
Nordic countries are reinventing their model of capitalism - JumpCrisscross
http://www.economist.com/news/special-report/21570840-nordic-countries-are-reinventing-their-model-capitalism-says-adrian
======
JumpCrisscross
Comparing the U.S. and Swedish cultures using Geert Hofstede's [1] parametric
ontology, a well-regarded comparative sociological model, the Sweden is far
more cooperation (versus competitive) oriented as well as less individualistic
(more collective) with a smaller power distance.

MAS U.S. 62, Sverige 5

"A high score (masculine) on this dimension indicates that the society will be
driven by competition, achievement and success, with success being defined by
the “winner” or “best-in-the-field.” A low score (feminine) on the dimension
means that the dominant values in society are caring for others and quality of
life. A feminine society is one where quality of life is the sign of success
and standing out from the crowd is not admirable. The fundamental issue here
is what motivates people, wanting to be the best (masculine) or liking what
you do (feminine)."

IDV U.S. 91 (highest measured), Sverige 71

"The fundamental issue addressed by this dimension is the degree of
interdependence a society maintains among its members...In Individualist
societies people are supposed to look after themselves and their direct family
only."

UAI U.S. 46, Sverige 29

"The extent to which the members of a culture feel threatened by ambiguous or
unknown situations and have created beliefs and institutions that try to avoid
these is reflected in the UAI score." [2]

Note that a recurring theme in Hofstede's research is that different cultures
are good at different things - a downside of the MAS/IDV dynamic is Swedish
companies' tendency to seek harmony to the point of inaction, i.e. death by
committee.

[1] <http://en.wikipedia.org/wiki/Geert_Hofstede>

[2] <http://geert-hofstede.com/united-states.html>

~~~
geon
Swede here.

> standing out from the crowd is not admirable.

That's interesting. We even have a word for that; "Jantelagen" (Law of Jante).
The meaning is, "Don't think you are better than anyone else."

Thankfully, it is starting to change, but it is still ingrained in our
culture.

<http://en.wikipedia.org/wiki/Law_of_Jante>

------
FD3SA
"The Nordics’ success depends on their long tradition of good government,
which emphasises not only honesty and transparency but also consensus and
compromise."

This is unfortunately the hard part. The big government/big corp/big law
collusion makes this almost impossible in the USA. These classes are now
unified into one upper class, and are working relentlessly to increase their
power and reduce their responsibility. Interestingly, China is much worse than
the USA in this regard, and is a good example of what happens when big
government owns a nation completely: a tiny aristocracy ruling with impunity
over the poor masses.

~~~
rayiner
This is perception more than anything else. I don't see many people
complaining that government was too big in the "golden age" of the 50's and
60's, yet total government revenue as a percentage of GDP has been pretty
stable since then:
[http://www.usgovernmentrevenue.com/include/usgr_chart3p22.pn...](http://www.usgovernmentrevenue.com/include/usgr_chart3p22.png).

Indeed, if you factor out the huge increase in social security and medicare
expenditures that result from the aging of the population between 1950 and
today, the rest of government is probably smaller today than it was then.

Moreover, much of what seems to be "growth" in government is the result of
transfer payments--things like Social Security checks that are taken out of
one pocket in the private sector and deposited directly into another pocket in
the private sector. In terms of bureaucratic machinery, at least the federal
government has been shrinking: [http://www.nextgov.com/cio-briefing/wired-
workplace/2010/09/...](http://www.nextgov.com/cio-briefing/wired-
workplace/2010/09/too-many-federal-workers/53775).

In 1950, there were 1.44 million federal workers for 150 million people. The
number of federal employees peaked in absolute terms in 1990, at 2.25 million,
but that number actually represents a decline in relative terms, because by
then the U.S. had 250 million people. Today the federal workforce is at about
2.15 million, while the population is at 310 million. That is to say we have
twice as many people as we did in 1950, but the headcount of the federal
government is only 50% larger.

As for your other points: collusion, etc. We are substantially less regulated
today than we were in the 1950's and 1960's:
[http://en.wikipedia.org/wiki/Deregulation#Deregulation_1970-...](http://en.wikipedia.org/wiki/Deregulation#Deregulation_1970-2000).
Many major industries (trucking, airlines, energy, finance, communications)
were deregulated between 1970-2000. With decreased regulation came decreased
opportunity for regulatory capture.

