The social spending and GDP per capita graph redux

For reasons unknown to me or to Mark Thoma, The Economist blogger doesn't seem to be willing to engage me directly in the interpretation of the following graph from this post:

My original comment on this graph was: 'These are countries whose per-capita incomes are greater than the OECD average. The point here is that there's no trade-off between high levels of national income and high levels of social spending.'

Now, it seems obvious enough - to me, at least - that

• The Nordic countries are rich, and
• The Nordic countries spend lots more on social programs than do Canada or the US.

I could have left it at that, I suppose, but I also wanted to illustrate the range of variation of the horizontal axis. To my mind, the variation in the GDP per capita numbers says more about the vagaries of cross-country GDP data than it does about comparing living standards: the countries plotted in the graph are rich, and that's pretty much all you need to know.

The interesting question is *how* the Nordic countries accomplish this feat, and that's what the post was about.

Comments

[Stefan Karlsson]

"The interesting question is *how* the Nordic countries accomplish this feat, and that's what the post was about."

In the case of Norway, the really rich of the Nordics, I think it has something to do with its vast amounts of oil. Sweden and Denmark on the other hand have long lagged the rest of the Western world in growth. They were third and fourth richest among the OECD countries in 1970 (Up until the 1950s, Sweden actually had lower level of government spending than the U.S.), but slipped since significantly. In the last few years they have managed to again see growth rise, but this is in part due to housing bubbles and in part due to recent tax and spending cuts.

[Cam]

I've heard that the Scandanavian countries, although they have massive welfare states, have quite liberal foreign trade and capital markets, as well as liberalized labour and product markets internally.