Tuesday, November 01, 2016

Misconceptions about the Nordic Economies

Misconceptions about the Nordic Economies | Foundation for Economic Education:
"The Nordic countries are usually mentioned in the Spanish political debate as examples of well-functioning and efficient Welfare States where the government provides citizens with a large range of social benefits.
(The terms “Nordic” and “Scandinavian” will be employed interchangeably to refer to Sweden, Finland and Denmark. Norway and Iceland are excluded from my analysis.)
Politicians, especially on the left side of the political spectrum, look at Sweden, Denmark, or Finland as successful social democratic experiments in which social entitlements are guaranteed by the benevolent and caring hand of the State.
Their existence is conclusive evidence that those who question the sustainability of an unlimited expansion of the Welfare State are wrong.
However, there exists a generalized misperception about the functioning of the Scandinavian economies.
They are usually regarded as highly interventionist countries with hyper-regulated economies and very progressive taxation systems in which the upper classes sustain the Welfare State by paying their so-called fair share.
This widely-extended view is fundamentally wrong for two main reasons. 

  • Firstly, far from being socialistic, the economic recipes that have led Denmark or Sweden to have sustainable Welfare States are those usually identified with the free market: deregulated economies and flexible labor markets. 
  • Secondly, the burdensome taxation system in the Scandinavian countries is rather regressive; hence, the fiscal burden is essentially borne by low and middle classes..."

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