Friday, December 14, 2007

That Shiny Nordic Welfare Model: Cato Looks At the Real Stats

We all have heard politicians and pundits (especially on the left, but not exclusively) defend welfare state ideas by referring to the success story of the Nordic countries. It's high time someone actually looked at those regions of the North to see what is actually going on, instead of just jawboning.

[Thanks to for the image.]

Cato has once again pulled through with this article that goes into the real situation.

It turns out the Nordics have indeed succeeded in some areas, but it's not where the welfare people think.

On the bad side, you have the government spending 48 percent of GDP. This is the cost of many of those "great" programs. In the US, this figure is 37 percent (less, but also a lot).

To pay for it all, you have tax revenues. The Nordic's burden averages more than 45 percent, and in the US it's 25 percent, of GDP.

On the other hand, surprisingly, the North has put policies in place that are more free-market than we are. This may shock most of us, and it certainly sets the record straight. According to Daniel Mitchell's article:

"Notwithstanding problems associated with a large welfare state, there is much to applaud in Nordic nations. They have open markets, low levels of regulation, strong property rights, stable currencies, and many other policies associated with growth and prosperity. Indeed, Nordic nations generally rank among the world's most market-oriented nations."

This is a surprise. We all thought they were socialist through and through. Not so.

Also this:

"Every Nordic nation has a lower corporate tax rate than the United States, for example, and most of them have low-rate flat tax systems for capital income. Iceland even has a flat tax for labor income. And both Iceland and Sweden have partially privatized their social security retirement systems."

Wow. So we do have something to learn from those northerners, but it's not the welfare-state lessons you'd think. On the contrary: If their redistribution planning is still standing, it is because they have gone further than we have towards freeing up some of their markets, lowering the tax burden, and privatizing one of the most costly government benefit systems there is.

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Anonymous Ami Ganguli said...

I live in Finland at the moment, and I can say that people here generally feel pretty good about their high tax rate.

For whatever reason, people here appreciate the services they get for their tax money. Decent health care, an excellent education system, amazing transport system considering the population density, comprehensive retirement benefits, and so on.

Recently there was a nursing strike in Finland, and the public was overwhelmingly in favour of increasing taxes to give the nurses a raise.

... Ami.

2:15 AM  

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