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Figure 9

Share of U.S. Median Income Received by Low-Income OECD Households, 2000

Sweden

38%

Norway

50%

F inland

38%

Denmark

43%

United States

39%

0%

10%

20%

30%

40%

50%

60%

Source: Economic Policy Institute.

made divergent choices about the burden of

may be more a reflection of positive reforms

government.

in nations such as Ireland rather than an

indicator of problems in countries like

Government Spending

Sweden, but it does suggest that strong eco-

As seen in Figure 10, government spend-

nomic growth is better than income redistri-

ing consumes a larger share of GDP in all

bution if the goal is to help the least fortu-

In every

Nordic nations than it does in the United

nate in society.

Nordic nation,

States. Sweden has the biggest burden of gov-

The United States has enjoyed faster eco-

ernment, followed by Denmark and Finland,

nomic growth than Nordic nations. Moreover,

the top tax rate

with Iceland and Norway closer to the

per capita GDP is higher in the United States,

is imposed on

American level. The larger burden of govern-

as are levels of disposable income and private

ment presumably does not bode well for

consumption. Unemployment is modestly

taxpayers with

Nordic competitiveness since this means

lower in America, and per capita wealth is sig-

middle-class

politicians and bureaucrats have more power

nificantly higher. The Nordic Model may be

incomes.

over how resources are allocated. And since

instructive, but not in the way advocates claim.

policymakers are more likely to be influenced

Taxpayers in

by political considerations rather than eco-

the United States

The Costly Nordic

nomic factors, that undermines economic

performance.30

Welfare State

do not get hit

But not all government spending is creat-

with the highest

ed equal. Economists generally find that

Why are people in the United States more

tax rate until

some forms of government spending cause

prosperous than their Nordic counterparts?

less damage (or even generate some benefits),

Is it by chance, the result of different endow-

income climbs to

particularly outlays for physical infrastruc-

ments, or the consequence of policy choices?

more than

ture and education. That does not necessari-

Regarding the latter possibility, policymakers

$336,000.

ly mean that spending in those areas leads to

in America and the Nordic nations have

11