The reality of the Scandinavian dream involves understanding the real costs, culture, and compromise behind the fame.
December 30, 2024
By: Bobby Casey, Managing Director GWP
Scandinavia comes up from time to time in American discourse. Sometimes it’s the Surströmming challenge, which most Americans flat out fail before they even open the can all the way.
Sometimes it’s about their healthcare system. Americans love to extol the virtues of the Scandinavian social safety net. Healthcare being the fascistic beast it is in the US, the envy grows.
Sometimes it’s about how “happy” they are, which many Americans attribute to their social safety net and exposure to nature.
What Americans never seem to talk about is the innovation that comes out of that region. No one talks about Scandinavia having its own version of the Silicon Valley, which is strange. No one is talking about the latest anything coming out of Norway.
So what is the reality of the Scandinavian Dream? It’s not all bad, and it’s not all great, and it ultimately depends on how you define these things… although, I’m pretty sure the Surströmming thing falls short of anything resembling “greatness”.
The Great Safety Net of Scandinavia
Scandinavia has a robust welfare state. It includes free access to education, healthcare, and other services like parental leave, child benefits, and care for the elderly and sick as well as basic public pensions that are paid regardless of previous earnings.
I wouldn’t say you want for nothing, but you probably need for nothing. You want for more of your take-home pay, perhaps? According to the Tax Foundation:
High levels of government spending naturally require high levels of taxation. In 2021, Denmark’s tax-to-GDP ratio was at 46.9 percent, Norway’s at 42.2 percent, and Sweden’s at 42.6 percent. This compares to a ratio of 24.5 percent in the United States.
If we approach this from the thresholds for highest tax bracket this is how it would look, using US average income of $62,000 per year.
United States:
Top income tax rate – 43.7% (federal and state combined)
Applies to income over 8.5 times the average income, which would be an annual income of $527,000.
Denmark:
Top income tax rate – 55.9%
Applies to income over 1.3 times the average income, which in the US would be an annual income of $80,600.
Norway:
Top income tax rate – 38.2%
Applies to income over 1.5 times the average income, which in the US would be an annual income of $93,000
Sweden:
Top personal tax rate – 52.3%
Applies to income over 1.1 times the average income, which in the US would be an annual income of $68,200
Add to this the VAT at 25% for all three Nordic countries, and that’s a lot of taxes on just the private individuals, never mind the business and capital gains taxes.
The VAT is naturally regressive since the poor spend a greater percentage of their incomes, but there is also the interesting phenomenon of private health insurance booming in a place like Scandinavia. What need would they have for private health insurance when they get the coveted free stuff?
In the US, people have immediate access to care, but often struggle to pay for it. In places like Canada, Scandinavia, and the UK, they don’t have to worry about the bills, but they do struggle to get immediate care. The wait times are much longer. To bypass the wait times, an increasing number of Scandinavians are opting for the private sector:
While the Nordic nations do provide publicly-funded healthcare, they also allow private health insurance options to their citizens. This private insurance allows individuals to bypass long wait times and access higher-quality care. In Sweden, over 643,000 individuals are solely covered by private insurance groups.
Similarly, in Denmark, the private supplementary insurance program, Sygeforsikring Danmark, covers over 14% of the Danish population, with 42% having at least some coverage provided by the private sector.
Notably, private healthcare firms, such as Aleris, have a significant presence in Nordic countries, indicating the growth of the private sector in the region. With seven private companies in Denmark and fourteen more in Norway, Aleris operates throughout numerous countries in Scandinavia.
The reality of the Scandinavian dream is, the laws of economics still apply. And the folly of the state is no less real for them than it is for anyone in the US.
Happiest Place on Earth
Scandinavia routinely scores as one of the happiest places on earth.
Americans romanticize Scandinavian “happiness”, but I don’t think they examine how happiness is defined. Happiness, like poverty, is relative to the scale upon which you measure. That’s why Americans can have “poor” people who are fat and have cell phones, while Sudan can have “poor” people who are starving and know nothing of electronics.
The actual test is a self-appraisal. Individuals are asked to rate their life on a scale of 1 to 10: 1 being the worst possible life and 10 being the best possible life. Scandinavians know they don’t have bad lives. One could even say they would not fall into the low end of that scale by any standard. But by what standard are they indicating they are at the high end of the scale?
