Why is the American economic model of capitalism so different from the Scandinavian Nordic system, which is characterized by a mixed market economy and extensive welfare? Naysayers of the Nordic model cite American innovation as the hallmark of our supposed success, warning idealists against the loss of economic competitiveness. However, welfare and competitiveness are not mutually exclusive. Moreover, the reason we cannot be Sweden is that we lack the political will our modern national identity struggles to encompass the divergent lifestyles and needs of our expansive country.
For those who are curious about the merits of the Nordic model, consider the Rawlsian concept of the veil of ignorance. To put on the veil means asking yourself where you would choose to be born, had you no knowledge of what your economic status, health, family or abilities would be. When asked this question, most Americans unwittingly select a country with the economic distribution of wealth identical to Sweden. The Economist's "Lottery of Life" survey provides a more empirical measure of the best places to be born in 2013. Norway, Sweden and Denmark all make the top five, and Finland is 11th. The U.S. ranks 16th.
Under the veil of ignorance, I might fear for my fortunes in the U.S. I might wonder whether I would graduate high school, what would happen when I fell ill, whether my full-time job would pull me above the poverty line and if I would ever retire.
The economic rationale against shifting the U.S. toward a more Scandinavian system is flawed. The traditional argument tries to tie increased wage equality to lower levels of employment expansion, citing Denmark and Sweden as countries whose system of economic redistribution stifles expansion and innovation. In reality, Nordic countries have embraced the free market credo. The Heritage Foundation's annual economic freedom rankings put Denmark in ninth place, one spot above the U.S., for 2013. At 16th and 18th, Finland and Sweden are not far behind. In freedom of business and trade, every Scandinavian country is ranked above the U.S. In a separate study published by the London Business School, Sweden was found to be the most innovative country, followed immediately by the U.S., Norway and Denmark.
But there are two differences that do cause trouble. One is that the Nordic countries have a combined population equal to that of the New York metropolitan area. The other is that divergent national interests are pulling American politics from one corner of the continent to the other. To borrow from economist Jeffrey Sachs, our "corporatocracy," which comprises various special interest lobbies, are the winners who set the rules of the game and distort our politics. American political consensus stretches itself thin to bridge a national dialogue across three million square miles, but it stretches even thinner to bridge dialogue within cities like Los Angeles a small area encompassing some of the nation's most striking socioeconomic inequalities.
This is not about national homogeneity, which some claim is the key to the success of the Nordic model. Rather, it is about interests. Within Los Angeles, you will find both people who fear for their fortunes because of limited welfare in a system lacking economic mobility, and people whose current good fortunes are secured because of the same lack of mobility. This is not a question of the 99 percent so much as a question of the political power of the one percent.
The divergent druthers of these varying socioeconomic classes have recently polarized national politics. If President Barack Obama tried to steer our ship of state toward the North Sea, he would be the captain of an aircraft carrier whose navigators were at odds with the engine room operators.
Scandinavian success in creating a cohesive society is perhaps due to manageable size, but it is also due to transparent political systems. Since we cannot change our size, the only way around our dilemma is to separate economic winners from politics, so the decision makers would no longer be able to peek out from under the veil of ignorance.
If we can reconcile the divergent interests inside Los Angeles county, we can make progress towards uniting places like California and Alabama. Only then will we harness the political will to capitalize on the Nordic model.
