Nordic size arguments part II

I have a post arguing that the small size of the Nordics makes it harder for them to do what they do. This is a rehash of the point that smaller open economies are more sensitive to competitiveness problems that social democracy is suppose to create.

Lyman Stone has a response that I want to address here. What’s remarkable is that rather than making the case that the countries’ smallness does make it economically easier to pull off social democracy, he instead makes the case that size has no economic relevance to the question of whether you can pull off social democracy.

There’s no reason, fundamentally, to think a small welfare state is less stable than a large welfare state because, as I’ve shown, none of the factors that make a welfare state possible have anything to do with the size of the state. At least, not in a direct economic sense. In a political sense, state size may matter, because it may relate to institutional quality.

Now I disagree with this because I think small sizes do make it harder for you to do a large welfare state because small sizes (coupled with easy paths to emigration) make labor and capital flight much easier and make competitiveness of exports more important. But putting aside those points, Stone’s position is only that size doesn’t matter economically. I’ll take that any day I can get it in the Nordic debate.

As the quote suggests, all Stone does after arguing that the Nordics’ small size is irrelevant economically is then say that the smallness point is not intended to be the economic argument that it often masquerades as. Rather it’s only intended to be a very indirect way of plugging into the debate of why Nordic countries can politically muster the will to do good governments rather than bad governments. That’s a separate debate from the one I am interested in.

All I want to confirm is that it is possible, from an economic perspective, for the US to do social democracy like the Nordics have. Put more bluntly: what I am trying to establish in this debate is that if the US adopted Nordic institutions, they would actually work and the economic system would be sound and sustainable. In his piece, Stone says it should not be any harder economically to do it here because size is irrelevant to the economic viability of the model. So let’s do it, then.

Addendum

Since I am not interested in the various sociological theories of why Nordic people have good political opinions while American people have bad political opinions, the rest of Stone’s article is not worth addressing. I will make one exception because I think Stone does get one thing particularly wrong.

In my piece, I noted that one small-country hack is to draw the lines of a country around a single city and thereby juice your economic statistics by not having any lower-productivity rural people in them. I noted that the Nordics do not really do this. With the exception of Iceland, Nordic countries do actually have sizable rural populations in them, unlike city-states such as Singapore.

Here is how Stone responds:

Another suggestion relates to the Federal/geographic structure of countries. Here we have a problem with Matt Bruenig’s story. He said that the Nordics aren’t very concentrated around just a few cities. Except that’s actually one of the sometimes-cited reasons for their success: they’re more likely to be glorified city-states.
Sweden is the only Nordic country that isn’t pretty heavily dominated by one city. And lest you think I’ve cherry-picked by looking at just the biggest city, let me be clear: these truly are one-city-countries.
See, what’s going on here is each Nordic country has one big city that represents a large share of the population and which is able to command the resources of a whole nation. Unlike U.S. states where the large city is usually separate from the capital, in the Nordics, the large city is the capital, and the city often predates the nation. The result of this is what I would call the Minas-Tirithization of national politics: the politics of Stockholm are the politics of Sweden, to a great extent.

The bolded part is what Stone decides to debunk. But the bolded part is not what I said. Rather, I said that Nordic countries are not like city-state countries that have no rural people in them. My argument is not about how many cities a country has. It is not about what share of people live in the biggest city. It is explicitly about what share of people in a country live in rural areas. City-states juke the stats by drawing their lines so as to exclude rural people. The Nordic countries do not do that.

I did not include any statistics on this in my first piece. But here is the percent of each country’s population that lives in a rural area.

Source: World Bank

So, I was not wrong in my point here. Nordic countries are not like Singapore and other similar microstates that have effectively no low-productivity rural people in them. That’s all I was saying.

Whether Stone’s point that DK, NO, and FIN each having one major city might explain why Nordic people have good political opinions rather than bad ones is right: I don’t really know and I don’t really care.

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