Mechanical

The Dangers of a Welfare State

While many of us envy our European neighbors who flirt with socialism, little Finland can give us a lesson of the dangers of trying too hard to maintain a welfare state. At the highest incomes, income taxes are a staggering 45%. The government, trying to educate a formerly uneducated population, has made a university education free for Finnish citizens. The CIA World Factbook entry on Finland lists "N/A" for "percentage of Finns under the poverty line" due to large payouts to the unemployed. And don't forget about their socialized health care, subsidized day care, extended paid maternity leave, generous pensions and many other payouts.

The list goes on an on about how much money the Finnish government has been spending. And the price they pay for this? The World Economic Forum, for the past four out of five years, has listed them as the most competitive nation in the world (the US comes in second place). Of course, we know that you can't have a healthy economy and protect the environment, right? Seems the Finns rank highest in the World Economic Forum's Environmental Index, too. The US comes in a dismal 51st place.

If you check the CIA World Factbook (linked above) you also find out they have a higher life expectancy than the USA, half the infant mortality rate and, to add insult to injury, the Christian Science Monitor reports that Finland has been running a budget surplus for ten years.

After doing a bit of reading, one thing does stand out. It seems the Finnish people are happy with their system and work hard to support it. Here in the US, we worship the dollar and I'm sure there are plenty of nay-sayers who will happily explain why the Finnish model could never, ever work here. Unfortunately, I think they would be right that the Finnish model can't work here. You'd have to convince enough people to actually care enough about their fellow citizens to be willing to help them out and I don't think that's going to happen any time soon. And, you know, we have to have enough money to kill the brown people, too.

Really, in reading up about Finland, it sounds too good to be true. Any readers familiar with Finland able to provide a counterpoint?
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The Swedish system is pretty comparable and I've always thought it a great way to do things. Of course, since the rich are taxed as much as everyone else, many have moved to Switzerland which has hurt their economy.
The income taxes are a 'staggering' 45%? We pay close to 35% some years, and we do NOT make THAT much money. We would be better off if we didn't have to pay over a third of our income back to the government.

And we don't even have state and local income tax here.
My grandfather is from Finland, and my best friend just returned from living there for 8 years, and so I can verify that these CIA "facts" about Finland are pretty spot on! They are also one of the most technologically advanced countries in the world as well. They definitely know how to strike a great balance with democratic socialism. And I agree, their system would not work here in the states - at least not on a federal basis - maybe more on line with a state-by-state type - but then again, Oregon tries too hard and fails (from an economic sense).
Oregon was hit hard by the collapse of the timber industry and later by the collapse of the high-tech industry. By concentrating on a few core industries, we are beholden to the health of those industries. However, diversifying our economy will take time and money. We'd have to spend a lot more than we currently do on education to ensure that our work force is attractive to other industries. It seems that when we do have the extra money to make this work, our congressman in Salem aren't too interested in long-term investment in the people.
How much of Finland's economy would fall over if its Wonder Child (Nokia) went under?

Another way of asking this is, what's the trade balance? I'm assuming they run a huge trade surplus, which means that their model, strictly speaking, isn't necessarily sustainable on a global scale.
If our taxes were raised to 45%, I'm sure that most of it will go towards military spending and pork projects for wealthy corporations. Meanwhile, the wealthiest 5% of the population will still get tax write-offs made just for them.
Back in the 40s and 50s and 60s, our highest marginal tax rates were much much higher than 45%. We used that money in part to create a large middle class.
That's true, but somehow, during the economic downturn of the seventies and the attendant energy crisis, people got all confused and Reagan/Thatcher managed to convince the us that our previously robust Keynesian system was the source of all our woes. We dismantled much of that and have convinced people that using public money to build infrastructure, create jobs and help people is a bad thing.

