Thursday, May 06, 2010

Sweden vs US

Ursula Le Guin's Earthsea cycle is a favorite work by a favorite author. I vividly recall the moment when, in the fourth novel of the series, Ged comes to understand the value of not doing. He who has 'til then spent his life making things happen, quietens, becomes reflective, learns to observe and not intervene.

This appreciation of mine explains the attraction of a column by David Brooks in the New York Times this week. Entitled The Limits of Policy, it's about doing less rather than not doing, but the theme is similar.

Brooks uses two phenomena, as he calls them, to tell us (paraphrasing a bit) not that governmental policy choices are meaningless, but we should be realistic about them. "The influence of politics and policy is usually swamped by the influence of culture, ethnicity, psychology and a dozen other factors."

The first phenomena concerns Swedes in Sweden compared with Swedes in the United States. Brooks uses some stats in an attempt to show (1) that two polities with different philosophies of government can have very similar outcomes and (2) that significant changes in public policy may not change social welfare outcomes over lengthy periods of time. It's a short piece and its main points easily grasped. He lays out his evidence well and states his conclusions succinctly.

He says the philosophies of the governments of Sweden and the U.S. differ greatly, yet the well-being of Swedes in their homeland doesn't differ much from that of Swedes whose families emigrated to America. A half-century of welfare-state policies in Sweden hasn't bought about big improvements in the lives of Swedes in Sweden when compared to Swedish-Americans, and Swedish-Americans today are no worse off than Swedes in Sweden.

Brooks indicates where he got his data and my superficial check doesn't show that he's abused his sources. As you'd expect he's selected stats that support his thesis and ignored ones that don't. He says 6.7% of Swedes live in poverty and exactly the same proportion of Swedish-Americans live in poverty. And he says in 1950 Swedes lived about 2.6 years longer than Americans and these days they live 2.7 years longer, which doesn't seem like much of a difference to him given what he sees as the huge expense of the Swedish social-system over that time.

A first question that comes to mind regarding this is how much the Swedish welfare-state model differs from the American. Most of us would say the Swedish system is comprehensive and extremely expensive. Yet if you consider the total welfare expenditure in the U.S., at least by one comprehensive measure, we in the U.S. are currently allocating about 35% our Gross Domestic Product to this purpose. I can't find the precise stat, but I believe the allocation in Sweden is about the same. The difference in policy seems to lie not so much in the amounts the two countries each spend on social welfare as in the sources of funds they use. In the U.S., much does not come from direct government cash outlays but from indirect sources (there's a list of some of these here) whereas in Sweden costs are much more likely to come from highly visible public expenditure.

A second question is whether the indicators Brooks uses do actually show what he intends. When he says that the same percentage of Swedes and Swedish-Americans live in poverty, he's relying on data from a study that aims to convince Swedes that their high-tax system is not worth the money they're spending on it (Is Sweden a False Utopia? by Nima Sanandaji and Robert Gidehag). It's a highly polemical piece in which the authors wildly extrapolate from a few social indicators. Example: "Rather than being the cause of Sweden’s social strengths, the high-tax welfare state might have been enabled by the hard-won Swedish stock of social capital. It was well before the welfare state, when hard work paid off, that a culture with strong protestant working ethics developed."

The data showing comparative poverty rates in this article come from a study by two Dutch economists. It may not surprise that Sanandaji and Gidehag have cherry-picked data out of this study. The study does say that by one constant measure, 6.7% of Swedes live in poverty. It doesn't give data on Swedish-Americans. That stat comes from another source which the authors don't trouble themselves to cite (possibly a Census report).

Looking at the data provided by the Dutch economists leads me to suspect that it's wrong to compare poverty level of everyone in Sweden with the more homogeneous group of Americans of Swedish extraction. The current Swedish population is only about 85% ethnically Swedish. I don't know the ethnic makeup of Swedish-Americans but believe it's, as I say, more homogeneous.* Moreover, those who self-identify as Swedish-Americans, many of whose ancestors arrived in the U.S. before 1920, may not have a great deal in common with the current population of Sweden. Their Swedishness may be quite different from what's actually Swedish today.

Brooks uses life expectancy as a measure of health care — Swedes lived 2.6 years longer than Americans in 1950 and 2.7 years longer today. Life expectancy may be a useful indicator, but it's a pretty crude one. For an accurate health comparison of Swedes and Americans in 1950 versus Swedes and Americans today, it would be much more satisfying to see a table like this for 1950 (this one just shows today):
Country Life expectancy Infant mortality rate Physicians per 1000 people Nurses per 1000 people Per cap. expenditure on health (USD) Healthcare costs as a percent of GDP % of government revenue spent on health % of health costs paid by gov't
Sweden 81.0 2.5 3.6 10.8 3,323 9.1 13.6 81.7
USA 78.1 6.7 2.4 10.6 7,290 16.0 18.5 45.4
{-- source: Health care system article on wikipedia}

Brooks' second phenomenon compares ethnic groups within the U.S. He says both ethnicity and geographic location "make a gigantic difference in how you will live."

