Scandinavian Models

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Via Reihan Salam, I see that Ezra Klein is again trumpeting the successes of the Scandinavian social model, arguing that in socialist countries like Sweden people are more likely to embrace globalization when there is a substantial safety net to catch those "unprotected and uncompensated" by the vagaries of the global economy. Here's Klein:

Does big government actually act as a facilitator of globalization, free trade, and open economies? The answer on this one is supposed to be no, of course not. Government mucks everything up, and burns your money in their big money chimney, and blah blah blah. But Denmark, Sweden, and other Nordic countries have, in recent times, acted as contrary evidence to this thesis. Their model, where an expansive social safety net reduces economic insecurity and thus reduces public fear of a dynamic economic system, has acted as a useful social democratic alternative to our system, where the losers of globalization are unprotected and uncompensated, and globalization is kept politically viable mainly through the support of elites.

Klein cites the following study to buttress his argument, which references Scandinavia as an example of a people who support big government and are broadly pro-globalization:

In one econometric specification, an increase in our risk-aversion variable to its maximum value was associated with an increase in the probability of the respondent being extremely protectionist of approximately 6.5 percentage points in Sweden, which is certainly a large effect. However, the probability of the individual respondent being extremely protectionist increased by approximately 16 percentage points in Indonesia, or by more than twice as much. The crucial difference between the two countries, our results suggest, is that while in Sweden the government consumes 26.6% of GDP, the government consumption share in Indonesia is only 6.5%. It is not surprising that those who dislike risk should be less worried by free trade in Sweden, where the government does in fact provide such insurance, than in Indonesia, where workers and families are to a much greater extent left to their own devices.

This seems to me a huge logical leap. So does it follow that all cruel, non-socialist systems like the United States are uneasy about globalization? (The study may indeed have found such a correlation, though Klein's link doesn't mention any figures for the U.S.) And if so, can one attribute that solely to America's supposed lack of a social safety net? And if so, why has Sweden's powerful left-wing labor union, LO, which represents two million members (in a country of 9 million) and spent $130 million in member funds to reelected a socialist government, fought tooth and nail against opening Sweden's labor markets to workers from Eastern Europe? Take the case of the Latvian construction company Laval, who was awarded a contract to rebuild a school in the archipelago town of Vaxholm. When Sweden's labor unions (Byggnads, a builders union affiliated with LO) objected to the lower wages being paid to Latvian workers, they demanded that the company abide by Swedish collective bargaining agreements and forcing the company out of Vaxholm—and, ultimately, into bankruptcy. Indeed, Sweden's former Social Democratic Prime Minister Göran Persson, who supported the union in the Vaxholm dispute, publicly backed "free trade and globalization," though of a type that would likely be unfamiliar to Jagdish Baghwati. In my experience, Swedes tend to be theoretical supporters of "globalization and free trade," though are skeptical and protectionist when quizzed on allowing cheap labor through its own borders .

And what of Sweden's vaunted social system? Klein scoffs at the notion that Scandinavian governments "muck everything up and burn your money in their big money chimney," though as a Swedish taxpayer, I assure him that this is indeed the case (space and time constraints prevent me from listing the government's more preposterous public works projects and social spending schemes). Klein is right that the economy has seen robust growth in recent years, though it is important to point out that the country rebounded after a period of liberalization in the early 1990s when, as Klein surely knows, being that he is a consistent booster of the Scandinavian model, Sweden had a non-socialist government. Today, the right-leaning Moderate Party coalition is further privatizing and liberalizing, though in small steps, after voters chucked out a atrophied, corrupt Social Democratic government on whose watch the unemployment rate topped out at close to 13 percent.

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  1. And if so, why has Sweden’s powerful left-wing labor union, LO, which represents two million members (in a country of 9 million) and spent $130 million in member funds to reelected a socialist government, fought tooth and nail against opening Sweden’s labor markets to workers from Eastern Europe?

    Becuase the effects of a social safety net accrue throughout society without regard to pre-existing political ideology or interests.

    Why is one segment of society less supportive of globalization than that society as a whole? That’s an interesting question, but it really has nothing to do with the question of why Society A is, in the aggregate, more supportive of globalizaiton than Society B.