The idea that things are worse today than they used to be is a lot of "back in
the good old days" day dreaming.

~~~
dmpk2k
_yet total government revenue as a percentage of GDP has been pretty stable
since then_

I'd be _very_ careful using GDP for anything. A while back I took a look at
the finer details of how GDP is defined by the US government, and more
importantly, how that definition has changed over time.

I wouldn't trust GDP further than I can throw a truck. As a metric it has
become nearly useless, and (I feel) highly deceiving.

~~~
im3w1l
Where can I read more about this?

~~~
srid68
Some Info on GDP [http://globaleconomicanalysis.blogspot.sg/2013/01/ten-
reason...](http://globaleconomicanalysis.blogspot.sg/2013/01/ten-reasons-for-
declining-gdp-growth.html)

~~~
im3w1l
For other readers, the issue seems to be how to calculate inflation.

------
sebcat
"Its public debt fell from 70% of GDP in 1993 to 37% in 2010" Talk about
selection bias. For those interested in the real stats (using a not so great
but still functional UI), check out
[http://www.scb.se/Pages/SSD/SSD_TreeView____340506.aspx?Expa...](http://www.scb.se/Pages/SSD/SSD_TreeView____340506.aspx?ExpandNode=OE/OE0202)

In the early nineties, financial hardship hit Sweden. It was mostly because of
irresponsible loan policies and having a fixed exchange rate to the best of my
understanding. One can make analogies to the sub-zero mortgages here.

"Sweden has also put its pension system on a sound foundation, replacing a
defined-benefit system with a defined-contribution one and making automatic
adjustments for longer life expectancy." Right. Ask my grand-parents who has
paid high taxes for most of their life to finance their pension how much they
enjoy their cut pensions. And ask them what they feel about going to an
elderly home run by an off-shore investment firm that receives a fixed amount
of tax money per senior citizen in their care, thus having a reason to lower
the expenses as much as possible to maximize profit. It's a company after all.

"the country was demoted from being the world’s fourth-richest in 1970 to
14th-richest in 1993, when the average Swede was poorer than the average
Briton or Italian" Yeah, but you really didn't have to pay for much back then,
or pay much for something. Wealth is relative. Also, again with the early
nineties...

IMO, some things in a society should be public. Health-care and infrastructure
shouldn't really be run for profit. I've got some stories regarding that, but
it's Friday evening so CYA.

~~~
subsystem
I've found the Economist to be surprisingly biased and uninformed when it
comes to the Nordic countries. Makes me question if their reputation really is
well deserved.

~~~
notahacker
I think the Economist is pretty consistent in advocating its deregulated,
trade-based neoliberal stance in more or less any article: it's just more
obvious when it comes to Scandinavian and East Asian Tiger states whose
economic performance glaringly conflicts with its theories than when it
_justifiably_ credits US success with a pro-business attitude and failures
with regulatory capture and protectionism, blames regulation for European
slowdown and accuses the slowly-developing world of being ridiculously
corrupt.

------
sheraz
I find it very intellectually dishonest to compare Scandinavia and the United
States, or any other large country for that matter.

    
    
      * All in they are 26 million. The US is 310 million.
      * The US is geographically HUGE with millions of square miles. 
        Nordic countries less so.
      * Scandinavian populations are less diverse than the US.
      * The US is a superpower and must support a large military.
    

I don't think we can look at Sweden or the other countries as a model society.
Sure, there are good ideas in there, but the question arises -- will it scale?

    
    
      * Healthcare and social services -- will it scale from 26MM to 310+?
      * Infrastructure -- will it scale from 100K kilometers 
        of roads and railways to 10MM kilometers of roads 
        and rail?
    

Then there are issues of States' rights in the US. Getting a federal law
passed is only the first part. Next, each state has to figure out how it will
be implemented, added-on, or blocked.

Having said all this, I don't know who we can look to. Maybe no one.

~~~
L4mppu
* Scandinavia is huge when compared to it's population.

* We (everyone in this planet) could live without armies.

* Universal healthcare and school system wouldn't work because corporations don't want it.

* US is corrupted.

~~~
zxcdw
Although according to Transparency International[1] US isn't any more corrupt
than an average European country and does damn well compared to the southern
countries, although tailing nordic countries quite a bit. Still, doing very
good in comparison to the rest of the world.

