Yeah, but the US Is the Freest Nation in the World

The US is the “freest nation in the world” is a common assertion by Americans, frequently invoked by prominent politicians. This claim often arises in response to critiques of systemic issues within the US, sometimes paired with the notion that adopting Nordic-like policies would undermine American freedoms. Such a comparative claim of “freest,” or any assertion of superiority, invites a rigorous comparative analysis. Yet, when pressed for evidence, responses often lack empirical support, relying instead on spurious claims or ad hominem attacks rather than substantive proof.

In 2022, following the devastating mass shooting in Uvalde, Texas – where a gunman killed nineteen children with a military-grade weapon at an elementary school – a British reporter questioned US Senator Ted Cruz about the alarming prevalence of mass shootings in the country. Rather than engaging with the substance of the question, Cruz dismissed the reporter as a “propagandist” and sarcastically retorted, “I’m sorry you think American exceptionalism is awful.” He then asserted US superiority: “Why do people come from all over the world to America? Because it’s the freest, most prosperous, safest country on Earth.”Footnote ⁴⁰ Such comparative claims demand examination.

Freedom is deeply intertwined with a sense of safety – it is challenging to feel truly free when one’s safety, especially that of one’s children, is at risk. According to the 2023 Global Peace Index, Iceland and Denmark are ranked as the safest globally, with all Nordic countries, along with Australia, Canada, Germany, Japan, England, Costa Rica, Vietnam, Uruguay, and South Korea, outperforming the US.Footnote ⁴¹ The tragically high incidence of mass shootings in US schools is one of the many indicators where the US significantly trails Nordic nations in measures of safety.Footnote ⁴² Furthermore, in holistic measurements of freedom, Nordic nations outperform the US. For example, the 2023 Human Freedom Index, compiled by the conservative think tank Cato Institute in Washington, DC, places all five Nordic nations in the top ten, while the US ranks no. 17.Footnote ⁴³ The empirical evidence starkly contradicts Senator Cruz’s comparative claims.

Comparative claims of US superiority often lack empirical backing, veering from healthy patriotism to dangerous denial. When these comparative claims are challenged, detractors are often dismissed as “anti-American,” reflecting a troubling trend where genuine issues are overshadowed by nationalistic fervor. The satirical title of Stephen Colbert’s book, America Again: Re-becoming the Greatness We Never Weren’t, humorously underscores the irony of unchecked American exceptionalism claims, which seriously hinder constructive discourse and the development of solutions for pressing issues.Footnote ⁴⁴

Yeah, but the Nordics Are Small and Homogeneous

Some US audiences commonly theorize that the smallness and perceived homogeneity of Nordic nations, often stereotyped as exclusively white, renders Nordic experiences irrelevant in the US. The frequent hypothesis expressed is that because the US is large and diverse, something that works in the Nordics is unlikely to work in the US. It is important to immediately note that the Nordic nations are not exclusively white and have experienced significantly increased demographic diversification over the past decades.

That said, the US and the Nordics are indeed different contexts.

Nevertheless, the Nordics can offer valuable lessons for the US no different than how the US has provided lessons for the Nordics. I routinely host Nordic political and business leaders who come to the US to benchmark practices in diverse fields such as artificial intelligence, entrepreneurship, technology innovation, and food safety. Nordic benchmarking exercises have been a longstanding tradition. In the late nineteenth and early twentieth centuries, letters from Nordic emigrants in the US helped spur the adoption of innovative practices in their home countries, which were then lagging behind the US in industrial development. Adopted in 1814, the Norwegian Constitution was inspired by the U.S. Constitution, incorporating its principles of democracy and separation of powers. It is crucial to remember that learning can flow both ways across the Atlantic.

These Nordic explorations are best understood as benchmarking exercises – systematic analyses of successful practices that can inform improvements elsewhere. Effective benchmarking requires approaching different contexts with curiosity, humility, and an open mind, recognizing that valuable lessons can emerge from studying systems different from our own.

Benchmarking can occur at many different units of analysis – not solely at the national level. Nordic states, cities, companies, and specific programs can offer valuable lessons through benchmarking.

