Social Democracy: “Clearly a stinker”
The Irish Daily Mail devoted its main editorial, written by Mary Ellen Synon, to warning Irish citiznes and politicians of the Nordic Model - here’s the article from Johnny Munkhammar’s site (I’ve copy and pasted the text here because the editorial was in MS Word format)..
Say No to Nordic Ireland
Copying the Swedes is the road to ruin
The Nordic model is the latest vogue with trades unions. Great – if you want high taxes and unemploymentSome of you might have noticed this new fashion among our trade union bosses over the last few months, which is, to creep away from the so-called “European social model†that they have been pushing for years – and if you aren’t sure what that social model is, I’ll tell you.
Or rather, I’ll let Martin Wolf of the Financial Times tell you. It is social democracy, it is the European system in which the state is maternal, “protective but also infantilising. Its high taxes and benefits discourage anybody from doing too well, while ensuring that nobody does badly. Its services are available to all, but are also mediocre and inflexible.â€Â
Even Mr Wolf, one of that nest of socialists writing for the Financial Times, is wondering aloud if this vaunted social model can endure. “It is a question I have wished to avoid.†You bet he has. But even he now admits “t\here is something rotten in western Europe.â€Â
What’s rotten is the European social model. It has made the countries of western European the tax-and-spend champions of the world, and has therefore made Europe “a continent of high and persistent unemployment, declining productivity growth, rapid ageing and growing fiscal strains.â€Â
The European social model is a fashion that is gone, and it is an economic system that is bankrupt. Which is why our trade union bosses, like the rest of Western Europe’s wrong-and-wrong-again socialists, have decided to slide away from it. Social democracy is so clearly a stinker that even the Irish union bosses have started to notice it is giving them a bad smell.
The problem of course, is that Mary Harney had already summed up the problem for them. You’ve got to choose Boston or Berlin. With the German economic growth flat-lining and German unemployment stuck at 12 percent, most of us would say the choice is obvious. Boston it is.
Except the ideologues running the Irish trade unions can’t admit that. So they have been looking around for something else, anything else, to push in their “social partnership negotiations†that is not the European social model, and yet is not free-market capitalism.
That doesn’t leave much of a choice. As a great philosopher once said, “Every argument has two sides. One side is right and the other side is wrong, but the middle is always evil.†Trust our trade unions bosses to come up with the evil in the middle – known as the Nordic Model.
Nice wheeze, that title. There is still a notion hanging in the air here that somehow the Scandinavians do socialism better than other people. So when David Begg, the general secretary of the Irish Congress of Trade Unions, tries to sound snappy he says he wants “Copenhagen not Chicago.â€Â
He tried it in a speech last Monday evening at University College Cork. He said our Government must match the high public-spending levels in the Nordic states and abandon our low-tax strategy. This would, he said, make a new form of partnership that would follow the example of Scandinavia. He reckons it would deliver “economic efficiency and social cohesion,†high productivity and excellent social services.
Except it wouldn’t. You only need to ask the Swedes about that. If Nordic-model Sweden were on of the 50 states of the US, it would be the fifth poorest. Sweden: the Arkansas of Europe. And Mr Begg thinks we ought to be just like that.
Indeed, I did ask one outstanding Swede about that. I sent Mr Beggs’s speech to Johnny Munkhammar, the economist and author who is head of the free-market Swedish think-tank, Timbro.
That piece from the Financial Times I quoted at the top of this is from Martin Wolf’s piece about Johnny Munkhammar’s latest book, “European Dawn: After the Social Model.†The heavies, from the Nobel Prize winner Robert Mundell to the former Swedish prime minister Carl Bildt, read Munkhammar when they want to know what is really going on in the Nordic model.
So here is what Mr Munkhammar says about David Begg’s version of the Scandinavian economies: “Mr Begg is factually wrong on several important points.â€Â
“To the extent that the Nordic countries still have an extreme version of the European social model of a big state, it still creates great problems and should definitely not be copied. In fact, the Nordic Model has brought us lower growth, unemployment, dependency on the state and deteriorating welfare services. We should be more inspired to do like Ireland, with its low taxes and free markets.â€Â
Mr Munkhammar notes that Mr Begg says the market economy concentrates wealth in the hands of the most powerful and tends towards ever-greater inequality. Wrong, points out Mr Munkhammar: “Inequality is not greater in market-oriented countries. In particular, poor people are better off in countries with a more free economy and a smaller state. Countries that pursue market-oriented reform get the quickest improvements for those who were worst off.â€Â
“What Mr Begg seems to want, “says Mr Munkhammar, “is that the state takes care of all social matters – and not the people themselves by keeping their money. That may be an ideological standpoint, but countries that have gone down that path have created social problems, not better social conditions.â€Â
And he points to his own most recent essay, published on the Tech Central Station website. In it, he praises the reforms that started in Sweden in the 1990s, in which marginal tax rates were cut and markets were deregulated, public pensions were cut and some free competition was allowed in health care.
But since then, he says, “The market-oriented reforms have come to an end. No new reforms have been introduced in Sweden and the positive effects of the old ones are fading.â€Â
An extreme version of the European social model of a big state was introduced in the 1970s and 1980s. The tax pressure on the country, that is, the amount of wealth sucked out of Sweden’s wealth creators by the state, was raised from 20 percent in 1950 to 50 percent. “The state monopolized welfare services and social security. The Labour market was highly regulated.â€Â
“The Swedish experience from walking this path is that it is a dead-end. And when it comes to this model, the big state, Sweden has not reformed. The tax pressure is still the highest in Europe. Ever since the taxes reached this level, growth has been declining. During the past 15 years, average annual growth has been 1.4 percent, lower than the average for the U.S, the OECD†— which is the club of rich countries — “and the EU.â€Â
“Employment has been developing very poorly. There are nine million people in Sweden, and some 1.5m people of working age don’t go to a job. The unofficial total unemployment is some 20 percent. In the EU-15 countries between 1995 and 2003, employment grew more in 11 EU countries than in Sweden.â€Â
“Thus, many people are dependent on the state. Early retirement, sick leave, unemployment, temporary labour-market programmes – there are many categories. Employment is decreasing and dependency on the state is rising. About 60 percent of the adult population is to some extent dependent on the state.â€Â
“And indeed, those welfare services that were said to benefit from public monopolies and a big state are deteriorating. Despite an increase of almost 70 percent in spending since 1979, Sweden’s public health-care system is coming apart at the seams. The Swedish Association of Local Authorities and Regions reports that doctors see an average of four patients a day, down from nine in 1975. The number of hospital beds is down by 80 percent since 1975.â€Â
“These are all natural results from this so-called social model. The big state stands in the way of prosperity and better living standards. In this regard, other countries, in the EU or anywhere in the world, should not copy Sweden.â€Â
Take it from the Swede: dump the Nordic Model.
