rates would likely be very damaging to the long-term future of the United States. Why would a young person want to be a surgeon or an entrepreneur if the government will take seventy cents of her top dollars of income? Like Scandinavian culture, the longer-term reactions to high top rates — skill acquisition, occupational choice, general attitudes about work — are much harder to measure. And it is fine for economists to focus on what they can measure when writing their papers. But it is not fine for the public debate to assume that these effects are zero just because economists can’t measure them.
But might policy and politics be downstream from culture? Well, that certainly appears to be the case once we look at Scandinavian culture. Scandinavians trust their fellow citizens. They think poor people have typically been unlucky instead of lazy. They vote actively and participate in civil society. They respect the rule of law, and they donate to charity. Professor Kleven recognizes all of these things, and ultimately chooses not to guess what causes what. Yet for the ambitions of American progressives, that distinction matters very much. If all of these things are so precisely because the Scandinavian countries are small and homogeneous and have been that way for quite some time, then there is not much to be learned from this Scandinavian business. The Scandinavians themselves seem quite confident that they know the answer: culture matters and that their countries are small and homogeneous matters. They are the most Euroskeptic peoples of the continent. Norway is not a member of the European Union, Sweden joined only recently, and none of the three adopted the eurozone’s common currency. They seem to like their small, homogeneous countries just fine. And perhaps that’s what Scandinavia ultimately teaches us: the value of subsidiarity, not of subsidies.
Other economists wonder if Nordic-style capitalism is as conducive to innovation. Certainly they file fewer patents and generate fewer superrich entrepreneurs. (Recall Strain’s remarks on taxes.) As economists Daron Acemoglu, James Robinson, and Thierry Verdier explain in their paper “Can’t We All Be More Like Scandinavians?”: “We cannot all be like the Scandinavians, because Scandinavian capitalism depends in part on the knowledge spillovers created by the more cutthroat American capitalism. … Some countries will opt for a type of cutthroat capitalism that generates greater inequality and more innovation and will become the technology leaders, while others will free-ride on the cutthroat incentives of the leaders and choose a more cuddly form of capitalism.”