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How Do You Explain Finland, And Noway?

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dadmonson

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They are countries with high tax rates, but they still thrive. All I can think of is that they still allow private property, low tariffs, and they still engage in free trade. Will they ever collapse? Why are they so successful?

As im from Finland i feel fairly confident about answering to this question.

1) Taxes, as for some reason many O'ists make it out to be, are not the holy grail of a capitalist country. There are many things that are far more important than whether a government taxes 10, 15 or 50 %.

2) Those things are:

- Even though Finland has very many regulations, they are upheld consistantly. That means, if you have a contract in your hand, that says something, you can be assured that it will hold. Sure, there are many kinds of contracts you cant legally make, but the ones you can do, will be upheld.

- Property rights. Even though property is taxed heavily, property rights are widely respected, by both the government and by private citizens. Just like in my last point: Once you have something written on paper, it will stand, and the courts, the police etc. wont arbitrarily just dismiss it.

- Very, very, very, very low levels of corruption. Consistantly ranked no.1 in the world. This is pretty much the same thing as the last two, but you can rely on the government to do the things they "promise", even though the things they promise arent always perfect.

3) Free trade and open borders. One thing Finland has always welcomed. Finland rarely turns into protectionism, or closing borders.

.....however, the things that make Finland even worse than the taxes, is the downright horrible labour laws. The main workers union, SAK, is as close to a government institution as it gets, and there is nothing a politician can do without the sanction of SAK. There is almost no freedom at the workplace, as you cant make individual contracts with employers, without following the gruesomely in-detail regulations on what you should get paid, how many hours you should work, how much the government collects in mandatory social security and retirement payments. No surprise, the salaries are always way above market levels, leading to the ones that get work, getting overworked, and the rest being unemployed. Finland has always had high unemployment, and if the government didnt cheat on the unemployment rates by leaving out clearly unemployed people that take part in all kinds of unefficient government work plans, our unemployment level would be constantly around 20%. The ones that have a job, are overworked and fear for their lives that they will lose their job, as getting a new one is really difficult. And then when they do lose their job, they blame capitalism :)

But, to sum things up. Objectivists, should perhaps stop worrying about the taxes, and instead focusing one the rule of law, property rights and the absence of corruption when comparing different countries. It is of no use that you have low taxes, if you cant trust that the contracts you make are upheld. Sure, ceteris paribus, lower taxes are better than higher ones, obviously, but i always get a little annoyed when i see people praising some developing countries who simply lower taxes or tariffs, without focusing on bettering the rule of law in their country.

edit: I wouldnt call Finland succesful, though, as this is not even close to being the best country to live in, if you want to make a happy, succesful life for yourself. The people in general are very melancholic, envious, un-social and pessimistic, and succesful people are really frowned upon here. Its not a place to be, if you want to be happy, and live around happy people.

Edited by JJJJ
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"Thrive" is a bit strong. Basically, they are an industrial failure (maybe a bit strong -- they don't really try). Here is my understanding of Norway. First, people continue to produce for cultural reasons. Second, the state is expert at extracting less than a fatal amount of life-blood. Third, there is rampant rationalization about services -- that things would cost more because you'd have to pay for snow-plowing, utilities set-up, health, education. Fourth, leaving is not typically considered a desirable option. Fifth, the "full employment" ethos means that there are relatively few people on total economic life-support (the downside is that labor is less efficient).

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Norway has fantastic natural rescources, spead over a small population. Good oil, natural gas, farmland (for grazing), great fish stocks, not part of the EU farming plan,powerful rivers for hyrdro electric powert generation and huge forests for logging.

As an outsider this is all I can come up with, so anyone who knows better feel free to prove me wrong

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1) Taxes, ..., are not the holy grail of a capitalist country.
True. Property rights are supported or abridged in many ways, and taxes are merely one. One can broadly break up the various economic polices into the following:

  • Structural policies: de facto enforcement of private contracts, respect for law, and so on
  • Fiscal policies: levels of taxation and deficit spending
  • Monetary policies: Whether the debt is monetized

Radical changes come in the form of structural-policy changes, as we have seen in China and India. If a country has a great bedrock there, it can take a lot of beating in the other two. When comparing one country to another, it is really important to look at that core "layer" of policies.

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Sheikdom-model welfare state: Nationalized oil reserves give the state enough revenue to buy off the population.

While I don't know about Finland, I do know that many of the semi-socialist countries avoid the "capital gains tax". Notice I said "semi-socialist". Besides which, when was the last Fino-Scandinavian manned trip to the moon? How long did the Norse last in WWII? Do you know what "Finlandized" means? I understand the rate of drunkeness is apalling in these nations. When was the last time you ever heard of a "great Swedish Industrialist" which used to be common? How long has it been since France mattered? Do you know that the fifth largest economy in the world is a single US State?

