Trending

Newsletter

Finland: Central Planners Are Notoriously Inept at Responding to Human Change

By: David Unsworth - @LatinAmerUpdate - Sep 21, 2017, 9:54 am
Scandinavia's social investment model is imperil due to demographic changes (pinterest).
Scandinavia’s social investment model is imperil due to demographic changes (pinterest).

In a wide-ranging recent interview with Al-Jazeera, longtime Venezuelan foreign minister Delcy Rodriguez fielded a number of questions related to the Andean nation’s economic and political meltdown. Among the biggest eye openers, she claimed that there was no “humanitarian crisis” in Venezuela. Queried as to the disappearance of an estimated USD $300 billion, she had a quick and easy reply:

“Where is the money? I told you. It’s invested in a social model for which Venezuela was internationally recognised. That’s where the oil money was redistributed, that’s where the oil revenues that in the past were never distributed to the people went and that’s why we’re being attacked.”

In the mind of a hard-core Marxist Chavista central planner, like Ms. Rodriguez, it is the concentration of power and money in the hands of omnipotent state bureaucracies that guarantees social, economic, and political progress: that guarantees equality and better opportunities for all. The fruits of central planning in Venezuela are now evident for all to see, and the unfolding disaster in Venezuela will serve as a teachable moment for governments across the region that want to return to the days of the “pink tide” where neo-Marxist central planning giants like Dilma Rousseff, Hugo Chavez, and Cristina Kirchner ruled the roost.

Few, even among parties of the left, are now still willing to go to bat for the Maduro regime: its dictatorial nature, economic ineptness, and social decay is all too evident.

However, the American Left, and indeed, the left in general, still likes present us with the “softer side” of socialism. As Ayn Rand said, socialism is Communism with a human face. Enter…Scandinavia! We are told by such lefty luminaries as Bernie Sanders and Elizabeth Warren that economic models in Finland and Iceland and Norway and Sweden should be emulated; that they guarantee a fairer economy, a more equitable distribution of resources for their citizens. There is some truth to this: Scandinavian nations, with their generous social-welfare benefits and high levels of education and income, have among the most equitable income distribution in the world, according to the Gini co-efficient.

Yet, there are serious signs that the Scandinavian model (which really owes its success largely to free-markets, not socialism) is in danger. Why? Because central planners are notoriously bad at predicting human change: demographic change, economic change, social change…they are atrociously inept at planning for the future.

Take a recent study by the Finnish government that concludes that its extremely generous social welfare model, particularly pension and retiree benefits, is in jeopardy. Why? Simple demographics. Native Finnish women are having fewer and fewer births with each passing year. Indeed, Finland now enjoys Europe’s lowest birth-rate. So what is the big crisis…the layman might ask?

The extremely serious problem for Scandinavian social welfare states is that with fewer and fewer workers every year available to pay into retirement and pension benefits, as well as other social benefits, the entire socio-economic model is in serious danger.

The central planners did not see this coming. To central planners, they make an offer to the taxpayers: “Just give us a bunch of money and power in (Washington, Helsinki, Stockholm…fill in the blank) and we will make sure everything evens out. Just trust us OK?”

Trusting the government to take care of you is about as prudent as trusting your favorite local wolf to take care of your chickens.

In a Bloomberg article entitled “Finland’s Welfare State Has a Massive Baby Problem,” a top economist notes that the changes are “frightening…They show how fast our society is changing, and we don’t have solutions ready to stop the development. We have a large public sector and the system needs taxpayers in the future.”

Simply put, very soon Finland and other Scandinavian welfare states will not have the money to pay out the social benefits that their citizens have come to rely upon, thus leaving governments with two equally unpalatable choices: scale back benefits (breaking the explicit social contract with long-suffering taxpayers and workers), or take on external debt.

It is time for governments to get out of the way and allow individuals to make their own economic decisions about their lives. In the socialist model, citizens pay high taxes to a government that plans many aspects of their lives for them. Thus the “social investment” referenced by Delcy Rodgriguez, or the Finn government. Sure…they pay high taxes, but they enjoy a bunch of “free” stuff from the government. Ask the Venezuelan people how that is working out today.

So, rather than individuals earning good salaries and paying for their own medical care, housing, food, clothing, education, retirement, et cetera, that is left to nameless, faceless central planning bureaucrats to make their decisions for the good of the people.

Venezuela, Finland, and everywhere else would be far better off with a free-market capitalist model: people earn high wages, pay low taxes, and then are free to make their own economic decisions as they see fit, without government interference.

What has happened in Venezuela with their disastrous “social investment model” could happen elsewhere. If I were a Scandinavian central planner, I wouldn’t be laughing right now.

 

David Unsworth David Unsworth

David Unsworth is a Boston native. He received degrees in History and Political Science from Washington University in St. Louis, and subsequently spent five years working in real estate development in New York City. Currently he resides in Bogota, Colombia, where he is involved in the tourism industry. In his free time he enjoys singing in rock bands, travelling throughout Latin America, and studying Portuguese.