Why is a big country less suitable for high-tax, high-welfare system?

Question

Back when the US presidential election, I frequently heard the US is not suitable for the high-tax, large-welfare system like in Scandinavia. This is especially common among leftists, mostly Hillary Clinton supporters (example):

Flam said, “We have to remember that Sweden is a small country, the population is very homogenous.”

But I didn't see anyone provide evidence for this statement.

So what is the reason big countries are considered to not be suitable for the same solutions as these 'good welfare nations'?

Also, does the "big" mean population-wise or geography-wise? The former includes countries like Japan and the latter like Australia.

Answer 1

Caveat: These are impressions of a Scandinavian dude (assuming you would include Finland) who only lived in the US (in late 80's) as a grad student/post doc, but never raised a family there.

I would say that the question is more complicated than just a matter of size. The scale may affect the viability of a welfare system financed by we the taxpayers, but not necessarily in a direct way.

• One thing that caught my eye in the article was the statement that the Swedes, by and large, trust their government. This is mostly true in all the Nordic countries, but I'm a bit skeptical about the Americans. You guys are proud of your form of government, but when is the last time you heard an American say "the government is on your side" un-ironically?
• Don't take the previous bullet too seriously though. Things aren't that different on this side of the pond if we scale up one level! Many people here, Scandinavia and elsewhere, have a similar mistrust of the EU and its bureaucrats. If some politician here suggested the EU to run the welfare system, the voters would call for their local equivalent of tar and feathers. I don't know whether the reason is related to the size, geographic distance or what. Ask a psychologist, I'm a math guy.
• Healthcare is a big part of it. May be I watched too much LA Law and such (my wife was pregnant during the last months of our stay so I did get a glimpse of the US healthcare system), but I have the impression that healthcare costs in the US are driven up by: A) the medical professionals need to cover the cost of their education, B) when an insurance company picks up the bill, the medical practitioners have a tendency to take a number of extra tests to cover their ass because, C) the US courts are occasionally rather generous with their malpractice compensations. I'm not saying that consumers in Scandinavia would not be able to take malpractice cases to court, but I do find the American legal pratices ridiculous. Cut a couple of zeros from those dollar figures, please.
• What I was getting at with the previous bullet is that you cannot isolate the healthcare system from the rest of the society, remove it with surgical precision, and replace it with another. It is connected to the legal and educational industries at least, and any changes in one component will have ramifications in the others.

Ok, so I just kept stating the obvious. Back to the actual question.

• The size of the country per se may not be a problem. But, while a taxpayer in New York City may find it acceptable to support people upstate, a taxpayer from Deep South may be more reluctant to support New Englanders (and vice versa). I don't know for sure, but the size of the country may enter the equation this way.
• The linked article also mentioned relative homogeneity of populations of the Scandinavian countries as a factor. This plays a role in the sense that the number of free-riders, while not equal to zero, is tolerable here. Not sure how the US taxpayers see this?
• If the US wants to change its welfare structure, it may be better to look at UK and/or Australia for cues. At least the legal systems are then more compatible.
• It may also be more palatable to the US taxpayers to do reforms like this at the level of states. Or, at the very least, finance it state-by-state. Within EU this is referred to as subsidiarity. Admittedly a point against bringing in a system from a small country to a much bigger one. Anyway, if implemented at the level of states, then the states could learn from experiences of each other, adapt and modify their own ways, and eventually come up with something that works.

Answer 2

It's not a matter of land area or even directly population, per se. The key part of the quote in the question is the homogenous part. The USA is the opposite of homogenous (and, at least for most of its history, a large percentage of the country has prided itself on that fact.)

• The USA has a large Southern border across which millions of people from much less wealthy countries immigrate (some legally, some illegally.) Overall, around 13% of the entire U.S. population is foreign-born. The vast majority of that is from nations with much lower standards of living. Most estimates of the number of illegal immigrants alone in the U.S. exceed the entire population of Sweden, over 11 million people.

