What are the top 10 happiest countries in the world?
Which countries offer the best quality of life?
Which countries are the most economically stable?
Answers to all these questions are the Scandinavian countries and other countries like Germany, Canada, Australia, and Switzerland.
What are these countries doing that makes them so great?
Are they completely capitalist like the US or socialist like China?
Too many questions, right?
Let’s make it simple and break it down to the kind of economics these countries follow.
The Nordic Model is a unique combination of free market capitalism and social benefits, adopted by Scandinavian countries. It has given rise to a society that enjoys a host of top quality services, including free education and healthcare and generous guaranteed pension payments for retirees. These benefits are funded by the taxpayers and administered by the government for the benefit of all citizens.
This mixed model is underpinned by a capitalist economy that encourages creative destruction. While the law makes it easy for companies to shed workers and implement transformative business models, employees are supported by generous social welfare programs.
While a capitalist economy might look good on paper as it brings good money on the table for the country to show in their GDP, it also brings high income inequality, high cost of living as the money will be held by a few, and global warming — as the industrialist keeps their interest before the society and government tend to avoid getting in their business officially.
At the same time, socialist economies tend to fall back in competition and put a lot of responsibility and control in the hands of a few, thus doing away with democracy.
Hence, an ideal mix is when the government is involved in public activity but so is the private. This means that the government regulates the prices in such a manner that neither the government nor the private makes losses and at the same time citizens are not taken advantage of. In such cases, the tax rates are on the higher end but at the same time benefits like universal healthcare, free education, smooth and subsidised public transport are offered.
While it sounds flawless, the Nordic or mixed economy is not free from challenges either:
Here are 2 major issues it is facing:
1) Tax-financed social service
All benefits including education, healthcare, and pensions are dependent on taxes paid by the people. Such dependency on taxation ends up becoming burdensome for the citizens. Thus, governments following the Nordic model must soon figure out a better alternative to avoid burdening their citizens with further taxes.
2) Ageing society
As the world grows, so does the working population. However, as of now, most of the world has lesser birth and death rates compared to before, which means that the number of people above the retirement age will exceed the working population, i.e., the taxpayers. This will burden the newer generation more for taking care of the retired population.
On the brighter side, in such mixed economies, people actually know where their money is being used and can directly take advantage of the same along with the unprivileged section.
We have all studied capitalist and socialist economies in depth before, but not enough about this third wonder of economics. Extensive evaluation needs to be done in order to ascertain whether a mixed economy will prove to be sustainable in the long term.
By Pranav Jainani, SYBAF