How do those Northern Europeans do it?

Responding to Ross Douthat’s latest column, Jamelle raises an interesting question:

And finally, I wonder how Douthat explains away Northern Europe’s high economic growth rates and robust welfare states?

I’m no economist, but I think this has something to do with the fact that government in Northern Europe, while large, is effectively limited and rather efficient. Denmark, for example, enjoys low trade barriers, a largely unrestricted labor market, and excellent protections for civil liberties. If I thought Obama was about to embark on the Denmark-ization of America, I’d probably be a lot more sanguine about the next four to eight years. Instead, our European trajectory seems to point south, with trade barriers slapped on as a sop to political constituencies, a health care reform package that hinges on subsidizing massive insurance corporations (regulatory capture, anyone?), and a stimulus bill that handed out goodies to just about every special interest imaginable. In other words, our political future looks more Mediterranean than Scandinavian, which should worry just about anyone familiar with Greek, Italian or Spanish politics.

Jamelle persuasively argues that taxation can be effective at reducing income inequality, but that’s only one half of the equation. The point of redistributive taxation isn’t to soak the rich – raising taxes, after all, imposes economic penalties. The larger goal is to improve the lot of poor and middle class citizens through redistributive programs. If the effectiveness of those programs is compromised by the Democratic Party’s core constituencies – teacher unions, the pro-immigration lobby – then perhaps it’s time to reconsider the scope of the Left’s political ambitions. This, to me, is one of Douthat’s better arguments, and I’m not sure that Jamelle has refuted it yet. If we are going to tax only to spend irresponsibly, I’d rather not tax at all.

Please do be so kind as to share this post.
Share

25 thoughts on “How do those Northern Europeans do it?

  1. I may be wrong here, but aren’t the parts of health care reform that end up subsidizing insurance companies things the Democrats added in hopes of getting some Blue Dogs and Republicans to sign on? Ditto with, for example, all of the ways in which the cap and trade bill was messed up.

      Quote  Link

    Report

    • Well, the mandates are probably the biggest thing that benefit insurance companies, and they’re something on which liberals have definitely been the driving force (Krugman, Hillary, and movement liberals ripped on Obama heavily during the primaries for the lack of a mandate in his proposal at the time).

      Other elements of health care reform and cap and trade were possibly put in as sops to Blue Dogs and maybe Republican Senators from Maine, but I don’t think you could say they were put in as sops to Republicans in general, and definitely not as sops to conservatives. Those elements are things that made the bills worse from the perspectives of most conservatives.

      Remember, there are three parties in Congress: liberals, conservatives, and Centrists. It just so happens that at the moment, almost all the centrists have Ds next to their name, as almost all the R centrists have been voted out of office.

        Quote  Link

      Report

      • The degree to which mandates are a benefit to insurers is overstated, as it’s combined with a guaranteed issue and caps on cost spreads between the lowest and highest insured, which bring down the degree that it’s actually profitable. In some respects the “worst case bare bones” version of healthcare reform would have included the the health exchanges and mandate/guaranteed issue but with no price controls or public plan, to basically force the health insurance industry to come back and beg the government for one down the line. (Either when they get hammered on premiums by a bunch of investigative reports of people with chronic conditions getting charged tens of thousands of dollars or they realize it’d be a PR nightmare and insure people at substantial losses.)

          Quote  Link

        Report

  2. This seems like a very good (and mostly correct) set of criticisms of the Democratic agenda. If only there were an organized political party that could effectively make these points and reshape America’s political discourse in more sensible ways.

      Quote  Link

    Report

  3. The notional boogiemen aside, I’m not quite sure where the Democratic Agenda (if there really is one) comes into conflict with setting up the necessary structures to construct a more Nordic economic system.

    Part of the reason Denmark is able to have such high economic mobility is the simple fact that they’ve removed a large number of things from the private sphere and turned them into public goods. Healthcare, education, child care, etc. are completely devoid of any private interests, which allows economic mobility to an unprecedented degree, because well…people have incentive to move on, rather than cling to jobs. In the US the entire economic system is stacked against that.

    You gotta start somewhere. Finding a long-term way to dismantle Employer-Sponsored Insurance (Ultimately we have to come to grips with the fact that ESI is doomed), putting money into developing the necessary education and unemployment benefit infrastructure (which the recovery act did include) and generally trying to raise the necessary revenues to do this (surtax on very high earners) is all a necessary part of the process.