Of course, there's another aspect, too: WWII. After the second world war, the Marshall Plan threw a lot of money into Europe but also turned it into a huge market for US goods as we had much of the world's production capacity. That was a huge boost to the US economy and we don't have that advantage today.
"they have a higher life expectancy than the USA"

- I'm betting that would be due to lifestyle, not a superior medical system. Now, excuse me while I shove this Big Mac down my throat.

"Seems the Finns rank highest in the World Economic Forum's Environmental Index, too. The US comes in a dismal 51st place."

- I agree we could do better here, but it's not clear to me from that link how it takes into consideration a population of 5.2 million versus a population of 300 million.

"You'd have to convince enough people to actually care enough about their fellow citizens to be willing to help them out and I don't think that's going to happen any time soon. And, you know, we have to have enough money to kill the brown people, too."

- Finland has no illegal immigration issues to speak of afaik. As for the implication of racism you make here, Finland is effectively one language, one people one culture. Considering how the rest of Western Europe reacts when Poles and Turks start pouring in to "steal their jobs", it's really just the same old Europe, different day. I don't believe Finland would be any different if it suddenly had to stare this issue in the face.
I do feel that racism is part of the problem over here. I still hear people bitching about those "ragheads" over in the middle east. Were Iraqis white and speaking English in an accent we considered "charming", I suspect that the war would have even less support than it does today.

And your comments about Finland's one language, people, and culture are reminiscent of the comments people make about The Netherlands when they explain why their "harm reduction" program in relation to illicit drugs "would never work over here". The problem is, we just assume that it won't so we don't even try.

A lot of what this is about comes down to the four cornerstones of economics: land, labor, capital and entrepreneurship. Land is fixed, so that's not something we can play with too much. Entrepreneurship generally requires an educated work force, so that goes back to labor. Capital deals with buildings, infrastructure, machinery and so on. However, all of those things are built and maintained by labor. So really the only way to try and effectively make the most of your economy is to have the best labor force suitable for the conditions in your country (both current and desired). That means they have to be educated and healthy. Finland has spent decades making sure this is the case and it's paying off handsomely.

There are some downsides. Nokia accounts for 4% of their GDP and a much higher percentage of their R&D and exports. If Nokia has financial problems, it will have a disproportionately large effect on the Finnish economy. Thus, the government needs to work hard to diversify their economy as much as possible. Of course, they've done a lot of work on this, so my little post is hardly news to them.
In any event, I should point out that the main point of my post is that a capitalist society that looks after its people can and does work despite those who claim that it's always a failure. The problem is that to make it work, you have to have a nation committed to making it work and the USA, as a nation, seems to place socialism on par with Satanism despite the fact that very, very few people in this country know a damned thing about economics.
My question, though, is whether such a system can be sustained under the weight of heavy immigration. I could be very well be wrong, but I doubt it.

Fortunately, Finland has many impediments in place to prevent heavy immigration from ever occurring - cold weather, tough language, boring culture - it's brilliant! :-P
socialism and heavy immigration
Yes, it definitely can. I grew up in a socialist country - more socialist than Finland, in fact. Israel.

Israel began seriously shedding its socialism only in the 80s & 90s (after we moved to the US). But it started out socialist, and stayed that way through waves of immigration that literally doubled, tripled, quadrupled its population. These included large numbers of immigrants with strikingly different background and culture. Two of the largest groups, for example, were Holocaust survivors from Eastern Europe, and Arab Jews from Iraq. There were plenty of others from all over the world.

Israeli socialism carried the country through independence, existential war, massive immigration and turmoil, and I think was one of the most important factors in letting the country get to where it did.
Note that the following ignores many moral issues implicit in what I'm discussing.

First, a large percentage of our immigration is temporary in nature and in the form of H1B visas. These visas do not permit immigration but allow skilled workers to come here for up to six years to fill positions that employers otherwise have difficulties filling. Though H1B workers generally earn less than their US counterparts (a key incentive for bringing them over), they are still bringing in valuable knowledge and skills to our country, paying taxes and not using "safety net" resources.

