...people in the United States have been peddled a myth that universal government programs like these can’t coexist with profitable private-sector businesses and robust economic growth. As if to reinforce the impossibility of such synergies, last fall the Drumpf administration released a peculiar
report arguing that “socialism” had negatively affected Nordic living standards.
However,
a 2006 study by the Finnish researchers Markus Jantti, Juho Saari and Juhana Vartiainen demonstrates the opposite. First, throughout the 20th century Finland remained — and remains to this day — a country and an economy committed to markets, private businesses and capitalism.
Even more intriguing, these scholars demonstrate that Finland’s capitalist growth and dynamism have been helped, not hurt, by the nation’s commitment to providing generous and universal public services that support basic human well-being. These services have buffered and absorbed the risks and dislocations caused by capitalist innovation.
With Finland’s stable foundation for growth and disruption, its small but dynamic free-market economy has punched far above its weight. Some of the country’s most notable businesses have included the world’s largest mobile phone company, one of the world’s largest elevator manufacturers and two of the world’s most successful mobile gaming companies. Visit Finland today and it’s obvious that the much-heralded quality of life is taking place within a bustling economy of upscale shopping malls, fancy cars and internationally competitive private companies.
The other Nordic countries have been practicing this form of capitalism even longer than Finland, with even more success. As early as the 1930s, according to Pauli Kettunen, employers across the Nordic region watched the disaster of the Great Depression unfold. For enough of them the lesson was clear: The smart choice was to compromise and pursue the Nordic approach to capitalism.
The Nordic countries are all different from one another, and all have their faults, foibles, unique histories and civic disagreements. Contentious battles between strong unions and employers help keep the system in balance. Often it gets messy: Just this week, the Finnish prime minister resigned amid a labor dispute.
But the Nordic nations as a whole, including a majority of their business elites, have arrived at a simple formula:
Capitalism works better if employees get paid decent wages and are supported by high-quality, democratically accountable public services that enable everyone to live healthy, dignified lives and to enjoy real equality of opportunity for themselves and their children. For us, that has meant an increase in our personal freedoms and our political rights — not the other way around.
Yes, this requires capitalists and corporations to pay fairer wages and more taxes than their American counterparts currently do. Nordic citizens generally pay more taxes, too. And yes, this might sound scandalous in the United States, where business leaders and economists perpetually warn that tax increases would slow growth and reduce incentives to invest.
Here’s the funny thing, though: Over the past 50 years, if you had invested in a basket of Nordic equities, you would have earned a higher annual real return than the American stock market during the same half-century, according to
global equities data published by Credit Suisse.
Nordic capitalists are not dumb. They know that they will still earn very handsome financial returns even after paying their taxes. They keep enough of their profits to live in luxury, wield influence and acquire social status. There are several dozen Nordic billionaires. Nordic citizens are not dumb, either. If you’re a member of the robust middle class in Finland, you generally get a better overall deal for your combined taxes and personal expenditures, as well as higher-quality outcomes, than your American counterparts — and with far less hassle.
Why would the wealthy in Nordic countries go along with this? Some Nordic capitalists actually believe in equality of opportunity and recognize the value of a society that invests in all of its people. But there is a more prosaic reason, too: Paying taxes is a convenient way for capitalists to outsource to the government the work of keeping workers healthy and educated.
While companies in the United States struggle to administer health plans and to find workers who are sufficiently educated, Nordic societies have demanded that their governments provide high-quality public services for all citizens. This liberates businesses to focus on what they do best: business. It’s convenient for everyone else, too. All Finnish residents, including manual laborers, legal immigrants, well-paid managers and wealthy families, benefit hugely from the same Finnish single-payer health care system and world-class public schools.
There’s a big lesson here: When capitalists perceive government as a logistical ally rather than an ideological foe and when all citizens have a stake in high-quality public institutions, it’s amazing how well government can get things done.
Ultimately, when we mislabel what goes on in Nordic nations as socialism, we blind ourselves to what the Nordic region really is:
a laboratory where capitalists invest in long-term stability and human flourishing while maintaining healthy profits.Capitalists in the United States have taken a different path. They’ve slashed taxes, weakened government, crushed unions and privatized essential services in the pursuit of excess profits. All of this leaves workers painfully vulnerable to capitalism’s dynamic disruptions. Even well-positioned Americans now struggle under debilitating pressures, and a majority inhabit a treacherous Wild West where poverty, homelessness, medical bankruptcy, addiction and incarceration can be just a bit of bad luck away. Americans are told that this is freedom and that it is the most heroic way to live. It’s the same message Finns were fed a century ago.
But is this approach the most effective or even the most profitable way for capitalists in the United States to do business? It should come as no surprise that resentment and fear have become rampant in the United States, and that President Drumpf got elected on a promise to turn the clock backward on globalization. Nor is it surprising that American workers are fighting back; the number of workers involved in strikes last year in the United States
was the highest since the 1980s, and this year’s General Motors strike was
the company’s longest in nearly 50 years. Nor should it surprise anyone that fully half of the rising generation of Americans, aged 18 to 29,
according to Gallup polling, have a positive view of socialism.
The prospect of a future full of socialists seems finally to be getting the attention of some American business leaders. For years the venture capitalist Nick Hanauer
has been warning his “fellow zillionaires” that “the pitchforks are coming for us.” Warren Buffett has
been calling for higher taxes on the rich, and this year the hedge-fund billionaire Ray Dalio
admitted that “capitalism basically is not working for the majority of people.” Peter Georgescu, chairman emeritus of Young & Rubicam, has put it perhaps most succinctly: He sees capitalism “
slowly committing suicide.”In recent months such concerns have spread throughout the capitalist establishment. The Financial Times rocked its business-friendly readership with a high-profile series admitting that
capitalism has indeed become “rigged” and
that it desperately needs a “reset,” to restore truly free markets and bring back real opportunity. Leading captains of finance and industry in the United States rocked the business world, too, with a joint declaration from the Business Roundtable that they will now prioritize not only profits but also “
employees, customers, shareholders and the communities.” They are calling this “stakeholder capitalism.”
If these titans of industry are serious about finding a more sustainable approach, there’s no need to reinvent the wheel. They can simply consult their Nordic counterparts. If they do, they might realize that the success of Nordic capitalism is not due to businesses doing more to help communities. In a way, it’s the opposite: Nordic capitalists do less. What Nordic businesses do is focus on business — including good-faith negotiations with their unions — while letting citizens vote for politicians who use government to deliver a set of robust universal public services.
This, in fact, may be closer to what a majority of people in the United States actually want, at least
according to a poll released by the Pew Research Center this year. Respondents said that the American government should spend more on health care and education, for example, to improve the quality of life for future generations.
But the poll also revealed that Americans feel deeply pessimistic about the nation’s future and fear that worse political conflict is coming. Some military analysts and historians agree and put the odds of a civil war breaking out in the United States frighteningly high.
Right now might be an opportune moment for American capitalists to pause and ask themselves what kind of long-term cost-benefit calculation makes the most sense. Business leaders focused on the long game could do a lot worse than starting with a fact-finding trip to Finland.
Here in Helsinki, our family is facing our second Nordic winter and the notorious darkness it brings. Our Finnish friends keep asking how we handled the first one and whether we can survive another. Our answer is always the same. As we push our 2-year-old daughter in her stroller through the dismal, icy streets to her wonderful, affordable day-care center or to our friendly, professional and completely free pediatric health center, before heading to work in an innovative economy where a vast majority of people have a decent quality of life, the winter doesn’t matter one bit.
It can actually make you happy. nyt