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Book Review: Viking Economics: How the Scandinavians Got It Right-and How We Can, Too by George Lakey

May 18, 2017

Viking Economics: How the Scandinavians Got It Right-and How We Can, TooViking Economics: How the Scandinavians Got It Right-and How We Can, Too by George Lakey
My rating: 4 of 5 stars

This book is an excellent, highly readable introduction to the Scandinavian-style democratic socialism promoted by Bernie Sanders, why it works, and why even conservatives in the four countries covered (Sweden, Denmark, Norway and Iceland—Finland is culturally quite different and is mentioned few times and only when citing studies that specifically included it) neither want to end their country’s socialism or particularly to leave it—he notes a guy who went to Cyprus to avoid taxes who became little more than a folk hero for Scandinavian right-wingers whom most ultimately refuse to emulate because they see the benefits of the system. It includes interviews with members of Lakey’s Norwegian wife’s family, as well as policymakers and experts in the four countries, as well as research into studies that have been done for comparable issues in more capitalistic countries.

Nordics secret to success are that they are universal services states, not welfare states. No one is employed in means testing because the services are universal, so that labor force is freed up to do more productive jobs. Lakey makes a wonderful example describing the foolishness of libertarianism. If libertarians started their own country that had no taxes, they would have no military and quickly conquered by the military of a country that did. I used this argument against a libertarian on Twitter, and he claimed I was endorsing “might makes right.” I pointed out that to recognize something as inevitable is hardly endorsing it. Nordics believe correctly that education and health care are public goods like the military, police, and fire departments from which everyone benefits, and studies show repeatedly that when workers work fewer hours and have more vacations, the hours they do work are more productive than the hours worked by those in countries like the United States, who work more hours on average. Lakey cites an OECD study that shows that Norwegian workers produce 27.8 more per hour for hours worked. A Norwegian worker works on average 1,418 hours a year vs. 1,790 hours in the United States. In the United States, productivity is higher in states with higher taxation (citing a study by Neil Brooks and Thaddeus Kwong at the Canadian Centre for Policy Alternatives, “The Social Benefits and Economic Costs of Taxation.”, p. 273 n 141). Nordics also have much more freedom of choice in what they do with their lives rather than being beholden to money: “What I respect is the choosing [if one has passion for what they are doing], rather than a workplace pressure that takes away employees’ freedom to create meaningful lives on their own, individual terms. This is one of the starkest contrasts I have found in exploring the Nordic model: the extraordinary lack of freedom available to individuals in the United States to place work in the perspective that makes sense to them” (135).

Contrary to American notions of Scandinavian socialism, Norwegians expect those able to work to do so. Paid work is fundamental to society. Other countries build unemployment into the model (112).

When the government raises the unemployment rate, some blame the unemployed themselves for lacking jobs. The psychological dynamic follows accordingly… overwhelmed by discouragement, especially when they are told that it must be their fault that they are “losers.”

In Norway, however, society says something very different… the economic system was built for everyone, (emphasis Lakey’s), and therefore jobs are available, and free training and support are available, and working is important for self-respect and the economic productivity of the country. In short, the government’s policy is full employment.

When I learned that the unemployment rate is actually a choice made by those who lead their economies, I looked more closely at the Norwegian unemployment rates. I’d read that Norway’s long-term average unemployment rate is considered by economists to be “full employment” because it allows for the people who are in the labor market but in transition from one job to another. The average for the period between 1997 and 2013 was 3.44 percent, according to” (114).

While many attribute this to the oil boom, Norway’s unemployment actually averaged lower before the oil boom (113). “The Nordics’ biggest achievement may be in refusing to think of themselves simply as objects of mysterious ‘market forces’” (122).

Much like in the fiction of Edward Bellamy, they started small and expanded. In
, the United States began by nationalizing the rail system. In Norway in real life, it began by subsidizing milk and nationalizing dentistry (122-3).

