Skip to comments.Is there any TRULY Capitalist nation on Earth?
Posted on 04/19/2008 2:08:46 PM PDT by WesternCulture
Yes there is.
Read on and you'll find out about it.
Capitalist paradise exists here on Earth.
However, it comes with a price tag called "competence".
Most of the world lacks this "competence" and will have a hard time aquiring it, because it is a matter of spirit, a spirit that I'm convinced most parts of the world ever will fail to aquire.
In my opinion, Scandinavia leads the world in true Capitalist endeavour (check out how many multinationals we possess in realation to population size).
The explanation for this tradition of entrepreneurship is not Scandinavian "Socialism". Sooner, it is a question of Scandinavian FREEDOM.
While continental Europeans suffered under the yoke of Feudalism, Scandinavians were running their own farms!
This is a MAJOR and often overlooked explanation behind our unparalled competence in the field of producing successful companies as well as producing wealth. Entrepreneurship is more or less in our blood.
Our prosperity is NOT a matter of coincidence.
I am a son of Gothenburg, Sweden, Scandinavia.
The region of Gothenburg is a part of Europe which would be churning out heavy trucks, buses, luxury cars and heavy industrial equipment even if she daily was struck by nuclear assaults.
It's a question of work ethics combined with self-reliance. Without a widespread attitude like this, Sweden wouldn't house more BMWs per capita than Munich, the home of BMW, or more Audis/capita than Ingolstadt etc, etc.
While continental Europe is away from its 6 hour work day due to ridiculous strikes, Scandinavia is working overtime.
The founding of the major port city of Gothenburg here on the West Coast of Sweden meant the guaranteed death of Danish hegemony over the Baltic region (Sweden could hereby reach the Seven Seas) and in the end, even our Viking brothers and sisters in Denmark accepted the cold, hard, concrete reality of Gothenburg - today a thriving little city of (almost) one million inhabitants on the go.
I've found out people from this home city of mine seldom reflect upon the fact that we DESERVE to drive around in luxury cars, travel around the world and live in affluence. We take it for granted. But why is this so? I think it's because a true lifestyle of progress can be taught.
In Gothenburg, you'll meet with few inhabitants who claim they're rich (even if their family owns two houses and a Volvo XC90). BUT, if you ask them if they feel strongly convinced their sons and daughters will be even better off than they, they'll answer:
THIS is a sign of a well functioning Capitalism structure.
I've never been a soldier, but I sure have experienced a frontline;
The assembly line of Volvo - Try it, you won't like it.
Still, Volvo is an extremely well run company (although Ford isn't) and I'm proud of living in a country where such an example of modern Capitalism (and American-Swedish cooperation) exists.
For better or for worse, Scandinavia is a part of the world where Capitalism is still given chance - by ordinary, hard working, responsible people.
I doubt there is ANY part of the Earth that boasts such a work ethic as Sweden, Denmark, Iceland, Norway and Finland.
The only part of the world that can compete is Eastern Europe (and hardly surprising, the economic development of this part of Europe is a completely different story compared to Germany, France and Italy - the sick core of a magnificent, giant economy).
Did you write that? If so - inspiring.
Thanks from an Ayn Rand fan.
I was kinda under the impression that Sweden had 60% income tax, etc.
Who is John Galt?
“I doubt there is ANY part of the Earth that boasts such a work ethic as Sweden, Denmark, Iceland, Norway and Finland.”
In no way, form, or fashion should Norway be included in this grouping.
Hours worked per year
United States: 1841
except for the welfare part....
On an average day, about 25 percent of Norway’s workers are absent from work, either because they have called in sick, are undergoing rehabilitation or are on long-term disability. The rate is especially high among government employees, who account for half the work force.
The average amount of time people were absent from work in Norway in 2002, not including vacations, was 4.8 weeks. Sweden, its closest competitor, totaled 4.2 weeks, while Italy came in at 1.8 weeks and Portugal at 1.5 weeks, according to the Organization for Economic Cooperation and Development.
Throw in vacation time (five weeks for most people), national paid holidays (11 per year) and weekends, and Norwegians take off nearly half the calendar year, about 170 days, a figure that does not include time off for disability and rehabilitation, according to Bergens Tidende, the newspaper that made the calculations. Long-term disability leave, up 20 percent since 1990, is growing at an even faster rate than sick leave.