Phil, I’ve understood you’re not very fond of either the Finnish or the U.S system since you are a strong libertarian, so which one of these two you like best? This is slightly off topic but has bugged me lately.
Comment by Passer-by — Mon, Mar 6th, 2006 @ 2:23 pm
“…The number of hospital beds is down by 80 percent since 1975.â€Â
“These are all natural results from this so-called social model. The big state stands in the way of prosperity and better living standards. In this regard, other countries, in the EU or anywhere in the world, should not copy Sweden.â€Â
I fail to see the connection here. Why is it low a standard of living if there are less beds in hospitals. There’s clearly too little information here. Are they trying to hide something?
_the_ Swede with a bloated ego?
Comment by St Korova — Mon, Mar 6th, 2006 @ 2:29 pm
I guess choosing the right model, depends for most people pretty much on under which living conditions they are currently (unemployed, poor, middle class in a deteriorating company, IT guy/girl in prospering company, upper class …).
I think it’s a little bit too easy to trash Nordic welfare state, only because a country like Ireland is on the rise currently. What happends if all the IT companies go away. Do the people happily fall back into there old lifestyle (after they are used the better one for maybe 20 years) ?
Comment by Michael — Mon, Mar 6th, 2006 @ 2:34 pm
Bad timing, Phil. That nest of socialists, the World Bank, has released yet another report about the success of the Nordic and European economic model. All the Nordic and Western European countries are among the most wealthy (per capita) in the world (article in today’s Helsingin Sanomat).
The funniest thing about Mary Ellen Synon’s propaganda piece was that she painted Martin Wolf as some kind of social democrat. In the real world he is Financial Time’s resident neocon, very right wing even for FT:s standards.
Comment by N. Siinistö — Mon, Mar 6th, 2006 @ 2:37 pm
Having lived in Ireland, it did seem a class society to a surprising degree. The bad areas were really bad in the way that is difficult to imagine in Finland. The Nordic model aims to level the playing field by providing both high quality education and health care without regard to your (or your parents’) personal wealth. The market economy is a pretty unpredictable system that needs people to lose, not only win. If we have no levelling methods to counter this the differences in wealth will ossify and lead to great waste of human potential.
Comment by mjr — Mon, Mar 6th, 2006 @ 2:44 pm
Phil, I’ve understood you’re not very fond of either the Finnish or the U.S system since you are a strong libertarian, so which one of these two you like best?
Both have elements which I like, and which I don’t like. Government is smaller, more efficient, and less corrupt here - so even with all the high taxes, I guess I choose Finland.
Comment by Phil — Mon, Mar 6th, 2006 @ 2:50 pm
You posted this just to irritate me didn’t you?
I am actually familiar with Wolf’s column and I responded to it over at Economists View. I’m not going to repeat myself but it was almost entirely nonsense and relied rather heavily on Munkhammer’s own nonsense.
Over at Crooked Timber I think it was John Quiggen who said that there are two types of think tanks. Some are impartial and some you can guess the conclusions of their “research” before the findings are published. TIMBRO and its employee Munkhammer are firmly in the latter. No matter what they research they find it supports their agenda.
By the way, the idea that Wolf is a socialist is laughable. Where did that come from?
Comment by finnsense — Mon, Mar 6th, 2006 @ 3:11 pm
“Mary Ellen Synon is now at Ireland On Sunday, but she made headlines as a Sunday Independent columnist.
She lost her job after challenging the significance of the Paralympics, to the horror of disability campaigners and the broader public.
Synon was back in the news last year when she spoke up in defence of Kevin Myers. The Irish Times columnist had suggested that a large number of Irish single mothers had opted to bring up ‘‘bastards’’ in order to fleece the state.
Generally right-wing in her views, Synon is a guaranteed generator of controversy.
Opinionated editorial is a key feature of the Daily Mail in Britain. Its best-known columnist, Lynda Lee-Potter, died last year but its current line-up includes Melanie Phillips, Richard Kay and Richard Littlejohn.”
The Irish Daily Mail (est. 6.2.2006) bears a striking resemblance to the Daily Mail (Associated Newspapers) Q.E.D.
P.S.
Carat Ireland is predicting a price war between Associated Newspapers and the Independent News & Media group.
The British edition of The Daily Mail currently sells an average of 10,500 copies a day here, dramatically less than the top-selling Irish Independent, whose sales average 170,000 copies.
The Irish version of The Sun sells 119,000 copies, the Daily Star 100,000 copies and the Daily Mirror 80,000 copies.
Media buyers differ on the potential for the new title.
The Guardian cited a former Associated executive with knowledge of the Irish market as saying that an optimistic assessment of the Daily Mail Ireland sales would be 40,000 copies, but pessimists put the figure at 18,000. Either of those results would be likely to disappoint Associated Newspapers.
Road Test:
http://freestater.blogspot.com/2006/02/initial-impressions-on-irish-daily.html
Comment by Not quite Andrex — Mon, Mar 6th, 2006 @ 3:47 pm
What happened to the Finnsense post, btw?
Comment by Not quite Andrex — Mon, Mar 6th, 2006 @ 3:48 pm
“If Nordic-model Sweden were on of the 50 states of the US, it would be the fifth poorest. Sweden: the Arkansas of Europe.”
Ouch!
One problem with the nordic model is that it is dependent on some of the people to work their hardest and earn as much as they can to subsidize the rest. But by doing that, they reduce their tax base, as the most wealthy, are also the most able to move and escape the tax-man.
How much has Mika Hakkinen earned in the last couple years? Where is he living? What would happen to Finland’s tax revenue if Nokia moved its HQ to Texas? (Which they have threatened to do in the past.)
Some Swedish Billionaire is in the news in the US for crashing his Million $$$ car. He too is living in the US and not in high-tax Sweden. His car cost more than Sweden will see in taxes from him this year.
Even my wife who was eager to move back years ago, is not so much any longer, as we are on the negative side of the tax-deal. The tax penalty is high to live in Finland. Maybe we try Maine instead.
