January 20, 2015
Denmark has long cold rainy winters where the sun only shows up briefly. It is understandable that someone can get pretty sour living in these conditions. But that is no reason for the Washington Post to run scurrilous screeds from Scandinavia that inaccurately impugn the region.
That is a reasonable description of Michael Booth’s Sunday Outlook piece, which managed to get most of the important points wrong in a piece titled, “Stop the Scandimania: Nordic nations are not the utopia they are made out to be.”
Going in order of importance, Booth somehow thinks that the McDonald’s workers in Denmark getting paid $20 an hour pay 75 percent of their income in taxes. He better try to explain that one to the OECD. It puts the tax rate for the average worker at 26.7 percent. Booth is apparently adding in the 25 percent valued added tax, which would still leave us just over 45 percent (the 25 percent tax is applied on 73.3 percent of income left over after-tax). That’s pretty far from 75 percent.
Booth then turns to mocking the employment record of the Scandinavian countries:
“last month the Times assured us that ‘A Big Safety Net and Strong Job Market Can Coexist. Just Ask Scandinavia.’ (*Cough* unemployment is 5.6 percent in the United States, vs. 8.1 percent in Sweden, 8.9 percent in Finland and 6.4 percent in Denmark.)”
According to the European Commission, the employment rate for people between the ages 20 and 64 is 73.3 percent in Finland, 79.8 percent in Sweden, and 75.6 percent in Denmark. All of which are above the 71.1 percent rate in the United States.
He then goes to Sweden, which he rightly attacks for its strong anti-immigrant movement, but then adds:
“This has distracted from the slowing economy, increasing state and household debt levels, and one of the highest youth unemployment rates in Europe.”
Again, he’ll have to explain his calculations to the folks who do this stuff for a living. The European Commission has a category for young people who are not working or in school or a training program. The share of young people in Sweden in this category about 7.5 percent, near the bottom of the European Union. As far as state indebtedness, the I.M.F. tells us the government has a deficit of about 2.0 of GDP and total debt equal to 42 percent of GDP, that less than 70 percent of the level in the United States.
Booth next goes to Denmark:
“Denmark took a bigger hit than its neighbors following the 2008 global economic crisis, which increased pressure on its massive welfare state, funded by the highest taxes in the world. Household debt is the highest in Europe (any connection there, I wonder?). And there is a nagging suspicion that the universal, free education and health care we receive are not as good as they should be.”
Well the pressure on its welfare state can’t be too great. The country has been running near balanced budgets, has a much lower debt to GDP ratio than the United States and currently has to pay 0.53 percent interest on its long-term debt. Although he is probably correct that Danes, like people in the United States, would like their health care and education systems to be better.
If he’s looking for the connection between Denmark’s massive welfare state and its level of household debt, he is looking in the wrong place. The more obvious place to look at Denmark’s massive housing bubble, which was driven by a good U.S.-style credit boom. According to the good old wealth effect that economists learn about in school, people spend based on their housing wealth. This meant that many Danes, like many Americans, borrowed against bubble-inflated house prices. When the bubble burst, they were left with large amounts of mortgage debt and no equity.
Anyhow, there’s more, but this should give you the picture. Booth is apparently unhappy living through a Danish winter (he’s even upset that workers in these countries work fewer hours than us), but that is no reason for the WaPo to print a fact-free tirade against the Nordic countries in its Outlook section. The countries are not utopias, but by many measures they look damn good compared to what the folks here have cooked up.
Comments