Market Overview

Nordic/Nordique: Bringing the Nordic Model to America


Could the Nordic model of economics used in Scandinavian countries be emulated in the US? I believe that under the right circumstances and with the proper conditions, bringing the Nordic model to the US is possible. The Nordic model used in the US could be quite advantageous and beneficial to citizens and firms to restore a sense of stability and economic soundness to various regions in the country. Would the US ever be willing to consent to the Nordic model? That is debatable.

The Nordic model is the economic and social models as used in the Scandinavian countries (Denmark, Norway, Sweden, Iceland, and Finland). The Nordic model is a mixed market economy characterized by relatively high tax rates, a strong social safety net, strong use of labor unions, and the promotion of egalitarianism in society. The economic principles behind the Nordic model thus entail universal health care and state-subsidized education.

Though the Nordic model embraces a strong social safety net with universal health care and free education, the textbook capitalist principles of property rights, contract enforcement, little product market regulation, limited governmental interference in the market (aside from healthcare and education), and low barriers to free trade are maintained in the Scandinavian system. For those living in a state that embodies the Nordic model, the government is viewed as an "employer of last resort" in a similar way to how a central bank may be viewed as a "lender of last resort".

In being put into practice in Scandinavia, the Nordic model goes beyond the realm of mere Stockholm School economic theory. Though there may be variations between Scandinavian countries, the heart of the Nordic model includes higher taxes, a strong social safety net, free education, universal healthcare, maintenance of the validity of contracts & property rights, and relative ease of doing business. Thus, the Nordic model is regarded as a "third way" between a capitalist economy and a socialist economy.

Given the hostile environment of American politics today, it would at first seem unlikely that the Nordic model could ever be implemented in the US. The recent debt debacle and continuing legal & legislative debates on Obamacare serve as strong testaments to the lack of political cohesion in the US currently. Where the nation is split down the middle between left and right, it would appear unlikely that such a broad transformation would ever be possible. And as can be seen with Obamacare, even were such sweeping reform handed down from Washington down to the rest of the country, there are no guarantees that such policies would ever fully be put into practice as intended by the policy's originators. Thus, were the Nordic model to ever be successfully implemented in the US (or any other country for that matter) it would most likely have to come with the consent and willing participation of the governed.

Despite possible rejections of policy mandates from Washington and a lack of political cohesion across the entire country, in light of the laboratory of federalism, it may be possible for a single state or a handful of states to bring the Nordic model into being within whichever state's boundaries. US Supreme Court Justice Brandeis once said that "a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country". In this way, aside from legal disputes regarding policy, the Nordic model could hypothetically be put into practice within an individual state in the US.

One example of policy reform of an individual state in the US is Massachusetts' health care mandate. Another example of an individual state's policy reform occurred in Vermont where the state government enacted a law establishing a single-payer health care system -- thereby effectively giving universal healthcare coverage to Vermonters. Other examples include the legalization of medical marijuana and gay marriage. Deference to the laboratory of federalism gives states the ability to experiment with new policies and lets citizens have the ability to vote with their feet.

By no means am I suggesting that the Nordic model should be mandated upon the entire US at once (save with the electoral consent of the populace). However, in various regions of the country where the Nordic model may be looked upon with favor and in politically cohesive regions, the transition to the Nordic model could be quite favorable and advantageous. Examples of states that could be fertile ground for a transition to the Nordic model include states with liberal majorities like Vermont, Hawaii, and Massachusetts. So-called battleground states like Pennsylvania, Virginia, or Ohio would most likely not be feasible states for implementing Nordic-model-style policies at this point in time.