His source for this observation is a study recently published by the Social Science Research Council: A Century Apart: New Measures of Well-being for U.S. Racial and Ethnic Groups. This report uses something called the American Human Development Index to generate data on the well-being of cross-sections of the U.S. population. It makes comparisons for racial and ethnic groups by geographic location (state). The authors call attention to disparities in life expectancy, educational enrollment, educational degree attainment, and median personal earnings among groups in different locales.

Brooks uses these stats to make a point about "social capital." He defines social capital as "historical experiences, cultural attitudes, child-rearing practices, family formation patterns, expectations about the future, work ethics and the quality of social bonds." And he says that a large number of "soft factors," such as different psychological, cultural and social factors combine in myriad ways to produce different viewpoints." His point: "As a result of these different viewpoints, the average behavior is different between different ethnic and geographic groups, leading to different life outcomes." This sounds like a nuanced version of my quote from Nima Sanandaji and Robert Gidehag. They say, in effect, Swedes are long-lived, healthy, prosperous, and well educated because of their "the hard-won Swedish stock of social capital." Swedes, they say, are fortunate to possess "a culture with strong protestant working ethics" and to have grown up in an environment in which hard work paid off. They say it is due to this stock of social capital that Sweden scores high on the Human Development Index not because of its costly and wasteful welfare-state politics.

But Brooks doesn't go in this direction. Instead he simply cautions that governments should not ignore the complex cultural determinants at work within the nation's heterogeneous population. He gives these recommendations:
The first rule of policy-making should be, don’t promulgate a policy that will destroy social bonds. If you take tribes of people, exile them from their homelands and ship them to strange, arid lands, you’re going to produce bad outcomes for generations. Second, try to establish basic security. If the government can establish a basic level of economic and physical security, people may create a culture of achievement — if you’re lucky. Third, try to use policy to strengthen relationships. The best policies, like good preschool and military service, fortify emotional bonds.
This sounds a lot like what Moynihan was trying to tell us back in the 1960s. Moynihan drew a lot of flak back then and it will be intersting to see whether Brooks does today.

He ends the piece: "Finally, we should all probably calm down about politics. Most of the proposals we argue about so ferociously will have only marginal effects on how we live, especially compared with the ethnic, regional and social differences that we so studiously ignore." I'm sure many agree that calmness should rule, but that government policies will have only "marginal effects" he hasn't demonstrated and probably can't. Despite my affection for Le Guin's not doing, I believe we elect officials to make policies for the betterment of the nation. Yes, as Brooks warns, they can overdo it, but act they must and, when they act, what they do does not have only marginal effect.

With respect to his first phenomenon, it's probably closer to the truth to say that American and Swedish policies look very different, but have much the same efficiencies, costs and effects, with the Swedish ones having a demonstrably superior edge by almost every measure. Perhaps the best indicator of this is the simple fact that Sweden is 7th and the U.S. 13th in overall rankings measured by the International Human Development Index, yet other indicators abound. For example, the annual growth rate of Sweden's Gross Domestic Product, per capita, is higher than that of the U.S., the after-tax median monthly disposable Swedish salary is also higher, the government expenditure on health as a percentage of total government expenditure is lower, and the cost of living is very nearly the same.***

With respect to his second phenomenon, disparities among ethnic groups and regions across the country shouldn't be taken as signs that government policy can't address in exactly the same way all needs of all people in all places. I don't think there are many who think it can. But targeted policies can and do address the needs of specific groups in specific places, and general policies can and do effect overall improvements despite ethic and regional differences.

Brooks is right to say these things are not easy and policy mistakes occur often enough, but that's no reason to convince ourselves that policy makers have only marginal effect when they prepare laws and regulations.


{source: NYT}


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See also:

Ranking of countries by Human Development Index

COMPARATIVE ECONOMIC STATISTICS: NATIONAL INCOME AND THE STANDARD OF LIVING from Baylor Univ.

Daniel Patrick Moynihan article on wikipedia

The Moynihan Report

The modern U.S. welfare state article on wikipedia

Welfare in the U.S. article on wikipedia

Montesquieu's Meteorological Climate Theory article on wikipedia



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Notes:

* Comparing all Swedes to all Americans leads to data that you'd expect to see: By one constant measure (the official EU poverty estimation), 23.5% of Americans live in poverty compared to 10.4% of Swedes. Using another constant measure (the one used in the U.S.), the amounts are 8.7% for the U.S. and 6.7% for Sweden.


