In my travels through Europe, I often wind up debating whether policy is better in the United States or Europe. I generally try to explain that this is the wrong comparison, both because Europe is not a monolithic bloc and also because most individual nations have both good policies and bad policies.
But sometimes you have to use blunt comparisons, which is why this data on living standards is powerful evidence that Europe is paying a high price for excessive government.
When I cite such data, proponents of statism often respond by arguing that I’m being unfair by lumping together more efficient welfare states in Northern Europe with poorly run welfare states in Southern Europe.
That’s a very good point, and I’ve acknowledged that nations such as Sweden and Denmark are examples of how to do the wrong thing in the best possible fashion. They have large welfare states, but they compensate with very pro-market policies in other areas.
Indeed, Sweden is a good example of a nation that has implemented some good reforms in recent years, such as school choice and partial Social Security privatization.
But I argue that these good reforms don’t fully offset the damage caused by excessive government spending. And now I have a new – and very pointy – arrow in my argumentative quiver. A study from the London-based Institute for Economic Affairs has found that Swedes in America earn significantly more money than Swedes in Sweden.
Here are a couple of excerpts from the IEA study.
The 4.4 million or so Americans with Swedish origins are considerably richer than average Americans, as are other immigrant groups from Scandinavia. If Americans with Swedish ancestry were to form their own country, their per capita GDP would be $56,900, more than $10,000 above the income of the average American. This is also far above Swedish GDP per capita, at $36,600. Swedes living in the USA are thus approximately 53 per cent more wealthy than Swedes (excluding immigrants) in their native country (OECD, 2009; US Census database). It should be noted that those Swedes who migrated to the USA, predominately in the nineteenth century, were anything but the elite. Rather, it was often those escaping poverty and famine. …A Scandinavian economist once said to Milton Friedman, ‘In Scandinavia, we have no poverty’. Milton Friedman replied, ‘That’s interesting, because in America, among Scandinavians, we have no poverty, either’. Indeed, the poverty rate for Americans with Swedish ancestry is only 6.7 per cent: half the US average (US Census).
This is remarkable information, and it reminds me that Thomas Sowell had similar stats for other groups in his great book, Ethnic America.
I’m not familiar with the methodological issues involved in this type of research, but is certainly seems like this is a good way of getting apples-to-apples comparisons of different economic systems.
Like many other people, I’ve argued that the success of the overseas Chinese community (compared to their counterparts stuck in Communist China) is a damning indictment of statism.
Now we see that Swedes do reasonably well when living in a country with a big welfare state, but they do even better when living in a nation with a medium-sized welfare state.
So you can imagine how prosperous they would be if a bunch of them lived in places such as Hong Kong and Singapore!
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This is a very strange question. The nominal amount of GDP per capita is only one small factor in the equation. If you want to compare which welfare system is superior you have to look at the entire standard of living: the health of the population, the actual opportunities to improve ones situation through access to education, crime rates, drug use, general standard of housing, mental health, happiness, etc. etc. I would rather be healthy and happy than earning double my income. Basically it comes down to what you value in life.
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[…] higher in the United States, but the data show that Americans of Swedish origin in America have much higher incomes than the Swedes who still live in Sweden. And the same is true for other Nordic […]
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This is not true, the $36,000 looks at GDP per capita (PPP) which is adjusted to living expenses because Sweden is much more expensive than the USA. However, if you look at the actual GDP per capita at nominal rate it is $58,000 in 2013 for Sweden and $53,000 for the USA!!!
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[…] Why Do Swedes in America Make More than Swedes in Sweden? (Dan Mitchell, Cato) — A new economic study shows how much better people do under free market policies than welfare states. In my travels through Europe, I often wind up debating whether policy is better in the United States or Europe. I generally try to explain that this is the wrong comparison, both because Europe is not a monolithic bloc and also because most individual nations have both good policies and bad policies. […]
Alas, the relentless process of Darwinian cultural evolution will not look favorably at societies using delusional flat effort-reward philosophical frameworks. Many cultures will end up like the Soviet Union. Who is next? The EU? Let’s see how many brief years of calm the new ECB and ESM redistribution will buy before the next, even more systemic, crisis.