  2. You knew damn well what we would all be thinking when you title an article “Scandinavian Models”. That was not nice.

  3. Bait – n switch, bait – n switch, you bastards!

  4. though as a Swedish taxpayer

    You are a Swedish taxpayer, Moynihan?

  5. Klein is right that the economy has seen robust growth in recent years, though it is important to point out that the country rebounded after a period of liberalization in the early 1990s when, as Klein surely knows, being that he is a consistent booster of the Scandinavian model, Sweden had a non-socialist government

    That would be a non-socialist government that is well to the left of the Democratic Party here in the US, and which supported a social safety net quite a bit stronger than what we have in the US, correct?

  6. Episiarch,
    If he is not now, I assume he was previously based upon his bio:

    Before joining Reason, Moynihan was a resident fellow at the Swedish policy institute Timbro and edited the English-language Stockholm Spectator. He is a frequent commenter in the Swedish media and has written for Expressen, Aftonbladet, and G?teborgs-Tidningen. He serves on the editorial board of the Swedish magazine Neo, where he is also a regular columnist. In 2006, Moynihan produced a documentary for Stockholm’s TV8 on New York radio legend Barry Farber. He is currently a visiting fellow at Timbro.

  7. Michael –

    the Danish election is also pretty interesting, her

    If the New Alliance party gets in the coalition, that’ll be very interesting!

  8. If he is not now, I assume he was previously based upon his bio:

    Sorry Episiarch, but that one goes in the http://www.justfuckinggoogleit.com column…

  9. Anyone else find it funny that the labor unions are called “Byggnads?”

  10. My reaction to this is so what, even if it’s true (of which I’m skeptical). I mean, if you’re pro social welfare safety net, argue for it on its own merits. It’s meaningless to claim that it supposedly encourages liberal policies elsewhere in the body politic to anyone who doesn’t support it for its own sake.

    This strikes me as the same argument in reverse as what’s spewed from supposed libertarians who claim we should close the borders because all those poor Mexican immigrants would vote for social programs!

  11. Comparing small, homogenous Sweden to any diverse country of 100’s of millions to make any point except that Sweden is smaller and more homogenous seems, well, silly. But, then, so am I.

  12. And what’s all this about “Big Government” equalling a big safety net? You can have plenty of wealth redistribution with a small government. You just need to hire enough guys to collect the taxes and write checks out to poor people. You only need big government for wealth redistribution if government decides how to spend the redistributed wealth in addition to collecting it.

  13. joe hates sweedish fish, and the tanks they live in, or something.

  14. Slavery is slavery. A mixed economy is just a little freedom diluted with a lot of slavery. We must settle for nothing less than a completely unfettered free market with no government intervention of any kind in the free economic relations between free individuals. Taxation is theft. Government- funded education is the road to ignorance, and socialized medicine is disease and death. Down with Swedish socialism!

  15. joe you are a FEMAnist(noun): A person who believes all natural dangers, social ills, and economic problems can be prevented, cured or resolved by the promises of the government and its agencies.

  16. Edward is a FEMAnist too!

  17. Yep, edward, you’re finally starting to get it.

  18. I will be filing taxes in Sweden this year, yes. And I still write for a Swedish magazine called Neo, so I have to pay taxes on that pittance.

    And no joe, I would say Carl Bildt’s government was to the right of the Democrats and to the left of the Republicans. They were good on tax cuts and privatization…things the Social Democrats fought against in the early 90s and now took credit for in the 2006 election.

  19. Uh, the Swedes can pretty much make any model work.

  20. SELL THE STREETS (AND THE CURBS, TOO)!

  21. I will be filing taxes in Sweden this year, yes. And I still write for a Swedish magazine called Neo, so I have to pay taxes on that pittance.

    So SoCalledReasonMagazine has a SwedishTaxpayer writing articles for HitAndRun?

  22. VM,
    Judging by the link you provided, I suspect that you are a Dane. I offered my opinions on the Danish election in Weekendavisen last week. I think its behind a subscription wall, though:

    http://www.weekendavisen.dk/apps/pbcs.dll/article?AID=/20071102/SAMFUND/111020159/-1/samfund

    mm

  23. Hi Michael –

    fortunately not (grins) – I lived there for about five years, tho – thank you for the link!

    mvh,
    Viking Moose

  24. SELL THE STREETS

    No, just the maintenance contracts, and take bids to build any new ones…Wait…you don’t really want to discuss this…I’ve been fooled!!!