Many efforts in the US are coordinated at the state level – including education, transportation, law enforcement, prisons and correctional systems, elections, public health programs, land use, and energy and environmental policies. Nordic nations are, on average, about the size of mid sized US states like Wisconsin and Minnesota, the US’s no. 20 and no. 22 most populated states, respectively. Sweden is the largest Nordic nation at just over ten million people, a similar population to North Carolina and Michigan, no. 9 and no. 10 in the US, respectively. Iceland is the smallest Nordic nation, just below the population of Wyoming, which is no. 50. Therefore, the range of populations of the Nordic nations spans over 80 percent of US states.

US states could, for example, look to Finland for educational reform, digital government services, or universal subsidized childcare; Iceland for gender equality, sustainable fishing, or geothermal energy; Norway for electric vehicle adoption, integrated public transportation, or “Freedom to Roam” laws (Allemannsretten); Sweden for elder care, waste management and recycling, or efficient healthcare systems; Denmark for wind energy transition, voter participation, or universal paid parental leaves, and so on.

Even the largest states may prosper by turning their benchmarking gaze on the Nordic nations.

California is actively benchmarking the Norwegian correctional system. It is examining how Norway dramatically reduced its recidivism rates since the 1990s, when they mirrored those of the US, by shifting the focus from punishment to rehabilitation. Today, Norway’s recidivism rate is roughly half that of California’s.Footnote ⁴⁵ California is the most populous US state and, if it were a country, would rank as the world’s fourth-largest economy, just ahead of Japan and behind only the US, China, and Germany.Footnote ⁴⁶ Nevertheless, Norway offers California valuable insights for those open to learning.

University of California, San Francisco, public health researcher Cyrus Ahalt routinely leads US groups on benchmarking tours of Norwegian prisons. He remarked, “We hear ‘Norway’s so socialist’ or ‘Norway’s all white,’ which is actually not true,” as common dismissals from US audiences. However, Ahalt notes that when someone experiences the Norwegian prisons firsthand on a benchmarking excursion, “the skepticism and resistance evaporate.”Footnote ⁴⁷ Secretary Ralph Diaz of California’s Department of Corrections and Rehabilitation emphasized that while California would not copy Norway’s system exactly, it could adapt valuable lessons for its diverse context. “We are not trying to make it the Norway way, or the European way, but the California way. We are a unique, diverse populous with cultures within cultures, but that doesn’t mean we can’t make necessary changes.”Footnote ⁴⁸

Researchers also point to opportunities for California to learn from Denmark’s successes in establishing innovative circular systems at scale. Denmark is a global leader in aluminum, glass, and plastic beverage-container takeback systems, supported by well-designed recycling infrastructure and strong industry collaborations. Denmark also leads efforts to convert animal waste into energy, providing additional practical insights for meeting sustainability objectives. Denmark’s combination of state policy support and private sector innovation holds particular relevance for California, as it seeks to meet ambitious climate goals.Footnote ⁴⁹ These lessons extend beyond California to other US states.

US Supreme Court Justice Louis Brandeis famously asserted, “A single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”Footnote ⁵⁰ Similarly, the Nordic nations are often described as “social laboratories,” where innovative policies are pragmatically tested and refined.Footnote ⁵¹ Encouraging state-level experimentation in the US by adapting proven Nordic policies could unlock powerful learning opportunities. However, as Jacob Grumbach warns in his 2022 book Laboratories against Democracy, the opposite is happening in many US states. Grumbach demonstrates that political, ideological, and economic interests are actively suppressing policy experimentation, undermining states’ ability to address pressing challenges.Footnote ⁵² This policy of suppression feeds into a neoliberal self-fulfilling prophecy: As state and federal governments become less effective, it reinforces the belief in their inherent inefficiency, justifying further reductions in the government’s role – a core tenet of neoliberal ideology.

Benchmarking has the potential to ignite meaningful change as growing public awareness of better alternatives challenges the status quo. When citizens recognize opportunities for improvement elsewhere, demands for change naturally intensify. The stark contrast between conditions under Soviet socialism and those in American capitalism once fueled Soviet citizens’ push for reform; they began asking, “Am I better off than Americans?”Footnote ⁵³ In much the same way, Americans today may find themselves inspired to question their own systems, comparing their quality of life with that of Nordic citizens. As more people examine the strengths of Nordic capitalism in fostering well-being, these comparisons may galvanize calls to reform American capitalism to better serve US citizens.

