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Welfare Reform Underway in Europe

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Europe is leading the way with welfare reform. Cato’s Michael Tanner outlines the good news. And the new government in Norway is leading the way.

Even the so-called “Nordic model,” long touted by advocates of the welfare state, is undergoing profound changes. Sweden long ago enacted significant reforms to its safety net, including the partial privatization of its social-security system. This August, Finland announced plans to increase the effective retirement age, cut payments to students, and reform maternity leave. And in Denmark, the government has said that the time has come to embrace the “modernization of the welfare state,” adding that the system “needs to prioritize things in a new way and create the best possible conditions for people to get a job.” In fact, the Danish government has already slashed the length of unemployment benefits from four years to just two.

Perhaps the last holdout, Norway, long buoyed by oil revenue, elected a new center-right government this fall on a platform that called for, among other things, cutting taxes, reducing bureaucracy, and reforming the welfare system to better encourage entrepreneurship. The new government has plenty of public support for its plans: A recent survey by Fafo, a Norwegian research foundation, reported 51 percent of Norwegians supported reducing welfare benefits in order to secure economic growth.

While the government shutdown is ostensibly about Obamacare and debt, the real underlying question is the future of U.S. government spending, which is a question of the welfare state. Those on the right often say that if we don’t change direction, we’ll end up like Europe.

Meanwhile, Europe seems to finally be learning its lesson. Will we?

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Richard C. Young

Richard C. Young is the editor of Young's World Money Forecast, and a contributing editor to both Richardcyoung.com and Youngresearch.com.