Scandinavian Unexceptionalism

Culture, Markets and the Failure of Third-Way Socialism

Nima Sanandaji

• Publisher: London Publishing Partnership
• Year: 2015
• Print ISBN: 9780255367042
• eBook ISBN: 9780255367066
• Edition: 1

This book is important to help an international audience understand the cultural peculiarities behind the Scandinavian "success story". It is also vital that Scandinavians themselves read this book to help them understand the market reforms that are essential for a successful future.

1. Understanding Nordic success

It is a country whose very name has become a synonym for a materialist paradise. […] No slums disfigure their cities, their air and water are largely pollution free… Neither ill health, unemployment nor old age pose the terror of financial hardship.

Time Magazine (1976), describing Sweden
as a social democratic utopia

The left’s admiration for the Nordics

During a visit to Paris, Bruce Springsteen explained that his dream was for the US to adopt a Swedish style welfare state (Nyheter 2012; Business Insider 2012). The famous musician is far from alone in idealising Scandinavian policies. The four Nordic nations (Denmark, Finland, Norway and Sweden) are often regarded as prime role models, the policies of which should be emulated by others. Internationally, advocates of left-of-centre policies view these countries as examples of how high-tax social democratic systems are viable and successful. Paul Krugman, for example, has said: ‘Every time I read someone talking about the “collapsing welfare states of Europe”, I have this urge to take that person on a forced walking tour of Stockholm’ (New York Times 2011).

The admiration of Nordic welfare state policies is far from a new phenomenon. The political scientist John Logue argued in 1979: ‘A simple visual comparison of Scandinavian towns with American equivalents provides strong evidence that reasonably efficient welfare measures can abolish poverty as it was known in the past; economic growth alone, as the American case indicates, does not’ (Logue 1979: 75). Logue believed that the greatest threat to the Nordic welfare states was that they were too successful; eliminating social problems to such a degree that people forgot the importance of welfare policies (Logue 1979, 1985).

In 1994 David Popenoe wrote that ‘Scandinavian welfare and family policies are the envy of [left] liberal-thinking people around the world’. The author continued to remark that he, ‘like most American social researchers’, was ‘largely in support of the Scandinavians’ accomplishments in the area of social welfare’.1 In 2006 Jeffrey Sachs argued in Scientific American that the ideas of liberal economist F. A. Hayek were proven wrong by the Nordic social democracies: ‘In strong and vibrant democracies, a generous social-welfare state is not a road to serfdom but rather to fairness, economic equality and international competitiveness’ (Sachs 2006: 42). This list of admirers could be easily extended.

The high regard comes as no surprise. Nordic societies are uniquely successful. Not only are they characterised by high living standards, but also by other attractive features such as low crime rates, long life expectancies, high degrees of social cohesion and even income distributions. Various international rankings conclude that they are among the best, if not the best, places in the world in which to live. One example is the ‘Better Life Index’, complied by the Organisation for Economic Cooperation and Development (OECD). In the 2014 edition of the index Norway was ranked as the nation with the second highest level of well-being in the world, followed by Sweden and Denmark in third and fourth position. Finland ranked as the eighth best country (Table 1).

1. Ranking in the 2014 edition of the OECD ‘Better Life Index’

   01.	Australia
   02.	Norway
   03.	Sweden
   04.	Denmark
   05.	Canada
   06.	Switzerland
   07.	United States
   08.	Finland
   09.	The Netherlands
   10.	New Zealand

   Source: The Huffington Post (2014).

Another example is the 2013 edition of Mothers’ Index Rankings, where Save the Children rates nations depending on how favourable their social and economic systems are for the well-being of mothers and children. Finland ranks as the best country in the world in this regard, followed by Norway and Sweden in second and third place respectively. Denmark is in sixth position (Save the Children 2014).2

If one disregards the importance of thinking carefully about causality, the argument for adopting a Scandi­navian-style economic policy in other nations seems obvious. The Nordic nations – in particular Sweden, which is most often used as an international role model – have large welfare states and are successful. This is often seen as proof that a third-way policy between socialism and capitalism works well, and that other societies can reach the same favourable social outcomes simply by expanding the size of government. If one studies Nordic history and society in depth, however, it quickly becomes evident that the simplistic analysis is flawed.

Is it only welfare states that make Nordic countries different?

The experience in Sweden, Denmark, Finland and Norway could also easily be used to argue for the benefits of policies oriented towards free markets. It can also be used as a warning of the economic and social problems that can arise when government involvement in society becomes too large. To understand the Nordic experience one must bear in mind that the large welfare state is not the only thing that sets these countries apart from the rest of the world.3

The countries also have homogeneous populations with non-governmental 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 deeper social institutions explain why Sweden, Denmark and Norway could so quickly grow from impoverished nations to wealthy ones as industrialisation and the market economy were introduced in the late 19th century. They also played an important role in Finland’s growing prosperity after World War II.

The same norms explain why large welfare systems could be implemented in the mid-20th century. A strong work ethic and high levels of trust made it possible to levy high taxes and offer generous benefits with limited risk of abuse and undesirable incentive effects. It is important to stress t...

Table of contents

• The author
• Foreword
• Summary
• Editorial note
• 1. Understanding Nordic success
• 2. The Scandinavian free-market success story
• 3. The failure of third-way policies – entrepreneurship
• 4. Job creation during free-market and third-way periods
• 5. Hiding the rise of taxation
• 6. Admirable social outcomes and low levels of inequality before big welfare states
• 7. Success of Scandinavian descendants in the US
• 8. Welfare dependency
• 9. The welfare state – social poverty and ethical values
• 10. Norway vs Sweden – a natural experiment in welfare state reform
• 11. The welfare state and the failure of immigration policy
• 12. Welfare states and the success of women
• 13. Rock stars of free-market recovery
• 14. Scandinavian unexceptionalism
• References
• About the IEA