Should We All Move to Finland?

Last week the New York Times published an opinion piece entitled Finland Is a Capitalist Paradise.  The article is a first-person account of the experience of an American  couple who emigrated to Finland in search of a better life.  The article addresses many of the knee-jerk reactions that Americans would have to such a move–socialism, high taxes, climate, etc,  In this family's experience the move has been nothing but positive, especially with regard to quality of life and affordability.

This article was shared amongst several of us in my office and it generated some thoughtful discourse.  There is no question that the "American dream" is out of reach for a depressingly-large number of Americans and that our nation's wealth seems to be ever more concentrated in the hands of a smaller percentage of the population.  Most of our disenfranchised citizens believe that their lives would be made better if, like Finland, our government embraced its citizens in an ever-expanding net of cradle-to-grave benefits. 

This is why the socialist rhetoric of Bernie Sanders and Alexandra Ocasio-Cortez has gained traction here.  People want help, and as they seemingly are unable to help themselves they want the government to do it. They want free healthcare and tuition and a host of other services and they want our more wealthy citizens to pay for it.  It works in other countries, they exclaim!  Look at Finland, they say.  And last week's article is a first-person account of a family telling us all that it works and is great!  So why are we so quick to proclaim this an unworkable solution here in the United States?  

Nothwithstanding the fact that our country has always valued individual freedoms and protections, we are as diverse a population as can be found anywhere on the planet.  We truly are a melting pot. Finland is not.  You won’t find many Asians or Africans or South Americans in Finland.  Because the majority of the country has blonde hair and blue eyes and has the same belief system, I would suspect the notion of sharing what you have with your neighbor is a more easily digestible concept than it is here.  

That is changing, however.   Scandanavian countries have long prided themselves on their open-armed approach to immigration.  With this century's global geopolitical unrest the countries of northern Europe have experienced a tremendous surge in immigration. Political refugees have been drawn to Scandinavia because of the liberal resettlement policies. However, because these refugees bring with them their own cultures and customs and have no interest in assimilating into Nordic culture,  there is cultural strain. Populism is on the rise. 

As a reference point, look at the news stories about the social disruption caused by immigration trends in Scandinavia.

“Consensus around the post-war Nordic model of high taxes and generous welfare was long sustained by a homogenous society. But immigration, global competition and fear for jobs have put that ideal of equality based on civic trust under strain.”

“Mainstream parties in Sweden are now proposing measures against immigration that were only the ground of the far right a few years ago. Prime Minister Stefan Lofven, who once told crowds, "My Europe does not build walls," tightened asylum rules and border controls with ID checks.”

“Generally speaking, individuals polled said that students and citizens of other EU countries moving to Finland for work were welcome, whereas refugees and asylum seekers were shunned.  The survey indicated that respondents would prefer immigrants from other EU states (73 percent), North America (68 percent) or Asia (68%). They were less keen to see migrants from the Middle East (60 percent) and Africa (50 percent), with many indicating that Finland should reduce immigration from these areas.”

It is easy to tout the success of your government policies when you lead a homogenous society.  However, the basic human instinct to distrust those who have a different appearance, speak another language, and have a different belief system is taking root in these Nordic countries.   America for more than 200 years has grappled with this issue.  We are hesitant to give more of what we have to those with whom we do not share a belief system–in work, religion, politics, whatever.   Our desire to help is tainted by those who take advantage of a system designed to help those who most need it. This fraud happens in every country of course, but combine that with our individualistic nature and one can understand why so many Americans oppose bigger government and more social programs.  The Finns, Swedes, Danish, etc are all now confronting this reality. 

I do not believe that more and bigger social programs are the answers here. In my opinion, we can solve most of our country's wealth inequality fairly simply: higher wages.   Corporate profits are astronomical.  In 2018 total corporate profits amounted to more that 2.31 TRILLION DOLLARS.  Check this out this graph of the growth of corporate profitability.

These profits most directly benefit two groups of people:  management and shareholders.  Management compensation is most directly tied to what?  Profitability.  It's no wonder that employee compensation, which is one of the few costs over which management has almost total control, has gone nowhere.  If management can keep labor costs down, it improves profitability which in turn improves management compensation.  Obviously, management and labor have an adversarial relationship here. 

Stock ownership is overwhelmingly the province of the wealthy, even taking into account corporate 401k and other retirement programs. CEO pay has gotten so out of line with worker pay that it is unbelievable.  Redirecting some of these corporate profits not into share buybacks or questionable mergers but to the workforce would help reinvigorate the middle class and thus reduce the wealth disparity in this country.  Yes, a dramatic rise in worker compensation would reduce corporate profitability and make stocks less attractive but after a period of readjustment stocks would resume their place as this country's greatest proven long-term wealth producer.

“Since 1978, and adjusted for inflation, American workers have seen an 11.2 percent increase in compensation. During that same period, CEO’s have seen a 937 percent increase in earnings. That salary growth is even 70 percent faster than the rise in the stock market, according to the Economic Policy Institute.”

Real wages for the working class have gone nowhere for 5 decades. Think about that. A worker today has less purchasing power, when adjusted for inflation, than he or she did fifty years ago.  Absolutely incredible. No wonder the middle class is on the verge of extinction.   As a believer in trickle down economics, if more people have more money to spend, they spend more.  More spending results in greater corporate profitability and would offset some of the profit loss caused by higher worker costs. Since consumer spending is 2/3 of U.S. GDP, it stands to reason that spreading the wealth around and not having it so concentrated would be a huge benefit to our economy.   We don’t need to increase social welfare programs and we don’t need to have a bigger government wastefully running them.  Pay people more for the work they do.  That’s it.  It’s that simple.