10 August 2016

Debunking Utopia #3: perfect social democracy won’t give you Shangri-La


Sweden is officially the “goodest” country in which one can live in. At least this is true according to the Good Country Index, a league table based on 35 different indicators of how a nation contributes to a better world. Sweden not only has the highest total score amongst the countries in the world, but also the highest score in two of the sub-categories: health & well-being, as well as prosperity & equality. Denmark, another Nordic country known for its large welfare state, ranks in second place. Finland has the 7th spot, followed by Norway in 13th. The United States is found well below, on 20th place. The Nordic countries also stand out as being exceptionally successful in other rankings, such as the OECD Better Life Index. Perhaps this explains why so many Americans on the left are pushing for the idea that the US should adopt a Nordic-style welfare state? After all, why not strive to make America a better country using the best countries in the world as a role model?

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There is no lack of top politicians (such as Barack Obama, Bernie Sanders and the Clintons), left-leaning academics or Hollywood celebrities who admire the social system in Nordic countries. Nearly all of them make a simple assumption: if America adopts Nordic policies, American society will shape into a Nordic society. To paraphrase the movie Field of Dreams, “If you build it, he will come.” But does this assumption make sense? Countries like Belgium and Italy also have high government expenditure and welfare policies based on socialist ambition. Why wouldn’t America turn out to be the next Italy or Belgium? I am sure there is a point to be made about the benefits of generous welfare systems in these countries. At the same time, it is obvious that social challenges such as unrest, high unemployment, and stagnant growth exist in southern European welfare states. They are far from the Nordic Shangri-La.

Ideologues on the left often simply avoid this question, but from an intellectual perspective it is quite intriguing. When you think about it, have states in America that have moved toward social democratic policies, such as California, been able to replicate the success of Nordic societies? Or have their outcomes been more in line with the welfare states of southern Europe? The point isn’t to dismiss the idea of welfare policies, but to have realistic expectations on the limits of policy.

To understand the Nordic experience, one must 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 are features that the Nordic countries have in common with Switzerland, a country with low taxes and a small government which also tends to rank highly in various international comparisons. Perhaps most interesting is that the good outcomes existed well before the introduction of large welfare states in the Nordics.

Around 1960, the Nordic countries had low taxes and limited government. Government involvement in their economies was minimal, the incentives to work was strong, and welfare was focused on basic support rather than the modern cradle-to-grave idea. Interestingly, Nordic countries were already exceptionally successful then .

Life span and child mortality are two of the most common metrics of social success, for which historical data can be found. In the images below I show the global ranking of countries which have the highest life spans. I look at the data during three points in time – 1960, when Nordic countries had small public sectors, 2000, at the peak of Nordic welfare states (before the recent years’ reductions in tax and of the generosity of welfare policies) and lastly 2013, latest available data.

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The findings are quite interesting. 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.

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.

Let’s do the same comparison, this time with child mortality. 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. 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 favour 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?

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Again, we can turn to a global analysis. The table above 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 low taxes and small public sectors. 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?

A simple idea, that many on the left cling to, is that good social outcomes exist in countries with large welfare states. This argument rests on the success of the Nordic states, and to a smaller degree their neighboring countries such as the Netherlands and Germany, which share a unique North-European culture. For some reason few people have been interested in examining the roots of this social success. As it turns out, the explanation is culture, and perhaps also the successful small welfare states – supported by low taxes – that were introduced in Nordic countries during the first part of the 20th century. The case certainly isn’t that the success materialized with the transition to large welfare states. If anything, Nordic countries fell somewhat behind as they made the shift to big government.

Why not learn from the true story of how countries achieve social success, and move towards a deeper understanding of society which emphasizes the importance of deeper social institutions, rather than just assuming that society is formed by politics.

Dr. Sanandaji’s latest book, ‘Debunking Utopia – Exposing they myth of Nordic socialism’, is published on the 16th August by WND books, RRP £12.97.

Dr. Nima Sanandaji is president of the European Centre for Policy Reform and Entrepreneurship.