August 20, 2016 - 8:00 pm
During the Democratic primary season, Bernie Sanders stressed some of the superiorities of Denmark over the United States. And indeed Denmark is wealthy, has strong social and economic indicators, and it offers a comprehensive safety net.
But is it the policies of Denmark that we should admire, or is there something special about being Danish? A closer look at the evidence shows a more complex picture and one actually pretty favorable to the American way.
Nima Sanandaji, a Swedish policy analyst and president of European Centre for Entrepreneurship and Policy Reform, has recently published a book called “Debunking Utopia: Exposing the Myth of Nordic Socialism.” And while the title may be overstated, his best facts and figures are persuasive.
For instance, Danish-Americans have a measured living standard about 55 percent higher than the Danes in Denmark. Swedish-Americans have a living standard 53 percent higher than the Swedes, and Finnish-Americans have a living standard 59 percent higher than those back in Finland. Only for Norway is the gap a small one, because of the extreme oil wealth of Norway, but even there the living standard of American Norwegians measures as 3 percent higher than in Norway. And that comparison is based on numbers from 2013, when the price of oil was higher, so probably that gap has widened.
Of the Nordic groups, Danish-Americans have the highest per capita income, clocking in at $70,925. That compares to a U.S. per capita income of $52,592, again the numbers being from 2013. Sanandaji also notes that Nordic-Americans have lower poverty rates and about half the unemployment rate of their relatives across the Atlantic.
It is difficult, after seeing those figures, to conclude that the United States ought to be copying the policies of the Nordic nations wholesale. It is instead more plausible to think that Americans might learn something from the cultural practices of Nordic-Americans. Sanandaji says those norms include hard work, honesty, a strong civil society and an ethic of cooperation and volunteerism.
My own view is that many groups work hard, but that a disciplined, family-based approach to education and human capital investment is the important norm in this context. All the main Nordic groups in the United States have high school graduation rates over 96 percent. That compares to an average of about 82 percent for the United States as a whole.
Given all that, should one conclude that the American system of policies and laws is superior and the Nordics ought to try to copy the Yankees? Probably not.
For one thing, Nordic immigrants to the United States probably came from the better trained, more literate and more ambitious segments of the population. For instance, data on Danish migrants from 1868 to 1900 show that laborers were underrepresented in the group and artisans and craftsmen were overrepresented. It is perhaps no wonder that the ethnic Danes in America are relatively high earners, because they are the results of a process of positive selection. And there is a growing literature showing that the cultural traits of migrants can persist to some degree for generations in their new countries.
Furthermore, larger countries tend to have higher levels of income inequality than do smaller countries. The most successful producers in the United States are selling to larger home markets, and they will earn more than comparably talented producers in Denmark. And some of that trickles down to higher earnings for their doctors, dentists, and other service providers as well.
But this cuts both ways. The less successful producers, or for that matter the unemployed, often have a harder time in the United States than in Denmark. A small country with higher ethnic homogeneity and with only a few concentrated population centers usually can provide higher levels of social insurance without experiencing the level of system abuse that might occur in the United States.
The goal should not be for either nation to copy the other, but rather to borrow the best policies of the other. Conservatives should note that when it comes to regulatory efficiency and business freedom, Denmark has a considerably higher score than does the United States, at least according to the Heritage Foundation Index of Economic Freedom.
Most of all we should consider the option of greater freedom of choice for residence decisions. For all the anti-immigrant sentiment that is circulating at the moment, would it hurt the United States to have fully open borders with Denmark? It would boost American gross domestic product and probably also improve American education. History teaches that serious assimilation problems would be unlikely, especially since many Danes already speak English.
Open borders wouldn’t attract Danes who want to live off welfare because the benefits are so generous at home.
How’s this for a simple rule: Open borders for the residents of any democratic country with more generous transfer payments than Uncle Sam’s.
Tyler Cowen is a Bloomberg View columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include “Average Is Over: Powering America Beyond the Age of the Great Stagnation.”