Nima Sanandaji, Nordic nations prosperity developed during periods of liberalism

In the period from 1870 to 1970 the Nordic countries were among the world’s fastest-growing countries, thanks to a series of pro-business reforms such as the establishment of banks and the privatisation of forests. But in the 1970s and 1980s the undisciplined growth of government caused the reforms to run into the sands. — The Economist (2013a)

A few years ago, US National Public Radio ran a story ‘about a country that seems to violate the laws of the economic universe.’ The country had ‘one of the lowest poverty rates in the world, low unemployment, a steadily growing economy and almost no corruption’ although it had high taxes. That country was Denmark (National Public Radio 2010).

A popular notion is that the Scandinavian countries manage to defy standard economic logic, by prospering despite large welfare systems and state involvement in the economy. Sweden’s former social democratic Prime Minister Göran Persson has compared the country’s economy to a bumblebee: ‘With its overly heavy body and little wings, supposedly it should not be able to fly – but it does’ (quoted by Thakur et al. 2003: iii).

In reality, however, the economic development that has occurred in Nordic nations is anything but mysterious. The nation’s prosperity developed during periods characterised by free-market policies, low or moderate taxes and limited state involvement in the economy.