Other aspects of the immigration question are interesting. I actually support the Bush proposal of a general amnesty for illegal immigrants. One problem with having a wealthy, diverse, growing economy is that no one wants to do the scut work. When there's a huge crack down on illegal immigrants, many agricultural products in this country become more expensive as companies cannot find locals willing to do such arduous work for such low wages.

Theoretically, in a healthy system this means that those jobs (read: companies) should transfer to where the work actually is. In practice, many local companies in the US can't simply pack up and move south of the border either because they're too small or they need their local environment for crop production. Agriculture is a huge industry in the US. If we want to keep it healthy, we need the influx of cheap labor.

For this and a number of other reasons such (translation services and cultural expertise come to mind), immigrants to the US are frequently not a substitute for US laborers. They fill different economic niches and despite claims to the contrary, it's not clear that immigrants depress wages in this country. That suggests to me that a system such as Finland's, if not sustainable here, would not be unsustainable due to immigration.

Of course, I could be misreading what you're saying. What connection between immigration and a system like Finland's do you feel is the problem?
Finland is effectively one language, one people one culture

Although I referred to "homogeneity of population" as one of Finland's advantages, in another comment, I do want to note that that isn't exactly true.

Finland was ruled by Swedes for a very long time. About 6% of the current population are Swedish, and Finland has two official languages: Finnish and Swedish. They're very serious about it, even though most people don't actually speak Swedish. Still, every street has two names, one in Swedish and one in Finnish, and every map and street sign has both. Every product you see in stores is labelled in both languages. Every city even has a separate Swedish name.

There are also the Sami in the north, a fairly small minority, but culturally quite significant. They have their own language, but it's not an official language (and unlike Swedish, Sami is related to Finnish - I don't recall if it's mutually intelligible)
piglet
(Anonymous)
- "but it's not clear to me from that link how it takes into consideration a population of 5.2 million versus a population of 300 million." It's not rocket science to take population into consideration. E.g. the USA represents 5% of the world population but 20 to 25% of energy consumption.

- "I'm betting that would be due to lifestyle, not a superior medical system."
Maybe in part, but I'm betting it's mainly due to equality. Think about it: African American infant mortality is twice as high as the average.

- "Finland is effectively one language, one people one culture."
Actually, Finland has two official languages, Finnish and Swedish. There is also an indigenious people, called the Saami. Furthermore, as a member of the EU, Finland has opened its labor market to the population of all member states (maybe with temporary restrictions for the new member states, I'm not sure about that).

Another strange thing about Finland wasn't mentioned in the article: this socialist model country which was one of the first in the world to elect a woman President has a conservative government.
I've been to Finland, and have been fascinated with it for a long time. I think homogeneity of population is definitely a significant advantage for them in some respects - people tend to be much more into shared community responsibility when the community is all pretty much like them. But that's neither here no there. Yeah, Finns seem to have things pretty good in terms of social support, health care, economy, and so on. Personally I don't think I'd trade that for the kind of diversity & weirdness we have over here - so many more kinds of food & music & art & subcultures & on & on. I hope that's not an either-or choice. You can have socialism+diversity, but perhaps there is some sort of creative tension between the two. And many countries that have probably struck a much better balance than today's USA.
I'd suggest getting a subscription to The Economist (or, I can give you my login info for their website... shhh...).

Rather balanced and fair reporting... then again, I am an economic moderate.

They've been doing some interesting reporting lately on the aging of Europe and what that means to their welfare states. As far as I recall, The Economist paints Finland pretty favorably.
The Economist is also very much pro-free market. It does taint their reporting though I will admit that their reporting is better than most.
The Economist
Yes, they're free-market, but they do make a concerted effort to seperate factual reporting of events from opinion and analysis, and to make it very clear which is which. I wish some of the more leftish publications would do the same.
(Anonymous)
But is it right to give away your hard earned money to people who are unemployed? I can understand that it is ok in case of a calamity to provide help. But in normal circumstances, "No Sir! Earn your own bread". I believe the work of a government should be:
1) Protecting sovereignity
2) Stop correction
3) Implement policies for development and creating more job opportunities (so that people who want to work can do that)

Any other activity from government, I will consider intrusion into my liberty.
Having a safety net for the unemployed goes both ways. You help them and, if you're down, they help you. Remember, part of the social contract is general agreements about how we should work together to survive. There is nothing immoral about people in a democracy deciding to help one another. If you disagree with helping your fellow human beings, remember that the vote is important and if the majority of people vote to have a bit of compassion, too bad.

