The Nordic countries (Denmark, Norway, Sweden, Iceland, Finland) have long served as models for worldly progressives everywhere. They're indisputably some the most left-leaning of the developed, Western democracies, combining a 'generous' welfare system with a prospering market economy, civil liberties, low levels of corruption and high levels of democratic participation. But they're not just foreign countries, they're European - and thus inadmissible as evidence in an American "court" of Politics.
Add to that, the media everywhere prefers to report bad news to good news. So US media is not only unlikely to report positively about Europe, but in the rare case that it does, it will carry some 'disclaimer' in the name of 'balance' on why it's not really relevant as a political example to the US. (Things like: "Yet, Americans would balk at the idea of waiting-lists for health care") Our Overton window covers all ideas we believe are worth considering, so if it's outside, it must be unworthy in some way. Just go with whatever reason comes to mind and don't think about it too hard, or you might become some deviant radical!
So it's not likely the US media will report much on the Nordic countries economy at the moment. See, while our economy and much of Europe's economy is in turmoil, they're doing great. Booming. In total contradiction of ingrained American political preconceptions about how things are supposed to work. (and in a great vindication of left-wing policies) So let me explain what's up - with none of the excuses, or bending of the facts to fit American political dogma. What's going on up North, as they see it.
(Note: This is a bit long.. As the number of readers here appears to be inversely-proportional to the diary length, please skip ahead to the Summary below if you're in a hurry.)
The Tea Party's worst nightmare of a place
From the American perspective, and in particular that of the American Right, it's upside-down world: I'll focus on Sweden, as I've lived there (and just got back from a summer in the beautiful Swedish countryside). Now, Sweden ranks third in the world among top individual marginal tax-rates, with Nordic pal Denmark at #1. Both close to 60%, as compared to the US rate of 35%. In short, they tax the heck out of their rich"job creators". It's steeply progressive taxation, even after some cuts in recent years.
Unions? Javisst! Over 80% of the Swedish work-force is unionized. Heck, they even have a union for executives. Either you're prepared to negotiate with unions, or you simply don't do business in Sweden, period. Few seem to mourn the fact Sweden has no Wal-Mart stores. Worker's rights are strong.
Then there's that 'generous' welfare system which makes these countries 'socialist' even in mainstream American political discourse. (Never mind the fact they never describe themselves that way) Free public education and higher education, in public schools which are generally perceived as equally-good if not superior to private ones. Single-payer health-care. Government-subsidized (and partially provided) care for children (daycare), the elderly and the handicapped. The most generous parental leaves in the world. (recently highlighted on DK) Five weeks paid vacation, minimum. Completely free dental care for those under 20. Unemployment benefits which start at 80% of your previous salary, and essentially never expire. I could go on, but I think you get the picture.
The Nordics have some of the strongest environmental laws in the world. (I'd say The strongest, only I don't know of any way you could reliably quantify this) Sweden's CO2 emissions per capita are less than one-third of the USA's - and dropping. They're on-target to fulfill that 'job-killing' Kyoto treaty the US refuses to even attempt to live up to. And there's little-to-no political 'debate' on whether or not Climate Change is actually happening.
On the social front, they're even more progressive, if anything. Abortion and gays in the military haven't been up for serious debate since the 70's. Gay marriage - more aptly framed in Sweden as "gender-neutral marriage" is legal in 3 of 5 Nordic countries, the other two (Denmark and Finland) have registered-partnership.
People of all orientations are now free to enjoy the Gothic goodness of medieval cathedrals, with none of the medieval values!
Not only did Sweden 'gender-neutralize' their marriage laws two years ago (with support of 6 of 7 parties, representing 95% of the vote), but even the Church of Sweden (former state religion, and largest congregation by far) followed suit within a year, from having previously performed religious "blessings" of gay couples to actual marriages.
Okay okay, what's the catch?
This is a natural and expected reaction. You can't just point to a example which is so alien to the ingrained paradigms of American political thought and attitudes, and expect people to accept it. I don't even expect the Daily Kos crowd to fully accept or agree. There must be some catch, some caveat, some really bad downside. American media (you know, the supposedly left-wing-biased one) won't report on these countries unless they can point to some simple fact which would be considered 'unacceptable' to Americans, and therefore cause to reject the example wholesale.
That 'catch' has always been Economics. It must be; after all, our 'conventional wisdom' tells us all the things the Scandinavians are doing are really really bad for the economy; Taxation, regulation, Unions, environment.. you name it. When Finland, Sweden and Norway were hit by a financial crisis 20 years ago, the spin was obvious: American media was full of stories and opinion pieces from pundits and economists, loudly proclaiming the 'death' of the Nordic welfare model. Communism had just fallen, and now Social Democracy was proving itself a failure as well - long live Capitalism!
Nothing like that actually followed. Which was that they learned from their mistakes. Cuts were made in the short-term, but they did not at all abandon their welfare systems, much less embrace US-style capitalism. They rebuilt their economies (expanding welfare once they could afford to do so) and put them on sounder economic footing. The Social-Democratic PM Göran Persson (1996-2006) summarized his policies in the title of his autobiography: "Den som är satt i skuld är icke fri" ("One who is in debt is not free").
