The American Dream is a Nordic Reality
The American Dream — the belief that anyone can succeed through sacrifice, hard work and determination has long shaped the image of America as the land of freedom and opportunity. Despite evidence to the contrary it continues to fuel the imagination of people at home and abroad. Nearly 7 in 10 Americans believe they have or will achieve the American dream in their lifetime. However belief does not portend reality, and most Americans have not nor will not live the American Dream.
What we often think of as the American Dream researchers refer to as economic mobility. It’s synonymous with upward mobility in that generally Americans expect to (A): earn more income than their parents earned; and (B) move up the income ladder over their lifetime, eventually surpassing their parents. Earning more income than one’s parents is referred to as absolute mobility. Moving up the economic ladder during your lifetime refers to relative mobility. Together they shape our thinking about the American Dream.
While Americans generally take for granted they’ll do better than their parents, a study finds that only 33 percent of Americans are upwardly mobile in both absolute and relative terms, surpassing their parent’s income and economic ranking. One-fourth of Americans are in the same relative economic position as their parents but earn more, in absolute terms. Five percent have surpassed their parent’s income while falling behind their economic standing. And a striking 33 percent of Americans are downwardly mobile, earning less than their parents and failing to rise above their economic standing.
Our expectation of upward mobility is derived in part from the period of rapid economic growth after World War II that gave rise to the iconic middle-class. Between 1947 and 1974 all five income groups, or quintiles, saw their income grow, with the greatest income growth occurring among the bottom 4 quintiles (80% of wage earners). During that period income was dispersed widely, enabling prosperity and mobility among virtually all income groups. But starting in the mid-1970s, U.S. economic growth slowed, adversely affecting the middle- and working-class. Tax and economic policies favoring corporations and the wealthy later combined with other policies to exacerbate growing inequality.
Income inequality that began in 1975 continues unbridled. Since 1975, wages for the bottom 90% of wage earners have increased around 15% while wages for the top 1% have gone up nearly 150%. For the top 0.1% the increase has been more than 300%. The upward transfer of income from the bottom 90 percent of wage earners to the top 10 percent is estimated by the Rand Corporation to total $2.5 trillion.
According to the Rand study if American prosperity remained widely shared as it had been from 1947 to 1974 — a person earning $33,000 in 2018 would have had income of $61,000 that year instead; and someone earning the median income of $50,000 in 2018 would have received $92,000 if incomes were more equitable. For more than forty years American workers have been denied their fair share of American prosperity. The result has been a decline in absolute mobility. Americans have been unable to earn more income than their parents because unwittingly they have been subsidizing the prosperity of the people at the top.
This has contributed to the decline in relative mobility as well as more people are stuck on their rung of the economic ladder. Forty-two percent of people born into the bottom quintile remain there throughout their lifetime, while thirty-nine percent born into the top quintile are destined to remain at the top. Only 7% of Americans manage to go from “rags to riches” and make the leap from the bottom one-fifth to the top one-fifth. That hardly makes this the land of opportunity.
The link between income inequality and inequality of opportunity is solid: the more income inequality a country has the less equality of opportunity there is among the population.
The Organization for Economic Cooperation and Development ranks the U.S. 34th out of 40 developed nations when measuring income inequality. Ahead of only Bulgaria, Turkey, Mexico, Chile, Costa Rica, and South Africa. The OECD concluded that rising income inequality can “stifle upward social mobility, making it harder for talented and hard-working people to get the rewards they deserve.”
Comparatively Iceland, Denmark, Norway, Finland, and Sweden consistently rank among the highest nations in income equality (low inequality). In the latest OECD rankings, they comprise 4 of the top 8 — and 5 of the top11 nations for income equality.
As a group, Nordic nations have overall affluence, stability, and opportunity. Annually they are among the leading nations in life expectancy, educational achievement, healthcare (quality and cost), business innovation, and economic growth. Together they enjoy a high standard of living and have some of the lowest rates of homelessness, poverty, and infant mortality among economically advanced nations. They consistently rate as the best places to live for mothers, the best places for children’s well-being, and the best places to grow old. They are among the most business-friendly nations in the world.
The annual World Happiness Report ranks countries by how happy their citizens perceive themselves to be. For the past 7 years, Finland, Denmark, Sweden, Iceland, and Norway have all ranked in the top 10, with one of them occupying the 3 top spots from 2017–2019. During those years the U.S. ranked between 14th (2017) and 19th (2019) and this year is ranked 18th, just ahead of the Czech Republic, Belgium, and the United Arab Emirates.
Whether measuring the state of democracy, trust in government, safety, social cohesion, gender equality, income equality, human development — or when making just about any civic comparison, Nordic countries invariably occupy the top spots. Why does the Nordic region rank so high among its global peers?
Finnish author Anu Partanen attributes it to the Nordic theory of love. She writes, “the Nordic theory of love has become an overarching philosophy about how to structure society. As such, it has inspired the broad variety of policy choices in Nordic nations that together ensure a single, predominant goal: independence, freedom and opportunity for every member of society.”
Partanen’s Nordic theory of love is not too unlike the American idea of rugged individualism, which also places value on freedom and independence. But in the Nordic version, freedom, independence and opportunity aren’t left to the whims of the marketplace nor determined by socioeconomic status where they become luxuries enjoyed by a few. Instead the Nordic countries translate those values into social and economic policies that enable all members of society to enjoy them.
Our image of America as the land of freedom and opportunity rests on the presumption we live in a fair and just society with a level playing field that equalizes opportunity for everyone. If true, it would follow that individual success or failure rests more with the will of the individual than with the structure of society. But with so few Americans experiencing upward mobility, it suggests that either more Americans are opting out of the American Dream, or our presumption of a fair and just society is misguided.
The late comedian George Carlin once quipped, “It’s called the American Dream because you have to be asleep to believe it.” With fewer Americans living the American Dream his words ring true. Yet Nordic outcomes are evidence of a better way. They are proof that a market economy can be fair and just. They prove that when we grow together, we also grow as a nation. And that is the way to make the American Dream a reality for everyone.