Friday, July 09, 2010

The irrelevance of the Scandinavian model

With America in crisis, there is a lot of talk about the alternatives to the American way. Even within America, people have begun to sit up and take notice of the way things are done in Western Europe. And some look wistfully towards the more egalitarian model of the Scandinavian countries.

As an outsider, and as an Indian, here are my thoughts about the Scandinavian model being the sensible way forward, in preference to the “crisis-exposed” American way.

At the outset, I must confess to some prejudices in favour of America. The fact is, even as I live out my life thousands of miles away from both America and Scandinavia, not a day passes when I am not grateful to America (and to Americans) for some aspect of my life that is now infinitely better thanks to their talent and creativity. I really cannot say the same for Norway, Sweden, Denmark or even Finland. (Disclosure: I make use of a Nokia cell phone but not Ikea furniture; I do not drive a Volvo car and have never been the recipient of a Nobel Prize.)

To begin with, the Scandinavian model of a comprehensive “cradle-to-grave” welfare state is financed by high levels of taxation with a steeply progressive income tax regime.

In terms of ethnic composition, these are all very homogeneous societies and generally closed to immigrants, especially from the third world. Therefore, citizens who pay out large amounts of taxes always have the implicit assurance that the benefits are going to their own countrymen. (Think of the reaction if India becomes a welfare state and word gets around that Bangladeshis are flocking in to claim benefits here.)

Besides, all these countries consistently rank as the top performers in the various surveys about levels of corruption, transparency and the efficiency of public services. Therefore, taxpayers in these countries have the further assurance that the money they pay is actually being put to good use, and not lost to waste and graft. In turn, this means there is far less resistance to the idea of paying more taxes.

It will now be obvious that the conditions existing as above are not those that can easily be replicated elsewhere. The model may therefore have less relevance for America and almost none for India.

From India’s point of view, there is the other issue that being an expensive model, it presumes the existence of a prosperous majority who can then pay for those who fall behind. In fact, any welfare state presupposes a minimum level of prosperity; you cannot go about building a welfare state on a foundation of unrelenting poverty. That should take India out of the picture (for the foreseeable future, at least) as far as following the Nordic footsteps go.

As for America, despite all the evidence of heartlessness in its workings, there is something special about this country I have only recently come around to appreciating. This is the idea that the idea of America is not just for the Americans, it is for every one of us.

In America, it’s called the “American Dream”. We know for a fact that this is not a carefully put up mirage meant to lull and buy peace with its underprivileged. Examples abound of people rising from the dirt and living the dream. And perhaps the most wonderful thing about the American dream is that it is open, in some degree or other, to just about everyone around the world. We know of so many ordinary folks in our own midst, born into modest circumstances and now living the dream in America.

As for the Scandinavian model, the last time I checked, I did not come across a “Scandinavian Dream”. And if there is one I happened to miss, I know for sure it’s not meant for me, my family, or my friends.

Critics make the point that for a wealthy country America’s social indicators are well behind those of its peers. There is a reason. When you have been letting in millions of the dirt-poor from all around the world, and with many millions more having let themselves in, averages—and social indicators are, after all, averages—are bound to suffer. A classic example is Germany today. During much of the eighties, West Germany was among the top European countries in terms of GDP per person. These days, Germany figures behind Britain and pulls in behind even Ireland. So, did the German economic miracle run out of steam? Not quite. In 1989, Germany let in about 17 million of its poor cousins from the former East Germany and the average has been depressed since then.

This is not to deny that the Scandinavian model takes good care of its own citizens. The American model takes less good care of its own citizens, but it also cares for millions of poor from around the world who were allowed in with honour and dignity. Every year, nearly one million immigrants to the country are granted American citizenships. This is over and above the fact that all children born in America, even to foreigners and illegal immigrants, are ipso facto American citizens.

The choice then is a no-brainer. If you happen to belong to one of the Scandinavian countries, yes, yours is the way ahead. For the rest of the world, it is the American way that holds promise.

And then, when you think of a Swede, a Norwegian, a Dane or a Finn, you think blond, and you think blue eyes. Think of an American, and you suddenly realize you just cannot think along these lines. To me, that is the explanation why the American Dream has such a powerful resonance across the world.

(This blog post was originally posted on another of my blogs in January 2010)