Much like long life spans and low child mortality, even income distribution evolved in the Nordics before the transition to large welfare states.
A recent paper by economists Anthony Barnes Atkinson and Jakob Egholt Søgaard similarly looks at the evolution of income equality in Denmark. The authors find that income equality evolved in Denmark during the last part of the nineteenth century and the first half of the twentieth century. Most of the shift toward higher equality happened before the introduction of a large public sector and high taxes. The same paper explains that equality in Sweden and Norway mainly grew until 1970; that is to say, during the period when the Nordic welfare states were still relatively modest in size. The shift toward equal incomes continued somewhat until the mid-1980s, and has since reversed to somewhat higher inequality. In short, for all three countries equality mainly evolved before large welfare states.12
My brother, Tino Sanandaji, wrote in another study: “American scholars who write about the success of the Scandinavian welfare states in the postwar period tend to be remarkably uninterested in Scandinavia’s history prior to that period. Scandinavia was likely the most egalitarian part of Europe even before the modern era. For example, it was the only major part of Western Europe that never developed full-scale feudalism and never reduced its farmers to serfdom.”13
Historic data for income equality only exists for a few countries, but modern data is easier to find. On the next page the present top-ten list of the most equal economies are shown. Certainly we can see that the Nordic countries all have equal wealth distributions. There is also another group of countries that share the top-ten list, namely Slovenia, the Slovak Republic, and the Czech Republic. Slovenia, in fact, has the highest income equality in the world. The common feature between these two groups of countries is not welfare policy or income distribution. Slovenia, the Slovak Republic, and the Czech Republic have lower, and relatively flat, taxes. What they do share with the Nordics is homogenous populations. A homogenous population means that the majority of citizens share the same culture. When this is the case, unsurprisingly, incomes are likely to be more similar than in countries with big differences in culture. In fact, we know that the large differences in culture in the United States is a main cause of high inequality.14
Why do American ideologues and politicians on the left want to copy Nordic policies rather than the policy of Slovenia, which has the highest income equality in the world? Is it because they prefer the policies of Denmark, where taxes amount to 51 percent of the economy (the highest rate in the world) over those in Slovenia, where taxes are 37 percent? Why not be inspired by the Czech Republic, with a 34 percent tax rate, or the Slovak Republic with a 31 percent tax rate?15 Could it be that they prefer a high-tax system? Or is it because they don’t understand that the common feature is the high level of homogeneity among populations whose cultures emphasize individual responsibility?
TOP TEN COUNTRIES WITH LOWEST INCOME INEQUALITY 2010–2014 AVERAGE (LATEST DATA)
1.Slovenia
2.Denmark
3.Norway
4.Iceland
5.Slovak Republic
6.Czech Republic
7.Finland
8.Belgium
9.Sweden
10.Austria
Source: OECD Stat Extract
What, exactly, is responsible for this culture of success in Nordic societies? What – other than the common answer, social democracy – explains the admirable social outcomes they experienced even before introducing large welfare states? The next part of this book attempts to answer this question through a historical outlook and a comparison between Nordics on both sides of the Atlantic.
Part 2
THE NORDIC CULTURE OF SUCCESS
3
COFFEE-CONSUMING WORKAHOLICS
HAVE YOU EVER VISITED SWEDEN, Denmark, Norway, Finland, or Iceland? Perhaps even worked there? If so, I would wager that you have noticed that people who live there have a unique way of interacting with one another. For example, a strong sense of cooperation exists in most workplaces. Employers and employees pull in the same direction, and therefore management practices are often relaxed. Nordic companies can give employees a lot of freedom without sacrificing efficiency.1 The book Understanding Cross-Cultural Management explains: “The Viking heritage of self-sufficiency, fairness, egalitarianism and democracy is reflected in the way Scandinavian business is run. In most companies, bosses are seen more as team leaders and groups facilitators as opposed to being decision makers who delegate tasks to others. As such, employees are often encouraged to express their opinions freely at meetings and everyone’s opinion is given consideration when making decisions.”2
People from the Nordics are valued as employees abroad, since the concept of strong Nordic work ethics is widely recognized.3 When directly asked, the large majority of workers in the Nordics see themselves as totally committed to their employer. As the following comparison shows, this is not the case for most other countries in Europe.4
SHARE OF WORKERS IN EUROPE “TOTALLY COMMITTED TO THEIR EMPLOYER”
COUNTRY
PERCENT
POLAND
65
SWEDEN
65
NORWAY
63
DENMARK
53
NETHERLANDS
47
SWITZERLAND
46
LUXEMBOURG
45
IRELAND
44
BELGIUM
43
GERMANY
43
UNITED KINGDOM
42
FRANCE
41
ITALY
39
PORTUGAL
28
HUNGARY
25
RUSSIA
16
Source: Kelly Global Workforce Index (2010).
