Contented Norway, Stressed-Out America: A tale of two countries, and what their governments spend the people’s money on

Nearly five years ago, The Economist published a front cover featuring a scruffy-looking Viking, accompanied by the words: “The Next Supermodel: Why the world should look at the Nordic countries.” While the world’s bigger countries and current and former superpowers struggled with their problems, the Nordic countries — Iceland, Norway, Sweden, Denmark and Finland — seemed to have their act together, winning praise over and over again for their healthy economies, relatively low crime rates and high standards of living.

Over the intervening five years, not much has changed. The Nordics continue to be strong performers in all the areas that matter. When this blog looked at countries’ performance across four indices last May — the Human Development Index, the Corruption Perceptions Index, the World Competitiveness Scoreboard and the Global Peace Index — the Nordics constituted at least four of the world’s 10 best countries, with Denmark taking the number-one spot. (Canada ranked either fourth or sixth, depending on whether you ranked each country by its “weakest link” or by its average score.)

Now there’s more good news for the Nordics. John Helliwell, Richard Layard and Jeffrey Sachs of the New York-based Sustainable Development Solutions Network have released their 2017 World Happiness Report, and concluded that Norway, Denmark, Iceland and Switzerland were the world’s happiest societies in the 2014-16 period.* They credit Norway’s high ranking on “mutual trust, shared purpose, generosity and good governance”, as well as good management of its oil reserves, and using the proceeds from it to prepare for a better future instead of spending it all as it comes in.

“Mutual trust, shared purpose, generosity and good governance” are not words, however, that would describe 2017 in our neighbour to the south. The United States has had a memorable 2017 for all the wrong reasons — and it showed in its rank. As noted:

The USA is a story of reduced happiness. In 2007 the USA ranked 3rd among the OECD countries; in 2016 it came 19th [Note: this might be a typo — the report’s data tables show the U.S. in 14th place; it was the U.K. that was in 19th place]. The reasons are declining social support and increased corruption . . . and it is these same factors that explain why the Nordic countries do so much better.

The authors particularly singled out the U.S. government’s priorities for criticism. As they bluntly note on page 180:

America’s crisis is, in short, a social crisis, not an economic crisis . . . This American social crisis is widely noted, but it has not translated into public policy. Almost all of the policy discourse in Washington DC centers on naïve attempts to raise the economic growth rate, as if a higher growth rate would somehow heal the deepening divisions and angst in American society. This kind of growth-only agenda is doubly wrong-headed. First, most of the pseudo-elixirs for growth — especially the Republican Party’s beloved nostrum of endless tax cuts and voodoo economics — will only exacerbate America’s social inequalities and feed the distrust that is already tearing society apart. Second, a forthright attack on the real sources of social crisis would have a much larger and more rapid beneficial effect on U.S. happiness.

One could only imagine the authors’ alarm that, having just passed controversial tax reform legislation, there is now talk of targeting America’s already modest social safety net for deep cuts. As the New York Times reported on Dec. 2:

As the tax cut legislation passed by the Senate early Saturday hurtles toward final approval, Republicans are preparing to use the swelling deficits made worse by the package as a rationale to pursue their long-held vision: undoing the entitlements of the New Deal and Great Society, leaving government leaner and the safety net skimpier for millions of Americans.

Speaker Paul D. Ryan and other Republicans are beginning to express their big dreams publicly, vowing that next year they will move on to changes in Medicare and Social Security. President Trump told a Missouri rally last week, “We’re going to go into welfare reform.”

In fact, the core items of the social safety net already constitute a relatively small share of total U.S. local, state and federal government spending. Organization for Economic Cooperation and Development (OECD) data show that, in 2015, only 21 percent of total government spending was dedicated to what the OECD classifies as “social protection”; that is, sickness, disability, old age, housing and unemployment support.

This already puts the U.S. toward the bottom of OECD nations in terms of the percentage of local, regional and national government spending on social protection. Indeed, given the low priority their own governments give to their well-being, not to mention other abuses like drawing local electoral boundaries to guarantee one-party rule, why shouldn’t Americans feel bitterly resentful toward their governments?