Nothing about this poll alludes to happiness as an emotion. It has to do with satisfaction toward their life and existence. So things like “joy” or “elation” or “sense of accomplishment” are not part of this “happiness” equation. Happiness isn’t therefore measured by what IS, but rather by what isn’t. That is to say, the absence of financial insecurity, and the degree to which it is absent is really what is being equated to happiness.
In 2024, the happiest countries ranked as follows:
- Finland
- Denmark
- Iceland
- Sweden
- Israel
- Netherlands
- Norway
A few terms swirl in the Scandinavian culture: kalsarikännit in Finland, hygge in Denmark, or langom in Sweden. These terms mean to capture the happiness factor of Scandinavian life. The Finnish term literally translates into a form of drunkenness; the Danish term speaks to comfort and friendliness; and the Swedish term speaks to sufficiency.
Jukka Savolainen is a professor of sociology at Wayne State University in Detroit and is a dual citizen of the U.S. and Finland. He thinks the Swedish term is broadly applicable to all of Scandinavia:
In terms of expectations for a good life, lagom encourages contentment with life’s bare necessities. If you already have those, you have nothing to complain about. Ergo, you are happy.
He explains the general cultural conditioning of the people:
This mentality is famously captured in the Law of Jante—a set of commandments believed to capture something essential about the Nordic disposition to personal success: “You’re not to think you are anything special; you’re not to imagine yourself better than we are; you’re not to think you are good at anything,” and so on.
People are socialized to believe what they have is as good as it gets—or close enough. This mindset explains why Finns are the happiest people in the world despite living in small apartments, earning modest incomes—with even more limited purchasing power thanks to high prices and taxes—and, unlike Iceland, having never even made it to the World Cup!
If you never expected much from life, and you aren’t materially struggling, then it’s not difficult to achieve high measures of happiness… if in fact that is how you measure happiness.
The reality of the Scandinavian dream, however, is a complacent people whose use of antidepressants is on the rise:
The prevalence of antidepressant use increased from 2006 to 2021 and was highest in Sweden (78 to 107 users per 1000 inhabitants) and lowest in Norway (61 to 69 users per 1000 inhabitants).
Norway and Entrepreneurs
If happiness is measured relative to expectations, then Scandinavians have, at the very least, struck that balance. They expect X and they generally achieve X. But you have to imagine parents encouraging their children, and having them aim straight ahead rather than high. “Get a nice office job, and be a middle manager.” It’s certainly easy to see why underachievers in the US aspire for the Scandinavian way, but it’s also understandable that the overachievers would quietly sneak out the backdoor.
Norway has popped up in the top ten list of digital nomad destinations. Among the standard fair, it requires you to have a contract with a Norwegian client. But, on your way in, you might be seeing Norwegian (aspiring) entrepreneurs on their way out.
The story of Fredrik Haga, co-founder of Dune.com, is illustrative of the capital flight from Norway. He was a small start-up. For several months he took no salary. Then he received a small grant whereby he could draw a $50k/year salary. After nearly two years since their inception, he and his co-founder landed an $80 million venture capital investment.
He not only paid his income tax, he paid the new 1.1% wealth tax on all value above $1.76 million. Haga left Norway before the exit tax kicked in, which would’ve been another 37.84%. The investment money was meant for the company to spend on resources and growth, not taxes.
But if you don’t have the liquid assets to pay for the tax debt, these businesses have no choice but to sell off their shares to pay for it.
Norway’s entrepreneurs are disappearing. In the past two years alone, 100 of Norway’s top 400 taxpayers, representing about 50 percent of that group’s wealth, have fled the country to protect their businesses.
Norway spends 45 percent more than Sweden on healthcare per capita with approximately the same health outcomes. Norway spends 50 percent more than Finland on primary and secondary school with worse results. And it splurges on green virtue-signaling with, for example, a $3.2 billion offshore wind project that industry experts believe is financially unworkable.
In the last 15 years, Norway has gone from having seven of the 30 most valuable companies among the Nordic countries, to only two—Equinor [the state run oil company] and DNB, a bank. Neither, obviously, is a tech company.
The Norwegian government is able to do this in large part because of the money they make from their invested oil revenues and capped spending from that fund. But it does seem odd to be so glib toward the tech industry or entrepreneurship in general. And it also seems to run counter to the “langom” ethic. If what you have is sufficient, why come so hard for the start-ups? Or is the reality of the Scandinavian dream that “langom” is only for the dutiful hoi polloi?
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