However, benchmarking alone does not automatically overcome barriers to change or ensure the direct applicability of all lessons learned. Overcoming entrenched, powerful interests that benefit from maintaining the status quo is persistently challenging. Denial of major problems remains difficult to counter in the US, where entrenched interests, polarization, and strategic misinformation work together to obstruct efforts to confront shared challenges. Additionally, even when the need for change is widely recognized, achieving consensus on specific policies and practices to enact can be difficult, especially in politically divided environments. Indeed, the US and the Nordics are different contexts with different historical pathways and current conditions.

The US is much larger, has a more diverse population, and is arguably more divided, raising questions about the applicability of Nordic practices in the US. Does the US possess the necessary social solidarity to adopt such practices? Does the US have enough sense of “We” to implement change for the common good? While there are no simple answers, two important points are evident. First, the scale of the US is daunting, and the political gridlock at the national level can be demoralizing. Benchmarking at a more local level – comparing Nordic nations with US states, Nordic cities with US cities, Nordic companies with US companies, and so on – is more effective. Second, US audiences must actively avoid the reflex to dismiss Nordic approaches as “socialism,” which reinforces false equivalences with Soviet socialism and forecloses meaningful discussion.

One concern that necessitates immediate addressing is the misconception that directing attention to Nordic countries equates to celebrating “whiteness” or endorsing white supremacy. Such a concern is understandable, considering the disturbing historical connections between Nordic identity, whiteness, and systems of domination associated with white supremacy.Footnote ⁵⁴ US eugenicist Madison Grant extolled “Nordicness” as the superior race in his xenophobic manifesto, The Passing of the Great Race, published in 1916.Footnote ⁵⁵ Grant was associated with numerous notable US figures, including President Theodore Roosevelt, who praised the book as “the work of an American scholar and gentleman.”Footnote ⁵⁶ Grant’s book also found its way into the hands of Adolf Hitler, who professed, “This book is my Bible.”Footnote ⁵⁷ The Nazis infamously appropriated Nordic symbols and Viking imagery. The insurrectionists who attacked the US Capitol on January 6, 2021, prominently displayed Norse and Viking symbols, continuing a pattern of white supremacist movements appropriating Nordic cultural imagery.Footnote ⁵⁸ During a meeting on immigration with lawmakers in the White House in 2018, President Trump reportedly questioned why the US accepted immigrants from Haiti and African countries, referring to them as “shithole countries,” remarking that the US should instead bring more immigrants “from places like Norway.” Trump’s remark was criticized as racially charged. It reflects a common discourse in the US conflating white supremacy with Nordic considerations.Footnote ⁵⁹ The rise of nationalistic political groups in the Nordic region with their thinly veiled agendas promoting white supremacy, like the Sweden Democrats, further cement such harmful associations.

This persistent appropriation of Nordic identity by white supremacist movements demands careful attention when examining Nordic social and economic models. However, rejecting substantive examination of Nordic policy innovations due to such appropriation would effectively cede important practical lessons to extremist narratives.

Furthermore, the “yeah, but they’re homogeneous” argument can at times come across as “yeah, but they’re white” – as if whiteness somehow equates with performance. By most measures, Japan is a more homogeneous society than any of the Nordic societies. Yet in all my years as an industrial engineer benchmarking Japan for its efficiency advances of the 1970s into the 1990s, I never once heard “Yeah, but they’re homogeneous” as a counterargument, despite Japan having a far more homogeneous population and different cultural context than the US. Yet I receive this objection routinely when suggesting Americans could prosperously benchmark the Nordics. This disparity in response suggests that the “homogeneous” argument may sometimes serve as a proxy for racial assumptions that need to be directly confronted and challenged.

Systems Thinking: The Earth as a System

Sustainable development emphasizes the necessity of systems thinking.Footnote ⁴ The Brundtland Report highlighted that economic development is intertwined with environmental sustainability, where poverty and inequality contribute to and are exacerbated by environmental degradation.Footnote ⁵ It highlights the interconnectivity of critical issues, including population, food security, species loss, energy, industry, and urban development, advocating for integrated, holistic solutions.

