The Glade 4.0

A Nordic person myself, I left my native Finland seven years ago and moved to the U.S. Although I’m now a U.S. citizen, I hear these kinds of comments from Americans all the time—at cocktail parties and at panel discussions, in town hall meetings and on the opinion pages. Nordic countries are the way they are, I’m told, because they are small, homogeneous “nanny states” where everyone looks alike, thinks alike, and belongs to a big extended family. This, in turn, makes Nordic citizens willing to sacrifice their own interests to help their neighbors....But this vision of homogenous, altruistic Nordic lands is mostly a fantasy. The choices Nordic countries have made have little to do with altruism or kinship. Rather, Nordic people have made their decisions out of self-interest. Nordic nations offer their citizens—all of their citizens, but especially the middle class—high-quality services that save people a lot of money, time, and trouble. This is what Americans fail to understand: My taxes in Finland were used to pay for top-notch services for me.

When I lived in Finland, as a middle-class citizen I paid income tax at a rate not much higher than what I now pay in New York City. True, Nordic countries have somewhat higher taxes on consumption than America, and overall they collect more tax revenue than the U.S. currently does—partly from the wealthy. But, as an example, here are some of the things I personally got in return for my taxes: nearly a full year of paid parental leave for each child (plus a smaller monthly payment for an additional two years, were I or the father of my child to choose to stay at home with our child longer), affordable high-quality day care for my kids, one of the world’s best public K-12 education systems, free college, free graduate school, nearly free world-class health care delivered through a pretty decent universal network, and a full year of partially paid disability leave. As far as I was concerned, it was a great deal.

...But wait, most Americans would say: Those policies work well because all Nordics share a sense of kinship and have fond feelings for each other. That might be nice if it were true, but it’s not, as anyone who has followed recent political debates about immigration or economic policy in Nordic countries understands. Nordics are not only just as selfish as everyone else on this earth but they can—and do—dislike many of their fellow citizens just as much as people with different political views dislike each other in other countries. As for homogeneity, Sweden already has a bigger share of foreign-born residents than the U.S. The reason Nordics stick with the system is because they can see that on the whole, they come out ahead—not just as a group, but as individuals.

...I understand why Sanders supporters believe in his vision, and I can assure them that they are not being the least bit naive. The problem is the way Sanders has talked about it. The way he’s embraced the term socialist has reinforced the American misunderstanding that universal social policies always require sacrifice for the good of others, and that such policies are anathema to the entrepreneurial, individualistic American spirit. It’s actually the other way around. For people to support a Nordic-style approach is not an act of altruism but of self-promotion.

Even so, surely these Nordic “socialist nanny states” pay the price in squashing entrepreneurship and business innovation? This is another refrain I repeatedly hear: Nordic countries have produced no Steve Jobs, no General Motors, and no medical breakthroughs....In reality, however, Nordic nations have produced what is, by any metric, an impressive output of successful entrepreneurs, international businesses, and brands. Sweden has Ikea, H&M, Spotify, and Volvo, to name a few. From Denmark have come Lego, Carlsberg, and one of the world’s largest pharmaceutical companies, Novo Nordisk. A Swede and a Dane co-founded the video calling service Skype. The core programming code of Linux—the leading operating system running on the world’s servers and supercomputers—was developed by a Finn. The Finnish company Nokia was the world’s largest mobile phone maker for more than a decade. And newer players like Finland’s Supercell and Rovio, creators of the ubiquitous video games Clash of Clans and Angry Birds, or Sweden’s Mojang, the publisher of the equally popular video game Minecraft, are changing the face of online gaming.

...Nordic economies go through cycles like all countries, and they make mistakes like everyone else—Finland is in the midst of a recession right now, whereas the Swedish economy is doing phenomenally well. As in any region, some Nordic companies eventually crash and burn, and others never get off the ground. Some continue to dominate their market for decades. This is all as it should be in free-market, capitalist economies—which is what Nordic countries are....Americans are not wrong to abhor the specters of socialism and big government. In fact, as a proud Finn, I often like to remind my American friends that my countrymen in Finland fought two brutal wars against the Soviet Union to preserve Finland’s freedom and independence against socialism. No one wants to live in a society that doesn’t support individual liberty, entrepreneurship, and open markets. But the truth is that free-market capitalism and universal social policies go well together—this isn’t about big government, it’s about smart government.