One idle thought I should mention about those folks who claim homeless people are just lazy and should get jobs (you didn't say that, but it's a common refrain): let's assume they all snap out of it and want a job. How do they go about it?

Many years ago I was homeless. And you know what? Employers didn't want to hire me when I didn't have an address. They didn't like that I left the phone number blank. I had no washer and dryer so even basic sanitation was very, very difficult (I lived near a beach with public showers and would take showers with my clothes on). Given these problems and the fact that there tend to be relatively few public services available to help homeless people, how precisely is one supposed to get a job? Do you have any suggestions?

I was damned lucky to get out my situation and were it not for a very fortuitous series of events, I could have been homeless for a long, long time.

(It's also worth noting that until you've eaten your first meal from a trash can like I have, you have no idea how soul-destroying it can be.)
(Anonymous)
But there are no checks and balances in this sort of system. Tell me what will happen if all the working people one day feel that they are comfortable enough to get by using the unemployment allowance and give up their jobs. People's vote sounds good but consider what happens in practical. Do you sincerely believe it is the people's wishes being carried out in current democracies? Also democracy reflects the wish of the majority and not the people as a whole. Consider a very hypothetical situation of a place which has two tribes which comprise 90% and 10% of the population. If even 60% of the people of the larger tribe want to legalize the slavery of the other tribe, democracy will allow that. Should the other tribe just shrug their shoulders and go about it. I am not equating both situations but my intentions are to show that democracy may not be right always. I would also stress that it is not about compassion- it is about letting an institution decide who should be helped. If I am compassionate about a cause, I (have and) will support it but the government cannot force me to do that.

I understand that the situation will be terrible if all of them start wanting a job at the same time. No revolution starts in a snap- there is a build up time. When people start waking up and look for earning avenues the existing job opportunities will start getting filled up, but this would again lead to people creating new job opportunities for them as well as others.

I have respect for the way you have gone about your life (I have some idea about you from perlmonks as well as livejournal). Agreed you had faced lot of troubles but considering the outcome as a matter of luck is a little too humble. May be if luck had not favoured you, you might have not be in a position you are now but I would like to believe that you would have not been lining up for unemployment allowance for too long.
As someone else mentioned, Finland doesn't have problems with illegal immigration. Contrary to statements to the...um...contrary, it does have a significant ethnic minority—about 6% of the population speaks Swedish natively. (Linus Torvalds is part of that group.) Nor is it as much of a target as the U.S.—I haven't been able to find an Internet source describing a terrorist attack on Finland, and it hasn't been involved in any military engagements since World War II. (Granted, it doesn't have the sort of foreign policy we do, but I suspect that our size would attract quite a bit of attention even if we made a policy of trying to keep everyone happy.)

Finland has military conscription—mandatory eight months of duty for 18-year-old males. Its per capita income is about $10,000 less than the U.S. Oh, and a quarter of all households own a gun, which most liberals would object to. (I'm not sure if you would.)

Don't get me wrong—it sounds like a nice place. Just not a perfect snowy paradise.
Unlike many other liberals, I don't have a problem with gun ownership. Despite the courts generally issuing strict interpretations of the Second Amendment (long story which I won't go into right now), I think the the intent of our founding fathers was to allow everyone the right to keep and bear arms. Thus, regardless of whether or not we support it, I think we should respect the Constitution and guarantee this right. If we don't like it, we should change the Constitution, not ignore it.

