I think I went a little bit off track in trying to defend my statements regarding the Scandinavian economic model. Let me step back to the original argument and restate my points step by step.
Communism can sound like a great idea conceptually. However, it is economically and socially not feasible. Firstly, it is constructed on perfect market assumptions, there are many factors that make equity of work and wealth unfeasible. Secondly, people are not really equal. Equal opportunity is one thing, but equalizing everything is another. Different people need different things in life. Forcing equity is going to make some people more happy than they deserve and some people more miserable than they ought to be. That is why I am against communism as an economic model.
Similarly Capitalism itself is conceptually very sound. Land is rewarded with rent, capital with interest, labor with wages, and entrepreneurship with profit. Everyone gets a fair chance and fair pay based on demand and supply. The ambitious can go as far as they dare to, and only the lazy will fall back. Unfortunately, even this seemingly fair model is based on a perfect market scenario. Demand and supply curves do not always set fair prices, competition is not always fair and, land, labor, capital and entrepreneurship do not get its fair due.
Socialism is a system that I will admit leans more to the left of the spectrum, but attempts to draw a balance between both. Many people tend to assume that socialism is against free market and does not allow people to reach their full potential. There are also assumptions that society will sustain the worthless and lazy in this over idealistic model.
That is not the intent of a socialist economy. A socialist economy attempts to regulate the market and industry, not to stop growth, but to prevent abuse of the system, unethical and unfair growth. A socialist economy tries to provide basic amenities to people, not to sustain the lazy, but to support hardworking people in times of setback. It is a fine line and a poor government can botch it up and historically several governments have. India is an example of how corruption and bureaucratic lethargy can hamper progress despite potential. Even in the United States which has always tried to move away from socialism has the welfare system which is sustaining a whole bunch of worthless good for nothing but breeding trailer trash.
However, a responsible socialist model is possible. In my opinion the Scandinavian countries have found a great balance between free market and a social welfare that successfully provides basic amenities to its citizen. One such amenity being education and vocational training that is imperative for career success. These are some of the nations that are considered amidst the developed and successful economies. Even the EU is modeling itself after this, on what economists call Eurosocialism.
It is not true that Scandinavian economies are failing or doing poorly. Here is a set of economic datafrom International Monetary Fund. It is a google document of statistics I downloaded. You can create and download reports based on IMF data
here or even verify my data.
Moving to the data I downloaded, note that 2008 onwards is estimate because 09 data is not finalized and 2010 is obviously forecasting. You will notice that except for Iceland who had a major economic meltdown none of the Scandinavian nations show a major negative balance sheet. United States cannot say that about itself. US has the highest Gross domestic product, but when you see Gross domestic product per capita, Norway and Denmark are far ahead. Sweden is pretty much in parity with USA. However, the difference between GDP and per Capita GDP shows how unproductive a large section of the United States. These economies are more productive than US economy. Only Iceland faced alarming inflation. When it comes to unemployment while Finland is on the higher end, all are lower than the USA even Iceland until their economic meltdown.
The happiest nations in the 2009 OECD report were 1) Denmark 2) Finland 3) Netherlands. Even Belgium made it to 10th place. When you compare for quality of life, Scandinavian nations rank the highest in terms of life expectancy, mental health, physical health etc. More OECD profiles can be found
here.
Of course happiness is a relative factor. It will be very difficult to calculate what true happiness is. Each person is unique and what makes one person happy will not make the other happy. These are just basal measures that researchers agreed upon.
Now one may tend to believe that the Scandinavian model does not support dreaming and achieve. It teaches complacency and mediocrity. I disagree. The Scandinavian model provides mandatory education for everybody. One does not have to be exceptionally brilliant or exceptionally rich or steeped in debt to be able to get a four year degree. Everyone has a right to quality education. If one has the interest and aptitude the government provides training in a career of their choice. If you are an entrepreneurial person, if you want to grow in the corporate ladder, startup a company and succeed - it is a free market, there is no stopping. Lets not forget some largely recognized international brand names like Nokia, Volvo, Errikson, Danske Bank, H&M, Electrolux, Ikea are Scandinavian businesses. Its not like these economies are averse to success or growth.
Lets face it the average American works 40+ hours a week. Gets two weeks vacation, 5 public holidays and sick personal as deemed fit. Some of these countries work 35 hours a day, get a month vacation and unlimited sick time. Plus the GDP per capita is higher despite these people working lesser.
People tend to blame taxation, but no one considers that the corporations are putting lesser in our pockets in real income (wages + fringe benefits). People hesitate to pay taxes because the American government has been incapable to wisely use taxes and put it back in people's pockets. Taxes are to be the collective asset of people. If taxes really paid you back with good infrastructure and opportunity why would anyone mind it. If you still got enough to live your dreams and be happy, why would anyone mind taxes.
Of course economy is not a one size fits all dress that can be fit on all nations. Each country is unique and has to adapt the balance between free trade, social welfare and regulation based on its population, natural resources and gross product and gross import. India cannot sustain anything large social welfare structure due to overpopulation issues. America cannot afford some things due to energy dependency. Scandinavian nations have offshore resources and get a lot of Siberian oil, plus have lower consumption. A large country like USA with high energy consumption is handicapped as it does not have the luxury of oil pipelines to their doors from their neighbors.
We recently through work met a couple of structural engineers living in Norway. They specialize in licensing products like concrete, bricks and other construction material for manufacture in the EU. They had cushy corporate engineer jobs in the Minneapolis, St. Paul area and lived in Norway for a year for a job site. They loved it so much that they decided to quit, move there and start their own consulting firm.
I don't consider myself a pessimist. In fact it is my optimism that leads me to believe that life, liberty and pursuit of happiness can truly be achieved if we just change our misconceptions and the way we think in relation to market economics. It is practically impossible to change my perception on market economics and my faith in the socialist model. I was a hard core capitalist till almost 21. It has taken defining years of my life to change my perspective, its not something that can be changed anymore.
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