In the period from 1870 to 1970 the Nordic countries were among the world’s fastest-growing countries, thanks to a series of pro-business reforms such as the establishment of banks and the privatisation of forests. But in the 1970s and 1980s the undisciplined growth of government caused the reforms to run into the sands. Free-marketers put the region’s impressive recent performance down to its determination to reduce government spending and set entrepreneurs free.

Government’s role in improving equality is also being questioned. Andreas Bergh, of Sweden’s Research Institute of Industrial Economics, argues that the compression of Swedish incomes took place before the arrival of the welfare state, which was a consequence rather than a cause of the region’s prosperity—and almost killed the goose that laid the golden eggs.

As for homogeneity, Sweden already has a bigger share of foreign-born residents than the U.S.

If one considers the employer portion of the payroll tax to be a part of the employee's income, this means that a West German making a gross income of 60,930/year who saves 25% of his net income effectively is paying tax of 45,410 EUR on an income of 71,226 EUR, or a total effective tax rate of 63.8%.

I'm not sure I understand this sentence. Are you assuming 25% savings in order to calculate consumption tax paid on the remaining 75%? Also, you start by assuming a gross income of 60,930 EUR but conclude by citing an income of 71,226 EUR. Which is it, and why so specific - are you pulling these numbers from a particular source?

So, out of curiosity, I just did a similar back of the envelope calculation for someone living in NY State making $80,000 USD (the same as 71,226 EUR after exchange) and came up with an effective tax rate of 41.1%. That assumes a single filer with no dependents and the same 25% savings rate you assumed, and it includes the employer share of payroll taxes as in your example. So, if the effective tax rate on that income level in Germany is 63.8% and the effective rate in NY is 41.1%, that's a difference of 22.7% or $18,000. That's definitely a big difference, as you said, but how much of that $18k does that hypothetical New Yorker spend on health care/insurance and college loans, how much of it does he have to set aside to pay for his future kids' childcare and eventual college, to hedge against periods of unemployment and family leave, to make his own retirement more comfortable, etc.? That's the point of the article - Europeans aren't giving the extra $18k away to others, they're paying to have all those services provided for themselves. I'm not saying it's necessarily a good trade - I think some of it is and some of it isn't. I'm just saying that I find the argument that the extra taxes are about getting extra services not helping others is a persuasive one that's often missing from the American debate.

Universal healthcare / education are good
things when done well.

I might be moving to New Jersey soon. A 20% tax cut would be nice. I wonder how accurate your envelopes are ;p

19 Yet she became more and more promiscuous as she recalled the days of her youth, when she was a prostitute in Egypt. 20 There she lusted after her lovers, whose genitals were like those of donkeys and whose emission was like that of horses.

But what about when it doesn't benefit me?

I never used public schools, nor does my daughter.

I've never relied on the social safety net.

I have better health care than is available in Europe.

But what about when it doesn't benefit me?

I never used public schools, nor does my daughter.

I've never relied on the social safety net.

I have better health care than is available in Europe.

And yet you drive on public roads, your neighborhoods are patrolled by public law enforcement, your food and drugs are protected by federally mandated quality standards, your freedom is protected by the US military, your recreational activities are the direct result of US gov't funded research projects.

Keep in mind, you're talking to someone who seriously put forth the idea that FDR allowed the Pacific Fleet to be sunk at Pearl Harbor so that new battleships could be ordered - despite the fact that every battleship built during WWII was already on order at the time, and the physical capacity to build any more did not exist.

19 Yet she became more and more promiscuous as she recalled the days of her youth, when she was a prostitute in Egypt. 20 There she lusted after her lovers, whose genitals were like those of donkeys and whose emission was like that of horses.

He is?

Odd that I'm not aware that I hold or held that position. Perhaps you'd like to source it?

Americans at the time of WW2 had a much more isolationist mentality. They, overwhelmingly, showed little support for America's involvement in the War. It required a direct attack on American soil in order to begin the beat of the American War Drum. Additionally, with FDR's belief in the reliability of the broken window theory, sunken battleships simply created a need to build more battleships, which in his mind was good for the economy.

Battleships sinking wouldn't have mattered to an early Keynesian. It would have been a boon to the economy in his eyes.

But what about when it doesn't benefit me?

I never used public schools, nor does my daughter.

I've never relied on the social safety net.

I have better health care than is available in Europe.

TheRiov:
Perhaps you'd care to address my specific objections rather than paper over them?