The Brundtland Report built upon seminal works, such as Rachel Carson’s Silent Spring and Donella Meadows and colleagues’ The Limits to Growth, which warned that human activity associated with industrialization would exceed the Earth’s carrying capacity.Footnote ⁶

Since the early 1980s, humanity has consumed resources faster than the Earth can regenerate them – driving natural resource depletion, rising greenhouse gas emissions, and biodiversity loss. The 2004 Limits to Growth thirty-year update illustrated this starkly. Using data from Mathis Wackernagel and colleagues, published in “Tracking the Ecological Overshoot of the Human Economy,” it featured a striking graph showing the ecological footprint rising from just over 0.6 Earths’ worth of annual regenerative capacity in 1960 to 1.2 Earths’ worth by 2000.Footnote ⁷

As depicted in Figure 2.1 – which offers an expanded view of the graph from the Limits to Growth update – humanity’s impact was negligible at the dawn of the Industrial Revolution era but has since surged. By 2025, it reached an estimated 1.8 Earths, corresponding to Earth Overshoot Day falling on July 24 – the symbolic date of the year when humanity has already consumed the Earth’s full annual regenerative capacity.Footnote ⁸

Figure 2.1

Number of Earths needed to support human activity.

Source: Adapted in part from figure P-1, “Ecological Footprint versus Carrying Capacity (1960–2000),” in Meadows, Randers, and Meadows, Limits to Growth: The 30-Year Update. The extension back to 1800 is a simplified approximation. Humanity’s ecological impact was effectively negligible at the dawn of the Industrial Revolution and rose gradually through 1960. Precise year-by-year data from this period are not available, nor are they necessary to convey the overall trajectory.

Patterns of overconsumption are deeply unequal worldwide. US citizens rank among the highest per capita consumers globally – if everyone consumed at the level of the average American, more than five Earths’ worth of regenerative capacity would be required. All of the world’s wealthiest nations, including all OECD and Nordic nations, exceed sustainable consumption levels.Footnote ⁹

Overconsumption is closely tied to wealth. The wealthiest 1 percent have a carbon footprint double that of the poorest 50 percent combined.Footnote ¹⁰ Alarmingly, research shows that the wealthiest individuals often view their consumption as fair. This perception gap is especially concerning given the disproportionate influence the wealthiest individuals have over global policy decisions.Footnote ¹¹ Furthermore, as lower-income nations continue to develop, their consumption levels are also rising, further intensifying pressure on the planet’s finite resources.

Addressing the global crisis of overconsumption necessitates a fundamental reassessment of our production and consumption models. Consumption levels have drastically altered the planet, and many scientists now refer to the present as the Anthropocene epoch, defined by the dominant impact of human activity on Earth’s geological history (from anthropo, for man, and cene, for new).Footnote ¹² Before this was the Holocene epoch, which began 11,700 years ago after the last ice age, offering stable climates that allowed human civilization to flourish. Preceding the Holocene was the Pleistocene epoch from about 2.6 million to 11,700 years ago. The Pleistocene epoch posed significant challenges for early humans, with repeated ice ages and harsh conditions that made survival difficult due to extreme cold, food scarcity, and unstable environments. While the official designation of the current epoch is debated, it is evident that humanity’s ability to alter Earth’s systems now significantly poses severe risks to human survival and well-being.

Nordic Sustainability Contributions

The Nordic region has pioneered numerous sustainability innovations, from philosophical frameworks to practical policies. The Brundtland Report sparked global efforts to tackle sustainable development challenges. The following examples showcase several more key contributions with Nordic connections that have had significant global influence.

Planetary Boundaries

Swedish scientist Johan Rockström led a group of scientists to identify the processes that regulate the stability and resilience of the Earth as a system. The Stockholm Resilience Centre was founded in 2007 by Rockström and colleagues – a global hub for leading climate scientists and experts in climate action – and the groundbreaking concept of “Planetary Boundaries” launched in 2009.Footnote ³⁵ Planetary boundaries have become a foundational concept for global discussions on sustainability.

