The Agony of The Welfare State, Finnish Style

The comments above & below is an edited and abridged synopsis of an article by Joseph Salerno

The title of this post—minus the reference to Finland—is from an essay that von Mises wrote in 1953. In it, Mises said that in the UK and Europe, the system of progressive taxation was already confiscating nearly the entire surplus incomes of the successful capitalists and entrepreneurs, meaning that higher taxes would not produce additional funds to finance these countries’ expanding welfare states. Mises foretold that the funds of the beneficiaries themselves would have to be tapped if more handouts were to be made to them.

Today things are worse than Mises foresaw. The beneficiaries of the most advanced welfare states are not reproducing rapidly enough to pay for the benefits they are receiving, and are endangering the long-term survival of the more generous welfare states. Finland, for example, recorded the lowest number of newborns in 148 years in 2016. Its fertility rate has fallen to 1.57 per woman, and the number of people under 20 as a percentage of the working-age population is the lowest among Nordic countries at less than 40%, down from 60% in 1970.

For Heidi Schauman, the Aktia Bank chief economist, the statistics are ‘frightening.’ As Ms. Schauman explains: “They show how fast our society is changing, and we don’t have solutions ready to stop the development. We have a large public sector and the system needs taxpayers in the future.”

Without the ability to milk wealthy capitalists and entrepreneurs, the welfare state has become a crazy machine with no purpose but to perpetuate its own existence by devouring massive quantities of taxes extracted from the people it supposedly serves. If demographic trends threaten the existence of the machine, well then, more people must be produced to feed it.