No bank bail-outs
When the crisis hit in 2008, the Nordic countries were doing well (except of course Iceland, which is politically and economically another story altogether. But their tiny economy isn't much like the other Nordic countries in any case). The fundamentals of their economies was, in fact, strong. Sweden did not bail out any banks or corporations. Nor did they need to; because they had stronger regulations on the amount of leverage the banks could have. The current Greek and Eurozone crisis has not shaken them either; their banks continue to pass the European Central Bank's stress tests with flying colors. (Finland is the only Nordic member of the Euro-zone, Iceland and Norway are not EU members, although the Nordic countries have their own independent agreements on free-trade and allowing each other's citizens to live and move freely between them)
The recovery was fast and strong: Swedish GDP growth was 5.5% last year - a phenomenally high number. Not only the highest rate in Western Europe, but the highest rate of just about any developed economy that year, and almost twice the US growth rate. This year, it's been expected to grow around 4%. This year's last quarter beat predictions and grew again over 5% (as an annual rate). While the turmoil of the last week(s) has lowered expectations, the most pessimistic of them is a tad over 2%, which is still a decent growth rate. While the US and much of Europe is in financial turmoil and fears of a double-dip recession are on the rise, a recession is not currently on the Nordic radar.
Sweden had a budget surplus as recently as 2008. Rather than damage economic growth by cutting spending, their center-right government let it go into deficit. While much of Europe is in an austerity frenzy, Sweden is expected to return to a budget surplus this year.
National Debt - What national debt?
So there's not much of an argument to be made on economic growth. Well, what about national debts? It'd fit the Right's world view perfectly if these welfare states were paying for themselves on borrowed money (á la Greece), proving the ultimate un-sustainability of the Welfare State. This was 'Exhibit A' during their crisis 20 years ago. How about now?
As the US gross national debt inches up towards 100% of GDP (92.7% last year, not that anything magic happens at 100%), the Nordics (sans Iceland) have some of the lowest amounts of public debt in Western Europe; from about 40% in Sweden to about 48% in Finland. (gross) It's also declining rapidly - as recently as the late 90's, Sweden was still above 80%. The net government debt (that is, once you subtract their treasury holdings) shows an even starker contrast: The US net government debt is about 65% of GDP, whereas Norway, Sweden and Finland are net creditors, while Denmark breaks-even. Their governments are essentially debt-free. Norway, who sensibly managed their oil assets (state-owned.. the horror!), has a net treasury balance of over 160% of GDP!
Unemployment
What about unemployment? It must be sky-high with those benefits? And it's 'common knowledge' that "Europe = high unemployment". But this isn't true, and it's never been true of the Nordic countries, who have always had low unemployment by European standards.
It's true that they've occasionally had higher unemployment than the USA. This has always been the USA's economic trump card: A low unemployment rate, and often, faster job-growth. But the Nordic countries have never been far behind, their rates were typically one or two percentage points higher, at most.
But the current recession (with no end in sight) has put an end to that. Nordic unemployment is lower than the USA's. Sweden was worst hit in the crisis, unemployment spiked to over 9%. (Norway and Denmark only reached about 6%, IIRC) But with the economic growth, Swedish unemployment has dropped fairly rapidly - at about 7.1% now (still very high, by their standards), while the US remains over 9% with only weak job growth.
I think this is important. Low unemployment has been one of the US economy's few redeeming features: Sure, we didn't have social safety nets. Fine, your boss can fire you at a drop of a hat. But what does that matter when jobs are easy to come by? Now, we're looking at the worst of both worlds: "European-style" unemployment without "European-style" social security.
Wealth and taxes
Then there's the argument: "Yeah, well.. We're the richest country in the world, and those taxes are outrageous and unacceptable!"
Of course, we're not the 'richest' in any meaningful terms (i.e. per capita). In terms of nominal GDP per capita, the Scandinavian trio of Norway, Sweden and Denmark are all richer than the US, with Finland not far behind. This is where tax rates make themselves noticed, as the PPP-adjusted numbers, which take into account the differences in prices and living costs (and so include a large part of the tax burden), tell a somewhat different story. Norway is still richer than the USA (even though it's a very expensive country, even compared to its neighbors), but the others lag behind us. Not by a huge amount, mind you. Sweden is on-par with ice-hockey rival Canada, and the others are not far behind.
I can't really argue against that. For all the upsides to the Nordic nations in terms of quality-of-life, education systems or simply not having to worry about health care or losing your job, the fact remains: Your average American household is indeed richer in terms of how much stuff we can afford to buy. We have bigger houses, and live in houses to a greater extent. We own more cars and certainly need them, with our public transportation (or rather, lack thereof).
But as the US economy remains stagnant while the Nordic ones boom, there's more reason than ever to wonder how long it will stay that way. Not only that though, there's an very overlooked counter-argument here: Income inequality.
The Nordic countries have a very low income inequality compared to the US - and it's growing here. Bringing this up is almost anathema in US politics. It's for 'socialists' and 'class warriors'. The most under-addressed problem in the US economy (except for perhaps the trade deficit) is that real wages (average wages, taking inflation into account) have been stagnant for over 30 years. No wonder we have an obsession with tax cuts - it's the only way the average worker has gotten a raise for the last decades!
