The Nordic Model: Misconceptions.

Progressives and the general Left in America often point out the Scandinavian states of Norway, Sweden, Finland, and Denmark as examples of successful Welfare States and benevolent “big” government. These nations have high standards of living, highly developed economies, enormous social safety nets, and high personal taxation. Polls often reflect a high level of happiness among the populations of these nations; Finland was even declared “The Best Country in the World to Live in” by Newsweek magazine for 2010. Heavily government-subsidized healthcare, education, and welfare programs are hallmarks of the loose economic system that is called the “Nordic Model”.

The existence of the Nordic Model often confounds amateur libertarians. The general happiness and prosperity experienced in the Nordic Nations seems totally juxtaposed against the backdrop of such a massive State presence, yet it is surely so. This makes the general Left feel very smug, and the amateur libertarian feel very stupid. However, neither the amateur libertarian nor the common Leftist understand all of the elements involved.

A fact rarely mentioned by the general Left when praising the Nordic nations is this: All of their governments have embraced free market and laissez-faire policy towards business, barring the labor market. All of the aforementioned nations rank closely to the USA in terms of general economic freedom and ease-of-doing-business. When the elements of economic freedom are broken down even further, some of the Nordic nations are even freer in certain economic respects than the USA. The chart below, based on the 2013 Index of Economic Freedom produced by the Heritage Foundation, displays the comparisons between the Nordic nations and the USA:

Numbers in red indicate where Nordic nations outrank the USA in terms of freedom.

Numbers in red indicate where Nordic nations outrank the USA in terms of freedom.

As you can see, all of the Nordic nations are considered freer in terms of Property Rights, Freedom from Corruption, Business Freedom, Monetary Freedom, and Trade Freedom.  Except for Norway, which is neck-and-neck with the USA, the Nordic nations also outrank the USA in terms of Investment and Financial Freedom.

To understand a nation’s economy, it is important to know their history: In the late 1800s, the Nordic nations began to heavily liberalize their business atmospheres, finally tapping into the potential of the industrial revolution. Prior to the 1960s, all of the Nordic nations also boasted modest taxes and low government spending, largely mirroring the levels of the USA. Due to the laissez-faire atmosphere and low levels of taxation, each of the Nordic nations were able to generate a fabulous amount of wealth, becoming some of the richest nations in the world by the mid-1950s. It was not until the 60s and 70s that the Nordic Model of welfare began to emerge amongst an increasingly socialist trend in the political atmospheres of each nation.

Throughout the 70s and into the 80s, each nation experienced astronomical increases in government spending, taxation, and regulation, leading to a general decline in GDP. This culminated in the early 1990s with a large recession sweeping across Scandinavia. Unemployment spiked nearly 10% across the board, with some nations seeing over a 5% decrease in GDP from 1990 to 1993. Only Norway and its vast oil reserves largely weathered the storm. In response, the governments of the Nordic nations returned to their prosperous roots by lifting numerous regulations and laws regarding business and finance, going from downright socialist to exemplary capitalist within the span of a few years. Sure enough, recovery arrived by the year 2000, although traces of the recession remain (largely in evident unemployment, especially in Sweden) to this day.

“Nordic Socialism” can only exist due to the pervasive free-market attitude of the Nordic nations. They are, for the most part, excellent capitalists. Were it not for significant and far-reaching laissez-faire reforms, the Nordic Model would have collapsed long ago. This is something that the general Leftist at best does not know, and at worst purposefully ignores.

This demonstrates that general Leftists and amateur libertarians make a fatal error when considering the Nordic Model: confusing an effect for a cause. The developed economies and prosperity of the Nordic Nations are in no way due to the benevolent presence of “Nordic Socialism”. Quite the contrary. The Nordic nations are prosperous IN SPITE OF the prevalence of “Nordic Socialism”. This is because the Nordic nations discovered that gaggles of bureaucrats commanding the economy at gunpoint cannot hold a candle to the productive power of self-directing individuals working in a system of free-enterprise and free-trade. Barring the labor market, businesses in the Nordic nations are relatively free to seek profit and make voluntary transactions with others as they please, free from nigh-arbitrary government mandates enforced with threats of violence.

It is impossible to have a Welfare State with any measure of success unless the money is there to pay for it. This is why only two types of nations can have far-reaching Welfare States that have only creeping negative impacts: 1) Laissez-faire, free market nations, and 2) nations sitting on fabulous resource wealth, such as Qatar and Kuwait. Many Welfare States are a mixture of the two. The mainstream Progressive in America often speaks out against “unfettered free-trade and capitalism”, and in favor of expanding social safety nets and extending subsidized benefits. They are trying to have their cake and eat it, too. They cannot have both.

Later, I will discuss the Nordic Welfare State itself with more detail in regards to education, healthcare, social safety nets, taxation, and the labor market. Stay tuned.

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4 Comments on “The Nordic Model: Misconceptions.”

  1. Renee Becker May 25, 2013 at 2:18 am #

    I’m interested to see your take on the Scandanavian model for education.

    • mastodon176 May 25, 2013 at 3:13 am #

      Coming soon.

  2. LC West April 21, 2016 at 7:46 pm #

    “Progressives….Welfare States and benevolent “big” government.”

    — Never have I heard any progressive use those words or even hint to that rhetoric you are writing. What I have heard many times from progressives is how impressed they are with the Nordic economic system and how well it is works for the entire population, compared to the oligarchy here in the U.S. that only works for a few.

    Have you ever played the game Monopoly? — That game is useful for explaining the GOP/Koch vision for America’s free market system.

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