Blog Posts > Ted Boettner: Nordic Countries Show How to Reduce Poverty
June 22, 2018

Ted Boettner: Nordic Countries Show How to Reduce Poverty

A recent report from the United Nations concluded that the extreme poverty and lack of basic human rights in the United States is not an accident, but “a political choice made by those in power.” In other words, through our political choices we are choosing to live in a society with a level of poverty and deprivation you would find in few other places. It doesn’t have to be this way.

The Nordic countries — Denmark, Norway, Sweden, Finland, and Iceland — provide a great model for how we can not only reduce economic and social inequality but build a stronger democracy with more individual freedom and self-reliance.

The Nordic states achieve better outcomes on almost every measure of human development and they provide a blueprint of how better policy priorities can alleviate the unnecessary suffering that exists in our country.

Take poverty, for example. The U.S. relative poverty rate is nearly 17 percent compared to just 7 percent in Nordic states. If we achieved this level in the US, 31 million people would be lifted out of poverty. Meanwhile, one in five children in the US are in poverty while just one in 20 children are in poverty in the Nordic countries, on average.

People live longer in Nordic states — three years longer, on average. More people also die prematurely in the U.S. from preventable death. We are also no better at taking care of our young. The infant mortality rate — which measures the number of babies that die within one year of birth — is twice the rate found in Finland and Norway. Altogether, 31 other countries save the lives of their babies better than we do.

The Nordic countries have the smallest gender pay gap in the world, while the U.S. ranks 49th. And, the top four happiest countries in the world are Nordic countries; the U.S. is 18th.

The intriguing part is that Nordic countries achieve these better outcomes with less money and by working fewer hours. The U.S. is richer than most of the Nordic states, with a Gross Domestic Product (GDP) of about $8,000 more per person. Workers in the U.S. work nearly 200 more hours per year than workers in Nordic states. That’s over a month of more work each year.

The Nordic countries are able to achieve all of this because of a commitment to wealth redistribution that supports a strong middle class. They invest more money in each other with higher taxes. Taxes make up 26 percent of the U.S. economy, while in Denmark it is 46 percent, Norway 38 percent, and Sweden 44 percent. These higher taxes mean more money is spent on social welfare and human development, funding things such as health care, pensions, housing, unemployment insurance, family benefits, etc. The U.S. spends only 19 percent of its economy on social welfare while four out of the five Nordic states spend over 25 percent.

All of the Nordic states guarantee health care as a basic right, while more than 28 million Americans remained uninsured. Because the U.S. has higher medical and prescription drug costs — a result of the government’s failure to negotiate prescription drug costs and its high administrative overhead resulting from our byzantine private insurance system — we spend twice as much as Nordic states with poorer results.

Students in the Nordic states also go to college tuition-free, while college grads in the U.S. have over $1.5 trillion in student loan debt. The Nordics also have a legal right to early childhood education, generous paid parental leave (480 days with 80% pay in Sweden), paid sick leave, monthly child benefit allowances, and more robust unemployment benefits. Instead of paying higher taxes, we tend to pay even more for private insurance, tuition, health care, and other goods.

Workers also have more power. While only 12 percent of workers in the U.S. operate under a collective bargaining agreement, 90 percent of workers in Sweden do.

Nordic states have more public employees and more public ownership of capital — meaning lower levels of income inequality. While 1 in 3 workers in Denmark and Norway are employed by the government just 1 in 7 are public workers in the U.S. And Norway — with a population the size of Minnesota — has a trust fund from oil reserve proceeds with over $1 trillion in assets. Meanwhile, Norway and Finland both own a large stake in commercial enterprises.

In spite of — or because of — the large role of public protections and provisions in Nordic countries, the conservative Heritage Foundation — Ronald Reagan’s “favorite think tank” — finds that all of the Nordic states have a higher degree of “economic freedom” than the United States. People in the Nordic countries have the freedom to explore new careers or start a business without crippling debt or fear of losing health insurance.

Nordic states also have just as much personal and political freedom. According to Freedom House, which publishes an annual report that appraises the civil and political rights of 195 countries, the Nordic states all have a greater degree of freedom than the United States.

It isn’t a mystery why Americans live shorter lives, work more, are less happy, have more people in prison, have fewer people voting, and have higher levels wealth and income inequality. It is a matter of political and policy action, not the law of economics.

If we want to build a better society — one based on the values of solidarity, equality, and basic human social and economic rights — we will have to start seeing public welfare as an essential part of greater human development and freedom.

As Nelson Mandela said, “Poverty is not an accident. Like slavery and apartheid, it is man-made and can be removed by the action of human beings.”

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