There are few penalties for chronic absenteeism. Most people who take sick leave receive 100 percent of their pay for a year, though the level dips to 60 percent in the second year under a job rehabilitation program. Few employees get fired, but, if they do, unemployment benefits are generous.
- The income tax is something like 30% and the corporate taxes are lower than in most countries.
Still, taxes are - de facto (a fancy expression that means “in fact” more or less)- higher in Sweden than they are in most countries because of the 25% VAT/Moms (a kind of sales tax). On top of this, there are extra taxes on alcohol, tobacco, gambling etc.
BUT, I personally claim this doesn't mean Sweden is Anti-Capitalist.
We nurture a STRONG government culture, which everyone ought to be aware is very DIFFERENT from the underlying principles of the magnificent Declaration of Independence.
The US and Scandinavia are both successful in the field of democracy, freedom and economy and often, we find it easy to communicate with each other even if we might not always agree.
Personally, I think Sweden/Scandinavia has got a lot to learn from the US. Like pointed out above, traditional Scandinavian work ethics constitute a true asset, but we need more of the overall support American culture provides the entrepreneur with. In the Nordic countries, entrepreneurship is sometimes met with suspicion and envy, which of course is bad.
Who is John Galt?
America needs to figure this out before we turn into a “People’s State”.
In France, most employees work 6 hours a day, in Norway the norm is 8 hours.
On top of this, Norwegians, especially people working in the oil, fishing and shipment businesses often work overtime a lot.
Few French would claim they work as hard as people do in the Nordic countres and this also is the reason why they are poorer, not the fact that Norway has oil, Sweden has iron ore or Denmark has mermaids.
Taxation: The rate of corporation tax is 28%. Personal taxation is based on worldwide income derived from employment, business and investments and is largely raised by local government. Including central government, the top rate is 60%. Capital gains tax is levied at a general rate of 30%. Value-added tax (VAT) applies to the sale of all goods and most services. The basic rate of VAT is 25%, with reduced rates of 12% on food and 6% on items including books and personal transport.
So if one earns 100 kronor at a job, one can buy 32 kronor worth of goods (60% income tax plus 25% VAT on the remaining 40). If one owns stock in a company whose share of gross profits is 100 kronor, one can buy just over 40 kronor worth of goods (28% corporate tax, 30% capital gains, and then the 25% VAT).
Sounds like Swedes have to work twice as hard for the government as they do for themselves, and their companies are almost as bad off. I am impressed that any can afford Volvos and the like at all after that burden, but it sounds a lot more like oppressive Eurosocialism than capitalism to me.
Yeah. They’re hard working all right. That’s why the shelves of the world are chock full of Norwegian, Swedish and Finnish products. (snicker).
Pilfering money from individuals at the point of a gun is always Anit-Capitalist and anti-freedom - no exceptions.
Over the past few years, it seems, everybody and his brother speaks about the capitalist system in America. Before, using the word was the hallmark of marxist training or influence. Yet lately, everybody is using the word - regardless of political leaning.
It bothers me because capitalism - the word and the concept - was the brainchild of Karl Marx. As well as offering an “-ism” opposite his own -ism, it describes a rigid class society in which one class possesses the means of production, the other nothing except its labor. The latter class is called “The Proletariat” who, as Lenin declared, can lose nothing but its chains when it rises against the oppressor.
This is not the place to argue whether capitalism was the appropriate way to describe certain European societies. The point is that owning things has always been open to Americans. The moment you buy one share of stock, you part-own “means of production,” not to mention owning your home and arriving at your place of work in your own automobile - a very American image.
America never had a proletariat.
In that case, America could not have been a capitalist country.
It’s even more complicated that that, but thanks for these remarks.
Let’s forget about the issue of taxes as such and approach this particular question:
Standard of living.
We would probably agree that as long average Swedes consume more than average Americans, they are richer and vice versa.
Well, what’s reality like?
- Americans own MORE cars in relation to population compared to Sweden (something like 0,85/capita - Swedes own a sole 0,56/capita)
- Measured by American MSRP Swedes, drive luxury cars that few Americans can afford.
- Average American wages are low compared to their Swedish counterparts
- Swedish consumer prices are high compared to American ones
- Swedes live in very well built houses
- It is more common for Americans to own a single family house.
- Many Swedish families (and even some singles) own a summer house.
Who’s rich, who’s not?
