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worthy since economic theory generally

consumption as an average American. The

assumes that a nation with less income

Norwegians are the most prosperous, but even

should grow faster than a nation with more

their private consumption is just 56 percent of

income. This phenomenon, known as conver-

U.S. levels. Both the Swedes and the Finns have

gence, is based in part on the relatively non-

less than 50 percent of the private consump-

controversial proposition that more invest-

tion of average Americans.

ment will flow to a poorer nation to take

Defenders of the welfare state could re-

advantage of lower production costs and

spond by arguing that people in Nordic nations

more profit-making opportunities.

do not need to worry about financing their own

There was substantial convergence for sev-

consumption because the government takes

eral decades after World War II, largely

care of so many expenses. The Danish Finance

because European nations suffered so much

Ministry study includes figures on individual

damage during the conflict and started with

consumption per capita, which includes items

low levels of income. But after several decades

"paid for by the public sector." This shrinks the

of strong growth, economic performance in

gap, but Figure 4 shows that the U.S. retains a

European nations--including Nordic coun-

large advantage. Norwegians are the best

tries began to wane. And beginning in the

regional performers and Finns are the worst,

According to a

1980s, following Reagan-era reforms to

but gaps between individual Nordic nations are

KPMG study,

reduce the burden of government, the United

trivial compared to the gap between all the

States has widened its lead. As Figure 5 illus-

Nordic nations and the United States.

Scandinavians

trates, the United States has maintained a

Even those numbers may overstate the

are the poorest

steady advantage over Nordic nations in com-

prosperity of Nordic nations. According to a

parisons of per capita GDP.14

people in Western

KPMG study, which attracted some attention

in the Norwegian press, Scandinavians are the

Not all Nordic nations are the same, of

Europe once

poorest people in Western Europe once

course, so "average" calculations often dis-

income is adjust-

income is adjusted for taxes and the cost of liv-

guise important differences. Figure 6, for

ing. Danes had the lowest adjusted income, fol-

instance, shows per capita GDP figures for the

ed for taxes and

lowed by the Norwegians and the Swedes.

individual Nordic nations measured as a share

the cost of living.

Finland managed to edge out Belgium, so the

of U.S. output based on OECD and IMF data.

four Nordic countries in the survey occupied

Oil-rich Norway stands out as the strongest

four of the bottom five slots.13

economy of the Nordic nations, surpassing

even the United States according to IMF fig-

ures. Sweden and Finland, by contrast, are the

Where's the Convergence?

least impressive nations in the region.

Whether measured by annual growth

Other Measures of

rates or levels of output, income, or con-

Prosperity

sumption, Nordic nations have inferior eco-

nomic performance when compared to the

United States. This does not mean Nordic

Unemployment is often one of the main

nations are economically unsuccessful. Nor

indicators of economic vitality. Nordic

does it mean that the United States economy

nations generally have low levels of unemploy-

is without flaws. But it does mean that it is

ment. Indeed, the average unemployment rate

rather absurd to claim that, as Jeffrey Sachs

is not significantly higher than the American

does, that "the Nordic countries outperform

level. Iceland, Denmark, and Norway have

the Anglo-Saxon ones on most measures of

especially strong job markets, while Finland

economic performance."

and Sweden lag.

The performance gap between America

Youth unemployment figures show a simi-

and the Nordic nations is particularly note-

lar pattern. The United States has a slightly

6