Debunking Utopia
Page 3
To understand the Nordic experience, bear in mind that the large welfare states are not the only thing that sets these countries apart from the rest of the world. The countries also have homogenous populations with nongovernmental social institutions that are uniquely adapted to the modern world. High levels of trust, a strong work ethic, civic participation, social cohesion, individual responsibility, and family values are long-standing features of Nordic society that predate the welfare state. These deeper social institutions explain much of the success in the Nordics. Serious researchers of course understand what ideologues often neglect. One example is Danish scholar Henrik Jacobsen Kleven, a professor at the London School of Economics. In a paper he explains:
As we continue our efforts to understand and draw lessons from the social and economic success of the Scandinavian countries, it is worth remembering that these countries have some specific traits.
They are small and homogenous, racial and religious diversity is limited, human capital is high, and they have been largely unaffected by violent conflict. It is not clear to what degree lessons learned from Scandinavia carry policy implications for large, diverse, and unequal countries such as the United States. Certainly the political economy surrounding the implementation of the policies proposed here would be different in the United States – indeed this is partly why we observe stark policy differences to begin with – and conditional on political feasibility, the effects and appropriate design of those policies might be different in the United States. Hence, replicating the Scandinavian policies and institutions in societies that are fundamentally different is unlikely to be achievable or perhaps even desirable.2
In other words, the Nordic countries’ unique cultural and historical attributes explain why they are successful. Therefore, it is wrong to assume that adapting a large Nordic welfare state would turn the United States into a Nordic society. The author also hints that one reason why the Nordic countries have adopted different policies than the United States might be precisely because their historic and cultural attributes make them more suited to large welfare states. It makes sense, doesn’t it? If you have homogenous societies with strong working ethics, healthy lifestyles, and high levels of trust it is more feasible to introduce a generous welfare system than if you have heterogeneous societies where a significant part of the population, to give just one example, have unhealthy lifestyles and therefore create high costs for universal health care. Of course, the United States can introduce a Nordic-style social democratic model, but we shouldn’t expect this to be as successful as in the Nordics.
The next part of this book will explain the origins of this unique culture of success, and how it allows Nordic Americans to be at least as affluent and socially successful as their cousins in the Nordics. This chapter will make two simple, but striking, points. The first is that the success of the Nordic welfare state, much admired by the Left in America and elsewhere, predates the welfare state. The Nordic countries became economically and socially successful before they transitioned to large welfare states. A historic view shatters the utopian illusion of how successful social democracy has been in the Nordics. The second point is that social and economic success is indeed concentrated to northern Europe, but not necessarily to countries with socialist policies.
Take Switzerland, as an example. In chapter 1 we learned that Switzerland has the fourth-highest level of well-being in the world, according to the OECD Better Life Index. In some areas, such as employment rate and living standard, Switzerland outperforms the Nordic nations. Switzerland has a similar culture and climate to the Nordic nations, but vastly different policies. It is a conservative country both culturally and economically. The Swiss system stresses individual responsibility, strong families, and a competitive market economy rather than a large welfare state. This of course has both merits and disadvantages. One thing we can observe is that Switzerland is achieving much of the social success that the Left admires. Why shouldn’t America be more like Switzerland? Why not, for that matter, Australia, which according to the same index has the highest well-being in the world? Australia also has market-oriented policies and a small welfare state.