How to settle this issue?
Travel around in Sweden and the US some and form an impression of your own without the aid of statistics:)
Yes, and Iberia has lots of ships . . .
Thanks for posting.
Sorry, there have been a number of articles published coming out of Sweden that show statistics that Sweden’s average standard of living is slightly lower than the standard of living of the average black in the USA. I think this was discussed before on FR. Here is just one discussion article on it from the Hudson Institute. http://www.hudsonreview.com/BawerSp04.html
Here is a better discussion of Sweden’s living conditions compared to the USA that came out of the Swedish Institute of Trade. Also, if Sweden was were to be measured by the same standards that it is used in the USA, 40% of Swedes would be considered “low income”. http://www.mises.org/story/955
Sweden: Poorer Than You Think
One of the enduring myths of the “Third Way” welfare state is that a nation as a whole can have a high standard of living—even if no one really has to work—as long as government transfers massive amounts of wealth from those who are well off to those who are less well off. For the past four decades, we have been inundated with news stories, books, and public commentary, all of which have exhorted us to be like Sweden.
The Swedes, we have been told, enjoy free medical care, generous welfare benefits, time off from work, and subsidies for just about everything. When one counters that Swedes pay enormously high taxes, the standard reply is, “That is true, but look at what they receive for their payments.”
According to a recent study, however, the cat is out of the bag. Relative to household in the United States, Swedish family income is considerably less. In fact, the study concludes, average income in Sweden is less than average income for black Americans, which comprise the lowest-income socioeconomic group in this country.
The research came from the Swedish Institute of Trade, which, according to Reuters, “compared official U.S. and Swedish statistics on household income as well as gross domestic product, private consumption and retail spending per capita between 1980 and 1999.”
The study used “fixed prices and purchasing power parity adjusted data,” and found that “the median household income in Sweden at the end of the 1990s was the equivalent of $26,800, compared with a median of $39,400 for U.S. households.” Furthermore, the study points out that Swedish productivity has fallen rapidly relative to per capital productivity in the USA.
In defense of the Swedes, let me first say that simple comparisons of income can be deceiving. While I have never been to Sweden (even though I have relatives there), I would think that even the poorest sections of Stockholm and other Swedish cities are more livable and attractive than what one finds in many U.S. cities. Even with the high taxes, I think I would rather live in downtown Stockholm than in downtown Detroit or Newark.
However, the study alerts us to something that is much more important, and that is that the European welfare states are not making their citizens wealthier. Over time, the cracks in these relatively wealthy nations are growing larger, and if the disease is not arrested, much of Europe will tumble off into real poverty in the not-so-distant future. Europeans—and, most likely, Americans—seem destined to learn the hard way that large, seemingly intractable welfare systems have their way of destroying the Goose that Laid the Golden Eggs.
While people can debate the present condition of Swedes in Stockholm versus blacks in Harlem, there is a deep issue here that people seem to forget when it comes to welfare states: they are destructive at their roots. Advocates of welfarism concentrate only upon distribution while vilifying production. Such a state of affairs cannot go on forever as governments are forced to cannibalize their own capital structure over time in order to make the system to continue to work.
The premises of the welfare state are as follows: (1) free markets, if not regulated by the state, lead to continuing inequality, as wealth becomes increasingly concentrated in the hands of a few people, while more and more people become poorer; (2) the only way to combat this problem is for the state to take a large portion of earnings from the wealthy and distribute it among others; and (3) such distribution actually enables the economy to grow, since growing concentration means that fewer people will have the ability to consume the products that are created within a private-market system.
Karl Marx developed the first premise into his theories, calling this the “internal contradiction” of capitalism. However, the statement contains its own internal contradictions, as it creates an impossible scenario.
As Ludwig von Mises and Murray Rothbard have pointed out, in a private-market society, individuals cannot gain wealth unless they produce goods that are demanded by large numbers of people. For example, it was Henry Ford who became rich producing cars, not the producers of early luxury automobiles that were accessible only to the wealthiest people in American society. Ford developed a method in which he could create cars that most people could afford, yet keep his costs low enough to where he could still make a profit. The most successful producers in our economy have been those people who make goods accessible to people across all socioeconomic levels.
Wal-Mart, which is another example, became the largest corporation in this country—and one of the most successful—by creating a retail system that would enable large numbers of people to conveniently do their shopping. In fact, Wal-Mart began its route to success by building discount stores in rural areas and small towns that were shunned by larger department stores and enterprises like the now-bankrupt Kmart.