Comment by Fred Fry — Mon, Mar 6th, 2006 @ 3:49 pm
The Finnsense post wouldn’t have gone because he slagged off Timbro as a one-trick-pony think tank that decided what it wanted its research to prove before it asked the questions, would it? Shirley not?
Comment by Not quite Andrex — Mon, Mar 6th, 2006 @ 3:59 pm
@Fred: Maybe that’s the difference in mindset. The social state and the associated philosophy is not about just about being selfish and looking for your own advantages. Why the heck is so much misery in the world because humans are humans and this philosophy doesn’t work well in the long run, because the only continous thing we have is that people tend to think first for their own pocket and then look whats left for the others. No ?
So what one can get from the media, the biggest reason the wellfarestate was working so far in the northern countries is, that people had pretty much the attitude that it’s worth spending so much money. But the globalization and the changing mindset makes it increasingly difficult.
So in the longrun the society as such has to decide into which direction it’s heading, any direction has it’s associated costs and I’m not sure whether the “let the market decide” direction is the best for the people or the society in the long run. After all a company as an entity has no feelings and needs no social treatments - as people do.
Comment by Michael — Mon, Mar 6th, 2006 @ 4:04 pm
What happened to the Finnsense post, btw?
It got caught in my spam-guard, it’s online now.
Comment by Phil — Mon, Mar 6th, 2006 @ 4:13 pm
Boingggggg…. it’s back again at #7. Something bizarre going on with the comments section. It had definitely done a runner ten minutes ago.
Comment by Not quite Andrex — Mon, Mar 6th, 2006 @ 4:15 pm
OK. But it WAS there. So the spam-guard doesn’t stop these things APPEARING, but grabs them by the scruff of the neck and takes them OUT after they have shown up? Is that how it works?
Comment by Not quite Andrex — Mon, Mar 6th, 2006 @ 4:17 pm
What happened to the Finnsense post, btw?
And what happened to my post? It was post #4 or 5, and now it’s gone. Makes almost one wonder if Timbro has installed some kind of censorware here…
Comment by N. Siinistö — Mon, Mar 6th, 2006 @ 4:18 pm
Do Arkansas people drive 9-5 Saabs and V70 Volvos? Something doesn’t add up here…
Actually, in Sweden the health care costs have soared in recent years because of privatisation; local administrations buy services from medical service providers (which also explains poor patient per day -ratio).
I don’t recall Nokia mentioning TX when Mr.Ollila speculated about HQ site, now why in the name of sweet jesus would anyone move to Lone Star State, except some US prez wannabe poseur?
To quote Sam L. Jackson: “No, no, no,no, no!”. Well, unless Nokia wants to screw US investors and retirement funds Enron style… Nee-haw! Yippikayiee!
Comment by Pete Q — Mon, Mar 6th, 2006 @ 4:21 pm
When viewing the supposed wealth of any country, one has to look at the ”purchasing power” of the consumer.
The 2005 GDP of the US is $41,800 compared to Sweden’s:$29,600 Finland’s:$30,300 ….Norway’s:$42,400.
Seeing that the cost of living in the Nordic states is MORE expensive than in the US, the US is to be considered more wealthy than the highly touted Norway or any other Nordic state.
Comment by KGS59 — Mon, Mar 6th, 2006 @ 4:25 pm
but you must remember to minus all the other expenses that americans have: health insurance, education etc. which are included in taxes in the nordic states.
Comment by P — Mon, Mar 6th, 2006 @ 4:57 pm
In order to prevent anybody from believing the propaganda in the original post: The Nordic economies are doing just fine in international comaparisons.
KGS59, I believe the figures you gave already are corrected with purchasing power parity calculations (which don’t provide objective data, by the way).
I seem to remember that The Americans work about 30% more than the Swedes and other Nordics. That pretty much “explains” the gap between GDPs.
Comment by Anonymous — Mon, Mar 6th, 2006 @ 4:58 pm
Whenever you bring up a complex topic, there are endless ways to divert the discussion to hospital beds or other nonsense. But a key thing that WAS in your original post that I am in violent agreement with is that the social democratic system smothers you into not trying very hard. I really have a problem with the Nordic model in that it really does not reward success. It’s in our value system.
Look back to 1980, here’s a true story — if you started a private company, people would actually go out of their way to let you know they despise you. And this only for wanting to have a job and make a living, and perhaps succeed. So it’s no wonder success is not rewarded.
Keep it going, Phil. Finns simply do not discuss issues, they like to conform to whatever their state is telling them is the right thing. Pushing them over the edge now and then could do miracles.
Comment by Markus — Mon, Mar 6th, 2006 @ 5:13 pm
Well, as a moderate compromise in this intellectually oh so honest standards of living debate between Sweden and Arkansas, why don’t we compare some really fundamental indicators like life expectancy, child mortality, literacy rate and such. Now, what would be the result?
Comment by mjr — Mon, Mar 6th, 2006 @ 5:13 pm
@Markus: You are right in noting that the wellfare-state doesn’t reward success as much as might be good. But don’t we all forget that the “non-wellfare-state” has problems too, like dumping peoples lifes more easily if they are not able to make their own business and make a lot of money ?
The biggest advantage of a completely market driven system is, that it reduces everything to the simple human needs/wishes to make money, get rich, or on the other side, to survive, no matter how.
I would rather see an effort to overcome the negative side-effects of too much safety and having a steady increase of the living conditions for all. (I don’t think the all or nothing mentality helps!)
Comment by Michael — Mon, Mar 6th, 2006 @ 5:33 pm
Finns simply do not discuss issues, they like to conform to whatever their state is telling them is the right thing.
Oh, I believe that the nation which reads more newspapers than nay other nation can be considered comprising of adults who know what they like and why, without this “mythical” state telling them what to think (”mythical” meaning that there is no mechanism by which this “state” could feed us propaganda even if there was such a thing as “common state opinion” in a democratic state). Besides Finland is doing fine in almost any respect. Why repair something that works so well? (Finetuning and occasional upgrades, that’s okey, and surely there’s always room for more discussion, too.)
Comment by Anonymous — Mon, Mar 6th, 2006 @ 5:37 pm
You are right in noting that the wellfare-state doesn’t reward success as much as might be good.
I don’t know about “welfare states” in general, but at least in Finland the taxes the firms pay are pretty low. If you succeed as an entrepenaur there’s nothing in particular that would prevent from being “rewarded”.