Swedish economist Gunnar Myrdal saved Sweden. He

had broken with the classical economists and offered breakthrough thinking that later won him the Nobel Prize in Economics. He argued that the reason classical economists were unable to imagine an economy that included well-being for workers was because they were not holistic enough. He believed that it was possible to design an egalitarian economy that would prevent poverty and be productive at the same time. His theory encouraged an investment in the individual person as a resource for economic growth—a pillar of what came to be called as the Nordic model.

Myrdal urged the new policymakers in the Swedish government to let go of the old, negative understanding of incentives for work held by classical economists—that it was a struggle for existence—and design a positive framework of incentives for economic participation.

Many lost their lives getting the Nordic model to be the law of the land. Nazi ally Vidkun Quisling made things difficult for Norway, and demonstrators had been murdered as early as 1885, while Sweden’s “Liberal-led coalition government’s choice to defend capitalism by killing workers lost the coalition most of its remaining credibility with most Swedes” (67).

While Margaret Thatcher was prepared to use the British military against her own people for engaging in a general strike, in Denmark, with 320,000 strikers is a country of 5 million, the government was persuaded to compromise, retaining stronger regulation on finance, and escaping the crashes that hit Norway and Sweden (33). “Rejecting free-market ideology, they largely returned to what works” (34).

Norway demands that banks risk their own money, not other people’s. Under President Gro Harlem Brundtland in 1991, the government seized the three biggest banks that were largely responsible for the collapse that year, regulations were restored. The government sold its shares in the banks and made a profit. Their most important decision was to eliminate shareholder equity. Morton Søberg, state secretary, notes that in order to prevent banking crises, you have to punish those directly responsible, namely, the shareholders, thus, they eliminated shareholder equity (31-32).

When hired by Iceland, health economist David Stuckler “learned that the IMF didn’t use hard data in determining the multiplier effect of government spending, relying instead on incorrect theoretical modeling. By using actual data, Stuckler’s team showed that government spending on health care and education had a high multiplier effect, and would therefore help the economy recover from the crash as well as save lives” (46). Untrue to form, the IMF, allowed Iceland to reject austerity because the government had the people at its back, and Iceland, being a democracy, has a government that, unlike in the United States, usually follows the will of the people (47). “The Icelandic government also argued that it was the banks’ idea to offer outlandish interest rates that couldn’t be made good on” (48-49). “The people as a whole do not have a responsibility for the debts incurred by private bank owners” (28). An international tribunal voted in Iceland’s favor, but not before the government acquiesced to the IMF on this one point.

Markus Jantti found that in Norway, Denmark, and Sweden, children of the bottom fifth had a much better chance of a higher income than their parents than in either the UK or the United States—“the more equal a society is, the more mobility it has” (78); “[t]he track record suggests that the Nordic economic design has features that are synergistic: the more equality, the more freedom. (Markus Jantti, et al. “American Exceptionalism in a New Light: A comparison of Intergenerational Earnings Mobility in the Nordic Countries, the United Kingdom and the United States. January 2006 IZA DEP No. 1938, Discussion Paper Series, Institute for the Study of Labor, Bonn, Germany.…)

In health care, so-called “market efficiency” is actually “market wastefulness” with multiple insurance companies with multiple plans covering different things with multiple employees acting as gatekeepers (136). Lakey notes that many American doctors leave their vocation because of the paperwork burden. He refers us to David Stuckler and Sanjay Basu’s The Body Economic: Why Austerity Kills
for more on the dangers of unsubsidized health care.

Innovation lags in the United States compared to Sweden and other OECD countries with lower inequality. ( Jonathan Jopkin, Vitor Lapuente, and Lovisa Moller. “Lower Levels of Inequality Are Linked with Greater Innovation in Economies.”…)

Lakey cites (267 n. 104) Bowles and Y. Park, “Emulation, inequality, and work hours: was Thorsten Veblen right?” Economic Journal (2005) 115: F398-F412, showing that those who work the most hours gain the least, while Wilkinson and Pickett’s The Spirit Level says that countries with less equality spend more GDP on advertising. “Presumably, advertising is the carrot held in front of the donkey to keep it working.” Nordics find that Americans suffer from the inability to strike a sane work/life balance (135).

