In my younger years, I oftentimes would have arguments with statists who wanted me to believe that countries in Northern Europe like Sweden “proved” that generous welfare states were compatible with economic prosperity.
That doesn’t happen as often today because the Nordic nations in recent decades have not enjoyed rapid growth. Moreover, some of the nations – such as Sweden in the early 1990s and Iceland last decade – suffered from serious financial downturns.
So I stand by my position that free markets and small government are the recipe for prosperity.
That being said, there are still some interesting lessons to be learned from these countries.
As I’ve previously argued, the Nordic countries demonstrate that a big welfare state is “affordable” so long as countries are willing to accept less growth and so long as they are willing to compensate for high taxes and high spending with very pro-market policies in other areas.
And that’s definitely the case. If you examine the Economic Freedom of the World data, you see that Nordic nations get fairly decent scores because they have very laissez-faire policies for regulation, trade, monetary policy, and property rights.
Yes, the fiscal burden of the welfare state slows growth and drags down their rankings, but they still do far better than other European countries that have big governments and a lot of intervention. Just think of France (#58), Italy (#79), and Spain (#51).
The Economics and Political Science Room
Reply With Quote