    (AND THE CURBS, TOO!
    The kerbs could be sold to the owner of the abutting property, I think. Give back what was most likely taken by eminent domain.

  25. Social Democratic government on whose watch the unemployment rate topped out at close to 13 percent.

    How do you calculate unemployment when everyone’s basically on the dole? I’m on the dole, but I go into an office 6 hours a day, vs., I’m on the dole, but I watch tv on my couch?

  26. james:

    A person who believes all natural dangers, social ills, and economic problems can be prevented, cured or resolved by the promises of the government

    joe is by far, not alone. For instance, there are lawyers who believe that when bad things happen, any bad thing, that the government should pay. Payments to be calculated and divided by, you guessed it, lawyers. Funny how that works.

  27. gaijin:

    […] make any point except that Sweden is smaller and more homogenous seems, well, silly. But, then, so am I.

    What, silly or homogenous and Swedish?

  28. And no joe, I would say Carl Bildt’s government was to the right of the Democrats and to the left of the Republicans.

    You mean his PARTY is to the right of the Democrats. Your earlier point, and my question, were about the government.

    They continued to preside over a government with a far-more exhaustive social safety net than ours. During this period of liberalization that, supposedly, launched the strong economy of recent years, the Swedish government continued to collect a larger share of national wealth and provide more extensive benefits to Swedes, correct?

    And can someone please explain to me how the greater homogeneity and smaller population of Sweden makes it impossible to draw conclusions about how a stronger social safety net reduces people’s concerns about globalization?

  29. I realize I’m far more interesting than Sweden or globalization, james, but it’s bad form to wander so far off point.

  30. “Comparing small, homogenous Sweden to any diverse country of 100’s of millions to make any point except that Sweden is smaller and more homogenous seems, well, silly.”

    Not only that but Sweeden, like all the other Scandinavian countries and indeed just about all of the free world have been free riders on United States military power for decades.

    They couldn’t have come close to affording their welfare states if they’d had to spend their money for their own defense in the world.

    Not only that but international trade is dependent on the safety of ocean trading routes between nations. The only reason they can engage in international trade is because we keep other nations from dominating the ocean and keep the sea lanes open.

  31. Where does that whacky figure of 26.6% of GDP for the size of the swedish government come from? Did they just go anarcho-capitalist while I was out looking for a new flat.

    According to the OECD tax revenue is ~ 51% of GDP.

    http://www.oecd.org/dataoecd/8/4/37504406.pdf

  32. They continued to preside over a government with a far-more exhaustive social safety net than ours. During this period of liberalization that, supposedly, launched the strong economy of recent years, the Swedish government continued to collect a larger share of national wealth and provide more extensive benefits to Swedes, correct?

    joe, if your point is that if you go from far-left socialism to center-left socialism, your country’s economy will likely take off from the additional freedom, then I agree with you. That’s as true in China as in Sweden.

    If, however, as I suspect, your point is that if we move to a more socialist government here we will have a more productive economy, you might want to look at the productivity per person in each country. The U.S. is more productive than Sweden, and Sweden is more productive than China, because the U.S. is more free than Sweden, which is more free than China.

    If Sweden further freed up their economy, their productivity would likely shoot up even higher than now.

  33. When I saw a thread titled “Scandanavian Models” I just assumed that it would be bait for Stevo Darkly.

  34. sorry joe I had to use the libertarian neologisms. You have to admit that they are hilarious.

  35. Edward finally says some things that aren’t just nay saying, name-calling, nonsense but he’s being sarcastic!

  36. At the risk of seeming insufficiently libertarian, I think it’s worth brining up Tyler Cowen’s unfairly maligned article on how libertarianism and big government have, in many ways, advanced simultaneously. Cowen’s point seems almost obvious to me: If you want an expansive “safety net,” you need an economy that is capable of generating the surplus capital necessary to fund it. At the same time, if the economy is humming along and lots of people are doing well, there’s less opposition to the taxes needed to pay for the welfare state; paying taxes hurts less when you’re making lots of money.

