Policy Convergence of U.S, Canada, Sweden, U.K

The appeal of treating countries as experimental laboratories is clear. When people want to figure out how well the welfare state works, the first thing they do is to compare countries with bigger and smaller welfare states.One of the problems with comparative policy analysis is that policy regimes change over time. Sweden is still viewed as the archetypical welfare state. The United States is viewed as the classic laissez-faire, neo-liberal model. Canada is sometimes portaged as a “socialist” country, and contrasted with the U.S. In the European context, the U.K is perceived as operating an “Anglo-Saxon” model similar to the United States.

There is some truth to these stereotypes. However it is also important to update our beliefs from time to time. During the last decades, the countries mentioned above have converged substantially in their economic policies.

Between 1990-2010 governments expanded In the U.K and U.S, while shrinking in Sweden and Canada.

I will plot graphs Government Expenditure as a share of GDP. The data is mostly from the IMF, with a few years of missing data for the U.S imputed using Bureau of Economic Analysis data. The graphs show a 3 year moving average.

In 1990 the difference between Sweden and the United States countries was so large that one could reasonably talk about different economic systems. In the subsequent two decades, government declined in Sweden and expanded in America. The differences in the size of the welfare state declined from 21 percentage points in 1990 to 7 percentage points in 2010.

Sweden looms large in the public policy debate in the United Kingdom, often as some sort of welfare state utopia. It is therefore important to point out that the large difference between the two countries in terms of the size of government that existed in 1990 has all but vanished.

In 1990 the “socialist-Canada” stereotype had some validity. Canada had a substantially bigger state sector than the United States. However the government retreated in Canada and expanded in the U.S, so that by 2010 the two countries were pretty close to each other. I predict that with the current trends of liberal political hegemony and demographic transformation, within a decade the U.S will have a bigger government sector than Canada.

This new reality is important to keep in mind, for example when trying to figure out why “socialist” Canada and Sweden have rapid economic growth if socialism is so bad. The answer is that these two countries are far less socialist than they were until pretty recently, especially when compared to the United States.