Therefore, it seems that if producers are becoming wealthier, it can only occur if consumers are purchasing on a large scale what the the producers are producing. The first statement justifying the welfare state does not have a good causal mechanism, for it does not explain how this transfer of wealth from poor to rich takes place, especially since it makes the implicit assumption that the voluntary purchase of goods is actually a wealth transfer. Such a statement turns the age-old theory of exchange—that economic exchanges create mutual beneficiaries—upon its head.
If anything, wealth transfers inhibit economic growth, not increase it. For one, it violently penalizes entrepreneurs for being successful. By accusing those who create wealth of actually being the ones who destroy wealth, welfarists do violence to language itself. If enough people are punished for creating wealth, less wealth will be created in the future. The more government impedes the creation and distribution of wealth, the less that will be created, which means that those people who are on the margins—that is, those who are less productive—are the first to be hurt. Thus, the welfare state actually makes the poor worse off in the long run.
This notion that the welfare state actually “helps” an economy is also bogus. As I stated earlier, consumption of goods must first take place before producers can reap the rewards from creating them. Furthermore, welfare regimes that attack business enterprises by confiscating their profits also impede future capital formation.
This became quite apparent to me in 1982 when I went to Central Europe, including what was then East Berlin, the capital of the former communist East Germany. While East Berlin was likened to being the “Paris” of the then-communist world, it was more like a huge time warp in which one was placed back in 1948. The entire city was shabby, and what new construction there was had the appearance and attractiveness of a typical American public housing project.
While the western portion of Germany was better kept and more modern than its eastern counterpart, it was still like traveling back to the 1960s. West Germany had a well-developed welfare state by then, having shunned its earlier model as an engine of free enterprise. A close friend who is a dentist brought this point home to me.
Like other medical care, dentistry in Germany is run on socialist principles. That means that individuals do not pay directly for dental (or medical) care, which is provided by the state. My friends, who were vacationing in Germany, visited a number of dental offices and found that the facilities looked like dentist offices in the United States four decades ago. In other words, the German dentists are still depending upon old capital.
One of the worst aspects of socialism, economically speaking, is that it has the perverse tendency to turn new capital from an asset—as is the case in a free-market economy—into a liability. German dentists have no incentive to purchase more modern equipment, since it is expensive and patients have nowhere else to go. In fact, wherever socialist medicine has been practiced for a long time, one can readily see deterioration of capital stock.
For many years, Sweden, like its European counterparts, has been eating its capital stock instead of replenishing it. Some high-profile Swedish companies like Volvo have been able to remain well capitalized, but even those companies are now finding it more attractive to locate in other nations, where their profits are not so readily confiscated.
The Swedes and other northern Europeans are somewhat lucky in that they have had a relatively high standard of living. People in southern European nations like Italy and Spain—where high taxes and vast regulatory agencies abound—find themselves to be much poorer and with no prospects of real improvement.
Unfortunately, many Europeans (like our Canadian neighbors) believe that a vast welfare apparatus makes them morally superior to nations that do not have the same scope of benefits. (While one can point out that the United States has a huge welfare bureaucracy itself, it does not offer the same “generous,” long-term benefits of the European states.) While they prattle on about their moral superiority and their egalitarianism, however, something else is happening. They are slowly becoming poorer and poorer, and the welfare state cannot save them. It can only accelerate their downward slide.
William Anderson, an adjunct scholar of the Mises Institute, teaches economics at Frostburg State University. Send him MAIL. See his Mises.org Articles Archive.
“Sorry, there have been a number of articles published coming out of Sweden that show statistics that Swedens average standard of living is slightly lower than the standard of living of the average black in the USA.”
- I too believe the average Swedish family lives in a house built of toilet paper and drive around in a 20 year old chevy.
However, what ought to interest us is what money actually can BUY in the US compared to Sweden.
I claim the best way of deciding whether Swedes or Americans enjoy the highest standard of living here on Earth is reached by traveling around vastly in both of these countries and forming an impression of your own.
However, I use the word “capitalism” above pretty much like anyone would use the expression “entrepreneurship”.
My basic point is that entrepreneurship and economical self-reliance is MORE firmly rooted in Scandinavian culture than in others.
