09/01/2016

Welfare Policies Same Effect On Nordic Countries As Everywhere Else

Veronique de Rugy, Mercatus Center

When outspoken socialist Sen. Bernie Sanders was in the presidential race, he often expressed his dream to turn the United States into a Nordic-type social democracy like the one in Denmark. Hillary Clinton dismissed his comments by claiming that the United States isn't Denmark. But the truth is that at the center of her political platform is an extensive set of Nordic-like government interventions, including paid sick leave, paid parental leave, subsidized child care and a more generous safety net — and higher taxes.

So what's the appeal of Nordic democracies for U.S. Democrats? Writing in The Atlantic, Anu Partanen (a Finn living in the United States) claims that 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."

Partanen admits that Sanders' socialist framing of the policies does the model a disservice. As "a proud Finn" with an American passport, she insists that these policies aren't socialist in nature, saying they don't go against free markets and they aren't about big government; they're about smart government.

We're to believe that Nordic government programs — such as free college, free graduate school and nearly free health care, all paid for with higher consumption taxes — don't involve trade-offs in the form of lower wages as they do everywhere else.

Don't believe it, says Nima Sanandaji, a researcher who grew up in Sweden. His new book, "Debunking Utopia: Exposing the Myth of Nordic Socialism," is a balanced and comprehensive analysis of Nordic public policies, including their home runs and failures. In particular, it nicely lays out the human and social cost of the welfare state.

Welfare policies have the same effects in Nordic countries as they do in other countries. As Nordic people have been asked to pay higher and higher taxes in exchange for the welfare payouts, their incentives to work less and capture government or mandatary company handouts have evolved to the point of undermining the countries' economic foundations. Sanandaji has a lot of data, including some showing how Nordic workers have a stronger tendency to call in sick during sporting events. Maybe the most extreme example is a 41 percent increase of sickness among men in Sweden during the 2002 World Cup, up from 7 percent during the 1988 Winter Olympics.

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4,000 Years Of Price Control

Tablets, said to be 200 years older than the Babylonian Code of Hammurabi ... show that the ancient kingdom of Eshnunna had wage control and price control. The news ought not to have come as a surprise. For the code of Hammurabi itself (unearthed in 1902), which was promulgated earlier than 2000 B.C., fixed prices, wages, interest rates, and fees. This makes price control at least about 4,000 years old. ...

 

Ironically, it is those who now wish to return to this ancient totalitarian device who are fondest of calling themselves “progressives.” They are also fond of saying that those who believe in economic liberty “are living in the nineteenth century.” These controlists have yet to learn that they themselves are still living, as the discoveries in Babylonia attest, in the nineteenth century—B.C.!

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