    There will always be some sort of inefficiency in a system with 500+ legislators and constintuencies fighting it out. The question is whether or not you can get as close to policy optimal positions as possible with the limited political environment you find yourself in.

      Quote  Link

    Report

    • It’s sort of built into far left wing thought patterns (at least in the US and Western Europe) that everything has to be regulated. For example see Freddie’s well intentioned post a while back about instituting regulation on physical trainers. Once you couple that with business interests that very much are on board with setting up barriers to entry you end up with the inefficient nightmares that can produce scenes like a Woman getting fined for watching her neighbor’s kids at a bus stop for running an “unlicensed daycare” or banning Winnie the Pooh toys from workplaces because Piglet may offend some groups. We liberals have our excesses and recognizing them is an important first step to restraining them.

        Quote  Link

      Report

        • Odd, I could have sworn I had some specific examples provided. Oh yes, I did. But I suppose none of them qualify as everything. So I’ll compromise and say instead that we liberals have a tendency to want to over-regulate. This isn’t to say all regulation is bad but there are a lot of times where it’s unnecessary, intrusive, wasteful and frankly stupid. Better Greginak?

            Quote  Link

          Report

      • I think it’s a symptom of fringe ideologies that they want to control things, whether left (in terms of economic activity) or right (in terms of moral and civil authority) so while I understand your inclination to label microregulation as a problem, more of the issue (and certainly the examples you present) is more of a structural debate on top down vs. bottom up, rather than a left/right spectrum debate. Moreover, all of these excesses are generally things that stem from local control over ordinances and business.

        A great deal of the inefficiencies that come from the American system of governance in general tends to come from the fact that A. Local governments lack the bureaucratic expertise necessary to run certain types of regulatory environments and B. Local governments also tend to be very parochial and setup barriers to entry on very small scale levels.

        But for the moment I’ll conceded that Paternalism is a problem with liberal thought at times, yes.

          Quote  Link

        Report

    • “Healthcare, education, child care, etc. are completely devoid of any private interests.”
      What do you mean by completely devoid of any private interest.
      For instance, in 2006 13% of children in Denmark attended private schools while the same figure for the US is 11%.

      You also stated:
      “I’m not quite sure where the Democratic Agenda (if there really is one) comes into conflict with setting up the necessary structures to construct a more Nordic economic system.”

      While:
      The ‘cornerstones’ of the Danish healthcare system are: it is a public healthcare system predominantly financed through general taxes; healthcare is organised in such a way that responsibility for services provided lies within the lowest possible administrative level, usually the county councils (subsidiarity); there should be universal, free and equal access for all 5.4 Million citizens; it should promote efficiency, be of high quality, and enable free choice of provider by users.
      Since 1970, most decisions regarding the form and content of health care activity have been made at county and municipal level. The ministry of health has a coordinating and supervisory role, but no operational responsibilities for health services. Working in close cooperation with the government and municipalities, the 14 counties are responsible for hospitals and primary care. Counties have wide powers to organise the health services for their citizens, according to regional wishes and possibilities and can adjust services and staff, etc., according to needs at the different levels. County council elections held every four years usually focus on local issues. There are important channels for co-ordination and negotiation between the state and the counties and municipalities and between the counties and the municipalities. In recent years, the political focus on controlling health care costs has encouraged a greater degree of formal co-operation1.
      http://www.civitas.org.uk/pdf/Denmark.pdf

      The Dems are certainly moving towards more public financing and universal coverage but seem to desire much more centralized control than the Danes.

        Quote  Link

      Report

      • Completely devoid of private interests in that they’re funded as public goods. Doesn’t mean there’s not private schools or clinics or day cares, but that they’re considered something that should be supplied as part of a simple baseline standard of living.

        As for the hospitals.

        God save us from more regionalized healthcare control. The US already is massively segmented by the state, county and municipal level. A bit of centralization would actually be preferrable to the current ad hoc state of affairs between state/county/municipal care provider chains.

          Quote  Link

        Report

          • Well sure, one of the main challenges to the NHX in the healthcare bill is that it’s going to be regionally constrained. But…

            I really doubt just letting insurance companies operate across state lines based on minimum standards of different states is all that great a solution either.

              Quote  Link

            Report

Leave a Reply

Your email address will not be published. Required fields are marked *