Comment by Anonymous — Mon, Mar 6th, 2006 @ 5:40 pm
I was more speaking about the problem that it’s (IMO) true that too much safety of the job makes people inflexible - more than necessary. (at least that’s my view of how it is in Germany and I think this applies to any other systems too, as this is a property of humans and not about Finns or Germans or whomever). For some people this is worse for some better - but finally almost everybody is longing for this safety. And unless there is this pressure you might loose you job, often the performance degrades over time. I just think this is something we have to cope with, especially if we (as society) decide it’s not the goal to have people fear of getting unemployed and all the negative effects. E.g. I think also that somebody who can be sure that his existance is secured, is able to work better and more relaxed - and thus to provide better results. No ?
I can’t tell much about enterprises, but might be that there are better places to start an enterprise if you want to get the maximum out, but that’s not what we are talking about - I hope.
Comment by Michael — Mon, Mar 6th, 2006 @ 5:51 pm
“@Fred: Maybe that’s the difference in mindset. The social state and the associated philosophy is not about just about being selfish and looking for your own advantages. Why the heck is so much misery in the world because humans are humans and this philosophy doesn’t work well in the long run, because the only continous thing we have is that people tend to think first for their own pocket and then look whats left for the others. No ?”
For lack of a better word, being selfish works. Step Number 1 for everyone is to worry about yourself. If everyone worried about themselves first then there would be less people in the world to worry about. If you don’t care about how much you have in your pocket, then you will often find out that you don’t have enough for what you want or need. After that, then worry about your family and then your friends and after that then you can worry about the ‘Worlds poor.’
You also need to seperate misery in the world from say, misery in your own country. Even in the US, there are tons of programs to help those most needy. I say this, because causes of poverty are different in the third-world than they are in the first. The first-world has great benefits. One problem though-is that the better the benefits are, the more people will accept what is available and opt-out of the working class, in addition to those who really need help.
As for the world’s poor, blame their governments. Look at North Korea. They are demanding free fertilizer from the south. Something is seriously wrong if you cannot even create your own fertilizer…. There needs to be international pressure for countries to change. This has historically not happened thanks to ‘balance of power.’ But that is another story.
Comment by Fred Fry — Mon, Mar 6th, 2006 @ 5:55 pm
So I blame W and GOP for ever-growing US poverty, and advise you lot to advance into Chinese version of one party rule, ‘cos it seems to generate more growth than US system, not?
Something must be seriously wrong if richest and most powerful nation cannot eradicate poverty among themselves…?
Comment by Pete Q — Mon, Mar 6th, 2006 @ 6:14 pm
Ireland’s cities are dirty and filled with cigarette butts and alcoholics. The UK is even worse - their ghettos are genuine ghettos, where you may get stabbed while you are ordering some curry chicken. Having been to the UK and Ireland AND Finland, I’d have to say whomever is running Finland is doing a better job.
Comment by giustino — Mon, Mar 6th, 2006 @ 6:21 pm
Fred: Well, I would rather like to see something in between. Worry about yourself, but don’t blame the system at a certain point that one could have some more pennies in the pocket, just because in the current situation one doesn’t need any special support. And that’s what it looks like often (not always though) if people tell about reducing parts of the wellfare-state. Interestingly this are usually not the poeple who would really need the state at this point in time and so could save money if they wouldn’t have to support it.
)
If I remember correctly that Phil for instance some time ago complained that he had to pay extra money for the doctor - in this case it wasn’t even enough wellfare state. (I have to admit, I don’t remember the full story, so this might be a bit wrong, but put then a different name there
Else, it’s clear that there is a lot of stupidity in the world and additionally everything interacts with everything and it’s hard to differentiate between what caused what. Else politics would be much easier and we couldn’t complain so easily.
But that’s the reason why I try to put it in perspective and try to speak of the general goal a society wants to achieve. If this is clear, one can go further. For me a general goal would be that also poor people (for whatever reason - as long as it’s not due to this misuse of wellfare offerings) should have the possibility to live a decent life and if the developments of technology make it possible everybody should have a share on what is being achieved.
An example: If we extrapolate further automatization and all, even less people are in the future needed to produce what we need (might take effectivly some more decades, but it will happen), in the same time world population will increase steadily. So where is the point (in the long run) to keep everybody working the same amount of time if all the time less people can do more. Of course this is simplified and might take still many decades, but it’s the only logical possibility. And now the problem arises, that it’s not anymore working like centuries before everybody can work to support themself, at some point there has to be an agreement that the wealth being produced has to be provided to the earth’s population, by whatever mechanism. For me one of these mechanisms can be a wellfare-state, which shouldn’t necessarily look at the matter only from a economical point of view, as the state in the first place is there to support the people living in it. (of course we live in reality and today so it has to take economy very much into account)
(or we’re dead then already)
And again biggest problem are the humans themself - so I guess we will see anyway how it turns out.
Comment by Michael — Mon, Mar 6th, 2006 @ 6:21 pm
KGS59,
Purchasing power takes into account the cost of living, in fact, it adjusts for pecisely that - that’s the point. So the average Norwegian can buy, in Norway, a slightly bigger basket of goods and services than the average American.
It’s worth noting that the average doesn’t really matter since no-one is average. If you have a very rich top 10% it drags the average up. What you should care about is the median, which is the wealth of the middle person. Unfortunately, there are no credible statistics for this.
There are credible statistics for the bottom 10% (from the CIA) and they show that if you’re in the bottom 10% of Americans you live on about half that of the bottom 10% of Finns (meaning you have half as big a basket of goods).
The truth is that the top 75% in any rich country have houses, cars, TVs, holidays, education, meals out, food, health care etc. It’s how you treat your weakest that counts.
Comment by finnsense — Mon, Mar 6th, 2006 @ 7:40 pm
“An example: If we extrapolate further automatization and all, even less people are in the future needed to produce what we need (might take effectivly some more decades, but it will happen), in the same time world population will increase steadily. So where is the point (in the long run) to keep everybody working the same amount of time if all the time less people can do more.”
Ahh, but then labor gets cheaper (as unemployment has increased) and that shifts the balance from increased automation to returning to using employees. Take the Mexican labor working farms in the US. The excuse is that American will not work for such cheap rates in the fields. But remove the cheap labor and then machines will be developed to do the work. As it is, cheap labor is preventing the automation.