It is also worth comparing Iceland with the other Nordic societies. The isolated island, which was populated by Viking sailors in the late ninth century, has arguably the most uniquely Nordic culture in the world. Yet it has never embraced large welfare states to the same extent as its larger cousins. Iceland certainly faces many challenges: it is far from other places, has too small a population to create a specialized economy, most of its lands are inhabitable, and, well, it is covered with ice. Large parts of its surface are barren and unfruitful. Sure, Iceland has geothermal energy, but it has few mineral resources and lacks the oil wealth of places such as Norway and Alaska. Still, as this chapter will demonstrate, the country is in many ways as successful, sometimes even more, as its cousins with larger welfare states. Given all its disadvantages, for example, Iceland is only a little less affluent than its Nordic cousins, even somewhat ahead of Finland.3
An interesting fact about the Nordics that is seldom acknowledged by the admirers of social democracy is that the countries have not always had large welfare states. Welfare state institutions such as public schooling were gradually introduced in the late nineteenth century and the first half of the twentieth century. The extent of welfare policies was, however, not exceptional. Instead it was in line with the introduction of similar policies in other parts of Europe, and for that matter, in the United States. The common measure of the size of government is how much of the total economy – that is to say, the gross domestic product (GDP) – goes to taxes. By looking at this measure, we can conclude that the size of government was about the same in the Nordic countries as in the United Stated during the mid-twentieth century. The point where policies started to differ is somewhere around 1960. At this time point the size of government was similar in the Nordics to the United States, while afterwards the Nordics gradually built up a larger public sector, funded by higher taxes.4
So we have established a year when the taxes in the Nordics were still relatively low, 1960. Let’s also establish another year, when the Nordic welfare states were at their peak. This occurred somewhere around the year 2000. At this time taxes in the United States had remained on about the same level as in 1960, while those in the Nordics had nearly doubled to close to half of GDP. Since then at least Sweden has substantially reduced its tax burden and the scope of the welfare state.5 By comparing 1960 to 2000, we can see how much of the social achievements of the Nordics came before and after the shift toward big government. It is, of course, also interesting to look at the present situation. So what do we find if we look at some broad measures of social success?
LONG LIFE SPANS DUE TO LARGE WELFARE STATES?
In late 2015, the Public Broadcasting Service (PBS) ran a story entitled “What Can the U.S. Learn from Denmark?” by the Associated Press. The AP explained, “Danes were excited this week to see their calm and prosperous country thrust into the spotlight of the U.S. presidential race when Democratic hopefuls Bernie Sanders and Hillary Clinton sparred over whether there’s something Americans can learn from Denmark’s social model.” The story continued by stating that “Danes get free or heavily subsidized health care” and “compensation when they’re unemployed, out sick from work or on parental leave.” Additionally, they have longer life spans than Americans.6 Now, all these statements are certainly true. The only problem is that many assume that these facts are directly correlated. Danes have universal health care and government compensation when sick. Correspondingly they live longer than Americans. So, for the United States to raise its life expectancy, perhaps a Danish model should be adopted? After all, what kind of heartless monster would you be to oppose policies that increase people’s life spans?
I am myself in favor of the public sector providing health care, and for that matter, sick leave compensations, particularly to the less well off. But the simplistic com
parison troubles me. As it turns out, according to the latest available data, Danes have on average 1.5 years longer life expectancy than Americans.7 However, during 1960, when the country actually had slightly lower taxes than the United States (27 percent in the United States compared to 25 percent in Denmark),8 the difference was even larger. At this time Danes lived 2.4 years longer than Americans.9 How many admirers of the Danish high tax model are aware that the shift toward massive taxation and a correspondingly generous welfare state has led to a smaller difference in life expectancy than before? How many are even aware that Denmark used to have lower taxes than the United States?
Interestingly, Denmark is not alone in this regard. When Nordic countries had similarly sized public sectors as the United States (1960), Swedes lived 3.2 years longer than Americans while Norwegians lived 3.8 years longer. Today the difference has shrunk to 2.9 years in Sweden and 2.6 years in Norway. This analysis isn’t sensitive to what exact year we choose. Finland, a war-torn and poor country at the time, had one year’s lower life expectancy than the United States and has now almost two years longer, since it has caught up with its Nordic cousins. Iceland is even more interesting. Icelanders went from having 3.7 years’ longer life span than Americans in 1960 to 4.3 years longer today. So, does this fit in with the idea that large welfare states promote long life spans? Well, let’s not forget that Iceland is the Nordic country that, over time, has had the smallest welfare state, with least leaning toward social democracy.
