finnish flag finland Lehtikuva Lehtikuva/Reuters
If you had to boil down the difference between the United States and the Nordic countries to a simple phrase, one way to say it might be: The United States has an unfair tax system and big government, while the Nordic countries have a fair tax system and smart government.

Another way to describe the difference is that the United States is stuck in the past and the Nordic countries are already living in the future.

This is how John Micklethwait and Adrian Wooldridge of The Economist frame the conversation. They begin the final section of their book with a chapter titled "The Place Where the Future Happened First." They make no bones about it. It's clear to them that the place where the future has happened first is the Nordic countries, and it's in every nation's interest today to try to borrow the best from their example.

One of the reasons the Nordic countries have arrived in the future first is that after their 1990s financial crisis they set about reinventing their governments to nurture capitalism for the twenty-first century, making them less bloated, much more efficient, and more fiscally responsible. They did cut public spending and taxes, but they also invested in their people.

In addition they added more choices to taxpayer-funded services, and created new systems to foster business. Denmark, for example, is famous today for its "flexicurity" system, designed to help businesses adjust to the fast-changing global economy — but without ruining lives.

The system allows employers to fire workers easily, but it also guarantees the people who've been fired a decent benefits package for up to two years, as well as help finding a new job.

The Nordic country that Micklethwait and Wooldridge admire most is Sweden.

For starters, the Swedish government maintains a strict budget surplus — at least 1 percent — over an economic cycle, and sets limits on what the government can spend in a given year. The model is flexible and allows for increased spending during a downturn, but the rules are stringent: The lost ground must be made up during the next upswing.

The assumption that Nordic government spending is bloated, and must therefore be inefficient, comes from oft-cited statistics showing government expenditures in relation to GDP to be significantly bigger than in America.

Swedish Navy commodore Wikstrom talks to the media during a news conference in Stockholm
Thomson Reuters
And indeed Nordic governments do spend much more in relation to GDP than does the United States.

That's hardly surprising, considering that they use tax revenue and government spending to provide services such as health care, pensions, and day care, which obviously increases government spending, while the United States leaves citizens to make these arrangements with private providers.

In addition this metric is generally a poor tool for comparing efficiency. It tells us how much money a government sends out to the world, but it doesn't say anything about the nature of that spending, since different governments pay for very different services.

A better way of comparing efficiency is looking at how much each country spends on a specific, comparable basket of services, regardless of who pays for it. The OECD has done exactly this, and found that when it comes to a specific array of social services, including items such as health care, pensions, unemployment benefits, child care, or credits for families with children, the United States ends up spending almost exactly as much as Sweden does in relation to GDP.

Not only that, but Finland, Denmark, and Norway all spent less than the United States in relation to GDP for the same basket of services. This makes Nordic countries more efficient than the United States in producing these essential services — they pay less, but the quality and results of their services are in many ways just as good or even better than what Americans get.

Overall the secret to Nordic success is not complicated. Nordic societies have simply taken the job of government seriously. They make mistakes and have their troubles, but they keep tweaking their systems in search of improvements, and they work hard to balance the books. They prove that there is nothing inherent in government that automatically makes it less efficient for arranging social services than the private sector.

AP/Jens Dresling


When it comes to technology, science, entertainment, and creating businesses, Americans are the smartest folks in the room. When it comes to government, it has to be said that they are, for the time being at least, the last in the class. Yet there is no reason why Americans couldn't get their house in order. Anyone who's ever read Alexis de Tocqueville's tribute "Democracy in America" knows how much the early American government got right.

What the United States needs is not bigger government but smarter government, government for the twenty-first century that is simpler and more transparent, that provides the basic social services and regulations that a government can best provide, and that then leaves the market free of all the targeted meddling that the United States is infamous for now.

Despite the general atmosphere of frustration that has encircled government in the United States, this is an entirely realizable goal. In fact proposals and actions for smarter government are already percolating all over America.

New legislation and policies by state and local governments have already succeeded in many places in the United States in circumventing political gridlock in the federal government.

Many states and cities have done wonders for their education systems, and several have already created their own parental leave, minimum wage, or even health-care systems. Proposals to restrict the role of money in politics through state or local action could change things further.

Handing over the drawing of congressional districts to independent commissions would stop politicians from manipulating the districts for their own gain and force them to appeal to a broader base.

Limiting the veto powers of different actors in Congress would help spur the crafting of effective legislation. Technology can be used to make current government services more efficient. Even the federal government is running many services reasonably successfully already — Social Security, Medicare — and it is pushing through new policies, despite the challenges.

The idea that the American economy would be destroyed if the wealthy were asked to pay their fair share of tax revenue has been refuted many times; when the Clinton administration raised taxes in the 1990s, an economic boom followed.

The government could start taxing investment income at similar rates as wage income, as it used to do under Ronald Reagan, or it could pass the so-called Buffett Rule — inspired by the billionaire Warren Buffett himself — that would ensure that all million-dollar earners and above pay at least 30% of their income in taxes. Or, the government could simply eliminate the copious tax breaks and loopholes that have crept into the tax code, which have made it so complicated, so unfairly beneficial to the well-off, and so burdensome to everyone else.

These are just a few examples and ideas. But in the country that experimented with perfecting freedom and democracy in the first place, shouldn't it be possible to rethink government in the twenty-first century? So go ahead: Ask what your country can do for you.

From The Nordic Theory of Everything: In Search of a Better Life by Anu Partanen, published on June 28, 2016 by Harper.