But all in all, Sweden does not bother me. I am actually happy it exists. Statists should have their places to go too, and Sweden would seem to me one of the better choices, though I do also miss the Soviet Union, both as a bad example and as a place for some hippies to move to. And if the paradise succeeds, I’ll move there too.
It is people who love individual freedom that have no place to go to. We thought such a place was the America, alas, its trajectory is now irreversibly tethered to the familiar movie so many of us have seen in Europe over and over. The uniqueness of the New World is becoming less and less discernible by the day, and hence so does the prosperity.
In that respect, the arguments of statists and non-statists are not symmetric. Proponents of individual freedom typically have no urge to eradicate cultures, not even the Taliban. By comparison, the mere existence of Hong Kong and Singapore is anathema to statists — and so are people like Mr. Mitchell, hence they will take any opportunity to throw him in a Mexican jail.
In short, are you more intelligent, more competent, or harder working? You, and you in particular of all people, shall be drafted to serve the community! That’s what the Soviets used to say: Were you born in the people’s hospital (the only legal type)? You belong to the people! Everything you did, do or will do in life belongs to the people.
Elizabeth Warren says: Have any of the 50% of salaries that were confiscated from your parents been used in any way (voluntary or mandatory) to raise you and bring you to your current state of relative success? If yes, then 50% of your salaries also belong to the people, and when the people decide, under my direction, that the 50% need become 60% or a French 75% then you only need obey.
Yup, sucks to live in Sweden. Getting paid to study at uni/college instead of paying anual tuition fees is a horrible experience.
There are quite a few Swedes in Hong kong and Singapore and indeed they seem much richer, but obviously, that is not an entirely fair comparison either. Those tend to be not the typical Swedes but those more competent amongst Swedes who do not want to share their superior intelligence, competence, or simply hard work with other welfare state Swedes.
I would also like to point out that a significant portion of that 36k produced by each Swedish Swede is controlled by the state. Therefore, the proportion of that reward that is directly controlled by the individual Swedish Swede is much smaller. In other words the comparison of per capita GDP controllable by the individual, available to spend as the individual sees fit, is much more unfavorable for the Swedish Swede compared to his Americanized cohort.
There are also other important factors, like the fact that the Swedish Swede can only use his/her 36k to live in an apartment (and a very expensive one at that) since Sweden subscribes to the general European central planning aspiration where forcing people to live in apartments is more or less an institutionalized and mandatory societal goal.
But Swedes do have an important advantage: Swedes can go to Hong Kong and Singapore and forget Swedish Swedes. The American cannot. Just to paraphrase something Pericles said twenty five centuries ago: “Just because you forgot America does not mean that America has forgotten about you”, especially if you are someone who produces a lot.
America now stands almost alone in this island of emigration oppression. Most other regimes employing such tactics no longer exist. Apparently all this with the apparent blessing of a majority of Americans, the presumably most freedom loving people in the world. How does that reconcile?
The American emigration vindictiveness issue will start figuring big in the declining years of the once great empire of freedom, now on an irreversible trajectory to becoming a welfare state, and the economic marginalization this implies in a world now riding a five percent growth trendline — save western world voter lemmings who react to their decline by further flattening their effort-reward curves.
Finally, perhaps the most important determinant of what is to come is growth. As elementary arithmetic implies (surprisingly not understood by a large number of people) a higher growth rate society, always overtakes a lower growth one, regardless of the starting point.
Isn’t that a separate (not entirely, of course) issue? Earnings versus welfare? I think Americans earn more than Swedes for many reasons, most of which are other than the nature of how the state “distributes” wealth. Do the welfare payments count as earnings? Swedish welfare, in my understanding, is much more meritocratic than American welfare. Those who put more in take more out, something like that.
It’s a trick question. Because the really productive swedes don’t stay in Sweden. They leave and go somewhere where they can be really productive. This is why Marx said that the revolution wouldn’t work unless it took place everywhere at once. Otherwise the productive people just leave.
Reblogged this on Talon's Point and commented:
Dan Mitchell nails it again