Garrett MacDonald sent me a very good article from the Economist:
Since then the Nordics have changed course—mainly to the right. Government’s share of GDP in Sweden, which has dropped by around 18 percentage points, is lower than France’s and could soon be lower than Britain’s. Taxes have been cut: the corporate rate is 22%, far lower than America’s. The Nordics have focused on balancing the books. While Mr Obama and Congress dither over entitlement reform, Sweden has reformed its pension system (see Free exchange). Its budget deficit is 0.3% of GDP; America’s is 7%.
On public services the Nordics have been similarly pragmatic. So long as public services work, they do not mind who provides them. Denmark and Norway allow private firms to run public hospitals. Sweden has a universal system of school vouchers, with private for-profit schools competing with public schools. Denmark also has vouchers—but ones that you can top up. When it comes to choice, Milton Friedman would be more at home in Stockholm than in Washington, DC.
All Western politicians claim to promote transparency and technology. The Nordics can do so with more justification than most. The performance of all schools and hospitals is measured. Governments are forced to operate in the harsh light of day: Sweden gives everyone access to official records. Politicians are vilified if they get off their bicycles and into official limousines. The home of Skype and Spotify is also a leader in e-government: you can pay your taxes with an SMS message.
This may sound like enhanced Thatcherism, but the Nordics also offer something for the progressive left by proving that it is possible to combine competitive capitalism with a large state: they employ 30% of their workforce in the public sector, compared with an OECD average of 15%. They are stout free-traders who resist the temptation to intervene even to protect iconic companies: Sweden let Saab go bankrupt and Volvo is now owned by China’s Geeley. But they also focus on the long term—most obviously through Norway’s $600 billion sovereign-wealth fund—and they look for ways to temper capitalism’s harsher effects. Denmark, for instance, has a system of “flexicurity” that makes it easier for employers to sack people but provides support and training for the unemployed, and Finland organises venture-capital networks.
The sour part of the smorgasbord
The new Nordic model is not perfect. Public spending as a proportion of GDP in these countries is still higher than this newspaper would like, or indeed than will be sustainable. Their levels of taxation still encourage entrepreneurs to move abroad: London is full of clever young Swedes. Too many people—especially immigrants—live off benefits. The pressures that have forced their governments to cut spending, such as growing global competition, will force more change. The Nordics are bloated compared with Singapore, and they have not focused enough on means-testing benefits.
All the same, ever more countries should look to the Nordics. Western countries will hit the limits of big government, as Sweden did. When Angela Merkel worries that the European Union has 7% of the world’s population but half of its social spending, the Nordics are part of the answer. They also show that EU countries can be genuine economic successes. And as the Asians introduce welfare states they too will look to the Nordics: Norway is a particular focus of the Chinese.
The main lesson to learn from the Nordics is not ideological but practical.
Other than “means-testing,” I entirely agree.