World Economic Forum puts Finland above the US.

[Swamp Fox]

I'm skeptical about the World Economic Forum (WEF). (http://www.washingtonpost.com/wp-dyn/content/article/2005/09/28/AR2005092800552.html) I mean, it puts the Nordic countries, with their high taxes, above the United States, which I find hard to accept. In fact, the findings of the WEF say that high taxes do not crimp economic performance, which is a sacriligeous statement to a free-market conservative.

OTOH, if Finland is more competitive than the US, the US is more competitive than the other social-democratic Nordic countries, namely, Sweden, Norway, and Iceland. Of course, the US has a host of other problems, like an influx of immigrants, a war in Iraq, and a continent-sized multi-ethnic community, which these countries don't have, and that will impact on its economy. IOW, small homogenous countries can have a social consensus and move more quickly, but big ones with differences across ethnic and/or regional lines cannot do so.

Comments?

[Sierra Mike]

So by that argument, China should eclipse everyone, since they have a society that's about 92% homogenous and low taxes, right?

SM

[Swamp Fox]

Not quite - I'm not saying that homogeneity is the key to success; I'm saying that the Nordic countries have a social consensus to have higher taxes, and that's a consensus that does not exist in North America because we're heterogenous and quite big. That means that the Nordic model can have higher taxes and still be fairly competitive, but that's something that cannot apply to us.

[Sierra Mike]

"Competitive" in this discussion is a relative thing. I think when you stack up the whole economic package, as well as current and future potential, you'd find that Finland is quite lacking.

After all, if Finland's economic prowess disappears overnight, the only thing the world might notice is a sudden lack of pickled herring. Hardly something to lament, in most quarters.

SM

[MNeedham73]

Now now, SM. Nokia is based in Finland, if I'm not mistaken.

[Sierra Mike]

I'm sure Motorola would feel embittered by the loss. ;)

SM

[Steve]

I think what the studies of places like Finland teach us is that once a minimum economic base has been achieved, a high level of taxation of that base can sustain a high standard of living for a relatively small population. If Finland's population were much larger, it would not have a correspondingly large economic base, except as regards to the service sector. Service sector industries, however, do not lend themselves well to high levels of taxation, thus the standard of living would drop.

If Finland's economic base declined, no amount of taxation would suffice to maintain living standards; indeed, the taxes would become penurious at some point, hastening the economic decline.

Finally, even with a healthy economic base and stable, small population, taxes can become too high to be bearable by all but the most socialist-minded of citizens. At some point, people say "enough is enough" and begin to rebel against the system.

Finland has achieved, for now, a decent balance between the three factors.

Note that the United States is out of balance to some degree or another on all three factors!

[ethics]

Damn Steve, nicely put.

[Swamp Fox]

Very nicely put, indeed, Steve. But size is not the only difference - there must also be a social consensus to accept high taxes. Small jurisdictions like Hong Kong and Singapore would never put up with that.

[Steve]

Oh, absolutely. There needs to be a certain degree of homogeneity in the population plus there needs to be a will to "spread the wealth". While HK and Singapore share the homogenous culture aspect, those societies are quite a bit more enterpreneur-oriented than is Finland; very high tax levels wouldn't go over very well.