Americans often assume that European-style welfare states are inherently unworkable and unstable and that they must lead in the long run to high unemployment and low economic growth.
This article disputes that view, saying that there are important differences between the generous welfare states of Sweden, Denmark, Norway, Finland and Iceland and their counterparts in countries like Germany and France. The former have managed to combine fairly lavish provisions for health and unemployment insurance, paid family leave and other amenities with farily robust economies.
The article suggests that the difference lies in the fact that the Nordic countries, unlike Germany and France, have maintained an economic climate that is more flexible and favorable to innovation:
The difference, analysts say, is in how the Nordic states spend the money, and how they structure their benefit programs.
While France, Italy and Germany are hamstrung by job-for-life cultures that erect myriad legal barriers to firing workers, the Nordic countries make it easier for companies to downsize. That in turn paves the way for new industries and new jobs.
The Nordic governments offer generous unemployment benefits and extensive government-funded retraining. But while Germans, French and Italians tend to linger on unemployment benefits for years, the Nordic states force people to take other jobs that come along.
Though their citizens take as much vacation as their European counterparts – two to three times as much as Americans do – the Nordic societies work more, because there is less early retirement and more women in their workforces.
Sweden and Finland also lead the world in research-and-development spending. The Swedes spent 4.3 percent of their gross domestic product on research last year, compared with about 2.6 percent for the United States and less than 2 percent for the European Union as a whole.
Another key factor: The Nordic states are widely perceived to have the world’s least corrupt, and the most efficient, governments and court systems. Foreign investors can count on fair and evenhanded treatment from regulators.
There are some problems on the horizon though:
This is not to say that the Nordic systems are problem-free. Sweden, for example, is grappling with huge abuse of its generous sick-leave policy. In recent years, it also has admitted large populations of poor, uneducated immigrants, many of whom are failing to assimilate and living on public aid.
I wonder if the success of these countries’ systems has something to do with the relative homogeneity of their population. This would seem to make a common ethos of solidarity and communal provision easier to maintain (i.e. strong ties of affection and identification with fellow-citizens combined with a sense of civic obligation). A welfare state can only last as long as most people choose not to become free riders.
Plus, such generous welfare provisions might be tempting for immigrants who don’t speak the language and find it difficult to find a good job and assimilate into the community. Could the U.S., for instance, have such a system and maintian its level of immigration?
And there’s the issue of freedom of choice. Even if one is able to rely on the state to ease the vicissitudes of living, some people no doubt prefer to have more control over their own lives and resources, the education of their children, etc. There is a trade-off between freedom and economic security.
Still, it’s good to be reminded that there are many possible social and political models. Americans in particular tend to think of our system as though it was delivered from on high and should be the model for the rest of the world.