Perhaps you have noticed that your Swedish friend is always on time? And when you are five minutes late, she has a disappointed expression on her face. This is also a typical cultural trait. In Cross-Cultural Business Behavior: A Guidebook for Those Who Work in Different Countries, we read: “Business people from the four Nordic cultures definitely share a monochronic orientation to time. They value punctuality, follow meeting agendas and tend to adhere to schedules.”5 One of the first things I have taught my friends who have moved to Sweden is that they have to respect the clock. In other parts of the world, promising to show up for dinner at eight o’clock means that you will be there somewhere between eight or nine. In Sweden, it means that you should be ringing the doorbell exactly when a few minutes have passed after eight (since being early to dinner is a greater sin than being late). If it is a work meeting, you should instead be there a few minutes in advance. Another cultural feature that is connected to working life, and difficult to miss, is the Nordic obsession with coffee.
When David Kamp reviewed Stieg Larsson’s hit Swedish crime trilogy for the New York Times, he expressed surprise about how many of the scenes revolved around servings of coffee: “Larsson’s is a dark, nearly humorless world, where everyone works fervidly into the night and swills tons of coffee; hardly a page goes by without someone ‘switching on the coffee machine,’ ordering ‘coffee and a sandwich’ or responding affirmatively to the offer ‘Coffee?’”6 Roberto Ferdman replied in the Atlantic that “the coffee obsession has much less to do with Larsson than it does with Sweden.” As Ferdman explains, the Nordic countries top the global rankings when it comes to the average number of coffee cups consumed. Finns, Swedes, Danes, and Norwegians gulp down more cups than Americans.7 Indeed, as shown in the table below, coffee consumption is three times as high in Finland as in America.8 Turkey and Italy, famous for their strong coffee, don’t even come close. In these countries, small cups of thick coffee are consumed. In the United States, coffee is often served in large cups but is frequently quite weak. In the Nordics, the cups are both large and filled to the rim with strong coffe
e.
COFFEE CONSUMPTION PER PERSON IN SELECTED COUNTRIES
COUNTRY
CONSUMPTION PER DAY PER CAPITA
FINLAND
12.3 KG
NORWAY
9.7 KG
DENMARK
8.7 KG
SWEDEN
7.3 KG
ITALY
5.7 KG
UNITED STATES
4.2 KG
UNITED KINGDOM
2.8 KG
TURKEY
0.5 KG
Source: International Coffee Council (2012).
Researcher Taija Ojaniemi explains that the high rate of coffee consumption in his home country of Finland might seem as something of a puzzle. Coffee cannot be grown in Finland, or anywhere near it. Over the years, coffee consumption in the country has been restricted by legislation, economic crises, and periods of warfare. So why are Finns so addicted to the beverage? Ojaniemi theorizes that the culture of coffee drinking can be related to historic attempts to ban alcohol, as coffee can be seen as an alternate social drink. Another theory is that coffee consumption is related to working culture: “An average middle-aged Finn drinks most of his or her coffee during the statutory coffee breaks at work. These breaks are important social events that maintain the employees’ working morale and group spirit. At many Finnish workplaces, the coffee is free and workers can drink as much as they like.”9
[The Nordic preoccupation with coffee] is a vivid example of the long-term obsession Nordic societies have with creating a culture focused on hard work.
Coffee was introduced in the seventeenth century when Finland was still part of the Swedish Kingdom. The new drink was suspected of deteriorating the citizens’ work ethics and the productive capacity of the nation. Ojaniemi explains: “Coffee was banned altogether four times in the eighteenth century on the grounds of its negative effect on the national economy, public health and work ethics.”10 The historical fear of coffee as a productivity inhibiter, and its modern embrace as a productivity enhancer, is a vivid example of the long-term obsession Nordic societies have had with creating a culture focused on hard work. But what is the origin of this unique mind-set? It seems that religion, climate, and history have all played a role in forming the Nordics into coffee-consuming workaholics.
