The Nordic countries that are often upheld to be some of the best countries in the world embrace the idea of redistribution of wealth. Redistribution of wealth is one of the main features of socialism, but the Nordic countries are not socialist countries, because they have free market economies and most of the property is in private ownership. They are often referred to as social democratic countries, which is a contested term, (Friedman 1962, p:1) argued that “society which is socialist cannot also be democratic, in the sense of guaranteeing individual freedom”. Many might say due to the success of the Nordic countries that this is an ideal way of running a state, and that it is the most equal way and that it will make people happier, in fact Finland was chosen as the happiest country in the world in 2017. Other economically successful countries embrace redistribution of wealth as well, but usually to a lesser extent. (Tucker 2017) argues that there are three things that are the core problem of social democracy, which are that social democratic policies are financially unsustainable, terminally inefficient and morally unconscionable.
Welfare states can suffer from exploitation. For example, In Finland, there are people who exploit the welfare system and they are labelled in the Finnish media as “Ideologically unemployed” (Yle, 2017). Ideologically unemployed refers to a person that is willingly unemployed and lives solely with welfare income, which is generated by tax revenue. The exploitation is an enormous burden on the economy, it wastes tax revenue, which can be scarce in a welfare state already without the exploitation due to the huge spending on pensions, healthcare, education and other benefits. The way these states pay for their generosity is by having huge taxes, people with high income might have to pay over half of their wage to the state. In many cases the high taxes are not enough to pay for everything, the states need to take debt, and in these countries, it is required to have a high employment rate to sustain the system.
It’s very difficult for states that have these generous welfare policies to get away from them if they need to, for example if there is huge rise in unemployment. When people get used to the generous welfare from the state, they do not want to lose it. For example, in Finland, the current government had to introduce policies that cut unemployment benefits if a person does not accept work that is given to them, this caused a big public outrage. The people argued that there are not enough jobs available and that many jobs do not have high enough wages, the low wages in a welfare society are a significant problem, because it’s not profitable for anyone to do those jobs, because they are better off if they rely on welfare.
There are several issues that haunt the Nordic countries and many other western societies, the most significant of them are aging population and mass migration. (Lindbeck 2006) argues that aging population and globalization are problems for welfare states, aging population forces states to increase taxes and that even though migration lessens the aging demographic, the fact that unemployment is high among migrants, it does not decrease the effect of aging population. (Statistics Finland 2014) In Finland 63,7 percent of people with foreign background were in employment in 2014 compared to 73,7 of people with Finnish background. The problem with these statistics is that they do not consider the nationalities of the migrants, it puts all the different migrants into the same basket. In recent years the number of refugees has risen, many of the refugees are not highly skilled migrants, so it is likely that they stay unemployed compared to European migrants for example, which burdens the economy even more than the statistics would indicate. And when we add in to all this the previously mentioned exploitation of the welfare system, it is unlikely that this will be sustainable if there are no drastic policy and societal changes although (Stiglitz, 2009 p:4) argues that “When the economy gets weaker, spending on social protection and unemployment schemes should automatically go up, helping to stabilize the economy”.
Now we come into the moral side of the argument, which is fundamental, but can be seen as biased, because morality is subjective, and it cannot be measured the same way as economic performance for example. By redistributing wealth states are trying to create equality by force and it goes against many western moral values such as having property rights. Redistribution of wealth is a politer way of saying justified theft and who justifies it, the state, which has to be big and bureaucratic due to the workload that these policies require. (Huemer 2017, p:12) “Theft can be justified, but this requires fairly serious reasons; theft is not justified, for example, merely because the thief has a somewhat better use for some property than the original owner. Similarly, taxation might be justified, but this would require fairly serious reasons, something stronger than merely that the state has a somewhat better use for the money than the taxpayers”. Why should the state take the money from a person who is more successful and give it to a person that does not contribute anything to the society? In a society, where there is economic activity, it is given that some people are more valuable to the society than others. And by this high taxation policy, the state is punishing the people that are more valuable to the society by giving handouts to the people that do not have any value economically to the society. (Hayek, 1944 p:158) “the striving for equality by means of a directed economy can only result in an officially enforced inequality-an authoritarian determination of the status of each individual in the new hierarchical order”. Having these redistributive policies gives the governments a huge amount of power over individuals, it gives the power to the government to determine, how well each individual can do financially by taking away the economic freedom from the individuals to determine it themselves.