    And that’s probably why the West, if not the rest of the world, does seem to have reached that fabled “end of history,” where we’re arguing over the margins and making periodic pendulum swings between more capitalism and more government, without ever straying too far from a neoliberal/democratic middle.

  37. Neither of those was my point, prolefeed.

  38. “Not only that but Sweeden, like all the other Scandinavian countries and indeed just about all of the free world have been free riders on United States military power for decades.”

    Doesn’t Sweden defend itself?

  39. Doesn’t Sweden defend itself?

    It has some nice planes, but if the Russkies had come over the border back in the Cold War days I have a hard time believing NATO would not have gotten involved. I’m pretty sure the Swedes knew it, too.

    And with less than 60K troops (around three US-sized divisions, but with less heavy gear) if we include the militia, they would have been in deep caribou in a hurry, though I suspect they have all manner of dispersal and guerilla war plans.

  40. I’m a libertarian, but I’m fine with the government providing a safety net. A mere safety net would not amount to big government. You get big government when you start providing corporate welfare and entitlements for the middle class.

    I just read an economic study showing that almost all welfare and education spending in Sweden is paid for by the middle class and goes to the middle class. I suspect it’s the same story in all modern, first-world democracies.

  41. Not to be pedantic, but could we cease all referring to welfare states as “socialist?” There is a big difference between a centrally planned economy and a market economy with a high tax rate.

  42. I’ll be kicked out of the cool libertarian’s clubs for this, but I fully agree with Mike Laursen. My guess is that some safety net can even be growth-enhancing, as it might encourage more risk-taking as the downside is reduced. What I’m trying to say, is that there might be a Laffer curve equivalent for social spending.

    Also, introducing some degree of choice and competition in the provision of welfare services would be neat as well, but you all know that.

  43. “Not only that but Sweeden, like all the other Scandinavian countries and indeed just about all of the free world have been free riders on United States military power for decades.”

    Doesn’t Sweden defend itself?

    And futhermore, the US paid cash money for the use of Swedish naval asset for about two years.

    (N.B. ignore everything after “departure back to Sweden”. The last part may be ‘correct’ but not necessarily ‘true’)

  44. http://www.fee.org/publications/the-freeman/article.asp?aid=8152

    According to a working paper prepared for the European Central Bank in 2003: Sweden, Finland, and Denmark have the most inefficient government sectors of all OECD countries in terms of the use of inputs. In Sweden the same level of output could be obtained for only 57 percent of the input. For Denmark this figure is 61 percent, for Finland, 62 percent. In other words, some 43 percent of the labor and other resources “used” in the Swedish government sector are-in effect-idle. The proportion effectively idle in the Danish government sector is 39 percent, and 38 percent in Finland.”

    The “welfare” state must operate on the principle of “one size fits all,” of course. Thus in Sweden the state supplies all childcare, schooling, medical services, and aged care, except for a minuscule proportion. But even here, “private” suppliers are paid from taxes. Swedish legislation virtually prohibits direct private purchase of alternatives.””

    One aspect of the Swedish “welfare state” is particularly disturbing: the power that official “social workers” have over children. Children can be removed from parents and put into foster care for a wide variety of reasons. Disputes go before special administrative tribunals, not the ordinary courts. So the whole situation is stacked in favor of the official and against the parent. Foster parents receive tax-free payments from the state. In high-tax Sweden this is a huge advantage, which results in really good incomes.”

    My guess is that people that tout the Swedish system have no idea of what they are talking about.

  45. I’ll be kicked out of the cool libertarian’s clubs for this, but I fully agree with Mike Laursen.

    Hmm, maybe just like there are Jack Mormons, we can call ourselves jack libertarians.

  46. Lemme help out with this:

    Their model, where an expansive social safety net reduces economic insecurity and thus reduces public fear of a dynamic economic system,

    How much of the Swedish economy is actually “dynamic”? What does their income mobility and rate of new business and job creation look like? How much foreign trade (after backing out resource extraction) do they actually engage in? How much of their growth in recent years is due to resource exploitation?

    You can’t even begin to assess the rather counter-intuitive claims in the article without answering some pretty basic questions that it thoroughly ignores, as far as I can tell.

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