Economic Advisers of president Trump warn Americans against Nordic Socialism, like single-payer health care
In a new report, The Opportunity Costs of Socialism, The Council of Economic Advisers, alongside president Trump in his latest rallies, warns against the Nordic Economic Model.
The White House paper suggests, American families would be taxed «$2,000 to $5,000 more per year», the living standard reduced and free welfare benefits would spend «other peoples’ money»: «A large body of evidence shows how … state monopolies, and centralized control of socialism disincentivize effort and innovation and substantially reduce the quantity and quality of a nation’s output».
This report and Republicans in general like to portray Scandinavia as high-tax economies, thus low income and redistributive, greedy government-run cushion-states.
The 5 Nordics: less inequality, higher income, higher living standard
Arguably, they do not want you to know, the 5 Nordics Norway, Finland, Denmark, Sweden and Iceland are more successful, more fair and free economies than America. Evidently, this elite wants to cover-up how the 4.4 times higher US inequality does not work for the majority of American families, how the economic system is made to serve their interests, not that of ordinary American families.
The US individual (per capita), mean, gross Census income 2017 was $48,150. Because of the large portion the top 10% US households grab, according to the World Income Database 47 percent, thus the gross income of 90% of working Americans is on average only $25,519. Before taxes, social security, health insurances, co-payments, tuitions etc.
Accordingly, this income of the bottom 90% in the Nordics ranges from $48,105 in Denmark, $46,139 in Norway, $32,878 in Sweden to $31,012 in Finland. Thanks to their much fairer income distribution.
The Census top to bottom quintile ratio in the US is 16.7, in the 5 Nordics on average 3.8, Eurostat figures show, thus 4.4 times fairer. In this case comparing the total household income, in the US on average 2.58 persons.
Where is capitalism at home, where is the really free market economy?
However, the 5 Nordics are highly competitive, open economies with predominantly private companies. The enterprise birth rate in all those countries is considerably higher than in the US, relative to their total population of 27, compared to 325.7 million in the US 2017.
In the Forbes list of the major, global 2,000 multinational corporations, per million, 2.2 companies are Scandinavian, 1.7 from the US. Their trade, exports to GDP, ranges from 35-55, the US only 12 percent.
The short version of the Nordic Economic Model and success is of course, they spent tax income wisely and invested in public education, public health, a fair labor market, family benefits, infrastructure and technology, to make their companies and economies competitive, both in terms of «added values», Gross Domestic Product, but also in terms of social outcome: «happiness», wellbeing, living standard, a truly welfare state.
Happiness for instance referring to the latest World Happiness Report, where the 5 Nordics rank #1, 2, 3, 4 & 9, while the US ranks #18, behind Canada, Israel and Costa Rica.
Prosperity and wellbeing start with universal welfare
The White House paper points to alleged high taxes, inefficient welfare benefits and lower standard of living in Scandinavia. Except for very general data, like GDP per capita, total wealth, gross income per quintile etc., there is very little evidence, the social and economic outcome in the 5 Nordics does not match that of the US. Depending on your standard. Take the individual, economic «freedom», wellbeing, here and there.
On median, after taxes, social security and a typical health insurance plan, a person living in Virginia earns an annual net income of $21,125, from a Census gross median income 2017 of $31,786. In Sweden that Eurostat net median income was slightly higher, $21,228. For which you in Sweden work considerably less, a staggering 21 days less a year (OECD total hours worked).
This very same net median income in the other Nordics amounts to $34,971 in Norway, $26,567 in Denmark, $25,387 in Iceland and $20,310 in Finland. The median income in a country with high inequality, will be considerably lower than the mean income.
How much buying a car? And the Pain at the Pump?
The White House report claims, to afford a Ford Ranger, the American average employee would have to work 4.4 hours a week, in Sweden 8.5 hours.
Hardly anybody in Sweden drives that Ford, the most sold car 2017 was the SUV Volvo XC60, for which the average weekly costs was Swedish kronor 1,350 ($154).
By a net hourly income of kronor 222.15, that would take the Swedish worker 6.08 hours. The same car costs an American buyer at least $1,061 a month, thus earning the mean hourly BLS.gov wage of $24.34, he would have to work 10.90 hours a week for his Volvo.
Further, the Pain at the Pump in America is greater, according to Bloomberg data: with a «typical salary» the US worker spends 2.16 percent on gasoline, in Sweden 1.23, in Denmark 0.95 and in Norway only 0.53 percent.
5 Nordics: living standard, raising a family, buying a home
However, whether the living standard in the 5 Nordics is reduced compared to the States, you must consider where in America that person lives. In the 382 Metropolitan Areas like New York-New Jersey, both wages and costs of living differ very much from the rest of the country. The median household income in that area is about $11,500 above the national median.
A 30-day subway ticket in New York costs $121, in Stockholm only $94, the latest median home sales price in New York on Zillow was $567,400, in Stockholm on average $435,500. Yet the consumer prices in the Swedish capital are only slightly higher than the national average and the Swedish worker already earns a higher net income. So much for the «reduced living standard.»
When the White House economists, president Trump as well as Republicans and a number of national media discredit the Nordic Economic Model as «socialism», even if they only refer to public, welfare benefits like paid sick leave, paid paternal leave: 39 weeks in Iceland to 170 weeks in Finland, 25 days vacation by law, collective bargaining and thus hardly any low pay, they must have a political agenda or being bad informed.
At least from a Nordic point of view, if economics is all about producing wellbeing, welfare is a good start.
The US economy is a cyle of jobs, wages & social progress, not Wall Street profits
However, to genuinely understand the difference in US macroeconomics from the 5 Nordics, you must dig deeper. That has more to do with productivity thanks to wise investments in new technologies, skillful workers and an effective labor market, and also in families’ wellbeing, child support, early and high education and maybe even more so, because any economy in the long run is most of all a cycle, anything that promotes the quality of major inputs in this cycle: disruptive technologies more than private ownership, social progress more than profits.
In that case, you have to look pragmatically to the overall matrix of all the socio-economic features, that promotes social progress, a productive labor market, a good society, good governance and innovative businesses. And this is no contradiction!
The British Prosperity Index 2017 benchmarks 89 such factors and for a number of years ranking the 5 Nordics among the best in the world: Norway #1, Finland #3, Sweden #5, Denmark #7 and Iceland #13, the little island of 338,000 people still five ranks ahead of the United States.
Being prosperous today means more competitive in the future, producing ever more individual wellbeing, but not at the cost of the wellbeing of anybody else. That is what sets the Nordic Model apart from the American model. Where the long-term and real «Opportunity Costs» come into play.