Laura Vanderkam’s “The Permanent Recession” shows that the U.S. acts in defiance of educational studies that call for small classrooms as well as divert taxpayer money into private sector testing companies (268-9). Philadelphia blaming teachers as an excuse to put educational taxes in private hands, running down quality of public service to achieve that result (269, n 117). In more equal countries, 15 year-olds tend to aspire more towards working class job that in less equal countries like Portugal and the U.S. (148-9). A 2013 poll showed 58% of Swedes opposed to charter schools, recognizing them as cash cows more than educational institutions.

UNICEF’s 2000 study of child poverty found that whether people are employed is less important a factor in poverty than what their wages were and the distribution of jobs (114). This again contrasts with a troll I encountered who insisted that work is important; whether the work pays you enough to live on is immaterial, and in my case, whether one is able to do the work safely and sustainably did not matter, either.

Lakey notes that there is a high correlation between the development and well-being of a country correlates to percentage of workers in unions. The high-union density Nordics are in the top (Iceland, 79.3&, Denmark 68.5%, Sweden 67.5%, Norway, 54.7%) with lower-union density (25.8%) UK down the list, and very-low-union-density US (11.1%), even farther down, a fact he attributes to the Orwellian labeling of common-interest groups like unions as “special interest groups” (86).

Citing a study by Neil Brooks and Thaddeus Kwong at the Candian Centre for Policy Alternatives, Lakey shows that high union density correlates with higher productivity, whereas the insecurity model used in the United States, which “creates an incentive to resist efficiency” (emphasis Lakey’s) (88).By denying businesses the right to undercut the union rate, U.S. economist James Galbraith explains, Nordic countries incentivize productivity: “They guard against lazy or incompetent managers who try to maintain profit by underpaying employees rather than doing their job of increasing efficiency” (ibid).

“Labor found that economists can design a system that virtually eliminates poverty, when hired to do so. When the working class takes power in a society, it can apply the economists’ policies and hire social scientists to evaluate the effects and stimulate course corrections.” The Nordics also “resisted the temptation to believe that poverty comes form one major cause” (111).

The Nordic countries have all but eliminated “absolute poverty,” and Lakey recommends that they take on “relative poverty” as well. The U.S., following the Nordic model, could eliminate absolute poverty and then proceed with relative poverty—“the economic marginalization that is measured internationally,” which, being more nuanced than homelessness, food, and heating, is more difficult. (See also Sean F. Readon.“The Widening Achievement Gap Between Rich and Poor”…, cited by Lakey) He gives examples of these as the lack of a well-packed lunch for the school trip or the lack of a new dress for the school dances, barriers to social acceptance that “more privileged and perhaps clueless well-off people, appear to represent no barrier at all.” He notes that Norway’s Conservative Party attacked the incumbent Labor party for not abolishing relative poverty (128-9).

The USA’s 400 wealthiest families found ways to pay an average of only 17% of their income in taxes. Public confidence in economic elites is very low (W/P) (166).
Citing Timothy Potts, “Major Parties vs, the Majority” Philadelphia Inquirer, December 28, 2011, Americans are willing to pay higher taxes if they feel they get something in exchange (272 n. 138), just as the Nordics are. The problem is that in the U.S., people paqy lower taxes but do not see the direct benefits of paying them because of the wasteful ways their tax money is used. Trust levels are also highest in more equal countries (again citing Wilkinson and Pickett). Lakey also brings in Brian Miller and Mike Lapham’s The Self-Made Myth: And the Truth about How Government Helps Individuals and Businesses Succeed, which includes an introduction by Bill Gates’s father, to show how heavily subsidized by the government successful rich people actually are.

The book is a breeze to read, and as others have noted, may not get as in-depth as one may hope, but the book is really a broad survey introduction to the concepts it presents. It also includes entire chapters on how the Nordics deal with major issues such as climate change. It is therefore more of an introductory book that a deeply analytical one, but, if widely read, could be a major force in changing the way Americans think about economics and pushing for a system that works for more than just an elite few.

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