“Of course this is simplified and might take still many decades, but it’s the only logical possibility.”
- I am not so sure. As it turns out, companies are now switching back some of their clothing production from China back to the US or to other CAFTA countries. Also, increases in efficience can increase the potential market for a product by reducing costs.
“at some point there has to be an agreement that the wealth being produced has to be provided to the earth’s population, by whatever mechanism.”
- Maybe at some point, but not in our lifetime. The real problem is finding work for everyone to do. A planet full of people without something, like work, to keep busy, will find something to do on their own and that often means trouble.
“For me one of these mechanisms can be a wellfare-state, which shouldn’t necessarily look at the matter only from a economical point of view, as the state in the first place is there to support the people living in it. (of course we live in reality and today so it has to take economy very much into account)”
The problem here is that the social welfare descisions do have economic consquences. My company has an office in Switzerland. They are forced to have an insurance policy if they have women of child-bearing years employed, just in case one does get pregnant and take advantage of the full welfare available to her, as it will cost the company a fortune. So how are all these benefits paid for?
“And again biggest problem are the humans themself - so I guess we will see anyway how it turns out. (or we’re dead then already)”
Exactly!
Comment by Fred Fry — Mon, Mar 6th, 2006 @ 7:54 pm
For Finnsense, I guess this would back up your argument:
http://www.ssb.no/english/magazine/art-2005-02-01-03-en.html
“Mr Røed Larsen has answered the question of why Norway is so expensive countless times. He says that, to a certain degree, it is correct when people say that Norway is expensive. However, after reading the first chapter of the book, we understand that it is primarily expensive for foreigners.
“Norwegians get a lot for their money. Norway is so expensive because it has productive workers who can be used for work that produces many valuable products in a short time. Hourly rates of pay in Norway are high. Because most products and services entail the application of manpower, labour costs are high in Norway. This in turn makes products and services sold in Norway expensive. A beer is expensive because the barman has to be paid to compensate him for not going to the North Sea to work on oil exploration. Espresso is expensive because the waiter has to be enticed into making coffee instead of working in Norsk Hydro. Norwegian products are primarily expensive for foreigners. For Norwegians, they are cheap in terms of working hours, and compared to what foreigners have to pay in working hours for similar products in their native country. The Italians and French have to pay more to buy a litre of petrol and loaf of bread than we do in terms of working hours. High prices therefore equate to time being cheap. High prices go hand in hand with a high standard of living,†explains Erling Røed Larsen.”
I will have to dig deeper on this.
Comment by KGS59 — Mon, Mar 6th, 2006 @ 8:10 pm
An example: If we extrapolate further automatization and all, even less people are in the future needed to produce what we need (might take effectivly some more decades, but it will happen), in the same time world population will increase steadily. So where is the point (in the long run) to keep everybody working the same amount of time if all the time less people can do more.
There is no reason, at least I can’t imagine one, why there would be less work in the future. So far machines have increased work and the trend will go on (till humans become half machines themselves and that happening isn’t far, by the way). But it’s true that the income gap - not between nations but people - will widen as it has been doing for quite some time now. The size of service sector will keep growing and there the state or unions can play a positive role by either guaranteening subsidies, education opportunities or increasing salaries. Otherwise, without such mechanisms, globalization and all that will result to a very unstable system of the haves and have-nots. At least, that’s a risk when the productivity depends more and more on more and more complicated techology.
Comment by Anonymous — Mon, Mar 6th, 2006 @ 9:44 pm
“Norwegians get a lot for their money. Norway is so expensive because it has productive workers who can be used for work that produces many valuable products in a short time. Hourly rates of pay in Norway are high. Because most products and services entail the application of manpower, labour costs are high in Norway. This in turn makes products and services sold in Norway expensive. A beer is expensive because the barman has to be paid to compensate him for not going to the North Sea to work on oil exploration. Espresso is expensive because the waiter has to be enticed into making coffee instead of working in Norsk Hydro.”
This probably has a good deal of truth to it, provided that there is low unemployment and job seeker have multiple job offers. This also means that the person are qualified to accept the higher-paying position.
Every person in the US is not being compensated because they have decided to make coffee against working on an oil rig in the Gulf of Mexico, or going to work the oil field of Alaska. They are paid more in those cases because it is rough work. Also, the example above assumes that labor is the reason for the high prices, not taxes and so on.
Take teachers for example. Alaska pays teachers more as compensation to move to Alaska. All teachers in the US are not paid more because they can go to Alaska to earn more. People maturally do not want to go there. However, if they want to make more money, they can do so, in Alaska.
“But it’s true that the income gap - not between nations but people - will widen as it has been doing for quite some time now. The size of service sector will keep growing and there the state or unions can play a positive role by either guaranteening subsidies, education opportunities or increasing salaries. Otherwise, without such mechanisms, globalization and all that will result to a very unstable system of the haves and have-nots.”
- You are gauranteed to be a have-not if you sit around waiting for other people to help you. Too many of the have-nots in America are self inflicted. I am not saying that there are not people who do not need assistance, there are. But there are too many people who are just lazy. Too lazy to learn in school, and then too lazy to work, because they do not like the jobs that they are qualified for.
The sad thing is, you can have only a basic education and still make money in the US, but you do need to bust your ass. Go out and work on an oil rig. Go sailing on Merchant ships. Even some garbage men make good money, like in NYC. As do some janitors. The trick is, nobody gave them these jobs, they went and got them themselves.
Comment by Fred Fry — Mon, Mar 6th, 2006 @ 10:50 pm
finn”sense”:
“Purchasing power takes into account the cost of living, in fact, it adjusts for pecisely that - that’s the point. So the average Norwegian can buy, in Norway, a slightly bigger basket of goods and services than the average American.”
Check my post here:
http://m-sandt.blogspot.com/2005/09/norway-not-so-rich.html
“It (a study by KPMG) indicated that when disposable income was adjusted for cost of living, Scandinavians were the poorest people in Western Europe.”
“While the private-consumption figure for the United States was $32,900 per person, the countries of Western Europe (again excepting Luxembourg, at $29,450) ranged between $13,850 and $23,500, with Norway at $18,350.”