In Norway, social protection was a significant 40 percent of all government spending in 2015 despite an unemployment rate of just four percent that year and 75 percent of all Norwegians aged 15-64 having a job — one of the highest rates in the world.

That spending paid off, according to a 2017 OECD report on Norway. Not only has it helped provide the sense of well-being that the lack of prompted many Americans to vote for Donald Trump in 2016, but it is something the OECD recommended that Norway leave intact (emphasis mine):

Fiscal reform should not aim to significantly reduce the scope of Norway’s comprehensive welfare programmes and public services. These are integral to its socio-economic model, playing a key role in making economic growth inclusive and keeping well-being high. Given the fiscal rule, this means that taxation will remain high compared with many countries. Consequently, a pro-growth tax mix, strong labour skills and easier regulations for doing business are needed for the business sector to thrive in global markets.

As we end 2017, revolution is in the air as like no other time in the past 50 years, if not the past 100 years. Some look to the hard-left for solutions to the high level of anxiety, some to the hard-right. What the world could really use, though, is a bit of Nordic sense by protecting not jobs, not industries, but people.

 

* – Canada ranked seventh in the World Happiness Report, just behind Finland and the Netherlands. New Zealand, Australia and Sweden rounded out the top 10.

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Trust leads to security leads to trust: The forgotten lesson that made a mess of 2016

“In the future, Americans — assuming there are any left — will look back at 2016 and remark: ‘What the HELL?’” American humourist Dave Barry wrote in his retrospective on 2016. “If years were relatives, 2016 would be the uncle who shows up at your Thanksgiving dinner wearing his underpants on the outside.”

Likening it to “a choice between ointment and suppository,” the U.S. presidential election was Barry’s prime example of the mess that 2016 turned out to be.

“CNN told us over and over that Donald Trump was a colossally ignorant, narcissistic, out-of-control sex-predator buffoon; Fox News countered that Hillary Clinton was a greedy, corrupt, coldly calculating liar of massive ambition and minimal accomplishment.”

“And in our hearts we knew the awful truth: They were both right.”

The absurdities of 2016 extended beyond the United States. The British — mainly the English — voted in June to leave the European Union, despite the possibility of a renewed bid for Scottish independence (continued membership in the E.U., popular in Scotland, having been one of the factors that prompted Scots to vote against separating from Britain in 2014), and the unraveling of the hard-won Irish peace (Northern Ireland also having voted against leaving the E.U.)

In other populist revolts, the Austrian far-right came uncomfortably close to winning the 2016 presidential election, and recent polls showed Marine Le Pen, of the anti-immigrant Front National, running a close second in the run-up to the 2017 French presidential race.

The strange mood has even crept into Canada, where the presumptive front-runner for the leadership of the Conservative Party — the party which has governed Canada for half of the past 30 years — is Kevin O’Leary, a comically abrasive businessman turned full-time TV personality, with no political experience, who brandishes a spatula in a Dec. 24 YouTube video and vows to take it to Ottawa and “scrape all that crap out”. (To his credit, O’Leary has avoided the anti-immigrant sentiment of Kellie Leitch, the Winnipeg-born Conservative leadership candidate whose capacity for getting attention through mean-spiritedness has not so far given her lasting momentum.)

What is behind the bitter mood that made 2016 the year of Donald Trump, Brexit, Marine Le Pen and the slowly rising weirdness of the Conservative leadership race?

The most probable explanation comes from the book Viking Economics by George Lakey, a retired professor and peace activist. In the book, he contrasts the sense of mutual security and trust that citizens of Norway, Sweden, Denmark and Finland feel with the chronic insecurity of life in the United States — not to mention other countries, to varying degrees.