Building upon the Brundtland Report and The Limits to Growth, Rockström and colleagues portrayed the Earth as a finite system, delineating nine vital planetary boundaries to illustrate the system’s limits and relate them to considerations of fulfilling human needs. In the Stockholm Resilience Centre’s words, “The planetary boundaries concept presents a set of nine boundaries within which humanity can continue to develop and thrive for generations to come.” The nine planetary boundaries are climate change, biosphere integrity, chemical pollution and the release of novel entities, stratospheric ozone depletion, ocean acidification, freshwater use, land-system change, nitrogen and phosphorus flows to the biosphere and oceans, and atmospheric aerosol loading. To the degree that any of the nine planetary boundary limits are exceeded, humankind is operating the Earth at an unsustainable level. Transgressing any of these boundaries could generate abrupt or irreversible environmental changes, compromising future generations’ ability to meet their needs.

Planetary boundaries are the Earth’s upper control limits (UCLs), representing thresholds that must not be crossed to maintain system stability for humankind.

In 2023, all nine planetary boundaries were quantified for the first time and published in a Science Advances article titled “Earth Beyond Six of Nine Planetary Boundaries.” Alarmingly, the 2023 assessment found that Earth was operating beyond the safe limits for six of these critical boundaries, including climate change and biosphere integrity, which measures genetic diversity and species extinction rates – breaching the biosphere integrity boundary risks irreversible biodiversity loss and the disruption of essential ecosystem services, such as food production and water purification, while increasing the likelihood of global health crises, such as pandemics.Footnote ³⁶ In September 2025, an even more sobering update was released showing that Earth is now in excess of seven of the nine planetary boundaries, with ocean acidification added to the list.Footnote ³⁷ Figure 2.2 illustrates how key Earth system processes have moved further outside the safe operating space for humanity, reflecting the expanding breach of planetary boundaries.

Figure 2.2

Planetary boundaries.

Figure 2.2 Long description

Triptych of radial charts illustrates how humanity’s pressure on nine planetary boundaries has increased from 2009 to 2023. Each boundary is represented as a wedge radiating outward from a central circle labeled safe operating space. The degree to which each wedge extends beyond the safe zone indicates the extent of transgression.

In 2009, seven boundaries were assessed, and three were crossed: climate change, biosphere integrity, and biogeochemical flows. In 2015, seven boundaries were assessed; four were crossed, with worsening biosphere integrity and biogeochemical flows.

In 2023, all nine planetary boundaries were quantified. Six are now breached: climate change, biosphere integrity, novel entities, biogeochemical flows, land-system change, and freshwater change. Stratospheric ozone, ocean acidification, and atmospheric aerosol loading remain within limits.

The radial layout highlights the expanding breach of boundaries with red-orange shading and emphasizes the narrowing safe operating space for humanity.

Source: “The Evolution of the Planetary Boundaries Framework.” Licenced under CC BY-NC-ND 3.0. Credit: Azote for Stockholm Resilience Centre, Stockholm University. Based on Sakschewski, Caesar, Andersen et al., Planetary Health Check 2025; Richardson et al. “Earth Beyond Six of Nine Planetary Boundaries”; Steffen, Richardson, Rockström et al., “Planetary Boundaries”; and Rockström, Steffen, Noone et al., “A Safe Operating Space for Humanity.”

The Planetary Health Check Report, first launched in 2024, now provides an annual dashboard that quantifies the current status of each planetary boundary.Footnote ³⁸ With it, Rockström emphasized, “Stewardship of the planet is necessary in all sectors of the economy and in societies, for security, prosperity and equity. By quantifying the boundaries for a healthy planet, we provide policy, economics and business with the tools needed to steer away from unmanageable risks.”Footnote ³⁹

The Planetary Boundaries Science initiative focuses on solutions and celebrates past successes where transgressions of planetary boundaries have been effectively addressed. One notable success story is the global response to the ozone hole discovery in 1985, which led to the 1987 Montreal Protocol and national policies phasing out chlorofluorocarbons (CFCs).Footnote ⁴⁰ In response to scientific evidence from the 1970s highlighting the detrimental effects of CFCs and in anticipation of state regulations, DuPont developed hydrofluorocarbons, reducing harm to the ozone layer. This proactive innovation by DuPont, driven by the anticipation of future profits following regulations banning CFCs and the effective interaction between the state’s ‘visible hand’ and the market’s ‘invisible hand,’ underscore a symbiotic relationship that facilitated the rapid phase-out of CFCs.Footnote ⁴¹ The subsequent recovery of the ozone layer demonstrates that concerted international cooperation between governments and the private sector can indeed reverse environmental degradation. Now, the planetary boundary for stratospheric ozone depletion is safely within limits, serving as a powerful model for addressing other exceeded boundaries.

