What Can Finland Teach Us?

What can Finland teach an ethnically diverse country like the U.S. or India about how to run a socialist society effectively?

Nothing.

The Washington Post sent associate editor Robert G. Kaiser and Post staff photographer Lucian Perkins to Finland to discover what makes Finland work. Finland has the best education system in the world (so the Post claimed) and socialized medical system that is much less expensive than the U.S. medical system and works well for them. Finland, like other Scandinavian countries, has a level of public spending, high taxes, a very equitable distribution of income, and few people in Finland want to change that.

Finland is ethnically homogeneous. Robert Kaiser commented about that here. Basically everyone in Finland is a Finn, speaks Finnish, belongs to the Lutheran Church (although doesn’t attend regularly), and has a lot in common culturally with every other Finn. This does not describe the United States or India. If you could measure ethnic diversity, Finland would be on the left, United Kingdom would be more towards the middle, United States to the right of the U.K., and India would be to the far right. A casual observation is that mild tax-and-spend socialism works well in a country that is ethnically to the left but not so well in a country that is ethnically to the right. Why is this?

Socialism requires cooperation from the participants. People will cooperate to a limited degree, but the more cooperation you ask from people, the more selfish they tend to be. In the United States, most will leave a tip in a restaurant they never intend to visit again, most who regularly watch public television will donate $10 to $20 to public television (but not much more), most will vote in a national election but not in a small local election.

People in India behave more in the way that the non-cooperative game theorist would predict. I am told that if there is a piece of trash in the hallway in a luxury apartment, no one will pick it up and put it in the dustbin. I’ve been to India and have observed that men regularly relieve themselves on the walls in public. I would be willing to bet that this would not occur in a neighborhood where everyone is of the same ethnic group. People are more cooperative among their own “tribe”.

Socialism can be modeled by a simple game: the commons game. In the commons game there are n (n greater than 1) participants. For every dollar that the participant puts into the common pot, the society can buy a public good worth 2/n to everyone. Obviously, if everyone puts in the same amount, everyone gets a good that is worth double what he or she paid for it, which is a really good deal. But the free rider will think: if everyone else puts in their money and I don’t I get the benefits for nothing. Obviously the free rider is a stinker, but these people do exist, and they more likely to exist among groups that feel that they have been abused in the past.

This is the important point: people who don’t trust others in society will act less cooperatively and make socialism unworkable. They will shirk their responsibility to work hard, pay lots of taxes, and avoid taking too much from the public pot. They won’t feel so bad about their anti-social behavior because they don't care so much about these other people. They will feel that the money in the public money-pot is going to those others and they would prefer that the money would stay within their own family.

I believe that we humans have an instinct for cooperating with the “tribe”. The commons game came up all the time in our prehistoric past and humans did not have capitalism to help overcome the free rider problem. Think about warfare. People in the tribe had to put their own interest aside for the common good or the tribe might lose to another tribe. But this feeling of cooperation did not extend to other tribes for obvious reasons: the other tribe might be your enemy, either today or tomorrow. Instinctively, we will feel bad if we are uncooperative with our own tribe but less concerned about other tribes.

Yesterday, I wrote about a fascinating encounter that Saket Vaidya had on a quay waiting for a train in Mumbai. He was about to fight a fiend who was taking a village girl against her will when someone from the crowd intervened. If the crowd had backed Saket, the girl might have been spared an awful fate. But that’s not what happened. The person from the crowd told Saket:

Why are you involving your self with such people? Let him take the girl anywhere. How does it matter to us? Why should we interfere? He may get away, but perhaps we might get into trouble in the end.

My guess is that no Finn would be like this in Finland.

Think about this situation: you are going to play the commons game with a group of Moslems (if you are Moslem, change it to Hindus). One from the group says something stupid (like “The U.S. brought 9/11 on themselves”) and the others nod in agreement. Do you cooperate or free ride? I would not cooperate in this case.

Mild tax-and-spend socialism is a good fit for Finland. Laissez faire libertarian capitalism is a very good fit for India. The United States can tolerate a mild touch of tax-and-spend, but not much. India and the United States should compare themselves to Switzerland, which is divided by ethnicity and religion and is still very free and prosperous, and not to any Scandinavian country.

As a postscript, I would point out that the recent failure of the Europe Constitution is a failure of socialism. European countries are individually must less diverse that Europe as a whole. And if we include Turkey, Europe would be very diverse. A common economy over Europe would require a shift from mild tax-and-spend socialism to laissez faire libertarian capitalism, and Europe is not ready for that.