Comment by Mikko Sandt — Mon, Mar 6th, 2006 @ 11:02 pm
Well, well well, how come those rotten Swedes still has a trade surplus with sooo “dynamic” economy of US of A…
Exports to USA (billions of kronors):
Pos - 2005 - 2004 - change%
1-USA - 94,407 - 89,155 - 10.6
Imports from USA:
Pos - 2005 - 2004 - change%
10-USA - 25,228 - 23,438 -3.3
So those “undynamic” Swedes sell stuff three times more than Americans sell back. The US economy is totally out of control, trade deficit is sky high, even in ATPs (Advanced Technology Products such as software, consumer electronics etc) US has a deficit of 40 BILLION DOLLARS. Among the US top ten trade surplus partners are such economic powerhouses as Panama and Bahama.
For more, there is no lending standards, everybody with a pulse (even illegal aliens) is able get a loan. Some banks do not bother to CHECK whether the income stated is true or not on the loan application. You get nice party going on by that way but the eventual hangover is one of the most severe ones.
Comment by tim73 — Tue, Mar 7th, 2006 @ 12:05 am
Tim73,
Calculate those trade figures on a per person basis. Swedes import more in American products than the US imports per person from Sweden. In that respect the US has a trade surplus…..
Part of the US’s trade imbalance is due to other countries depressing the value of their currency by supporting US bonds. There is talk in asia of diversifying their foreign asset holdings but do not because they will lose their export market if the value of the $ drops.
Comment by Fred Fry — Tue, Mar 7th, 2006 @ 1:10 am
Mikko,
Disposable income doesn’t take into account freebies. If you have high taxes like Norway, people will have less disposable income. That doesn’t mean they have less. Americans have to pay for health care and higher education (usually) from their disposable income.
You can have lots of disposable income by borrowing lots of money. This is, in effect, what has fuelled the US economy. Both the government and individual citizens are hugely indebted. By contrast, Norway runs a massive surplus.
Fred,
The trade imbalance largely comes about because the Chinese have continued to lend money to Americans to buy their stuff. The US economy grows but based on what most people think is unsustainable debt.
Comment by finnsense — Tue, Mar 7th, 2006 @ 8:27 am
The trade imbalance above means that Sweden is investing more money into the US than vice versa. This not an assumption but what trade imbalance actually means; “Sweden” is not buying more American stuff with the dollars it has received nor changing them into kronas so the only place these dollars can really go is into the US economy as investments - it’s not like the Swedes would stuff the money under the king’s pillow or something.
This again means that Sweden along with most of the world is borrowing money to the US and thus boosting its economical growth.
The problem is that the day will come when at least some of these loans have to be paid back (not all necessarily, because it’s possible that “Sweden”, for example, is satified with the investments eternally, so to speak). When the pay-back day arrives these “free-riding Americans” have to cut down on their consumption.
This again is something that will affect the whole world: the economical growth of all nations, not only Americans, will slow down. But because big part of the borrowed money in the US has been spent on non-productive purposes while Swedish or Chinese money is for example in treasary bonds with a fixed interest rate and thus with guranteened returns - I’ve been told - the forthcoming slump will affect the Americans hardest. Then the Eureopean growth will surpass that of the US’s and in blogs like this people start talking aboout what’s wrong with the “capitalistic system” of the US and whether “sosialistic features” of Europe should be adopted once again;-)
Comment by TomiA — Tue, Mar 7th, 2006 @ 1:16 pm
Hi,
Why it can not be a flexible system?
A health insurance where everybody has to pay in. The minimum payment entitles to receive the minimum needed health service and some self responsibility for all services. The unemployed gets the minimum health insurance paid for free.
That system would propably be quite cheap.
For people who want more safety can simply pay step by step higher insurance rates and get better health service. e.g. free selection of doctors in and outside Finland without self responsibility.
As well in car insurances people can select how much safety they need by selecting the coverage and self responsibility. But a minimum coverage is necessary for every vehicle.
rgds
Tom
Comment by Tom — Tue, Mar 7th, 2006 @ 1:32 pm
Tom, why would the poor get only minimum health care? Sounds pretty harsh. Otherwise the Finnish system works the way you described - -unless you meant that the “basic insurance” would be private. It’s not, which defenitely is a good thing.
Comment by TomiA — Tue, Mar 7th, 2006 @ 3:19 pm
When Americans start their bulling about economies, they always take out that those GDP comparisons. Well, GDP figures are heavily biased statistics, and reflection of a over priced currency and an economy based on private consumption (and services, and imports). It’s actually questionable to talk about “production” at all. Therefore, no respectfull economist would use it as a prove of superiority of the US economy, nor as a measure of wealth. Instead, the experts make much more reliable in meaningfull rankings, like World Economic Forum does.
Comment by Markku — Tue, Mar 7th, 2006 @ 4:27 pm
@TomiA
I meant the basic insurance would be private and is free for the “poor”.
And the basic would cover health care about as it does now. And it should cost the same for everybody who has some income. Only the “poor” unemployd gets it for free.
Anyone who likes to get better service such as full cover of dental care or optical lenses or free selection of doctors and no waiting for possible surgery need to pay higher insurance fee.
Now the health care is too much mixed with the general tax system and unflexible. The most important health care is available for everybody but better service is not available for a fair price.
If I use a private doctor I need to pay the bill my selves and Kela will compensate me the costs what the public halth center doctor would have cost for the same treatment. But that what Kela compensates for one hour health center doctor is far below a cleanist salary.
Presently it is to my opinion an inefficient, unflexible and unfair system.
rgds
Tom
Comment by Tom — Tue, Mar 7th, 2006 @ 4:49 pm
What is the definition that everyone is using for ‘poor’ anyway?
Is a person who owes more than he is worth poor?
For that matter, what is the definition of a have-not? As far as I am concerned, there are no have-nots posting on this board.
Comment by Fred Fry — Tue, Mar 7th, 2006 @ 5:08 pm
One of the uttermost disasters of our times is that efficency has somewhow become an ideological issue. I don’t really give a damn whether I pay for education or healthcare indirectly through taxes, indirectly through insurance (health) or directly by tuition fees (education). What I care about is what am I getting for my money, and this a strictly emprical question. So far the evidence seems to suggest that having the state run those services is more effective, particullary when it comes to healthcare. Should that cease to be so, they should be privatized. Simple as that.
Whether those who can not afford the services should be subzidized is a different question, and I think they should. How best to do it is once again a technical matter.