Obviously, a Nordic model experiment in a diverse, politically-divided state like Ohio with a population of 11 million citizens would most likely be unsuccessful and could bring disastrous socio-economic consequences. But in a state like Alaska, Maine, or Vermont with a population of around 600,000 to 1 million citizens, a Nordic model experiment in the US could be worthwhile and could set an example for the rest of the country. Technically, such an endeavor would not strictly be an experiment as the Nordic model has been successfully used and applied in Scandinavia. Given the dire state of the US economy and the politically hostile environment in the country right now, the situation could very well be that no American state would be able to successfully implement Nordic model reforms in the foreseeable future. Nevertheless, I think there are various regions in the US today that may be open to Nordic model reforms and may be able to successfully implement Nordic model socio-economic policies.

If only on a purely hypothetical level, I think it would be interesting were northern states like Alaska, North Dakota, Michigan, Maine, Wisconsin, or Minnesota to also embrace a Nordic model mindset. In some ways, northern states like Alaska, North Dakota, Wisconsin, and Minnesota are parallel to Scandinavia, i.e. the aforementioned states are to the US as Scandinavia is to Europe. Analogous to the term "Nordic", a "third way" economic model used in northern states like Alaska, Wisconsin, Maine, or Minnesota in the US could then rightfully be called the "Nordique model" (or the American equivalent to the Nordic model). In a state like North Dakota experiencing a boom while the rest of the country suffers in a depressing recession, a transition to the Nordic model would indeed be interesting. However, given the fact that North Dakota is currently led by Republicans, the practicality of a Nordic model transition in North Dakota is highly unlikely.

Nevertheless, with a level of pragmatic political and social cohesion moving forward, for one state to embrace the Nordic model in policy could be highly advantageous. Those living elsewhere in states like Michigan or Ohio may desire to live and work in such a "Nordique model" state. Thus, a Nordique model used in one state could be a compelling marketing tool to attract new residents and new firms from other states. By allowing the laboratory of federalism to work and allowing citizens to effectively vote with their feet, the US may be able to find resolution to much of our current political strife after all. Where right-leaning citizens would flee or avoid Nordique model states in favor of "Austrian School" states, left-leaning citizens who want free market principles at work but who also want to live with universal health care and free education can find refuge in Nordique model states. States would then be forced to compete with each other based on pragmatic ideology -- rather than a non-productive all-or-nothing battle in Washington every four years that gets us nowhere and that leaves the American populace feeling alienated & hopeless.

Advantages of the Nordic model could provide a state's citizens with a much-desired feeling of security and even a sense of happiness in this economy. According to a 2010 article in Time, "Studies show that countries and states investing more in education, health and social security typically spend less on their prison systems. Last year, California spent 11% of its state budget on its prisons -- more than it put into higher education." Scandinavian countries are also regarded as some of the happiest in the world. In Jan. 2011, Forbes discussed how Norway, Denmark, and Finland were ranked as the top three happiest countries in the world. Sweden was ranked the sixth happiest country in the world. Could a transition to the Nordic model in an individual state in the US create a happier citizenry within that state?

This is not to say that the transition to a Nordic-model-style economy would be easy...even in traditionally liberal states. Given wide political differences in the US, there will always be critics, but at the end of the day, the proof will be in the pudding and citizens will be left with the choice of where to live. That being the case, there will be significant barriers for states to overcome in transforming to the Nordic model. Though these barriers may be formidable, I believe these barriers can be overcome in time. One such barrier could possibly be bias against another's race, religion, ethnicity, gender, etc. One of the primary reasons that the US has not been willing to ultimately embrace the Nordic model could be owing to unconscious bias in American society and the fact that the US is not a homogeneous society like Sweden or Norway. The US does not have the required level of societal trust to implement the Nordic model. Given these prospects of bias on the grounds of race, religion, ethnicity, gender, et al., it may be best for various states and regions in the US to embrace or reject policies (like health care reform, free education, or an increased social safety net) on their own terms.

Another major reason why the Nordic model has not been embraced by the US could be owing to a general sense of skepticism in the federal government. Given the prospect of Americans' skepticism in the federal government, how better it would then be to allow states to form and mold their own theories & policies regarding economics within their own states' boundaries. As has been seen with Obamacare, when a critical amount of the populace is vehemently opposed to a policy mandated upon them, the policy is in serious danger of being rejected or nullified. If there is anything we have learned from Obamacare, it is that it is better to give citizens the choice & to let citizens vote with their feet rather than shoving policies down the unwilling throats of Americans.