The United States operates a different economic model, which values insecurity . . . A family depends on a job that might disappear tomorrow; it lands in a feeble safety net; it has few prospects for finding another job as good or better. Small wonder that U.S. unions sometimes defend inefficient labor practices and outmoded organization of work, even though undermining productivity — whatever it takes to keep workers in jobs. In other words, compared with the high-productivity Nordic model, the U.S. insecurity approach creates an incentive to resist efficiency.

Lakey contrasts the American tendency to resist a social safety net with the freedom that a strong social safety net has given Nordic business owners to experiment with new ways of doing things, and to Nordic unions to accept and even welcome such changes.

There is reason to believe that the Nordic approach has secured positive results. The 2016 World Competitiveness Scoreboard places fifth-place Sweden and sixth-place Denmark just behind the third-place U.S. (and ahead of tenth-place Canada) in its ranking of the world’s most competitive economies. China and Switzerland took the top two spots.

And there is reason to believe that chronic insecurity takes a toll on people, and on their faith in democracy.

Andrew Wroe, of the University of Kent in the U.K., has carefully researched whether economic insecurity and anti-government sentiment are linked. In the case of the United States, he wrote in a 2015 commentary on the London School of Economics web site, the answer is “an unambiguous yes”.

As Jacob Hacker points out in The Great Risk Shift, the US government has deliberately privatised risk in the name of ‘personal responsibility’ by dismantling large parts of the social insurance system, and it has done so at a time when macro-economic changes have actually increased threats to economic security.

[. . .]

. . .[P]rior research demonstrates that political trust is vital to the good functioning of contemporary polities. One possible remedy for low trust would be to halt and then reverse the privatisation of risk by bringing the government back in. Comparative European data show that countries with more extensive welfare systems generally experience higher levels of political trust, possibly because welfare protects people against insecurity. However, the major progressive reforms that may help restore trust in the US are primed to fail precisely because trust is so low. Distrusting citizens, which constitute a large majority of all Americans, are less likely than trusting citizens to support major liberal reforms to the welfare state; indeed, they are more likely to support conservative alternatives that further privatise risk and, in turn, further increase insecurity. Such is the irony of the politics of trust.

Indeed, in 2014, three French researchers examined the relationship between the comprehensiveness of the social safety net in OECD member-countries and the degree to which the citizens of those countries trusted one another. They found that countries that were more polarized between trustworthy and untrustworthy — or “civic” and “uncivic” — individuals had the greatest difficulty supporting an effective social safety net.

Uncivic citizens, the sort who evade their tax obligations while seeking to extract all they can from social benefits, will support the expansion of the welfare state more strongly than civic citizens will, since they expect to benefit the most from it while shirking the costs. A rise in the share of uncivic citizens could thus increase the demand for a generous welfare state. However, an opposing force is also at play. Civic citizens will be less inclined to support high taxes if they expect to be surrounded by uncivic individuals who do not pay taxes and abuse social benefits . . . [But an increase in support] appears when everyone is civic. In this situation, all individuals strongly support the welfare state because nobody cheats on taxes and social benefits.

So, in short, what went wrong that gave the world the upcoming Trump presidency and Brexit debacle? A safe bet is that the U.S. and the U.K. fell into a “distrust trap”: a culture of economic insecurity, and resentment at feeling abandoned to fend for themselves by politicians who went on to live comfortable lives separate from the wider community, killed trust in politicians. Meanwhile, difficulty trusting fellow citizens made a strong social safety net that would ease their burdens unsustainable.

The lesson? Trust matters. With it, a society thrives. Without it, a society begins to fall apart.

Between 2005 and 2009, the World Values Survey asked people around the world if they felt that “most people can be trusted”. In Norway and Sweden, with their strong social safety nets and high levels of confidence in their parliaments, two-thirds or more of citizens agreed that, yes, most people can be trusted. In the U.S., however, only 39 percent considered most others trustworthy; and in the U.K., just 30 percent felt this way.

As for Canada: we were barely more likely than the Americans to trust our compatriots, with 42 percent of us considering most other people to be trustworthy. Never assume that a Donald Trump can’t happen here.