7 Myths About Scandinavia’s Social Democratic ‘Paradise’

 

hiker-on-mountain-shutterstock-500x293If Scandinavia didn’t exist, the left would have to invent it. Overall, Denmark, Norway, and Sweden are known as nations that combine big government with good economic growth. Low levels of inequality and poverty with high levels of innovation. Social democratic models for America, some Democrats suggest.

But in “Scandinavian Unexceptionalism: Culture, Markets and the Failure of Third-Way Socialism,” Nima Sanandaji argues that all these wonderful qualities of Scandinavian society “predated the development of the welfare state” and that “all these indicators began to deteriorate after the expansion of the Scandinavian welfare states and the increase in taxes necessary to fund it.” Some key points:

1.) Left-leaning pop stars, politicians, journalists, political commentators and academics have long praised Scandinavian countries for their high levels of welfare provision and for their economic and social outcomes. It is, indeed, true that they are successful by most reasonable measures. However, Scandinavia’s success story predated the welfare state. Furthermore, Sweden began to fall behind as the state grew rapidly from the 1960s. Between 1870 and 1936, Sweden enjoyed the highest growth rate in the industrialised world. However, between 1936 and 2008, the growth rate was only 13th out of 28 industrialised nations. Between 1975 and the mid-1990s, Sweden dropped from being the 4th richest nation in the world to the 13th richest nation in the world.

2.) As late as 1960, tax revenues in the Nordic nations ranged between 25 per cent of GDP in Denmark to 32 per cent in Norway – similar to other developed countries. At the current time, Scandinavian countries are again no longer outliers when it comes to levels of government spending and taxation.

3.) The third-way radical social democratic era in Scandinavia, much admired by the left, only lasted from the early 1970s to the early 1990s. The rate of business formation during the third-way era was dreadful. In 2004, 38 of the 100 businesses with the highest revenues in Sweden had started as privately owned businesses within the country. Of these firms, just two had been formed after 1970. None of the 100 largest firms ranked by employment were founded within Sweden after 1970. Furthermore, between 1950 and 2000, although the Swedish population grew from 7 million to almost 9 million, net job creation in the private sector was close to zero.

4.) Scandinavia is often cited as having high life expectancy and good health outcomes in areas such as infant mortality. Again, this predates the expansion of the welfare state. In 1960, Norway had the highest life expectancy in the OECD, followed by Sweden, Iceland and Denmark in third, fourth and fifth positions. By 2005, the gap in life expectancy between Scandinavian countries and both the UK and the US had shrunk considerably. Iceland, with a moderately sized welfare sector, has over time outpaced the four major Scandinavian countries in terms of life expectancy and infant mortality.

5.) Scandinavia’s more equal societies also developed well before the welfare states expanded. Income inequality reduced dramatically during the last three decades of the 19th century and during the first half of the 20th century. Indeed, most of the shift towards greater equality happened before the introduction of a large public sector and high taxes.

6.) The development of Scandinavian welfare states has led to a deterioration in social capital. Despite the fact that Nordic nations are characterised by good health, only the Netherlands spends more on incapacity-related unemployment than Scandinavian countries. A survey from 2001 showed that 44 per cent believed that it was acceptable to claim sickness benefits if they were dissatisfied with their working environment. Other studies have pointed to increases in sickness absence due to sporting events. For instance, absence among men due to sickness increased by 41 per cent during the 2002 football World Cup. These shifts in working norms have also been tracked in the World Value Survey. In the 1981–84 survey, 82 per cent of Swedes agreed with the statement ‘claiming government benefits to which you are not entitled is never justifiable’; in the 2010–14 survey, only 55 per cent of Swedes believed that it was never right to claim benefits to which they were not entitled.

7.) Another regrettable feature of Scandinavian countries is their difficulty in assimilating immigrants. Unemployment rates of immigrants with low education levels in Anglo-Saxon countries are generally equal to or lower than unemployment rates among natives with a similar educational background, whereas in Scandinavian countries they are much higher. In Scandinavian labour markets, even immigrants with high qualifications can struggle to find suitable employment. Highly educated immigrants in Finland and Sweden have an unemployment rate over 8 percentage points higher than native-born Finns and Swedes of a similar educational background. This compares with very similar employment rates between the two groups in Anglo-Saxon countries.

So what then explains the Scandinavian success story? Well, they’re Scandinavians:

The descendants of Scandinavian migrants in the US combine the high living standards of the US with the high levels of equality of Scandinavian countries. Median incomes of Scandinavian descendants are 20 per cent higher than average US incomes. It is true that poverty rates in Scandinavian countries are lower than in the US. However, the poverty rate among descendants of Nordic immigrants in the US today is half the average poverty rate of Americans – this has been a consistent finding for decades. In fact, Scandinavian Americans have lower poverty rates than Scandinavian citizens who have not emigrated. This suggests that pre-existing cultural norms are responsible for the low levels of poverty among Scandinavians rather than Nordic welfare states. Many analyses of Scandinavian countries conflate correlation with causality.