A third major reason why the Nordic model has not been embraced by the US could be owing to issues of taxation within the US. When the average, everyday citizen is unable to properly calculate his or her taxes without the help of a professional, that is when you know it is time to reform the tax code. Given the startling state of the tax code in the US when many Americans are struggling, perhaps now is as good of a time as any for Nordic-model-style reforms. Nonetheless, given an overwhelming skepticism in the government, the idea of paying 40%-50% taxes for some hypothetical societal safety net may sound like a pipe dream to most Americans. Either way, taxation is one of the reasons why the colonies declared their independence from Great Britain; reluctance to increased taxation goes along with the territory in America. A "tax shock" increase of 10%-20% in any given state (or simply the fear of an imminent tax shock) could possibly drive citizens & companies to flee the state altogether -- this suggests that an experimental transition of an individual state to the Nordic model may cost more in time & money than it's worth and could stunt a state's economy owing to tax hikes and a possible exodus. Of course, the other side of the coin is that other firms & individuals may wish to enter the state because it is implementing Nordic model reforms. The situation then would unfortunately appear to resemble a bureaucratic game of who can take advantage of the system the greatest at the least cost to oneself.

The transition of an individual state in the US to the Nordic model right now could very well require a heightened level of societal maturity, patience, and trust that a state's population would be unable to afford given the struggling US economy. Even more, a state attempting to bring about Nordic model reforms may find currency troubles; unlike Scandinavian countries, individual states do not have central banks and could not simply control their own currencies and print their own kroner at will.

The Nordic model is not without its own issues and by no means is the Nordic model perfect, but given the apparent lack of political & socio-economic cohesion in the US that is disrupting the lives of many Americans, leaving certain policy issues to the states may be beneficial for all. For those states who desire a capitalist paradise, let them attempt to have a capitalist paradise. For those states seeking more of a Nordic model economic system, allow them to fashion within their state a Nordic model with high taxes, ease of doing business, and a strong social safety net. Where the Nordic model may have issues in guaranteeing various social programs, a bit of collective cooperation might do some states in the Union some good.

While many Americans are struggling merely to find jobs, keep their homes, and/or put food on the table, a little bit of Danish "hygge" (coziness) or "flexicurity" might sound very appealing. US Supreme Court Justice Thurgood Marshall once said in a dissenting opinion that "every citizen who applies for a government job is entitled to it unless the government can establish some reason for denying the employment". In this light, the idea of a state government being an "employer of last resort" might be welcomed by many struggling Americans in various regions of the country. While the federal government struggles to achieve political cohesion on a national level, state governments could be proactive in serving their citizenry. And for those who like the Nordic model but think it is unfeasible in the US, if it is any consolation, the Nordic model is somewhat already present in North Greenland.

Where I can see the advantages and disadvantages of both the Austrian School minimal-government low-tax free-market approach and the Stockholm School high-tax strong-safety-net Nordic model approach, I think both approaches are capable of being harmonized in the US by the federal government giving due deference to the states. States would then compete to conform to the better system given the sentiments of their respective populations. With deference given to the states, perhaps one state might seek to one day implement Nordic-model-style policies and citizens would then be able to vote with their feet in the laboratory of federalism. As such, I think it would be interesting to see what would happen were a Nordique model developed in an individual state within the US. I think it would be nice if Americans had a Nordique option to turn to, a state that would act in the spirit of the laboratory of federalism to institute a Nordic-model-style economy. I and many others might even want to move to such a state. It could be only because we are currently in the middle of a financial crisis, but I think there is something to be said for shared risk and shared benefit in an economy.

At the end of the day, there is something to be said for socio-political cohesion and societal cooperation (as espoused in the Nordic model) in making a society function and an economy work.


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