Saturday, June 30, 2018

The Nordic Theory of Everything: In Search of a Better Life

The Nordic countries tend to show up near the top of well-being surveys. What can we learn from them for our own culture? As a big fan of Nordic culture, I expected to buy into everything in this book. Alas, I found myself being extra critical. Some of the ideas seem pretty clear, if counter intuitive. You want to increase women's pay gap relative to men? Provide for better paternity leave.
Education was a little more questionable. It seems everybody likes to pick the part of the Finnish education success that best suits them. The author claims Finnish education was reformed primarily around equity. All schools were high quality and everybody had access to the highest level of education. (Even "private" schools would fall closely under the similar government scheme.) Alas, much of that is missed in the US. Seattle schools are obsessed with equity. Yet, the implementation method often involves lowering the bar. There is also the matter of private schools. If the public school district provides an equally bad experience for all, yet there are abundant, high cost, high quality private offerings is that really equitable? The author also noted some problems with "school choice" in other Scandinavian countries. Public school advocates will use this to fight against vouchers and charter schools. However, the school districts get into the same game with open enrollment, option schools and magnet schools. It is just school choice controlled by the education bureaucracy. The bureaucracy is the real difference. US schools have a significantly greater number of administrators per student. They also rely extensively on standardized tests. The antagonistic union situation results in teachers being treated more as cogs in a system rather than skilled professionals as they are in Scandinavia. School districts are also fragmented and rely on a local property tax base for funding. Nordic countries tend to be fairly homogeneous populations, however, there are plenty of states that are similar in population and homogeneity to Nordic countries. They could likely reform their education system to have similar success, but there will be big fights from both the parents and schools in order to get there.
The book lauds the social welfare benefits of the Nordic countries, while lamenting the lack of high cost of medicine and lack of social benefits in the United States. Taxes, however, are not too different in both. What gives? The United States often tries to do "socialism on the cheap". Rather than give a benefit like healthcare to everybody, it is only given out to a certain population under an income threshold. There are also a large number of tax breaks for different behaviors or activities. This makes for a highly complex system that is in many ways highly restrictive in behavior. You arguably have a choice in health plans in the United States. However, medicaid is only for the poor, medicare for the elderly, VA for veterans. There is a huge tax subsidy for private health insurance plans - but only if purchased through an employer. If you want to purchase insurance on your own, you lose out on most government largess (and tend to pay higher rates on top of that.) And this just gets you insurance which may or may not let you see the doctor you want. (And there is no guarantee that you can even purchase a policy that will let you see them.)
The Nordic model of benefits provides similar benefits to everyone. Anybody has access to the same health care at the same cost. Education, parental leave, unemployment and other benefits are provided by the government. This frees companies and citizens to focus on adding value rather that entrepreneurial risks will leave their family on the street. These benefits are covered by taxes. However, the tax rates are mostly flat, instead of highly graduated. They are still somewhat progressive, but not obsessively so as in the United States. In the US, it seems too much effort is spent on making a "progressive" tax system and then limiting benefits to those that are "in need". Then the tax code is filled with a bazillion loopholes to prevent these high taxes from negatively impacting "special interests". The result is a lower class that receives a large amount of benefits and pays no taxes and an upper class that can spend the effort to legally avoid taxes. This leaves a middle class that earns to much to qualify for benefits, yet doesn't have the resources to avoid taxes and thus pays away a large portion of their income. Public benefits tend to be stigmatized and associated with the "poor". (However, tax breaks carry no such stigma - even though they are essentially just another "payment" from the government. Would removing income validation change things? (It could also reduce some incentives for "reducing" income and working under the table to qualify for benefits.)
The book ends with the author becoming a US citizen. She was willing to sacrifice the Nordic safety net after falling in love with an American. Despite the challenges, there are advantages of the US way. I had met a Dane who was similarly desirous to move to the US due to the more dynamic start up culture. There may be something in the lack of safety net that pushes people to work harder. (Though there may also be the advantage of a much larger market.) There are many places in the US that would love to have a similar social welfare system. However, attempts often fall victim to entrenched interests (such as insurance companies and government agencies.) How can the United States keep the entrepreneurial spirit and move beyond third-world social welfare?

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