2021 is off to a fast start. Democrats have taken the White House and both houses of Congress, and Alexandria Ocasio-Cortez is flexing her new-found strength by leaving her fingerprints over everything from Biden’s Green New Deal to the twitter shaming of any Republican silly enough to challenge the new ascendant Left.
So naturally, the topic soon turns to what comes after Covid — namely, the replacement of our entrenched, institutionally racist system of elitist capitalism by an enlightened, progressively just form of new socialism. Not your grandfather’s brand of socialism, mind you; that sclerotic, tyrannical form of collective ownership and central control has been condemned to the trash heap of history (plus the occasional blip of contemporary misery such as the failed state of Venezuela). Instead, our American beacon of socialistic light originates from a much brighter corner of the globe: the happy, peaceful, prosperous countries of Scandinavia. From AOC to Bernie Sanders, our liberal leaders have touted the Nordic Model as a proven paragon of social and economic success.
This much-discussed Scandinavian roadmap provides a very intoxicating brew of socialistic potency…with one minor quibble: the Nordic Model is not, in fact, socialism. Rather, the Nordic nations are — like the US and most of the rest of Europe — free-market, democratic capitalist countries. They have some unique differences, to be sure, including a larger unionized workforce than the US, more collective bargaining (known as social corporatism where the government mediates between companies and labor), and a larger welfare system. But these attributes are a far cry from democratic socialism. A more accurate description would require flipping those two words around into the phrase “social democracy,” or perhaps following the cue of economists and going with the more humorous but aptly named “cuddly capitalism.” Either way, it’s important to understand the model for exactly what it is: US-style democratic capitalism, accompanied by a nice, warm social safety net.
But regardless of what it’s called, this Nordic approach would still be a huge step in the right direction for America, right? A quick look at Norwegian statistics would seem to bear that out. Compared to the USA, Norway has less than half our poverty rate, dramatically better murder, incarceration and infant mortality rates, free universal health care, 20% higher home ownership, longer life expectancy, and a spot inside the top 5 of the World Happiness Report. The results are clear and obvious. And more importantly, the causality is just as apparent: the Nordic Model’s social safety net produces innumerable societal benefits and broad well-being.
Or does it? Are conclusions about the efficacy of the Nordic Model truly as straightforward as they might appear? A deeper deconstruction of the origin of social democracy raises several problematic questions, beginning with a simple analysis of how the Scandinavian countries afford their generous safety nets in the first place.
Using Norway as a proxy for the region, we see that the country ranks 4th in GDP per capita. It also has the world’s largest sovereign wealth fund (as per SWFI). State-owned oil and gas assets have clearly been kind to the national ledger, creating a level of deep-pocketed government financial power that is nearly unprecedented on a global scale. And wealth is not limited to the sovereign fund and a concentrated circle of elites, as is the case in most other oil-rich states; Norway’s average annual wage ranks in the top ten globally, creating the unique situation where the government has nearly unlimited funds to spend on a population that, as it turns out, is already independently wealthy of their own accord.
Norway also possesses a high degree of ethnic homogeneity and, with only six cities in the country with more than 100,000 population, a preponderance of smaller towns. Add these factors all together, and we find a country with massive national wealth (i.e., a large safety net), equally impressive individual wealth (i.e., few people with any incentive to abuse that safety net), little diversity (i.e., high conformity to norms), and small communities (i.e., high social pressure and adherence to rules). With this degree of wealth and homogeneity, it’s becomes easy to understand the source of Nordic success. In fact, causality itself begins to flip on its head: instead of social democracy causing broad well-being, we begin to understand that well-being and cuddly capitalism are more likely merely correlated, with the uniquely Nordic combination of fortuitous demographics and national wealth serving as the causal driver of both outcomes.
And so we arrive at the point where America joins the conversation, a country with massive national debt, tremendous wealth disparity, extreme ethnic and cultural diversity, and a dwindling capacity to demand adherence to a single set of norms. Any attempt to reproduce the Nordic Model within our borders will end with a net too small, abuse too large, and compliance too weak to even pretend that it could somehow work.
But maybe that’s okay. The Nordic countries are burdened with their own set of problems, including economic stagnation and an over-reliance on non-sustainable natural resources. Trying to transplant the Scandinavian solution to our unique American situation would likely result in organ rejection — we’d end up with all of the damaging consequences, and precious few of the offsetting benefits. The far better strategy, as championed by our newly elected President, Joe Biden, is to reject the notion of importing a foreign solution to our problems, and to instead look within and “Buy American.” When our country is sitting on the greatest political and economic engine the world has ever seen, there’s simply no reason to look anywhere else for inspiration.
