Tuesday, August 27, 2013

Nordic Success.

"International: The Lottery of Life"
The Economist, November 21, 2012
available at http://tinyurl.com/bvp45uj
From time to time I take on blogging topics that are bigger than a single post. A friend asked me a couple of months ago "where do you think California is headed?" That's definitely one such topic, and this post is the start of an effort to answer that question.

When thinking about California's future, it's not unusual to draw comparisons concerning the recent experiences of other countries. In such conversations, the "Nordic" countries of Europe -- Switzerland, Sweden, Finland, Norway and Denmark -- usually get discussed. I don't think these are ultimately the most relevant international comparisons, but they're not a bad place to start.

The Economist recently ranked Switzerland as the best place to be born in the world in 2013. Their survey of the country in 2004 pointed out why -- for a small, landlocked country of 7 million, the Swiss have done well.  The country is known for democracy, fairness, stability, quality, meticulousness, punctuality, thrift, efficiency, openness, reliability (whether a watch or a bank), good hotels, and great chocolate.

Indeed, all the Nordic countries do well in the Economist's rankings. The Economist ranked countries in the world in 2012 on competitiveness, and, surprise of surprises, Sweden is the top of the list, followed by the four other Nordics.

"Lessons: The Secret of Their Success"
The Economist, February 2, 2013 
"Why has this remote, thinly populated region, with its freezing winters and expanses of wilderness, proved so successful?" asked the editors?

There was one factor in these countries' success that stood out, at least to me, and which is relevant to the future of California.  The Economist noted that a key feature in the success of each of these countries is the quality of their governments:

"[T]he Nordic talent for government is sui generis. Nordic government arose from a combination of difficult geography and benign history. All the Nordic countries have small populations, which means that members of the ruling elites have to get on with each other. Their monarchs lived in relatively modest places and their barons had to strike bargains with independent-minded peasants and seafarers... [t]hey embraced liberalism early. Sweden guaranteed freedom of the press in 1766, and from the 1840s onwards it abolished preference for aristocrats in handing out top government jobs and created a meritocratic and corruption-free civil service ..."
Like the Nordics, California has had a combination of difficult geography and benign history.  California has, for practical purposes, not been a theatre of war since statehood in 1850, and the State was initially cut off from the rest of the United States, a problem addressed in degrees by the  Transcontinental Railroad, the Panama Canal, the Interstates, and the advent of cheap consumer air travel.  California's internal geography presents its own challenges, still not resolved.  Further, population growth was, is, and will continue to be constrained by water shortages, notwithstanding the construction of massive dams and aqueducts.

Sather Tower, UC Berkeley, with view of San Francisco.
Image available at http://tinyurl.com/mxqg3mf
California's history of "big projects," I (and a lot of other people) would argue, led to the creation of what the State calls its "Master Plan" for education.  Starting in 1960, the State essentially decided that cheap (indeed, oftentimes free) higher education would be available to everyone. The effect of the Master Plan has been profound -- I have no problem agreeing with the assertion that California's economic dynamism results from the implementation of the Master Plan. Indeed, the Master Plan (despite its faults) has been a sterling example of the success of California's government.

California has also ended up with a liberalism that, at first glance, appears similar to if not the same as that of the Nordics.  I don't generally think it's necessary to pull examples to support that argument, but here are a couple of strong data points. Yet this is where the comparison with the Nordics starts to break down.  The Economist argues that the experiences of the Nordics had an important cultural impact, which makes them different from many other countries to this day:
 "The combination of geography and history has provided Nordic governments with two powerful resources: trust in strangers and belief in individual rights ... Economists say that high levels of trust result in lower transaction costs—there is no need to resort to American-style lawsuits or Italian-style quid-pro-quo deals in order to get things done. But its virtues go beyond that. Trust means that high-quality people join the civil service. Citizens pay their taxes and play by the rules. Government decisions are widely accepted." 
This does not describe the popular perception of California. There are few people that would agree that California, in the last 40 years, has been a place high in trust in strangers.  The State, in general, has very high quality civil servants (per the Economist, "it has never paid to bet against a state with as many inventive people as California"), but the voters of the State nonetheless undertook an effort to write tax avoidance into law. And California became an example of the most litigious State in America.

To try to understand how California enjoys a similar economic dynamism to the Nordics, but not their cultural advantages, it seems to make some sense to look for California's foil.  That country would be a place every bit as technically advanced as California, that has similar cultural advantages to the Nordics, but at the same time, would be a country that would (tragically) lack economic dynamism.  Sadly, there is such a place in the world.  Since 1990, that country has been Japan.

And that is a post for another day.