Of course, there can never be too little corruption in a country, so everyone
has room for improvement on that part. Even us nordics.

[1]: <http://transparency.org/cpi2012/results>

~~~
L4mppu
Corrupted in sense of companies ruling it. Most of those countries that are
red are military controlled.

~~~
cgh
In 2009, 16% of Finland's exports were from Nokia, and they employed a good
percentage of the population of the entire country. Would you say Finland is
corrupt? Or do you think you are simply biased against the US?

~~~
L4mppu
But how much did they pay for politicians? Do you know how bad light they get
if they take any money? Do you know how much corporations on US pay for
politicians so they only do good things for them?

------
Expez
In one of the lectures of Econ101 at Yale Robert Schiller brings up a very
interesting thought experiment: imagine everyone about to be born having a
pre-birth meeting. What sort of system would they agree upon if they had to
decide without knowing what their lot in life would be?

I am norwegian and I feel like this kind of reasoning about 'fairness' has
shaped a lot of our public policy. Everyone should be able to be find
happiness in life, even if they are unfortunate with their rolls during
character creation.

Another issue, which I personally find very important, is that of moral
hazard. There are greedy and/or ambitious people out there willing to step
over bodies to improve their own situation This is one of the reasons I feel a
state run health care system is so important.

We are in a sense erring on the side of caution with most of our government
policies, and the price we pay is some waste. There are people who exploit the
welfare state for their own gain. I will, however, happily pay for some waste
if we never get in a situation where someone needing help is denied because
someone else is out to make a buck.

What the article talks about, in my eyes, is mostly the nordic countries
trying to eliminate waste--moving toward a smaller government while still
keeping the quintessential intact.

Another thing worth mentioning, which is also able to explain part of the
government downsizing, is that we--as everyone else--are facing serious
challenges because the baby boomers are about to retire, and in general the
ratio of retired to working people is expected to shift quite a bit over the
next 50 years. The promises goverment can--and should--make necessarily has to
change when its expenses are expected to go up while revenues stay the same.

------
laut
The nordic countries have been capitalist for a long time. In 1960 the taxes
in Denmark were lower than in the US. In the 1960s and 1970s the welfare state
really started expanding.

The system as it is now in Denmark is unsustainable. Most people don't work.
The government is running a deficit. And the outlook is very low growth and
Denmark is going to be the poorest northern European country.

It used to be in the top 5 of the richest countries in the world.

Besides the government deficit and debt, the population also has high private
debt.
[http://online.wsj.com/article/SB1000142405270230444460457733...](http://online.wsj.com/article/SB10001424052702304444604577339853607313194.html#)

One of the good things in Denmark that you don't have in most southern
European countries is that you can fire people easily.

BTW Denmark has had the school voucher system for decades.

edit: According to this site Denmark is more economically free than the US:
<http://www.heritage.org/index/>

~~~
summerdown2
> One of the good things in Denmark that you don't have in most southern
> European countries is that you can fire people easily.

I feel this requires a very particular definition of “good.“

~~~
laut
It's good because it's less risky to hire people. In Spain it's hard to fire
people and the youth unemployment rate there was more than 50% last time I
checked.

edit: And the ethical answer is because employers and employees should have
the freedom to voluntarily agree on the terms of employment.

~~~
summerdown2
I have a different view of ethics. To me it seems more ethical to give people
the freedom to voluntarily agree on the terms of employment within certain
limits.

The reason for this is two fold: first, some people need protecting and
second, the employment contract is frequently an unequal power relationship.

Also, I'm not sure it's good to pick an economy in poor shape and presume it
can be reduced to a single reason. Germany has laws to protect workers, for
example, but no one says they're in trouble.

I guess what I'm saying is that making it too hard to fire workers is one
thing that can drive unemployment up, but only one of many, and it should be
balanced by the need to care for others. Some middle position seems best.

------
nextparadigms
Aren't the nordic countries the countries with the highest "happiness" level
per citizen, _because_ of the way their societies have worked so far? Are they
sure they want to mess with all of that?

~~~
dariopy
Nope, that would be us, Latin American countries :-D

[http://americablog.com/2012/12/poll-latin-americans-the-
happ...](http://americablog.com/2012/12/poll-latin-americans-the-happiest-
people.html)

Not sure why though.