Instead of solely comparing with the United States, let’s compare with the world. The table on the next page shows the top ten countries with the longest life spans during three periods. In 1960, when the Nordics had small welfare states, Norway had the highest life expectancy in the world, followed by Iceland in second place, and Sweden and Denmark in fourth and fifth. In 2000, during the peak of the Nordic welfare states, Norway and Denmark had dropped out of the top-ten league. Sweden had fallen to tenth place and Iceland to fourth. The latest data shows a similar picture, except that Iceland has again climbed to second position. Pretty interesting, huh? Just for the sake of curiosity, do we find in general that countries with large welfare states have the longest life spans today? We do not. Japan, which currently has the highest life span, has conservative, family-oriented policies and relatively low taxes. The same is true for Switzerland, which has the third-highest life span; Singapore, which has the fifth highest; and Australia, which has the seventh highest. Instead of politics, the common feature seems to be that these are countries where people eat healthily and exercise. Perhaps this shows that systems that put emphasis on big welfare states as well as systems that put emphasis on market economy, individual responsibility, and family-oriented policies can achieve long life spans. Or perhaps it shows that politics cannot fully solve our problems. Social outcomes are to a large extent determined by the choices that people make, which in turn is influenced by culture. A country cannot just copy the policies of another country and hope to gain the same social outcomes.
TOP TEN COUNTRIES WITH LONGEST LIFE SPAN
1960 (SMALL PUBLIC SECTORS IN NORDICS)
2000 (PEAK OF NORDIC WELFARE STATES)
2013 (LATEST DATA)
NORWAY
JAPAN
JAPAN
ICELAND
SWITZERLAND
ICELAND
NETHERLANDS
ITALY
SWITZERLAND
SWEDEN
ICELAND
SPAIN
DENMARK
AUSTRALIA
SINGAPORE
SWITZERLAND
FRANCE
ITALY
NEW ZEALAND
SPAIN
AUSTRALIA
CANADA
ISRAEL
ISRAEL
UNITED KINGDOM
SINGAPORE
FRANCE
AUSTRALIA
SWEDEN
SWEDEN
Source: World Bank World Development Indicators Database. Microstates have been excluded.
Long Nordic life expectancy is anything but a mystery. Much as in 1960, the populations in this part of the world combine healthy diets with a love of nature and sports. The Icelandic people do live in a cold country, with large, barren, volcanic fields that resemble the fictional Mordor from Lord of the Rings, yet, they enjoy going out in this nature. Also, they eat a healthy diet based largely on fish. That Denmark has fallen out of the global top-ten list in life expectancy doesn’t come as a surprise either. It is not because Danes have such a well-funded universal health care sector that they say, “The hell with it; let’s live unhealthy lives.” The explanation lies in culture. The Danes are famous for enjoying life more than their Nordic cousins. This goes hand in hand with high rates of alcohol consumption and smoking.
Certainly, having some sort of system where people who are sick are given treatment is vital for public health. Preventive health care interventions by the welfare state – for example, where individuals at risk of future health problems are identified and encouraged to change their diets and lifestyles – can have great effects. But large welfare simply doesn’t translate to high life expectancy. If that were the case, Danes would live longer than Swedes, who in turn would live longer than Icelanders. The opposite is true. Once we realize this, perhaps American admirers of the Nordic model should change their perspective: Instead of trying to copy Nordic policies, why not copy their healthy lifestyles? Wouldn’t Americans be healthier if they exercised more, took hikes in nature, walked to the store on occasion (as Nordic people often do) instead of driving, and ate less junk food and more fish? If anything, isn’t it remarkable that the difference in life span is so small – and has shrunk over time – given that Americans have much less healthy lifestyles? Perhaps some Americans would like to continue having an unsound diet and hope that Nordic-style social democracy can improve their health. I very much doubt that would be the case.
LOW CHILD MORTALITY DUE TO LARGE WELFARE STATES?