Over a hundred years ago, German sociologist Max Weber observed that Protestant countries in northern Europe tended to have a higher living standard, better academic institutions, and overall more well-functioning societies than in other parts of Europe. He believed that the cause of the success of Protestant nations was to be found in a stronger “Protestant work ethic.”11 Swedish scholar Assar Lindbeck later built upon this theory by looking at factors other than religion. He explained that it has historically been difficult to survive as a farmer without working exceptionally hard in the hostile Scandinavian environment. The population, therefore, out of necessity adopted a culture with great emphasis on individual responsibility and hard work.12 This is in line with the ideas put forth by Greek philosopher Aristotle, who already by the 300s BC observed that people in cold countries had to strive harder than those in warmer countries in order to survive.13
What is unique about Nordic countries is that they are not only cold, but have also through most of their recent history been dominated by independent farmers. In most other parts of the world, the majority of farmers did not own their land, and were instead landless workers, indebted laborers, or slaves. Groups such as Russian serfs could often face even greater hardship than the independent Nordic farmers. However, strong working ethics do not arise simply from hardship, but rather from a situation where hard work is clearly rewarded. The returns of intense labor and investments are much more significant in systems where property rights are extended to broad segments of the population. While Russian serfs got a meager reward even if they worked hard, Nordic farmers could enjoy the fruit of their labor. Nordic agriculture fared better than in Russia since the Nordics were early adopters of one of the key elements of the free market system: widespread property rights.14 This corresponds with Thomas Jefferson’s description of independent farmers in the United States as “the most virtuous and independent citizens.”15 The Nordic climate and economic system was thus for generations, well before the rise of industrialism, characterized by environmental and societal conditions that promoted norms related to work and responsibility.
A vivid example is given by a poem written by Swedish poet Johan Ludvig Runeberg. After a visit to the town of Saarijärvi in middle Finland during the 1820s, Runeberg wrote about the local population’s harsh struggle for survival. The poem depicted the labors of the farmer Paavo, who strove to support his family by working the land in the inhospitable climate. Floods during the spring and hailstorms during the summer ruined much of the crops. The cold during the autumn destroyed the remainder. Paavo and his wife were forced to mix bark in their bread to survive the coming year, a common tradition among farmers in this part of the world. During the next year the Finnish farmer worked hard digging trenches to improve his farmland. Again however he was rewarded with a meager harvest due to unfortunate weather. The family mixed even more bark in their bread to survive the second year, and Paavo worked the land even harder. Finally, the third year’s harvest was not destroyed by the weather. Paavo’s wife happily exclaimed that they could now afford to eat regular bread. But Paavo insisted that they continue to mix in bark in their bread, since they ought to share food with their neighbors, whose harvest had been ruined by the cold.16
The United States will not simply transform to Sweden or Denmark by expanding the size of government and raising taxes.
The descriptive poem illustrates that those who lived off the land in the harsh Nordic nations needed to have not only a stoic resolve to work hard and plan ahead, but also social trust and cohesion. Without hard work and cooperation, Paavo’s family and their neighbors would find it difficult to survive. The poem also clearly illustrates that the independent farmers, in contrast to landless peasants in many other parts of the world, had much to gain from working to improve the productivity of their farms. These nuances of Nordic history don’t seem to interest the admirers of Nordic-style social democracy in America. However, once we understand the deep-rooted cultural roots of Nordic achievement, we can better understand why the United States will not simply transform to Sweden or Denmark by expanding the size of government and raising taxes. It is the norms of cooperation, punctuality, honesty, and hard work that largely underpin Nordic success.
Historic sources show that Nordic people for generations have been seen as industrious and honest. An encyclopedia from 1834, for example, tells us, “The Swedes … bear the national character of bravery, frankness, honesty, and hospitality…. The men are in general tall, robust, sincere and industrious.”17 In another book, published the same year, Danish-French geographer and journalist Malte-Brun wrote about the excellent roads that had been built in Sweden, and how the civil rights of the peasantry were protected in Sweden as well as in Finland (which was part of Sweden at the time).18 A history book about the Nordics, published in 1838, extends a similar description to the Norwegians: “The Norwegians may be considered an industrious people; but from the poverty and limited resources of the country, their genius is compelled to operate within a narrow sphere, and can rarely avail itself of extensive improvements.”19 The common theme from historic sources is that the Nordic people were honest and hardworking, doing their best to survive and thrive in their countries unforgiving climates. It is this historic heritage on which much of the region’s current success rests. Perhaps we shouldn’t be surprised that the same peoples in generations past, although their lands were rather unfruitful, conquered much of northern Europe, settled far-reached islands, and even established colonies in North America well before Christopher Columbus was born.
Although norms, values, and other aspects of social capital are inherently difficult to measure, they are nonetheless extremely important for
creating well-functioning societies. A good illustration is how levels of trust vary between different societies. The more we trust strangers, the safer we feel. High levels of trust and trustworthiness also affect prosperity. The simple reason is that the more we can trust each other, the more we can trade and cooperate with others. From an anecdotal perspective, many individuals from Nordic countries who work abroad are told by their business associates that Nordic people are generally trustworthy. Researchers have shown that this view on trustworthiness has merit. In surveys the Nordic people indeed stand out as among the most trusting in the world.20 A study by Jan Delhey and Kenneth Newton shows that the countries in the region combine all the features traditionally associated with high levels of trust. The authors wrote, “High trust countries are characterized by ethnic homogeneity, Protestant religious traditions, good government, wealth (gross domestic product per capita), and income equality. This combination is most marked in the high trust Nordic countries.”21
Debunking Utopia Page 4