Published in Culture, Economics
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  1. Ricochet Member
    Ricochet
    @Manny

    Don’t the Scandinavian countries get huge revenues from North Atlantic oil reserves?  And that spread over a small population keeps them well off?  There has to be something more than just cultural norms that have kept them so well off.  With all that socialism you would have expected their economies to completely crash at some point.

    • #1
  2. ConservativeFred Member
    ConservativeFred
    @

    I studied in Norway, and have periodically visited Sweden.  I have a few remaining contacts in both countries.  I’ll add my perceptions:

    1. As Mr. Pethokoukis alludes to, there is a “Scandinavian” mindset or culture, which the left refuses to recognize.  Even with recent trends in immigration, the Scandinavian countries remain predominantly “native” or homogeneous, and this creates a dominant culture that is difficult to replicate outside of Scandinavia.
    2. Allow me one brief anecdote.  We met with a social welfare ombudsman in Norway, and she was shocked, genuinely shocked, that someone would cheat the social welfare system.  There is a large, core belief among many Scandinavians (the 55% number in Sweden referenced in the article) that it is improper to take advantage of the social welfare system.  I do not believe that attitude would have a similar level of support in the U.S.
    3. Norway benefits significantly from oil production, which pays for many of its social services.
    4. Scandinavia is wonderful to visit, and it all seems to “work,” and many times I shake my head and wish it could work in the U.S. (and I am conservative).
    5. Scandinavian society is not transportable to other countries, and as a result, its welfare programs and structures are not readily transportable to other countries.

    Culture matters more than government programs.

    • #2
  3. MichaelC19fan Inactive
    MichaelC19fan
    @MichaelC19fan

    In  Scandinavia, out of wedlock birth rates are high but what the Left does not mention is the child is born into an intact household that would meet definitions of Common Law marriage. The couples are in a de facto marriage.

    • #3
  4. user_1050 Member
    user_1050
    @MattBartle

    Kevin Williamson is writing about the same thing today at National Review:

    http://www.nationalreview.com/article/420877/socialism-left-white

    Opening lines:

    “The curious task of the American Left is to eliminate ‘white privilege’ by forcing people to adopt Nordic social arrangements at gunpoint.”

    “Progressives have a longstanding love affair with the nations of northern Europe, which are, or in some cases were until the day before yesterday, ethnically homogeneous, overwhelmingly white, hostile to immigration, nationalistic, and frankly racist in much of their domestic policy.”

    Read more at: http://www.nationalreview.com/article/420877/socialism-left-white

    • #4
  5. Steve in Richmond Member
    Steve in Richmond
    @SteveinRichmond

    I have spent a lot of time in Norway on business and have gotten to know quite a few Norwegians.   There is indeed a very homogeneous mindset, as well as common misconceptions about how things are actually paid for.  For example, they have a 25% sales tax on top of the usual VAT and other fees.  This results in things like a simple pint of draft beer costing $10.  Yet at the same time, in discussion over that beer, they will insist that college education in Norway is free, as it should be.  They do not connect the taxes with the benefits.  They see the taxes as their obligation as citizens and the benefits as their right as citizens.  There is a strong sense of needing to get along and not rock the boat.

    • #5
  6. Ricochet Member
    Ricochet
    @IWalton

    Even if the Nordic welfare state worked perfectly, it would be analogous to a large homeowners association not to giant heterogeneous America.  They are small, homogeneous, rich and democratic enough to do lots of stuff as public goods that ought to be private goods, because if they don’t like it they can reach a new consensus and change it.   We aren’t any of those things.  We have to be decentralized through markets and the constitution.   Totalitarianism is the alternative the Nordics don’t  necessarily face, while we necessarily do.

    • #6
  7. Mendel Inactive
    Mendel
    @Mendel

    I lived for almost 10 years in Germany, which has a number of similarities to the Scandinavian countries when it comes to social democracy.

    In general, Germany has a high-tax/high-benefit social welfare system which, overall, works decently well. However, one big dirty secret is that their social programs are constantly on the verge of falling apart/becoming insolvent and are continually being rejiggered. From healthcare to unemployment insurance to pensions, it seems like there are major overhauls to nearly every big program at least once a decade.

    In other words, while the social system still “works”, it is perpetually one step away from ruin – and could easily unravel at a moment’s notice if an unexpected disruption were to occur (such as the Euro exploding…).