• Even among people born in the U.S., while all incomes are denominated in U.S. dollars, average incomes and costs-of-living vary dramatically from region to region (though regional differences in actual standard of living are much smaller, since the regions with lower nominal incomes also tend to have much lower cost-of-living.) The variation is even more dramatic when non-state territories (e.g. Puerto Rico, Guam, Saipan, USVI, etc.) are considered.

This lack of economic homogeneity causes a lot of problems for attempts to implement social safety net programs that attempt to provide an overall minimum standard of living.

• Regional variations in incomes and costs-of-living make it difficult to set which income levels should actually qualify for certain forms of government assistance. An income level that would represent poverty in one part of the country might be solidly middle-class in another part, so nationwide standards are hard to set. And this is not just state-to-state variation, but county-to-county. Places like New York City and San Francisco can having living costs 2-3 times those of areas that are only a relatively short distance away in the same state.

• Attempting to provide a minimum standard-of-living (especially if that standard is around middle-class) when you have dramatic differences in incomes means that a relatively small percentage of the population will be supporting a relatively large one. Even as it is, around 45% of U.S. households pay net zero or negative federal income taxes. The percentage who are receiving government benefits exceeding their tax liability would be significantly higher than that. This puts a huge tax burden on a relatively small portion of the population.

• Further increases to programs attempting to provide a minimum standard-of-living without adding massive restrictions on immigration would only increase the incentive for immigration from less-wealthy countries, which just increases the ratio of people drawing on benefits to people funding them even further.

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For much of its history, the U.S. has been a nation with very heavy immigration with most of that being less wealthy people seeking the opportunity to make a better life for themselves and their families. Most have been people with the drive to work hard and they often brought their families up to U.S. middle-class standards of living within a generation or two. This is great when they are providing for themselves.

However, when the rest of the population is expected to support them, the incentive to immigrate from less wealthy areas increases dramatically while the incentive to work hard (for natives and immigrants alike) drops dramatically. This quickly gets out of hand and drags down the median and average standard of living for the entire population due to the extra taxation requirements on the portion of the population that is providing for the rest. The only way to slow that problem while increasing the guaranteed social safety net programs is to place additional artificial controls on immigration.

And, of course, this is only focusing on the problems stemming specifically from lack of homogeneity. Even in a homogenous culture, a high-tax, high-welfare system reduces the incentive for productivity and tends to reduce median and average standards of living beneath what they otherwise would have been. This is largely why, even after adjustment for which services are provided by the government instead of being paid out-of-pocket, the United States has a median household disposable that is 49% higher than Sweden's, according to OECD data.

Answer 3

Ethnic and cultural homogeneity is a big issue. Scandinavian countries used to be far more homogeneous than they currently are, and that leads to a greater sense of affection for everybody else and their troubles, and therefore people are more willing to support socialistic policies.

But with the changing demographics of Scandinavian countries, you are also witnessing a changing stance on the welfare system. People abusing the welfare system and resting on their laurels has been a common theme in most welfare countries for multiple decades, but it only became a major topic of public attention once the immigrants started doing it.

This obviously applies to the USA too, which is much more mixed culturally and ethnically than Scandinavian countries. Even in terms of ideology and politics, the extremes are apparent. Does a Republican Trump supporter really want to pay for the healthcare of a less well-off lefty? Or what about vice-versa?

Important note: It's very, very, very important to note that above argument is a reason why people don't want a social welfare system.

It is in no way or shape or form a reason why it wouldn't work. So what a politician is really trying to say when they say the US is too big of a country for a welfare system is that the US is too heterogeneous for people to care all that much about one another. This also ties into your gun control policies, and why people seem to care more about their right to possess a gun than dead children.

Answer 4

It isn't.

I guess that one could argue that larger countries are more inhomogeneous by definition and that a high-welfare system kind of tries to make things more homogeneously but with a larger inhomogeneity to start with this may be more difficult.

In truth I think this is complete nonsense actually. Large countries are equally suitable for high-tax, high-welfare systems as small countries if their average state of development and wealth are the same. This argument is just an excuse not to do something. I don't see where size of the country directly comes into the equation when considering the collection of taxes and organization of a welfare system. If at all, it will be a secondary effect.