** Human Development Index Indicators from the 2009 Report of the UN Development Program

        Sweden   United States 

International migrants as a percentage of total population

1960 4.0 5.8
2005 12.3 13.0

Life expectancy at birth (years)

2007 80.8 79.1

Annual growth rate of GDP per capita (%)

1990-2007 2.3 2.0

Government expenditure on health per capita (PPP US$)

2006 2,533 3,074

Government expenditure on health as a percentage of
total government expenditure

13.4 19.1

Percentage of adults with low educational attainment
levels (% aged 25 and above)

20.7 14.8

Percentage of adults with medium educational attainment
levels (% aged 25 and above)

51.1 49.0

Percentage of adults with high educational attainment
levels (% aged 25 and above)

27.0 36.2



***Cost of Living in Sweden

Consumer Price Index (Excl.Rent): 95.49
Rent Index: 28.92
Groceries Index: 89.58
Restaurants Index: 91.42
Consumer Price Plus Rent Index: 65.81
Local Purchasing Power: 118.47

Restaurants
Meal, Inexpensive Restaurant 14.36 $
Meal for 2, Mid-range Restaurant 54.59 $
Combo Meal at McDonalds or Similar 8.65 $
Domestic Beer (0.5 liter draught) 5.74 $
Imported Beer (0.33 liter bottle) 6.08 $
Coke/Pepsi (0.33 liter bottle) 2.13 $
Water (0.33 liter bottle) 2.14 $

Markets
Milk (regular), 1 liter 1.03 $
Loaf of Fresh Bread 2.00 $
Eggs (12) 1.79 $
Fresh Cheese (1kg) 13.18 $
Water (1.5 liter bottle) 2.02 $
Bottle of Wine (Mid-Range) 8.63 $
Domestic Beer (0.5 liter bottle) 2.69 $
Imported Beer (0.33 liter bottle) 3.02 $
Pack of Cigarettes (Marlboro) 6.79 $

Transportation
One-way Ticket (local transport) 2.89 $
Monthly Pass 80.96 $
Taxi (5km within center) 29.63 $
Gasoline (1 liter) 1.62 $

Utilities (Monthly)
Basic (Electricity, Gas, Water, Garbage) 180.94 $
Mobile Phone 100 Minutes Call 10.19 $
Internet (2 Mbps ADSL flat) 26.78 $

Rent Per Month
Apartment (1 bedroom) in City Centre 614.23 $
Apartment (1 bedroom) Outside of Centre 443.15 $
Apartment (2 bedrooms) in City Centre 802.45 $
Apartment (2 bedrooms) Outside of Centre 675.81 $

Buy Apartment Price
Price per Square Meter to Buy Apartment in City Centre 3,842.45 $
Price per Square Meter to Buy Apartment Outside of Centre 2,622.69 $

Salaries And Financing
Median Monthly Disposable Salary (After Tax) 3,352.48 $
Mortgage Interest Rate in Percentanges (%), Yearly For USD / EUR 5.25

Last update : May, 2010

Country data (source CIA, 2008 est)
GDP Per Capita ($) : 38,500.00
GDP Growth Rate: 0.70%
Population Growth Rate: 0.16%

-----------------

Cost of Living in United States

Consumer Price Index (Excl.Rent): 78.43
Rent Index: 46.37
Groceries Index: 83.91
Restaurants Index: 66.09
Consumer Price Plus Rent Index: 64.13
Local Purchasing Power: 116.09

Restaurants
Meal, Inexpensive Restaurant 11.48 $
Meal for 2, Mid-range Restaurant 38.51 $
Combo Meal at McDonalds or Similar 5.96 $
Domestic Beer (0.5 liter draught) 3.62 $
Imported Beer (0.33 liter bottle) 4.69 $
Coke/Pepsi (0.33 liter bottle) 1.48 $
Water (0.33 liter bottle) 1.31 $

Markets
Milk (regular), 1 liter 1.32 $
Loaf of Fresh Bread 2.25 $
Eggs (12) 2.15 $
Fresh Cheese (1kg) 8.54 $
Water (1.5 liter bottle) 1.58 $
Bottle of Wine (Mid-Range) 11.18 $
Domestic Beer (0.5 liter bottle) 2.05 $
Imported Beer (0.33 liter bottle) 3.03 $
Pack of Cigarettes (Marlboro) 5.78 $

Transportation
One-way Ticket (local transport) 2.06 $
Monthly Pass 56.03 $
Taxi (5km within center) 12.56 $
Gasoline (1 liter) 0.75 $

Utilities (Monthly)
Basic (Electricity, Gas, Water, Garbage) 168.25 $
Mobile Phone 100 Minutes Call 36.06 $
Internet (2 Mbps ADSL flat) 36.84 $

Rent Per Month
Apartment (1 bedroom) in City Centre 970.11 $
Apartment (1 bedroom) Outside of Centre 746.93 $
Apartment (2 bedrooms) in City Centre 1,323.75 $
Apartment (2 bedrooms) Outside of Centre 1,024.35 $

Buy Apartment Price
Price per Square Meter to Buy Apartment in City Centre 2,441.87 $
Price per Square Meter to Buy Apartment Outside of Centre 1,203.51 $

Salaries And Financing
Median Monthly Disposable Salary (After Tax) 3,201.52 $
Mortgage Interest Rate in Percentanges (%), Yearly For USD / EUR 5.35

Last update : May, 2010


Country data (source CIA, 2008 est)
GDP Per Capita ($) : 47,000.00
GDP Growth Rate: 1.30%
Population Growth Rate: 0.98%

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