There are lot of things wrong and more that could be improved with the Nordic model, like with any other model, but this kind of view from thirty thousand feet is not helpful. To give a particular problem, effective tax rate on low income is scandalously high and leads to unemployment in low productivity sectors (and the rest of us doing our own laundry, but that is another thing.) There is this socialist invention called progressive taxation to fix that…
Oh and Munkhammar knows perfectly well that “real unemployment rate” of +20% is comparetively damn good, as it implies an employment rate in high 70’s. Top three nations in employment rate have been for a good time now Denmark (close to 80 I think) and Norway with Sweden and the anglo-saxon nations a notch below (low 70’s).
Comment by teme — Tue, Mar 7th, 2006 @ 5:38 pm
Just to weigh in on the health care debate going on here, socialised medicine is actually more efficient than private health care. Americans spend twice as much of their GDP on health than Swedes (13% to 6%) and yet have far worse health outcomes. Plus, 40 million Americans are without health care except in emergencies.
Privatising things doesn’t always work. Health care is one area where the economies of scale involved in a big monopoly work out better than choice.
Comment by finnsense — Tue, Mar 7th, 2006 @ 6:30 pm
Finnsense,
In many cases American can get immediate service, unlike the public care system which have notorious waiting periods. How long is the wait for an MRI in Finland? I had a friend whose brother thought he was going for an MRI after waiting three months. It turned out that it was just another examination to confirm that an MRI is needed. He should get his MRI in about another thre months, maybe.
“Plus, 40 million Americans are without health care except in emergencies.”
- Or having babies. That’s free too, even if your an illegal alien.
- Babies also get free health care. There are ways to get coverage. Where are the stories of people dying in hospitals because they didn’t have health insurance?
Comment by Fred Fry — Tue, Mar 7th, 2006 @ 9:19 pm
In many cases American can get immediate service, unlike the public care system which have notorious waiting periods.
Most of the time you’ll get appropriate care, at least I have, my kids have and my elderly parents have had. Not always, though, I’ve ben told, but the Finnish public health care is not measured by customer satisfaction but by overall results, how well it serves the citizens in general or in avarage. That’s it’s strong point, believe it or not. Furthermore, most jobs include private health-care benefits, pretty much like in the USA.
Comment by TomiA — Tue, Mar 7th, 2006 @ 9:56 pm
Fred,
If you don’t want to wait in Finland you can pay for your MRI. What you mean is, you have to wait in Finland if you want it for nearly free.
Nothing in Finland stops you getting insurance or going private but it guarantees that if you’re poor you will get quite good care and that if you’re in pain you will be seen immediately. That’s not the same in the US.
Actually in terms of socialised systems Finland and Sweden aren’t great. France has a far better socialised health care system but it costs more too.
Comment by finnsense — Tue, Mar 7th, 2006 @ 10:21 pm
“Most of the time you’ll get appropriate care, at least I have, my kids have and my elderly parents have had.”
Tell that to the old people who die waiting for heart surgeries etc.
Comment by Just a dude — Wed, Mar 8th, 2006 @ 1:10 am
Fred: Denial is not a river in Egypt. 40-50 million people without decent health care and you still defend that piece of shit-system. Retirees desperately smuggling drugs from Canada (They have a national healthcare system) because those are way cheaper than in the US. Even Cubans under dictatorship have better health care than poor Americans, what an irony.
US trade deficit (both relatively and absolutely) is highest among the world and consumer indebtness is also very very high. National debt now over 8 200 billion and rising. Real unemployment is around 10 percent (you are not counted as unemployed if you have not actively seek a job within last four weeks, millions just “disappear” from official statistics every year). Manufacturing base decimated, US army stuck out there in the sand etc. etc. I’d say the situation is pretty much FUBAR.
Comment by tim73 — Wed, Mar 8th, 2006 @ 2:20 am
Tim73,
Your comments about the Cuban system is a joke:
http://www.therealcuba.com/Page10.htm
As for Canada, they are having aproblem keeping their doctors as many are moving to the US, as are many patients who are going to the US and Europe for MRIs and knee replacement surgeries and so on. Also, you should take a minute to check up on what is NOT included in the Canadian system. It is not all-inclusive.
As for the following:
“US trade deficit (both relatively and absolutely) is highest among the world and consumer indebtness is also very very high.”
- So what. There are 49 other states that each company can export too Before looking to exporting overseas (and the problems that go with it.) There have been a couple articles where companies explain how often they are courted to export their products to other countries but do not bother as they are still trying to expand across the US. What will happen the the world if the US stops buying it’s crap?
“National debt now over 8 200 billion and rising. Real unemployment is around 10 percent (you are not counted as unemployed if you have not actively seek a job within last four weeks, millions just “disappear†from official statistics every year).”
- So what? What’s the real unemployment rate in Europe and Finland? In the US your not forced to work for other companies to collect unemployment. We have a 4-year college progrm instead of 6. We don’t punish students for going to work. Whatever the US is doing to exclude people from the workforce, Finland is doing it much worse.
“Manufacturing base decimated,”
US Merchandise Exports: (Not total exports)
2001 $731,025,906
2002 $693,257,300
2003 $723,743,177
2004 $817,935,849
2005 $904,379,818
“US army stuck out there in the sand”
- You mean International Press stuck in the Green Zone and has no clue what is going on in that Country.
“I’d say the situation is pretty much FUBAR.”
- About half as FUBAR’d as in Europe.
Comment by Fred Fry — Wed, Mar 8th, 2006 @ 2:41 pm
It’s not right to compare countries like US and Finland. US is a country for people who want to work and earn money. People born in US are ready to earn and make money from their childhood. They are not waiting and hoping for country to do anything for them.
US is a paradise in any way for anyone who wants to work and the only country where you never feel that you are foreigner. People who speak about bad life in US, healthcare and expensive study look quite funny. Just compare what you have, what you drive and what you can get during whole your life here. Tiny omakoti and cheap french car?
There are those who don’t have anything in US. But open your eyes in Finland you have same kind of people and the only difference that they get money for doing nothing except drinking.
Comment by Ferrili — Wed, Mar 8th, 2006 @ 2:49 pm
“I’d say the situation is pretty much FUBAR.â€Â
- About half as FUBAR’d as in Europe.
So, how come Europe’s economy is growing so much faster? (Or did you by “Europe” mean Germany and France as most anti-European Americans do?)
Comment by TomiA — Wed, Mar 8th, 2006 @ 2:55 pm
“So, how come Europe’s economy is growing so much faster? (Or did you by “Europe†mean Germany and France as most anti-European Americans do?)”