If anything one could adapt the high-tax, high-welfare system somewhat locally within large countries.

Answer 5

The statement is true in terms of political will, not as a matter of policy. The point about Sweden being "homogeneous" in that statement basically means that they are all white (and have no significant language, religious, or ethnic divisions that can be exploited politically). Sweden being small is ancillary to it being homogeneous, its small size allows it to be homogeneous when a large country would develop unavoidable divisions between different regions or populations.

In the case of the US, racial divisions has been tied to economic policies. For example, Lee Atwater (RNC chairman as well advisor to Reagan and Bush 41) said this about racial issues and how it tied to tax policy (among other things):

You start out in 1954 by saying, “Nigger, nigger, nigger.” By 1968 you can't say “nigger” — that hurts you. Backfires. So you say stuff like forced busing, states' rights and all that stuff. You're getting so abstract now [that] you're talking about cutting taxes, and all these things you're talking about are totally economic things and a byproduct of them is [that] blacks get hurt worse than whites. And subconsciously maybe that is part of it. I'm not saying that. But I'm saying that if it is getting that abstract, and that coded, that we are doing away with the racial problem one way or the other. You follow me — because obviously sitting around saying, “We want to cut this,” is much more abstract than even the busing thing, and a hell of a lot more abstract than “Nigger, nigger.”

A robust welfare system just happens to be easily attacked when privileged and disadvantaged populations can be divided on something like race. Note that this is not a prescriptive answer, I'm not saying people should try to establish various ethnostates and theocracies so that people within a country can get along better, but things like racial divisions are a political reality that would need to be overcome.

Answer 6

The theory is that it's due to ethnic/economic homogeneity.

i.e. In a homogeneous society, people recognize everyone else as being like themselves, and are therefore more inclined to make sacrifices (i.e. paying taxes) to support benefits for others in that society, because they can empathize with them.

I'd also add economic equality as a starting point. In that case, you have a state where the vast majority contribute towards the common good, and the vast majority benefit from the same common goods. So everyone pays towards schools and hospitals, and everyone uses those schools and hospitals.

Such things are easier to achieve in small countries, both population and geography wise, but there are exceptions, as you mention.

Now, if we take countries like the USA, we have considerable ethnic diversity and economic inequality. So - rightly or wrongly - people don't feel as much of 'we are all in this together, we are all the same'. And there ends up being a distinction between contributors (the wealthy, who pay a lot of tax but don't use public services) and recipients, who pay little tax but use those services.

Politicians will exploit this, of course. Indeed, this is the real reason why you might say that the US is 'not suitable' for a high-tax/high-welfare system; it is simply too easy at the moment for some politicians to gain traction by playing off different groups against each other.

Answer 7

Welfare is effective in environments where it is reasonable to give something away "for free," and expect that the person receiving it will do something valuable enough with it to have been worth giving it away in the first place.

If a group is homogeneous, it is easier to make a justification like this because you can make the assumption that the person on welfare has similar ideals to you, and will pursue those ideals with your free gift. In a highly diverse environment, this justification becomes more complex. It becomes harder to have confidence that their use of the gift will be "good."

Likewise, the smaller the group, the easier it is to treat the individual receiving the welfare as a person, with unique hopes and dreams and aspirations. The larger the group, the harder it is to do so and the easier it is to start treating them like WelfareRecipient_0438739. This effect has been well captured in the concept of Dunbar's Number. The effect is very well documented for groups up to 150, and reasonably documented up to 1500. But I do believe that if you look at how societies are built, it is reasonable to assume that this effect scales. The less human a welfare recipient is, the harder it is to justify giving them the money simply because they are human. For example, we tend to assume that humans can converse with us, and slowly change their opinions "for the better" over time. If we give a human a gift, we may feel like they'd squander most of the gift, but if we can use the opportunity to change the way they think, eventually they may begin to spend gifts in a way we find more valuable. WelfareRecipient_0438739 is not a human, so much as an ID you assigned to the paperwork for that human. It's unlikely you have the delicate tools required to help a human grow in this way through such inhumane paperwork, mostly because its hard for you to listen to WelfareRecipient_0438739's voice through bureaucratic instruments.