This is a key explanation behind the fact that the Scandinavian countries (25 million inhabitants all in all) has 69 companies on the Forbes Global 2000 list while Germany (housing a population of 82 million) - a former victim of Feudalism, Communism and Nazism - only has 57.
Interesting that Hong Kong at the bottom and China at the top of the scale were not combined for an average score. They are both the same country, albeit Hong Kong is treated differently than the mainland.
43.5 Hong Kong
That would put China (combined) lower in the misery ranking than the U.S.A. (115.7).
That is where my ancestor came from -- Timen Stiddem, ship's doctor for the Kalmar Nyckel (containing the colonizers of New Sweden, or Delaware) back in 1638. His dad, Luloff Stiddem, was the first known minister of commerce for Gothenburg. I may be the only person on the planet who cares about this; but I think it's really cool.
Statistics is sometimes useful, but most often it is all nonsense.
From what I’ve understood of the English language, “Misery” means material poverty.
Sweden has been rated “the least poor country” on Earth.
In this case, UN made the evaluation. I agree they are PC and all that, but seriously where does REAL poverty exist in Sweden?
Ok, I admit it existed at least to a certain extent some years ago in Rosengård, a Muslim slum in Malmö, but does ANYONE think this has got ANYTHING to do with how average Swedes live?? (The immigrant unemployment rate mentioned is incorrect because these reporters confuse Rosengård, a small part of Malmö, with that of the immigrant population of Malmö as a whole, but this clip still sheds light on a severe problem few Swedish PC politicians dare to confront).
Living cost are much higher in the Sweden than in the USA. Even with the lower US$, American pay a much lower percentage of their paycheck for things like food and housing. When I travel to Sweden and Denmark I can't believe how high the prices are for hotels and restaurants. Also, things like liquor and petro prices are incredible.
And, further to the standard of living, the weather in Sweden is awful, except for about two months of summer (if you have a really good summer!)
There is a reason why more Swedes live outside Sweden than actually live in Sweden. If you subtract Muslim and Eastern European immigration, there is actually a net loss each year to people leaving Sweden to live in other countries.
So you think the average black American lives in a house made of toilet paper and drives a 20-yr old Chevy? I know you’re exaggerating, but you’re still falling for leftist propaganda.
Wouldn't the test would be who owns the stock, not where they are headquartered?
- You're not. In fact, there are thousands and yet thousands of people who find these things interesting.
Sweden was one of the European countries who took part in colonizing North America. This historical fact is often overlooked, even here in Scandinavia.
This accomplishment by a small nation, that also was very poor at that time, goes hand in hand with the founding of Gothenburg. The struggle of colonizing America and the establishment of a port city on the Swedish West Coast north of Copenhagen was a bold one.
Simultaneously as Sweden was successful in these two endeavors, we also managed to lay siege to most of what today is called “Germany” for 15 years, but something that is of much more importance is the fact that Sweden secured the position of Lutheranism in Northern Europe.
Swedish Vikings founded the nation of Russia, yes, but crushing the corrupted Catholic/Habsburg movement of the 17th century is probably the most important thing my forebears have done so far throughout history.
“So you think the average black American lives in a house made of toilet paper and drives a 20-yr old Chevy?”
- Not all of course, but the kind of poverty you find in places like the south of US (been there, even though it was some time ago) doesn’t exist in Sweden.
It’s not about color of skin, about Capitalism or Socialism, it’s about getting rid of useless, outdated patterns of Feudalism that don’t belong in an advanced Capitalist society.
“I know youre exaggerating, but youre still falling for leftist propaganda.”
- Is this article I wrote some months ago based on reality or “leftist propaganda”??:
A Swedish politician was visiting the United States. He noted to his host, “America has so many poor people”. “Yes, we do, but please note that few if any are from Swedish ancestry”.
I agree with everything you’re saying.
Scandinavia is indeed expensive compared to the US.
However, especially in Sweden, most families can afford a standard of living that few people in the US or the rest of Europe or elsewhere can afford.
Do you wish to deny the fact that AN AVERAGE Swedish family owns:
- A well built house in the city/A nice apartment/Condo
- A well built summer house
- A nice powerboat/sailing yacht
- A Volvo V70/SAAB 9-5/Audi A6
From what I’ve understood, All Swedes don’t enjoy this, but the vast majority does.
