The Secret of Scandinavian Socialism’s Success

Liberals like me often hold up the Scandinavian states as a model to which the United States should aspire. There’s a lot to like about them: they’re highly equal societies with strong progressive taxation, little poverty or crime, and comprehensive welfare states. As a result of these policies, countries like Iceland, Denmark, Sweden and Norway consistently rank near the top on human-development indexes that track markers of progress like democracy, gender equality, secularism, and freedom of speech. They even lead the pack on global happiness surveys.

What makes it so easy for these nations to do this, while the same outcome seems so unattainable in the U.S.?

Megan McArdle, a libertarian-leaning journalist, wrote an investigative essay about Denmark’s social-welfare system. She concluded that it really does deliver what it promises:

So, sorry, conservatives: Denmark really does combine high wages with high employment, high taxes with prosperity, fiscal responsibility with high levels of government spending. No wonder leftists ask if policymakers couldn’t do something like that in the U.S.

What makes the Danish system work so well? Part of the answer, it seems, is that it’s one of the most trusting countries in the world:

“Trust,” said a photographer, when I asked him the best thing about living in Denmark. “If we agree on something, you would live up to that.” That confidence, he added, “makes everyday life more comfortable.”

“There’s a lot of social trust,” a speechwriter at the culture ministry told me. “Farmers putting out their products by the roadside, and then putting a jar and saying, ‘Put money in this.’ It’s very common here, and it works.”

In fact, McArdle writes, Danish public transit is so trusting that she accidentally cheated the system out of a fare:

The first time I used Copenhagen’s extensive transit system, I dutifully bought a transit card, loaded it with money and carried it onto the platform. To my consternation, there was no turnstile.

“Ah,” I figured. “They must collect the fare on the train.”

The train arrived. I got on. There was no fare collection on the train, either.

It took me several rides to realize that I was expected to tap my card against unobtrusive pillars set up along the platform. The Danish train network, it turns out, works on the honor system…

From another site, an even more telling anecdote about how trusting Danes are:

It is not uncommon to find unsupervised, covered carriages with sleeping infants in gardens, offices, and patios in Denmark. In some countries leaving a child unattended may seem alarming, but in Denmark it is natural for parents not to disturb a sleeping child, demonstrating how safe the environment is and the trust Danes have for their fellow citizens.

As I’ve mentioned in the past, corrupt and highly unequal societies have to spend a lot on “guard labor“. The wealthy pay people to stand guard and protect their assets. The state has to spend more on police and courts to fight crime and corruption. Businesses have to spend more on overseeing employees to make sure they do their jobs and don’t steal or cheat customers. Whenever you contract with someone to do something, you have to hire lawyers to draw up elaborate agreements guaranteeing that they’ll hold up their end of the bargain.

In the best case, all this effort and energy is wasted. It doesn’t create anything tangible, it doesn’t make people more productive. It’s like friction in the gears.

Meanwhile, in a more trusting society, people are freed up to do actual productive work rather than standing around watching others. This also means that workers can be paid more, since there’s less overhead and supervision required. As the financial guru Mr. Money Mustache said in a post on the same subject:

Once you frame the issue as “trust”, you can see the effects all over a prosperous economy. People are willing to build houses and factories on their land, because they trust it will not be confiscated by government or revolution. Companies are able to grow quickly, because they can get huge amounts of funding from investors who trust that their ownership rights will be preserved. The entire concept of money exists only because of a massive network of trust that exists in modern rich society – a shared reassurance that the money will continue to be worth something tomorrow (despite the perpetual insistence of gold bugs worldwide). Without all of this trust, we would spend much more of our time worrying and devising safety systems and much less time actually getting things done.

If we want to emulate countries like Denmark, the question is which way the causal arrow points. Are Danes willing to trust each other because they know they have a generous safety net to fall back on? Or does the Danish social-welfare system only work because people can count on each other to be honest and not try to cheat the system or take more than they’re entitled to? Does a trustworthy society make people more trusting, or do you need trusting people to create a trustworthy society?

Paradoxically, according to some of the Danish people that McArdle interviews, the answer is “both”. Trusting people create a trustworthy society, and a trustworthy society makes people more trusting, in an upward spiral of positive feedback.

Unfortunately, it works the other way too. Severely unequal, brutally unjust societies can permanently damage people’s trust in each other, and those deficits can last for generations. There’s no better illustration of this than the old slave states of the U.S. deep south:

Just how persistent and culturally bound these effects are can be seen by looking at U.S. data from the General Social Survey, a study by the research organization NORC that’s been monitoring American social attitudes since 1972. Superimposing the data on a U.S. map shows that the regions with the lowest trust are those that straddle the southern reaches of the Mississippi River, where the slave economy was expansive. The highest-trust areas are in the old Puritan redoubts of New England and the Midwestern states that were heavily settled by Scandinavians.

It’s no surprise that the U.S.’ abiding problem is racism (and sexism and anti-atheist bias and other forms of prejudice). But viewed in this light, you can say that it’s doing exactly what it’s supposed to do: it breaks down trust between different groups of people, preventing us from creating a more cohesive and prosperous society.*

Whether sowing prejudice was a deliberate policy or not, the fact remains that it benefits the ultra-rich at the expense of everyone else. And that’s a message for liberals and progressives of all kinds to internalize: if we want greater economic equality, we’ll never achieve it unless we do more to promote social justice and break down the barriers of prejudice between people.

* This isn’t to say that Scandinavians are intrinsically immune to racism in a way that Americans aren’t. Much the opposite: these societies have historically been ethnically and culturally homogeneous. They’ve never had to confront the problem to the degree that a large, diverse nation of immigrants like America has.

Image credit: CucombreLibre via Wikimedia Commons; released under CC BY 2.0 license

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