Of course, all of this doesn't mean that it's impossible to have high-tax/high-welfare in a large hetero-genus group. It may be entirely possible. But it shows that there are some built-in difficulties which make it more challenging.

Answer 8

There's tons of answers but they are all handwavy without research evidence.

Actual research backing up this assertion is research into Social Capital and specifically the effects of homogeneous/heterogeneous society has on that (the most famous research is by Putnam, in part notable because the results were so "not good" from his point of view that he delayed publishing the research).

In short, the more homogeneous society, the more social capital (in plain speak, trust) it has, the more social benefits come from that.

Answer 9

The tone of this question points to the problem. In the USA, it is very hard to get unfiltered information about how other countries work, and people are indoctrinated by all the flag-saluting in school to believe that their country is the best. I have experienced similar mass delusions about exceptionalism in other countries, notably Mexico and Indonesia, which also do the flag-worship thing to their children. Patently the USA is not exceptional - e.g. equality, well-being, and access to healthcare and justice are very low by international standards. The economic success of the USA is down to initially high levels of natural-resource availability and continued high levels of immigration. The latter both maintains a cheap labour supply and freeloads on the education of skilled workers in other countries. But anyway - the discussion about the relative importance of private enterprise and government is universal and interesting. My view is that both are important - clearly a society like the USA's, where social mobility is tiny, is very wasteful of talent. But talent needs an incentive. It is useful to note that the societies that score best on human happiness are intermediate between the extremes of say USA (where the lack of a safety-net makes inovation very risky) and say Venezuela (where extensive state intervention makes inovation unrewarding). I think it's healthy for countries to keep exploring this range, and give people the freedom to choose another country if they want. The real risk is that populist kleptocrats such as Trump and Putin might succeed in grabbing all the resources for themselves, and then close the borders, Kim Jong Un style. Get out while you can, my American friends! You have nothing to lose but your indoctrination!

Answer 10

It's related to level of trust.

For one, level of trust in the central government is not high enough to implement such a drastic change. Look at ACA [some minor changes - compared to implementing universal healthcare - to make the current system look more like universal health care] as an example of a relatively minor change that was very difficult to implement. In fact it hasn't been implemented in a working, stable form yet - it has already been set up to explode by the next administration a mere 11 months after taking office. That level of trust is correlated to size of the "country", but there are many other factors involved as well.

For the other, level of trust in the politicians is important as well. A politician who is seen as wanting to create a massive disruptive change to the country is often undesirable to at least a large minority of voters. Having a large minority of voters against them lessens a politician's chances of keeping/gaining their job. While there are ways around that, many politicians see this as undesirable. If a politician wants to prevent being branded as someone who wants to implement a massive disruptive change, a good strategy is to make up a believable mock argument that explains why that massive disruptive change doesn't make sense.

Answer 11

Simply put the USA has at its core avoided state involvement in business as much as possible in it's history. It is central to the way the US governs itself. There simply just does not exist the political will to push such a stance that has proven to be so unpopular in so many ways over the course of the US history. For the most part the average American wants his guns, he wants to pay as little taxes as possible and then wants the government to leave him alone.

There is also the issue of how a federally funded health care system is going to interact with the various states. There exist great variation in the social economic status of particular states in the US. Some states may be able to afford it while others may not. Even if the funding model could be ironed out (which is a big if) it requires the federal government to provide a service that it is not allowed for in the constitution and also requires states and federal government to work more closely together than what either piece of government really wants to.

Lastly, people don't really understand how incredible vast the US really is. Texas by itself is massive. Just providing state sponsors for medicine in Texas would be an truly incredible feat. When you then talk about more than 50 states and the federal government working together you begin to understand that this is not a solution.