Well there is old and new Europe. Look at the taxes:
—————-
Taxation as a percentage of the overall economy of the European Union fell slightly in 2004 to 40.7% of gross domestic product, down from 40.9% in 2003. However, the latest figures from the European Union’s statistical office Eurostat continue to show wide variations in national tax burdens, with the Nordic countries the most heavily taxed.
In 2004 Sweden (51.2%) recorded the highest ratio, followed by Denmark (49.9%), Belgium (47.4%), France (45.3%), Finland (44.5%) and Austria (44.3%).
The lowest ratios were observed in Lithuania (28.7%), Latvia (29.1%), Slovakia (30.6%), Ireland (31.7%), Estonia (32.7%) and Cyprus (33.7%).
—————-
Now where is the growth taking place? Is there a connection between the two. In which group is there ‘Great’ social welfare?
Comment by Fred Fry — Wed, Mar 8th, 2006 @ 4:33 pm
“Now where is the growth taking place?”
Comparing those growth figures is like comparing two-year old and 17 year-old. The other one is almost grown up and the other one HAS A LONG WAY TO GO in order to catch up. It is always easier to raise your salary from 100 to 200 dollar/euros per month than let’s say from 4000 to 8000.
“US is a country for people who want to work and earn money. People born in US are ready to earn and make money from their childhood.”
Typical American bullshit…we Europeans just drink latte and discuss politics, right?
Comment by The Dude — Wed, Mar 8th, 2006 @ 8:35 pm
Now where is the growth taking place? Is there a connection between the two. In which group is there ‘Great’ social welfare?
The real rapid growth is happening in the poorer countries - and Ireland. A bit less rapid growth is happening among other places in Finland. And I don’t have to guess what taxes have to do with the growth because it’s been studied. There is no correlation between the two, highly taxed countries have done as well as less taxed countries. The people in highly taxed countries do on average better, though, and there is more social mobility. In other words, high taxes slowing down economical growth is a myth.
Comment by The Dude — Wed, Mar 8th, 2006 @ 9:26 pm
—
Comment by Once again wron nick, sorry — Wed, Mar 8th, 2006 @ 9:27 pm
Who the fuck hijacked my callsign!??!? Die bastard die….
Comment by The Dude (the real one) — Thu, Mar 9th, 2006 @ 2:45 am
Freerider!!! I’m going to feed you to Finnpundit…
Good comments though….
Comment by The Dude (the real one) — Thu, Mar 9th, 2006 @ 2:48 am
“Everyone is welcome to pay taxes in Finland” This is what I was told when I asked if I could get a KELA card. I was working and paying taxes but had no Kela benefits.
You are welcome to pay high taxes. The people they are giving your money to certainly appreciate it.
“The real rapid growth is happening in the poorer countries - and Ireland. A bit less rapid growth is happening among other places in Finland. And I don’t have to guess what taxes have to do with the growth because it’s been studied. There is no correlation between the two, highly taxed countries have done as well as less taxed countries.”
Link please for the study that says there is no correlation between growth and tax rate..
Comment by Fred Fry — Thu, Mar 9th, 2006 @ 2:55 am
Link please for the study that says there is no correlation between growth and tax rate..
Do you read Finnish? In case you do try the ETLA’s book Mistä talouskasvu syntyy? chapter 13 Julkinen sektori, verotus ja talouskasvu by Jaakko Kiander (VTT, tutkimusprofessori, VATT)
If you don’t, well, just think about it: historically there is no big difference between the economical growth of such countries like the USA or Great Britain which have lower tax rates and smaller public sector and those which have higher and bigger like the Scandinavian countries.
There must be studies about this in English, too.
Comment by TomiA — Thu, Mar 9th, 2006 @ 8:18 am
Here’s part of the book:
http://www.etla.fi/files/1410_talouskasvu_sislu_linkit.pdf
unfortunately in Finnish.
Comment by TomiA — Thu, Mar 9th, 2006 @ 8:30 am
Sorry about the nickname “stealing”, sometimes in this site the name field is filled with the last writer name and if you are not careful, you will end up stealing the name
Comment by tim73 — Thu, Mar 9th, 2006 @ 4:00 pm
“Do you read Finnish?”
- Yes I can
In case you do try the ETLA’s book Mistä talouskasvu syntyy? chapter 13 Julkinen sektori, verotus ja talouskasvu by Jaakko Kiander (VTT, tutkimusprofessori, VATT)
- Sorry, I am not going to bother with this. If the definative study is in Finnish, then there is a great secret trapped behind the Finnish language.
“If you don’t, well, just think about it: historically there is no big difference between the economical growth of such countries like the USA or Great Britain which have lower tax rates and smaller public sector and those which have higher and bigger like the Scandinavian countries.”
- Over time a one percent difference makes HUGE differneces. There is currently a gap between growth in the US and Europe. The US is pulling away from Europe.
Thanks for the link, but it is only of the index.
Comment by Fred Fry — Thu, Mar 9th, 2006 @ 5:29 pm
- Over time a one percent difference makes HUGE differneces. There is currently a gap between growth in the US and Europe. The US is pulling away from Europe.
There is no one percent gap between the US and Europe, I thought we settled that already. Even if you’re talking about “old Europe” it’s a bit dubious to claim so.
Secondly, the article deals with historical evidence and so did I. After the WWII, for example, Finland has grown faster than the US (and there is no particular reason to assume that it will not countinue doing so). Or, to give another piece of evidence, the US growth has been slower during the last 20 years or so - after Reaganomics so to speak - than it was during the 20 years before that.
Anyway, these kinds of statitics can be twisted or explained almost any way you want. The bottom line is, that there really is no great gap between the US and the Scandinavian countries (or Great Britain, New Zeland or whatever is your favorite pick for a “free Economy”), in particular if you take into account the longer hours the Americans work.
There was more behind the link than just the contents, see the underlined titles - or don’t, the chapter 13 is not online.
Comment by TomiA — Thu, Mar 9th, 2006 @ 7:41 pm
really have a problem with the Nordic model in that it really does not reward success.
Why the hell should success be rewarded? Success is a reward in its own right. Success should be enabled for more people, and that is what the evil welfare state ideology is all about.
But yes, I agree that our income tax progression is too steep and our system is riddled with all kinds of “envy taxes”. I see a problem more with the Finnish mindset than the Nordic model.
Comment by Freeridin' Franklin — Sun, Mar 12th, 2006 @ 12:44 pm