Last week, we received a wonderful comment from a close friend. It was in response to this article:
This piece stumbled into an uninformed tirade: the market economy is booming in European democracies. Even outside of tourist meccas, businesses are thriving with no empty store spaces. Locals buy fresh, mostly organic food; overnight delivery at our building’s doorstep every day; latest smart phones everywhere; cellphone plans and wireless at $25 monthly, so you can stream at will; clean filtered water not just from refrigerators, but in the building. Students don’t just get a free education, they get living expenses for an apartment, and dinner out – even on Mondays. If you are ill, doctor practices are everywhere, excellent doctors at local hospitals take care of you free of charge. Uninsured foreigners pay $170 for a night at the ER alone in a room, including batteries of tests. Expectant mothers take off 6 weeks before childbirth and 8 after (fathers too!), with full pay; one parent can take a three-year job break with job-retention guarantee. At the maternity, spend a week to recover and learn how to take care of baby. The social system guarantees that you have a decent home, but you can refuse help and live in the street (you do see homeless people – with smart phones).
The article was probably not very well written, since while it proposed an affection for the market economy, it was somehow taken as an indictment of European or Nordic countries, a premise being that they are somehow socialist countries. While we are very critical of the nascent social democratic movement by the American Left, we still wanted to address what many perceive as successful socialist states, such as Norway or France. They are not socialist countries at all, as an investigation of Nordic countries such as Norway or Denmark will show (since we are lazy and pressed for time this week, a focus on smaller countries like Norway is what we have).
It is not unusual to hear Democratic Socialists say that their model is the “Nordic”. However, in global ranking of economic liberty, Nordic nations score relatively high, with Denmark and Finland in the top 20. Scandinavian nations do have large welfare states, but otherwise have very laissez-faire economic policies. In Norway, they are geographically blessed with large amounts of oil; the country is very wealthy because of it.
Private property is guaranteed by law and citizens’ savings are fully private and free of government control. All Nordic countries have been lowering the tax wedge and — until the recent US tax cuts — had lower corporate tax rates than the US.
The state does not dictate or impose schooling and healthcare (most have co-payment schemes). It simply administers and promotes choice between private and state-run services.
They are leaders in private banking, which finances the vast majority of economic activity (80%).
They are leaders in attracting capital, guaranteeing legal security and private investment.
Nordic countries are also leaders in the privatization of inefficient state-owned entities and applying world-class private company corporate governance and defending shareholder interests in semi-state owned companies (Statoil, etc).
The economy is generated from the private sector, which finances more than 60% of research and development, and government applies private-sector best practices of efficiency and transparency in the management of public services
Nordic countries have carried out successful privatizations of state sectors, from telecommunications to electricity generation and distribution. Even the postal service and some forests were privatized.
They have a labor market that is among the most flexible in the world.
There is also willingness of citizens to work and pull together. Historically, Nordic nations were descended from large family farms
The success of the Nordic countries has been to take pro-market measures, privatize inefficient sectors and guarantee private property, wealth creation as well as legal and investment security.
Theirs is a unique combination of free market capitalism and social benefits that have given rise to a society that enjoys a host of top-quality services, including free education and free healthcare, as well as generous, guaranteed pension payments for retirees.
It is understood that there is no welfare state without a thriving private sector, economic freedom, and private investment and that the public sector is there to facilitate, not absorb the country’s economic activity.
Not so much Socialist, but more robust welfare system in a capitalist society–all the benefits of capitalism, with a huge safety net.
The articles Scandinavian Unexceptionalism by Nima Sanandaji and “The Secret of their Success” in The Economist were referenced here.