The Hidden Side of the Scandinavian Miracle

If you are of a quiet temperament, if you like blending with the crowd and if you don’t mind being on the giving and sometimes on the receiving end of tax, Scandinavia is the place for you.

TEMPERAMENT

I have been living in Sweden since 2015, and prior to that I lived in Belgium, Canada, the UK, Italy and Switzerland. I could not put my finger on it until I came across Erin Meyer’s maps of cultures in terms of expressiveness and confrontation: Swedes in particular, and to a lesser extent other Nordics, are deemed to rank relatively low on expressiveness and confrontation:

If you are an introvert, or the type of person who hates to ruffle feathers, you will have a great time in the region.

If you like speaking your mind and are not afraid of “agreeing to disagree”, you will find it a bit harder here…

BLENDING WITH THE CROWD

Image from the 2002 movie Equilibrium, credit Dimension Films and Blue Tulip Productions

The Scandinavian and Nordic countries have also worked very hard in the 20th century to flatten out hierarchy. You can see it in corporate culture, but some social class markers remain here even though people like to think that they no longer exist.

Baby boomers tightened their belts and made sacrifices to significantly raise productivity in Scandinavia. So Millennials are now caught with one foot in a Lutheran tradition of austerity and one foot in the temptation of displaying wealth. For the moment it is still done discreetly (don’t wear big labels) and indirectly (through humble bragging).

When it comes to opinion and politics, there seems to be a social stigma associated with expressing polarised or controversial opinions. Your opinion is better kept to yourself, and at worse shared in confidence.

This can create tricky situations, and for example mentions of ethnicity in crime reports is a very touchy subject( The cost of Sweden’s silent consensus culture).

CAPTURE AND REDISTRIBUTION OF EXCESS WEALTH

Scandinavia fosters entrepreneurship, but the tax system looks like it was designed to stifle a lavish lifestyle, which is frowned upon from a cultural standpoint.

Image source The JetSet Lifestyle Travel

Basically, if you are a Warren Buffet type millionaire who builds corporate wealth and spends very little on (him/her)self, you will feel at home in Scandinavia.

Warren Buffet, photograph by Annie Leibovitz

If you want the bling, from paying yourself a high salary to driving fancy cars, Scandinavia might not be the best place for you:

  • Value added tax (comprehensive sales tax) is around 25%, while in other European countries it is between 17% and 21%. So just buying more things and expensive things cost you more.
  • Corporate tax is the same as in any other European country (so companies are not taxed excessively), but progressive income tax, for example in Sweden, means that the highest salary brackets are taxes up to 60%.
  • In Denmark, cars are taxed at 85% up to $29,000, and at 150% for anything above. Want to show off with a $215,000 Ferrari? That will be $518,650, with compliment of the Tax Authorities.
  • Norway levies traffic fines on based on 10% of the annual income. Do you have money to buy a fast car or do you feel you can disregard traffic laws? You most certainly have money to pay higher fines…

If you’ve clearly got more money than ideas about what to do with it, Scandinavian tax authorities will think of something for you…

I am expecting comments from proponents of Neoliberal Capitalism. So here’s my preemptive foreword:

The paradox is that high value added tax and progressive income tax rate do not prevent Sweden or Denmark from being listed amongst the most startup friendly countries: see The 5 best countries in Europe for founders and startups and The 10 most startup friendly countries in 2020 | Silicon Canals).

Allowing the creation of wealth and redistributing it are not mutually exclusive.

I do not have Scandinavian roots and I did not grow up in the region, so I cannot be accused of having a strong bias. I have two children and I probably get more out of the system than what I am paying in combined income tax and value added tax.

Although the local culture and customs mean that one can not be too expressive, too vocal or stand out too much, my appreciation as a foreigner is that somehow the Scandinavian model seems to “work” better than in the other countries I have lived in.

I find civil servants to be more service minded than in my other countries of reference (but I give a B+ to the UK and to Switzerland), and there is relatively short red tape once that you are in the system.

In my lifetime there have been global economic recessions every eleven year in average (1973 Energy crisis, 1987 Black Monday, 2000 Dotcom bubble, 2007 Subprime crisis and 2019 Coronavirus recession).

Based on this short experience of life and of the world, I find it much more preferable to have a system that runs a tight ship and tries to capture excess wealth with the intent to redistribute it and guarantee that each and every citizen lives decently, especially in hard times.

Image source The Business Journals

I fail to see the benefits of trading it for a system where corporations dictate their terms and where the gap between the rich and the poor keeps getting bigger with every new crisis that hits. Maybe that’s because I am not a millionaire, but even if I was, I might still be interested in setting up a company in Scandinavia, just as hundreds of startups do every year:

People here are well trained, hard working, productive and disciplined, and employers don’t have to foot in the bill if a worker takes a parental or a sick leave: the system does. If someone gets sick, they don’t have to worry about the financial aspect of it.

I think the benefits of the Scandinavian model vastly make up for its tradeoffs.

Luxury Industry professional, former Head of Design and Competitive Research at the Longines Watch Company

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