Besides life span, another common measure of how well societies are doing is child mortality. The levels of child mortality basically tell us three things:
•how good and how widely available health care is for mothers;
•how many parents go to the hospital to give birth rather than stay home; and
•what share of mothers have issues such as alcoholism, smoking, and drug abuse, which could seriously hurt their infants.
Much like life expectancy, the United States doesn’t come on top on this indicator.
The child mortality rate in America is 5.6 among 1,000 children. This is twice the rate in Denmark and Sweden, three times that of Norway and Finland, and nearly four times that of Iceland.10 Again, the simple argument could be: “In America more than twice as many children die at a young age as in the Nordics. Therefore, if you aren’t in favor of Nordic-style social democracy, you don’t want to protect children.” Now, perhaps Americans could learn a thing or two from Nordic maternal care. But isn’t the obvious problem the poverty, and related addiction to alcohol and drugs, which exists in particular among marginalized minorities in the United States? One could of course argue that poverty would vanish if a larger welfare system existed in America. But where is the proof? Have states with higher taxes significantly reduced social ills? Why not?
Again, we can turn to a global analysis. The following table shows the top ten countries with the lowest child mortality at different times. We can see that the five Nordic countries all have among the lowest child mortalities in the world today. The same situation existed during the peak of welfare policy and when Nordic countries had the same low taxes as in the United States. Over time Denmark and Sweden, the two Nordic countries with the highest tax burden, fall behind somewhat, while Iceland goes from third to first position globally. And again, countries such as Singapore, Japan, and Korea, which have small public sectors, also make the top ten list. Clearly the Nordics are successful societies whose achievements are to
be admired. But this success existed before the transition to high tax systems. Doesn’t this tell us something?
TOP TEN COUNTRIES WITH LOWEST CHILD MORTALITY RATES
1960 (SMALL PUBLIC SECTORS IN NORDICS)
2000 (PEAK OF NORDIC WELFARE STATES)
2013 (LATEST DATA)
SWEDEN
SINGAPORE
ICELAND
NETHERLANDS
ICELAND
FINLAND
ICELAND
SWEDEN
JAPAN
NORWAY
FINLAND
NORWAY
AUSTRALIA
JAPAN
SINGAPORE
DENMARK
NORWAY
SWEDEN
SWITZERLAND
FRANCE
AUSTRIA
FINLAND
ITALY
DENMARK
UNITED KINGDOM
AUSTRIA
ITALY
FRANCE
DENMARK
KOREA
Under-five mortality rate is shown. Source: UN Inter-agency Group for Child Mortality Estimation (IGME) and own analysis. Modern comparable countries for which data exist have been compared. These are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Greece, Iceland, Ireland, Italy, Japan, Netherlands, Norway, Portugal, Czech Republic, Korea, Singapore, Spain, Sweden, Switzerland, UK, and USA. Some countries, such as Germany, have been excluded, since data from 1960 is not available. In 2000, Iceland and Singapore shared the first position with the same rate, while in 2015 Iceland was ahead of all other countries.
EQUALITY DUE TO LARGE WELFARE STATES?
Admirers of Nordic societies in particular point to the countries’ even income distribution. Certainly, by distributing incomes and providing services such as universal health care, the welfare states do contribute to more equal incomes. Much like long life spans and low child mortality, however, even income distribution evolved in the Nordics before the transition to large welfare states. Historic data on income equality only exists for a small number of countries. Therefore, it is not possible to look at how the global top-ten list has evolved over time. Swedish economists Jesper Roine and Daniel Waldenström have, however, been able to compare historical rates of income inequality in Sweden, the United States, Canada, France, and the Netherlands. Their findings are quite astonishing. Already by 1920, well before the existence of a large-scale welfare state, Sweden had among the lowest levels of inequality within this group of countries. The two economists wrote, “We find that, starting from levels of inequality approximately equal to those in other Western countries at the time, the income share of the Swedish top decile drops sharply over the first eighty years of the twentieth century. Most of the decrease takes place before the expansion of the welfare state and by 1950 Swedish top income shares were already lower than in other countries.”11