(Picture: Turning Point USA)
A better way is to guarantee equal opportunities for everyone, but this should not be done at the expense of other people. In an ideal society poverty should not be too comfortable, because if poverty is too comfortable for the poor, why would they want to rise from it and become financially successful and independent. The idea of personal responsibility is often ignored in the field of social sciences, the blame is always on the system not the individual. Everything is about oppression, when at least in the countries that do well economically, there are possibilities to succeed even if the person is poor. It is very harmful to victimise people, by victimising people, you make people to feel entitled and you make it very hard for them to grow and to be responsible.
It is important to acknowledge the counter arguments to this argument and try to answer them. A common argument against economic freedom is that it only makes the rich richer. If there is economic freedom, everyone has the chance to become rich, if a person does not manage to do it, it is not because of the rich people, it is the fault of the person themselves. Then there is the argument that if someone does not want to work or does not generally have an ambition to progress in life, the person is still a human and has a right to housing and healthcare among other things. When other people must pay for it, can it fundamentally be called a right, if it can, these rights violate other rights such as property rights. The leftists commonly think that everyone has these “rights”, because it is fair according to them. How is it fair, if someone else does all the work and half of that success from that work goes to somebody else that did nothing for that money?
Then there is the question, is taxation theft? Left-wing leaning people would say no, because it makes everyone more equal in the society. There is an argument to be made that by working person is willingly paying the tax and so it is not by force thus taxation is not theft, in other words there is a social contract between the state and the individual. What makes taxation theft is that by collecting taxes, the state is violating individual’s property rights, the government has the power to determine how to spend money that an individual has earned. In many cases not paying taxes will result in person going to prison, so there is two choices either pay the taxes or suffer the dire consequences. Taxation can still be justified even if it is acknowledged as theft, and some might argue that taxes are fundamental for the well-being of the society as a whole, but it still needs to be addressed as what it really is. Lastly, the high taxation can affect people’s drive to succeed in a society, where individuals know that they have done more hard work than many other people, but their reward is to have half of their wage taken by the state to give to people, who have earned it only by existing. (Sowell 1999, p:333) argued that “If the government punishes people for being productive by hitting them with big tax increases, and rewards people for being unproductive by giving them entitlements to the taxpayers’ money, how is that likely to lead to a more productive economy”? . Even after arguing that taxation is theft, there still needs to be some form of taxation. States need taxes to maintain their military, justice system and protecting individual rights such as freedom of speech, freedom of association and property rights, but there is an argument to be made that these could be achieved by other means without taxation, but that would be extremely unlikely.
All in all, social democracy has many flaws, but it cannot be ignored that social democratic states have been successful, but the success is based largely on morally ambiguous redistributive policies. Even if the world would move away from welfare towards a society like the one that is proposed in this blog, there should still be a safety net for people, but it should not be forced by the state. Charities and institutions like churches could play a significant part of it, this way you help people without making other people worse off. In a society like this, taxes could be significantly lowered, while giving more economic freedom to people to succeed, while encouraging success, because in a society such as this, people would know that they themselves would enjoy the profit of their success. The power of the governments would thus be reduced, and bureaucracy would diminish.
Simo-Juhani Sievanen – M00627621
Friedman, M. (1962). Capitalism and Freedom. Chapter 1, pp 1-7.
Hayek, F. (1944). The Road to Serfdom. Routledge Taylor & Francis Group
Huemer, M. (2017). Is Wealth Redistribution a Rights Violation? Available at: https://philpapers.org/archive/HUEIWR.pdf
Lindbeck, A. (2006). The Welfare State – Background, Achievements, Problems. Available at: http://www.ifn.se/Wfiles/wp/wp662.pdf
Sowell, T. (1999). Barbarians inside the Gates and Other Controversial Essays. Available at: https://www.scribd.com/document/350348570/Barbarians-Inside-the-Gates-and-Other-Co-Thomas-Sowell
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Yle (2017). Young people who don’t want to work, growing illicit employment and a break for school kids. [online] Available at: https://yle.fi/uutiset/osasto/news/mondays_papers_young_people_who_dont_want_to_work_growing_illicit_employment_and_a_break_for_school_kids/9884738 [Accessed 5 Nov. 2018].