Americans are better off than Europeans in general, but my conclusion is that Swedish standard of living can compete with that of other rich countries like the US, Norway and Switzerland.
“Winning” this game isn’t important as such, but economics is an important aspect of building true civilization and therefore we OUGHT to compare our own accomplishments as countries to those of other ones in the pursuit of national success.
Certain things I write about Scandinavian prosperity here might annoy some Americans, but I certainly do not mean any disrespect. One of the most impressive aspects of the US is, by all means, the standard of living. Europe in general has a lot to learn from the US in this respect.
However, competition is often something very constructive.
Without the presence of Lexus, BMW, Audi etc, the average Volvo would probably be something resembling a Toyota Corolla.
“I’ll paraphrase a famous quote, because I don’t recall the exact words;
A Swedish politician was visiting the United States. He noted to his host, America has so many poor people. Yes, we do, but please note that few if any are from Swedish ancestry.”
- That’s a good point, but does it really end there?
How come several people that have failed to establish a normal, productive life in their own home countries have managed to do so in Sweden?
In the US, this isn’t exactly unusual. A lot of immigrants to the US have become very, very successful like we all know.
But why is there still poverty in America?
Because there should be!!
Sweden promotes the idea of the nanny state. We are used to this societal concept, it has disadvantages but still we manage to compete on markets worldwide.
USA is based on something called LIBERTY and I, sincerely, hope Americans will continue to promote this noble ideal, because if you all of a sudden would start talking about “becoming Scandinavian”, I would declare all of you insane and then shoot myself in any part of my body where it would cause a lot of inconvenient pain.
Back in 1970 the US was way in front of our country when it comes to livingstandard, but now the opposite is true.
Ayn Rand was smart enough to know you not only need a John Galt, but you need a Ragnar Danneskjöld to kick ass.
Oh, and a smart, hot babe to keep everyone motivated.
Your post is pretty funny.
Come to think of it, Ragnar was Norwegian.
As was Warren Zevon’s Roland the Headless Thompson Gunner.
The truth can be funny some times. I know what people on my age earn in the US. From my calculations average hourly wage for a full time employee in Norway is around $43 and is expected to increase by as much as 6% this year.
I am 31 years old and own 2 houses. Still I have money left and I live on a little bit lower than average wage in Norway.
Please explain whats so funny about my post. If you look at the CIA fact book etc you will see that health care in the US is very expensive.
First of all, Norway has population that is about half of New York City and is basically a welfare state because of all the North Seal oil. Hopefully for you, it won’t run out before you die. You have a pretty good deal, a lot of resources and very few people (like Australia —we call ourselves the “lucky country”), however, amongst other things, the weather would be enough that you couldn’t pay me enough to live in Norway.
But I agree that the weather is crap. Thats why I will relocate to warmer climate in probably 4-5 years. Meanwhile I will save up money so that I can purchase a house without loan.
In Australia, our pension program is funded by the money we put into our own accounts from money earned.
Also, the high wages and employment in Norway is driven by oil production and other resources. So the living is great now for the few people that live there. But is hard to compare a country of 5 million people with all of these resources to much larger countries like the USA. You should compare youselves more to small areas like Dubai.
The Nordic Approach
To General Welfare
AT THE START of the present century, the Nordic countries were among the poorest in Europe. But as the 1900s come to a close, that state of affairs has been reversed, thanks to a demonstrably successful blend of market economy, democracy, voluntary organizations and active government policies.
*For a definition of “Norden”, see Norden & Scandinavia.
All European countries may to some extent be described as general welfare states. What is distinctive about the Nordic approach is the dominant role of national governments in the formation of social policy, and the development of an extensive public sector for the implementation of that policy. The state also has an important social-political function in other European countries; but a much more prominent role is played by the private sector, voluntary organizations, and the family than is generally the case in Norden.*
The European invention of social insurance has since spread throughout the world The invention of social insurance
Social insurance, which constitutes the foundation of the modern welfare state, is a European invention. In replacing the “poor laws” of Europe, national insurance programmes provided a more effective and humane response to the problems of old age, illness, industrial accidents and unemployment.
One of the first programmes to be established was workmen's compensation for Norwegian miners, in 1842. A number of limited insurance plans were developed throughout Europe during the following decades, but a major breakthrough occurred with the introduction of a national insurance system in Bismarck's Germany during the 1880s. The most lasting and significant innovation of the Germany system was the principle of state-supervised compulsory insurance. That principle was fiercely debated at the time, but has since been incorporated into most social insurance systems.