~~~
ThomPete
danes are repeatedly voted most happy people in the world.

~~~
mindjiver
With all that beer and bacon who wouldn't be happy? :)

------
acd
As a Swedish hacker I would like to add yes we do have a balanced government
budget. But no we have not reinvented capitalism in a way that is fully
coherent with system engineering principles and sustainable for the future
without boom/bust cycles.

As it is now, we have fractional reserve banking, were money is created by
private banks, in Swedens case Handelsbanken is using 6sek(1 USD) in capital
to create 100sek(16 USD) in loans. If that bank fails, it will be bailed out
by the Swedish state. The only difference the last time Sweden bailed out it's
national banks in the 90s was that the state demanded ownership so which at
least is smarter than demanding nothing back.

We need to reinvent capitalism to a system which is not driven by exponential
debt creation by private bank entities backed up by the government.

PIMCO debt supernova [http://www.pimco.com/EN/Insights/Pages/Credit-
Supernova.aspx...](http://www.pimco.com/EN/Insights/Pages/Credit-
Supernova.aspx#.UQp3KOIdHWo.twitter)

The debt bubble graph by Professor Steve Keen
[http://www.debtdeflation.com/blogs/wp-
content/uploads/2009/0...](http://www.debtdeflation.com/blogs/wp-
content/uploads/2009/02/KeenDebtwatchNo31February2009_files/image056.gif)

The 75 year stock trend line, sure looks like an exponential curve.
[http://www.zerohedge.com/news/2013-01-30/75-year-
trendline-h...](http://www.zerohedge.com/news/2013-01-30/75-year-trendline-
holding-stocks-back-now)

The limited productivity of debt, the most important chart of the century
[http://economicedge.blogspot.se/2010/03/most-important-
chart...](http://economicedge.blogspot.se/2010/03/most-important-chart-of-
century.html)

[http://www.debtdeflation.com/blogs/2012/01/28/economics-
in-t...](http://www.debtdeflation.com/blogs/2012/01/28/economics-in-the-age-
of-deleveraging/) [http://cdn.debtdeflation.com/blogs/wp-
content/uploads/2012/0...](http://cdn.debtdeflation.com/blogs/wp-
content/uploads/2012/01/012812_0316_Economicsin1.pnghttp://economicedge.blogspot.se/2010/03/most-
important-chart-of-century.html)

~~~
geon
> the last time Sweden bailed out it's national banks in the 90s was that the
> state demanded ownership

Some calculations showed that the state pretty much got all the money back in
the end.

<http://arc.hhs.se/download.aspx?MediumId=371>

------
3am
I like how they framed this: "It has also cut the top marginal tax rate by 27
percentage points since 1983, to 57%... This year it is cutting the corporate-
tax rate from 26.3% to 22%."

You might also note their top marginal income tax rate is 22 percentage points
higher than the US, and their corporate tax rate is 6 percentage points
higher. As other commenters have noted, this is not a high point for The
Economist.

EDIT: yup, completely wrong on the corporate tax rate. 16% was the _effective_
rate.

~~~
rieter
US corporate tax is 35%.

~~~
Cadsby
A rate which virtually no corporation actually pays.

~~~
rieter
A completely unsubstantiated statement.

------
jacoblyles
"It also allows parents to send children to private schools at public expense
and make up the difference in cost with their own money"

Theoretically this is a lot easier to do in the United States, where public
schools cost much more than private schools on average. Washington DC was able
to fund private school scholarships at 50% the cost of sending kids to public
school, pocketing the savings.

~~~
juan_juarez
The problem in the US is that the most vocal proponents of this are trying to
use it to get their children into parochial schools rather than academically
superior ones.

~~~
jacoblyles
How is that a problem? The parochial schools are academically superior, at
least compared to the inner-city schools run by public unions. And America is
very religious for a western nation so it is not a political handicap.

~~~
_delirium
On the latter point, it's not a political handicap as long as religions
Americans like are getting the taxpayer money for their schools, but once
religions Americans don't like qualify for the programs, support starts to dry
up:
[http://www.huffingtonpost.com/2012/06/13/louisiana_n_1593995...](http://www.huffingtonpost.com/2012/06/13/louisiana_n_1593995.html)

------
Symmetry
I'm surprised they didn't mention Sweden doing relatively well in the recent
crisis compared to Denmark due to being outside the Euro.

~~~
Kiro
Denmark doesn't have Euro.