Beyond that. these are tiny, homogenious nations where everyone pretty much wants the same things so whether or not they used the government for those things may be just a matter of convenience. Even in a cpaitalist country, an official may use his "good offices", the respect he has earned in a non-corrupt way, to get things done on a voluntary basis by acting as a high-profile magnet for like-minded persons. A;sp tje government is not the geographically (and socially) isoloated entity it is here. It was much the same here before the politicians turned against the folks.

Besides all that, I just wonder where we're getting the data of "successfulness" anyway?

In line with that, the next time President Obama goes to and from Europe, he should go by boat. Now it might be a bit hard to get on the waiting list for reservations for his return to the US but he'll have plenty of room on the trip from the US.

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Also, one thing that sometimes gets forgotten, is that among all the countries in the world, the nordic countries, especially Denmark and Finland, have one of the freest economies in the world. The taxes and government spending of countries like Sweden always gets touted around in the US media, while never failing to mention that the actual difference with the US is not that big. Sure, if we compare modern Scandinavia vs. 19th century USA, the difference is startling, but the key difference with the late 20th century USA and modern Sweden is just the rhetoric politicians use, and with the Obama administration even that difference doesnt exist anymore.

When looking at the Heritage foundations country rankings of economic freedom(that has its faults), you can find that Finland is ranked no.17 in the world, as one of the most free European countries. Their report echoes pretty much what i said in my earlier post. Finland's government is very good at the things it does well, respecting propert rights, avoiding corruption, respecting contracts and not making arbitrary incursions into the individuals lives. Here is the short report:

Finland's economic freedom score is 74.5, making its economy the 17th freest in the 2009 Index. Its score remains almost unchanged, decreasing by only 0.1 point. Finland is ranked 9th out of 43 countries in the Europe region, and its overall score is well above the world average.

Despite small reductions in six of the 10 economic freedoms, Finland is still a world leader in business freedom, trade freedom, monetary freedom, property rights, and freedom from corruption. Private enterprise continues to blossom in a minimally regulated, business-friendly environment. Finland is one of the least corrupt countries in the world, and the result is a business environment that is free from political influence. Property is protected by transparent laws and even-handed enforcement, and foreign investors enjoy excellent market access. As a member of the euro zone, Finland has a standardized monetary policy that yields low inflation despite some government distortion in the agricultural sector.

Finland's labor freedom is weak, and government size is problematic. As in many other European social democracies, high government spending supports an extensive welfare state that is continually expanding even though government spending already equals half of Finland's GDP. Restrictive labor regulations hurt employment and productivity growth by mandating maximum work hours and unusually high unemployment benefits.

Here is the full list: http://www.heritage.org/Index/Ranking.aspx

Edited by JJJJ
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This points to a common misunderstanding of Socialism.

Under socialism. there is a heavy governemtn presence in the means of production (industry). I say "heavy" rather than complete "onwership" because it varies from workers' paradise to workers' paradise and from time to time. Beyond that property rights vary from minimal to nil. However Socialsim is just one form of the Welfare State of which redistribution is the major economic goal.

It is in this respect that John Maynard Keynes considered himself to be in the capitaistic camp. However what he was was an atavism; a throwback to the pre-capitalist system of mercantilsim.

This all stems from the fact that "capitalist" preceeds capitalism. and they were the "money poeple" of the mercantile era c1550 Hobbesian England to c1800 when companies were chartered by the governments; "Royal Charter"s and had monopolies in their fields, such as the London Company. The shortcomings of mercantilism were what led to the American war of Independence of 1776. The name "capitalism" was sort of grafted onto the system that evolved out of mercantilism since the system of liberty engendered the free flow of capital to the areas of highest return rather than to places directed by the monarchies. Marx never saw capitalims. Ironically, he believed that the most promising country was the United States. In Marxian terms, "capitalist" and "bourgeois" are very different from what they came to be in the real world post 1870. In fact, it is capitalism that meets the stated goals of wealth spread and greater input by the bulk of the population in the command structure of the economic system by the creation of common stock and mutual funds that marshal small individual amounts of capital into larger systems with these small inputs coming from the populace at large rather than a specific rich class. This system also attenuated the severity of socio-economic class differences by facilitating upward SES mobility and the "all ships rise with the tide" effect. The "harsh conditions" of the 19th century about which we moan and groan were a paradise compared to preceeding ages; the fledgeling capitalism inherited the conditions of previous eras, as well as we inherited the advances that they engendered.

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