The European invention of social insurance has since spread throughout the world. As of 1995, some 165 countries had adopted some form of social insurance system; nearly all provide old age and survivors’ pensions, as well as compensation for work-related injury. Less widespread is unemployment insurance, which currently exists in approximately sixty countries.
Historical factors help to explain why citizens of the Nordic countries tend to expect a great deal of their governments
The role of the state
In the early developmental stages of European social insurance systems, debate centred on the proper role of the state. There eventually emerged a variety of approaches, the basic outlines of which remain visible today. A rough distinction can still be drawn between a Northern European approach which emphasises national citizenship and a co-ordinated institutional structure, and a continental approach with more fragmentary institutions and a greater reliance on the family.
There are historical factors which help to explain why the citizens of Northern European countries in general, and the Nordic countries in particular, tend to expect more of their governments than do the peoples of Southern Europe and the United States. The feudalism of the Nordic region was less rigid than in continental Europe; and, although far from classless, Nordic societies were comparatively egalitarian during the pre-industrial era. They have always had fairly small populations, with a high degree of cultural homogeneity in terms of language, religion, social behaviour, etc.
In all of the Nordic countries, there was a forced merger of church and state following the Reformation, which helped to strengthen and legitimate the central government. In Southern Europe on the other hand, health, education and social welfare services remained the province of the “supra-national” Roman Catholic Church until quite recently.
The growing strength of the labour movement and the class-based struggles of the industrial era resulted in political compromises which laid the groundwork for the universal, egalitarian social insurance systems of today's Nordic countries. The notion of a “people's insurance” was already well-established at the turn of the century; but it was not until the 1950s and 1960s that such systems were more or less fully established throughout the region.
The state guarantees basic pensions and free or heavily subsidised health services for all residents
The Nordic model
In comparison with the rest of Europe, the Nordic general welfare states share twelve fairly distinct characteristics which, taken together, may be regarded as a specifically Nordic “model”. Those characteristics are:
1. A greater degree of active state involvement than in other countries. For example, the state guarantees basic pensions and free or heavily subsidised health services for all residents, although the delivery of such services is usually administered by provincial or local governments.
2. By international standards, the greatest proportion of the labour force employed in the social, health and educational sectors— roughly thirty percent.
There is a comparatively high level of trust between citizens and governments 3. Heavy reliance on the public sector for the provision of social and educational services; roughly ninety percent of all personnel in those sectors are public employees. The corresponding figures for other European countries range from 40-80 percent; in the U.S., the figure is 45 percent.
4. The organization of social insurance within co-ordinated national systems which have overall responsibility for basic pensions, sick-leave benefits, child allowances and health services.
5. A comparatively high level of trust between citizens and governments. Nordic societies are more “state-friendly” than other European societies.
Entitlement is not conditional on participation in the labour market
6. Comprehensive, or universal, social insurance systems which cover entire populations or sub-groups. For example: every resident is entitled to a basic old-age pension upon attaining retirement age, even in the absence of any history of gainful employment; child allowances are allocated to all families with children, regardless of income level; all residents are entitled to the best available medical services, irrespective of income, social status or other personal characteristics. This contrasts with most other European countries, where entitlement is conditional on successful participation in the labour market.
7. An advanced level of gender equality, especially as a result of legislation since the 1970s; essentially all benefits are “gender-neutral”, in that women are treated as individuals with needs and rights of their own, rather than as merely wives and mothers. Nordic labour markets are characterised by high rates of female employment, nearly-equal incomes for men and women in comparable occupations, and a well-developed support system for working mothers.
8. Social insurance systems free of class or occupational bias. Those with high incomes are included in the same system as those with low or no incomes.
The egalitarian spirit of the Nordic countries very likely contributes to social cohesion and stability
9. General taxation as the principal means of financing, which has the effect of redistributing income. As a result of the Nordic countries’ universal, redistributive social insurance systems, their poverty rates are among the lowest in the world. Minimum pensions are not especially high, but generous in comparison with those of most other countries.
10. A greater emphasis on providing services, as opposed to direct income transfers, than in other European countries. Those services include an extensive network of child-care centres, old-age homes, and in-home assistance for the severely ill and the elderly.