In the same period, the Nordic countries have seen steady real wage growth. (the only exceptions being a few years in the early 80's, when they had high inflation, and a few years during the aforementioned crisis of the early 90's). The poorest people in the Nordic countries have been better off than their American counterparts for quite some time, but if the trends of the last decades continue, it's only a matter of time before the Nordic middle-class as well becomes materially wealthier than the American one - Even once taxes and prices have been taken into account. And even if our economic growth starts to outpace them - because that's now just the rich getting richer.
It's a dire scenario. Do we want to be the richest nation in the world, or merely the nation with the richest upper-class? Long term, we're trending towards the latter. Short-term, towards neither.
Summary
Despite decades of predictions in the US media about the imminent death of the welfare state every time their economy hits a downturn, the Nordic countries (minus Iceland) are booming and appear stronger than ever. They're not problem-free, nor unaffected by world events of course. But at the moment, their biggest economic problem is only that; the fact that so much of the rest of the world is going to s--t.
Europe is in turmoil. The US may be headed for another recession. I'm starting to worry for Paul Krugman's mental health as austerity-fever has caught hold on both sides of the pond. Only after capitulating to dramatic budget cuts in the debt-ceiling-debacle have we begun to see that "it turns out that what really terrifies the markets, let alone the suffering unemployed, is the prospect of a second Great Depression" - in Krugman's words. Only now does it seem that people are starting to wake up to the fact that the debt, while serious, might not be the most important thing right now, and that cutting spending in the midst of a recovery, 1937-style, might cost a lot more than it will ever save.
Every day we hear again and again from what Krugman aptly calls "Very Serious People", repeating the tired clichés of US politics. Unions are bad. Liberals always spend recklessly. Income taxes kill jobs and the rich are 'job creators', even if other nations as well as our own economic history, tell a very different story.
It wasn't that long ago - the 60's - that the US had it all, too: Wealth, economic growth, real wage growth, scientific leadership, political leadership on the world stage (minus that eternal blemish on our reputation that was Vietnam), and an expansion of welfare programs and environmental protections. We can do it again. But only if we succeed in breaking the mental shackles of Reaganism.
Post-script: The Economist's take
As it's hard to give it the appropriate spin, it's unlikely mainstream US media will report on this story. At least not as something that might be relevant to the US. Too much reality, showing its "left-wing bias". But if we do see one, it may also look a lot like this article, recently published in The Economist. They're unabashedly economically-conservative, but in a sane, European sense, not the rabid, insane American one. So they heap praise on Sweden's current center-right government, and attribute all success to them. That's one way to spin it, I suppose.
They misstate basic facts: Sweden hasn't raised their retirement age at all. While they claim Sweden was long "a case study in jobless growth (except in the bloated public sector)". In the past two decades, Sweden had "jobless growth" roughly between 1994-1997 and 2003-2006. The latter period was a key factor in the current government's gaining power, but I wouldn't call three years a "long" period.
The "bloated public sector" they talk of is disproven by the graph accompanying the article! It clearly shows an steady decrease in public spending in GDP terms from 1998-2006, during Social Democratic government. (who weren't cutting the welfare system, but not expanding it faster than the economy)
They claim the Moderates (yes, that's what Sweden's main right-wing party is named) are "well poised" to win again in 2014. Besides the absurdity of calling an election that far away, current polling is in fact a toss-up. They state the current "lacklustre" Social Democratic leader Håkan Juholt, has "failed to inspire the voters", despite the fact he's only been chairman since last March. The Economist may have formed an opinion already, but I doubt many Swedish voters have.
But they save the greatest hyperbole for last: "To many on Europe’s left, Social Democratic Sweden was once a statist paradise. Now it is the right that looks north for inspiration."
As much as they make of Prime Minster Reinfeldt's friendship with David Cameron, I think Tony Blair was more of an inspiration for him. They fail to mention the fact that he essentially did Blair in reverse; taking his party several steps to the left to capitalize off dissatisfaction with the Social Democrats and pitch himself as a 'softer' right - even going so far as openly admitting they had, 'in the past', concerned themselves too much with the interests of the rich. He largely scaled back their demands for tax and welfare cuts. The party even re-branded itself the "The New Moderates" - a move straight out of Blair's "New Labour" playbook.
Sweden remains far more Social Democratic than The Economist would like to pretend it is. (and no mention of also-prospering, Social-Democrat-ruled Norway) In my opinion, it'd be more correct to say the left lost two elections than that the right won them.
It's easy to try to pin to Sweden's current economic success on their center-right government, if you ignore the facts. The Swedish welfare state is quite intact. Reinfeldt's cuts were made with a Scandinavian-style cheese slicer, rather than a southern-European cheese knife. While Sweden has indisputably moved to the right since the 1970's or so (who hasn't?), its welfare state is nevertheless more comprehensive than it was at that time.
But if The Economist can convince the Republicans or Tories to turn the US and UK into Sweden, then I'm all for it!