    • #7
  8. Mendel Inactive
    Mendel
    @Mendel

    ConservativeFred:

    1. As Mr. Pethokoukis alludes to, there is a “Scandinavian” mindset or culture, which the left refuses to recognize. Even with recent trends in immigration, the Scandinavian countries remain predominantly “native” or homogeneous, and this creates a dominant culture that is difficult to replicate outside of Scandinavia.

    I don’t think lefties would necessarily dispute this assertion – most of the social democrats I talk to in the US both acknowledge and actively wish Americans would change their cultural mentality and work ethic.

    What most on the left don’t appreciate is that such changes cannot be enacted overnight or through willpower alone. Culture is a complex phenomenon with deep roots and which takes centuries to develop. The underlying individual behaviors and preferences which facilitate the success of Scandinavian countries are likely unattainable even by the most fervent American liberal.

    • #8
  9. ConservativeFred Member
    ConservativeFred
    @

    Mendel:

    I don’t think lefties would necessarily dispute this assertion – most of the social democrats I talk to in the US both acknowledge and actively wish Americans would change their cultural mentality and work ethic.

    What most on the left don’t appreciate is that such changes cannot be enacted overnight or through willpower alone. Culture is a complex phenomenon with deep roots and which takes centuries to develop. The underlying individual behaviors and preferences which facilitate the success of Scandinavian countries are likely unattainable even by the most fervent American liberal.

    Yes and no.  Most liberals admit the U.S. culture must change to match the over-culture of Scandinavia, but the failure of U.S. liberalism is the belief that a Scandic change to U.S. culture can be accomplished.  The U.S. cannot turn into Scandinavia in 10 years, 20 years, 1,000 years . . .

    “But if we pass Obamacare.”

    “But if make the top marginal tax rate 90%.”

    “But if we mandate pre-school.”

    Ever-expanding government program are the manifestation of the liberal desire to turn the U.S. into Scandinavia, but the abject failure of those programs should be seen as the failure of those desires.

    I am not sure why U.S. liberal are blind to this reality?

    • #9
  10. AIG Inactive
    AIG
    @AIG

    MichaelC19fan: In  Scandinavia, out of wedlock birth rates are high but what the Left does not mention is the child is born into an intact household that would meet definitions of Common Law marriage. The couples are in a de facto marriage.

    And wouldn’t that also apply in the US?

    As to the main post, there’s really only one thing that needs to be said, and it was said by Milton Friedman: the Scandinavians in the US don’t have poverty either.

    There are several issues with Nima’s analysis, however:

    1) Growth rates among all developed countries pretty much converge at some point, and once they converge, they flatten out. So the fact that Sweden’s growth rate was very high in the 19th early 20th century, but then flattens out, is simply what we observe everywhere (at least in countries in peacetime: the losers of WW2 had a much higher growth rate post WW2 of course)

    2) The Nordic countries were also starting out a much lower level than the rest of Europe in the 19-early 20th century. They were…poor countries. Which is why 30% of their populations emigrated to the US. So high growth rates to catch up with Europe, and then once converged, the growth rates slow down.

    So this isn’t evidence that the “welfare state” slowed down their growth.

    It may very well have done so, but this isn’t the evidence for it.

    • #10
  11. Henry Castaigne Member
    Henry Castaigne
    @HenryCastaigne

    Speaking of Scandivia, who hear loves Lilyhammer?

    • #11
  12. Ricochet Member
    Ricochet
    @IWalton

    http://www.gatestoneinstitute.org/5195/sweden-rape

    • #12
  13. user_423975 Coolidge
    user_423975
    @BrandonShafer

    ConservativeFred:I studied in Norway, and have periodically visited Sweden. I have a few remaining contacts in both countries. I’ll add my perceptions:

    1. As Mr. Pethokoukis alludes to, there is a “Scandinavian” mindset or culture, which the left refuses to recognize. Even with recent trends in immigration, the Scandinavian countries remain predominantly “native” or homogeneous, and this creates a dominant culture that is difficult to replicate outside of Scandinavia.
    2. Allow me one brief anecdote. We met with a social welfare ombudsman in Norway, and she was shocked, genuinely shocked, that someone would cheat the social welfare system. There is a large, core belief among many Scandinavians (the 55% number in Sweden referenced in the article) that it is improper to take advantage of the social welfare system. I do not believe that attitude would have a similar level of support in the U.S.
    3. Norway benefits significantly from oil production, which pays for many of its social services.
    4. Scandinavia is wonderful to visit, and it all seems to “work,” and many times I shake my head and wish it could work in the U.S. (and I am conservative).
    5. Scandinavian society is not transportable to other countries, and as a result, its welfare programs and structures are not readily transportable to other countries.

    Culture matters more than government programs.

    Too true, and its been unfortunate that they have done everything possible to undermine our own culture.

    • #13
  14. Pete EE Member
    Pete EE
    @PeteEE

    Great post (just commenting to add to the stats.)

    • #14
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