11. A traditionally strong emphasis on full employment as a goal in itself, and as a prerequisite for generating the necessary economic resources for the general welfare state.
12. Strong popular support. Such issues as children's well-being, public health, old-age care, etc., are consistently accorded the highest priority in opinion surveys and during elections. No political party seeking broad support can afford to ignore them.
Three Types of
Additional writings by Stein Kuhnle on this subject:
“Reshaping the Welfare State”, in The Politics of the New Europe; Ian Budge and Kenneth Newton et al. (eds.), Longman, London and New York, 1997.
“The Nordic Welfare Model and the European Union”, co-authored with
Rune Ervik, in Comparative Welfare Systems: The Scandinavian Model in a Period of Change; Bengt Greve (ed.), Macmillan Press, Basingstoke, 1996.
Prof. Stein Kuhnle
Dept. of Comp. Politics
University of Bergen
E-mail: email@example.com The fact that the Nordic countries can be described with the foregoing list of distinguishing features does not mean that they have become “welfare paradises”. As nations everywhere, they are confronted with a variety of old and new challenges. But in comparison with other developed countries, they are subject to far less severe and widespread levels of crime, alcohol and drug abuse, poverty and related problems. Furthermore, problems associated with single parenthood and unemployment appear to be less severe, due to the support provided by Nordic societies to those affected.
This comparatively favourable state of affairs is almost certainly a consequence of the institutions and social policies of the region's strong and efficient central governments. In addition, the comparatively egalitarian spirit of the Nordic countries, as expressed for example in their redistributive income policies, very likely contributes to greater social cohesion and stability.
Thus far, the 1990s have been a decade of considerable economic turbulence, resulting in unusually high rates of unemployment and growing strains on social insurance systems. Sweden and Finland have been most severely affected, while Norway has thus far managed to avoid cutbacks, thanks in part to its substantial oil and gas revenues. Iceland and Denmark occupy a middle position in that regard.
In recent years, all Nordic governments have stepped up their efforts to encourage and assist the jobless to find gainful employment. Some may be tempted to interpret that trend as a concession to neo-liberal ideology. But it is actually in complete accord with the traditional Nordic emphasis on the value of work and full participation in society. Politicians who blow the neo-liberal trumpet too loudly tend to encounter resistance in Norden. Thus, the basic structures of the Nordic general welfare states have remained intact, largely due to broad political compromises and the sufficient, if somewhat grudging, support of the voting public.
At this point, it is impossible to say whether the minor modifications to the social insurance systems of Sweden and Finland, and to a lesser extent of Denmark, may prefigure some kind of fundamental change. But so far, the institutions and programmes of the Nordic general welfare states have survived fairly intact, despite the severe challenges of recent years. It is therefore still appropriate to speak of the “Nordic model” of society.
— Stein Kuhnle, March 1998
“First of all, Norway has population that is about half of New York City and is basically a welfare state because of all the North Seal oil”
- When it comes to Norwegian prosperity, oil matters less than some people seem to realize.
See my two previous posts. I believe, correct me if I wrong, but Norway’s pension system is almost completely funded by oil. This a tremendous advantage to companies doing business there as they don’t have to pay any of these costs and with this system, many of the Norway citizens should become millionaires.
- Oil is of course an important explanation behind Norwegian wealth, but it is certainly not the only one.
Like I'm pointing out in the thread I linked to above, there are oil exporting countries that are roughly the size of Norway population vise, but are much, much poorer. Norway would be as poor as Libya if the country was run like Libya and had the same backward culture.
IMO The key factors behind Scandinavian prosperity are Capitalism, business and engineering competence, high levels of education and Lutheran work ethics. “Socialism” and oil has got less to do with it.
No, of course not and I didn't interpret what you've written that way.
“But nevertheless, to try to compare how these tiny country populations with the USA is not realistic”
- I can't see any reason why differences in population size would make different sorts of comparisons pointless.
You can always compare how successful two given countries are in different areas, even if one has a large population and the other has a pretty small one. You can look at how educational systems function, crime rates, economic growth etc, etc and make different conclusions about how well societies perform in these regards, try and finds reasons to the actual results and so on.
Population and ethnic mix are the key factors. That is why it is unrealistic to compare the tiny Scandinavian countries with the USA in general. A more valid comparison of things like health care, crime rates and education would be with small states with 90% people with the same race/culture , such as Maine or Vermont with Sweden.
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