The Story of Finland

From The Atlantic:

Inarguably one of the world’s most generous — and successful — welfare states, the country has a lower infant mortality rate, better school scores, and a far lower poverty rate than the United States, and it’s the second-happiest country on earth (the U.S. doesn’t break the top 10). According to the OECD, Finns on average give an 8.8 score to their overall life satisfaction. Americans are at 7.5….

It’s a good debate to have, and in some ways, it seems like there’s no reason why the U.S. shouldn’t borrow from Finland or any other Nordic country — we’re richer and just as committed to improving education and health, after all. Here’s the difference: Finland’s welfare system was hardwired into its economic development strategy, and it hasn’t been seriously challenged by any major political group since. And just as Finland was ramping up its protections for workers, families, and the poor in the 1960s, Americans began to sour on the idea of “welfare” altogether. What’s more, some economists argue that it’sbecause of all that American capitalism contributes to the global economy that countries like Finland — kinder, gentler, but still wealthy — can afford to pamper their citizens. With actual Pampers, no less….

Over time, Finland was able to create its “cake” — and give everyone a slice — in large part because its investments in human capital and education paid off. In a sense, welfare worked for Finland, and they’ve never looked back.

“In the Finnish case, this has really been a part of our success story when it comes to economic growth and prosperity,” said Susanna Fellman, a Finn who is now a professor of economic history at the University of Gothenburg in Sweden. “The free daycare and health-care has made it possible for two breadwinners — women can make careers even if they have children. This is also something that promotes growth.”

With this setup, Finns have incredible equality and very little poverty — but they don’t get to buy as much stuff. The OECD gives the U.S. a 10 when it comes to household income, the highest score, while Finland gets a measly 3.5….

And there are some major lifestyle differences: Finns live in houses and apartments that are about half the size of Americans’, and their taxes on the wealthy, like those on capital gains, are much higher than ours. (Hence why taxes make up a huge chunk of their GDP.) Professionals such as doctors make far less there, which helps medical care to stay reasonably priced. (The conservative Heritage Foundation ranks Finland as downright “repressed” in some categories, like government spending, on its “Index of Economic Freedom.”)…

It’s also worth noting that Finland isn’t a total economic Wonderland, either: It’s not growing very fast and will probably have issues with its aging population in coming years. The Bank of Finland recently predicted that the country might soon exceed the 60 percent debt-to-GDP ratio mandated by the European Union — a common problem in Europe these days.

Some of Finland’s more conservative politicians have suggested cutting public benefits there in the wake of the economic downturn — but even with those cuts, social protections there would still be far more generous than ours.

And the economic redistribution there doesn’t always work perfectly. Some municipalities inevitably find themselves with lower-quality hospitals and day cares, even when they’re supposed to be roughly identical, and recently some pro-business groups have tried to edge the country toward greater privatization (though unions have pushed back.)…

When Americans hold up Finland as a model, their arguments are usually dismissed with two indisputable facts: Finland is indeed much smaller than the U.S., making it easier to disperse generous benefits on a national scale. It’s also far more homogeneous, making disputes over payouts less frequent and less racially charged.

Still, Cook says, the claims of homogeneity are a bit over-stated. Finland has both sizeable Swedish- and Russian-speaking communities, and right-leaning parties like the “True Finns” want to pare back the little immigration the country does have. (Even the True Finns, though, love the welfare state.)