~~~
kzrdude
The Danish DKK is closely tied to the exchange rate of the euro (+- 2.25 pct)
due to being a part of ERMII, see
[http://en.wikipedia.org/wiki/European_Exchange_Rate_Mechanis...](http://en.wikipedia.org/wiki/European_Exchange_Rate_Mechanism)

~~~
jsnell
Yes, but having your currency tied to the Euro isn't a problem. (Quite the
opposite, if the majority of your trade is to the Eurozone. It's what
Switzerland ended up doing to prevent the CHF from getting too strong and
killing exports). Actually being in the Euro means having to take over an ever
increasing proportion of debts of other, possibly mismanaged countries. That's
what's going to kill the few remotely healthy Eurozone members.

------
tuneit
Being a scandinavian, I have to start by saying I do not agree on the positvie
light of this article. But having said that I thought I wanted to add a few
facts. First of oil, both in Denmark and Norway plays a huge role for
sustaining the welfare state. Sweeden is the biggest arm exporter per. capita.
Also about armies, Denmark is the country in the world with the biggest loss
per. capita in Afghanistan. And then as many say the uniformity is key to have
a lot of public services. There become less choice and more standards. Those
who are not able to fit the mold is having a hard time in these countries.

~~~
_delirium
Oil contributes about 3% of the Danish government revenues (~US$5 billion out
of ~US$150 billion), so while it's nice, I wouldn't say it has a "huge role"
in financing the state.

------
platform
Seems like Swedish economy has significantly better longer term prospects than
Norway's (because it is based on replenishable exports, while Norway's on
natural resources)

However both, and most of the other 'Nordic' economies are export oriented.
Meaning that they depend on having negative trade surplus somewhere in the
global economy

[https://www.cia.gov/library/publications/the-world-
factbook/...](https://www.cia.gov/library/publications/the-world-
factbook/rankorder/2187rank.html)

This is why their model (including taxation and welfare systems) are not
applicable to places like US.

Actually, trade deficit that cannot be easily (and organically) 'corrected' by
sudden jump of exports (typically means natural resources, arms or food) -- is
rather catastrophic for economic stability.

US was able to maintain its economic stability since late 70s (this when US
trade deficit started) -- by continuing making the USD a reserve currency but
now without the gold standard.

Being the country controlling the value of the world's reserve currency puts
US in a place - that simply cannot be compared with any other country in the
world.

~~~
geon
> Swedish economy has significantly better longer term prospects than Norway's
> (because it is based on replenishable exports, while Norway's on natural
> resources)

True, but Norway invests _heavily_ in infrastructure (building highways
through the fjords is crazy expensive) and technology. They also very
carefully manage their oil money so that they will last for generations once
the oil is gone. At least they are not building skyscrapers in the desert...

------
aluhut
I am not surprised to not hear anything about the developments in Iceland.

------
dhughes
On Rick Steeve's travel show on PBS it was interesting to see in Nordic
countries the biggest buildings were city halls but in Europe it is pretty
much always a church.

That really shows you how even hundreds of years ago how different the culture
is in Nordic countries.

------
allerratio
What I'm interested in is how much of this success comes from consuming long
term investments of the past like infrastructure.

------
Muzza
Presumably a propaganda piece designed to win over the remaining 50% of the
American voters who still haven't bought into the idea that the Democratic
party can turn the US into a leftist utopia.

"Democracy will cease to exist when people realize they can vote themselves
more money." Does the article mention that 15% of Swedish, female voters work
in (government) health care? Add a couple of more percentage points for
teachers and other government workers... Is this sustainable?

Does it mention the injustices of the welfare system, where fresh-off-the-
airplane "refugees" can receive more in benefits than I net after taxes in my
work as a software engineer?

Does the article mention the great Moslem slums of the cities? There are
places in Scandinavia which firemen and postmen can no longer go into
unescorted for fear of being pummeled by rocks. Does it mention the occasional
"youth" riots? (We just had one a few weeks back in Gothenburg). The
Sahlgrenska university hospital in Gothenburg must now keep its emergency
entrance locked due to recurring fights breaking out between various clans.