As for whether or not we would be a constant target because of our size, I'm not convinced this is true. Regardless of whether or not we agree with the views of those who oppose us, they often have clear, very articulate positions about what they perceive as the bad things we have done. And let's face it, we've done a lot of very bad things. Iran exists in the form it does today in large part because of the dictator we supported there. The same can be argued for Iraq. In fact, there are many countries around the world who have people who resent us because of the brutal dictators who rule(d) them with our support. We reap what we sow.
Size definitely doesn't make targets
There are countries bigger than the US. Physically bigger - Canada, for example - does not mean more threats. And if you ignore that silly little war in Chechnya, Russia is also a good example. Having more people - India, China - doesn't either.
Actually, the Constitution says that a person has a right to bear arms in order to equip a well-regulated militia.

Bill of Rights: Second Amendment - A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms shall not be infringed.

It does not protect the right of citizens to bear arms as a general right (which is how many people mistakenly interperate it). You gotta remember, that in those days there was no army and no money for one. The only way for a fledgling government to keep an army around was to enlist militias. And militias were made up of volunteers who furnished their own equipment.

Although, I personally think that handguns, hunting weapons and shotguns are fine for personal defense. I just find it difficult to understand the person who thinks an M16 and is necessary for their protection. To me, selling things like assault rifles to markets other than police and military is overkill and dangerous because that just gives people who want to acquire one illegally more ability to do so.
The question here is whether or not a "well regulated militia" is an exemplifying phrase (an example of why we have that right) or a qualifying phrase (the reason why we have that right). If it's exemplifying then you can remove the militia and we still get the right to keep and bear arms. If it's qualifying, remove the militia and you remove the right. Courts have generally ruled that it's a qualifying phrase, but given our nation's birth, I can't fathom how anyone would believe our founding fathers would want this right stripped.
True enough. I've seen examples of how the arguments generally play out. The general short answer to that is the following (this isn't to you specifically but to the arguments in general): I can't see how it isn't qualifying. If they didn't intend to reserve the rights for militia, they wouldn't have talked about the rights in terms of and regarding militia.

I'd elaborate more but I'm exhausted right now and I dunno if you really want to see the essay I was about to right you :)
Hmm, I read your comments above and decided I should clarify why I mention illegal immigration.

Illegal immigration badly skews our poverty statistics. I don't have a source handy, but I remember reading an article which rather clearly showed that black poverty was declining and white poverty was staying more or less even, but Hispanic poverty was rising rapidly enough to negate those gains. When you're discussing poverty in America, realize that a lot of our poverty is imported.

...Okay, I took some time and analyzed data from the Census Department. When you look at the percentage of all impoverished people who are Hispanic, the three-year averages look something like this. (Note: due to a serious shortage of OpenOffice-fu, time runs backwards on the chart; the left edge is the present, the right edge is the past.) In other words, the share of poverty "belonging" to Hispanics has fairly consistently risen for almost two decades.

What do I think should be done about immigration?
  1. Throw out all the illegal immigrants we can.
  2. Restructure the laws so that immigrants who haven't been naturalized:
    • Pay the same taxes as everyone else.
    • Can't receive public funds. (Their kids can attend K-12 schools, though. Actually, I'd probably privatize K-12 education anyway, but that's beside the point.)
    • Have to spend seven years in the U.S. being consistently employed before being naturalized. "Consistent" doesn't mean "constant"; it just means they didn't keep getting fired every month or go long stretches without being employed.
  3. Open the floodgates as wide as possible. Basically, if you can get a passport, get to the border, pass a health exam to ensure you're not infectious, and pass a cursory background check, you and your family can move to America.
People we threw out before can come back in, but they have to go through the procedure just like everybody else. I live in Southern California, and I rather like having cheap labor around to pick up the jobs I don't want to do—I just think the people who do them should come on our terms.
I adore Scandanavian countries and attempted to defect to Denmark.

They thought I was kidding.
Their Santa walks around with 6-8 Big Black men beating up bad kids or kidnapping them to Spain.