More recently, the Stockholm Resilience Center has emphasized the importance of integrating Indigenous knowledge into solutions for pressing sustainability challenges. Many Indigenous communities have developed sustainable stewardship practices over generations, offering invaluable insights into living in harmony with the natural world. The initiative aims to restore Earth’s systems to a safe operating space, drawing upon innovative and time-tested solutions.

SDGs

Launched in 2015, the SDGs represent the most significant global initiative to further the cause of sustainable development, as outlined in the Brundtland Report. The SDGs comprise seventeen interconnected goals: SDG #1 “No Poverty,” SDG #2 “No Hunger,” SDG #3 “Good Health and Well-Being,” SDG #4 “Quality Education,” SDG #5 “Gender Equality,” SDG #6 “Clean Water and Sanitation,” SDG #7 “Affordable and Clean Energy,” SDG #8 “Sustained, Inclusive and Sustainable Economic Growth, Full and Productive Employment and Decent Work for All,”Footnote ⁴² SDG #9 “Industry, Innovation and Infrastructure,” SDG #10 “Reduced Inequalities,” SDG #11 “Sustainable Cities and Communities,” SDG #12 “Responsible Consumption and Production,” SDG #13 “Climate Action,” SDG #14 “Life Below Water,” SDG #15 “Life on Land,” SDG #16 “Peace, Justice and Strong Institutions,” and SDG #17 “Partnerships for the Goals.” Figure 2.3 presents the SDGs.

Figure 2.3

SDGs.

Figure 2.3 Long description

A row grid of 17 black-and-white square icons, each labeled with a goal number and name, represents the United Nations Sustainable Development Goals. Each icon includes a symbolic image. The SDGs are as follows:

1. 1. No Poverty - a family with children and an elderly figure.

2. 2. Zero Hunger - a steaming bowl.

3. 3. Good Health and Well-Being - a heart and cardiogram line.

4. 4. Quality Education - an open book and a pencil.

5. 5. Gender Equality - an equal sign within a gender symbol.

6. 6. Clean Water and Sanitation - a water droplet in a glass.

7. 7. Affordable and Clean Energy - a sun with a power button.

8. 8. Decent Work and Economic Growth - a rising bar chart and arrow.

9. 9. Industry, Innovation and Infrastructure - interlocking cubes.

10. 10. Reduced Inequalities - arrows pointing to an equal sign.

11. 11. Sustainable Cities and Communities - buildings and a house.

12. 12. Responsible Consumption and Production - circular loop arrow.

13. 13. Climate Action - an eye containing a globe.

14. 14. Life Below Water - a fish and waves.

15. 15. Life on Land - a tree and birds.

16. 16. Peace, Justice and Strong Institutions - a dove with olive branch and a gavel.

17. 17. Partnerships for the Goals - five interlocking rings forming a flower-like symbol.

Source: UN, 17 Sustainable Development Goals: Black/White Version, in United Nations SDG Guidelines, September 2023, p. 41, accessed October 1, 2024, https://shorturl.at/W04Pg. Used under UN Guidelines for non-commercial use.

The 193 Member States of the United Nations unanimously adopted the SDGs in September 2015 at the UN Summit. All member states have committed to achieving the SDGs by 2030, making the SDGs a global framework for development across nations at all stages of development. The deliberations and consensus-building processes leading up to the SDG launch involved governments, civil society, and the business community.Footnote ⁴³ The result is a globally recognized framework representing the world’s most pressing social, environmental, and economic challenges. The SDGs are described as the world’s most comprehensive materiality assessment.

The SDGs represent a global effort with deep Nordic ties. The basis for the SDGs is the Brundtland definition of sustainable development. The iconic packaging of the SDGs also has Nordic roots, as Swedish designer Jakob Trollbäck designed the SDGs’ vibrant and distinctive logos. The attractive SDG packaging has proven vital in helping propel the SDGs as a common global language.Footnote ⁴⁴

The Nordic nations’ success in implementing the SDGs offers practical lessons for realizing sustainable capitalism. For example, Denmark’s 2024 agricultural carbon tax – the world’s first – demonstrates how democratic processes can create market mechanisms that internalize environmental costs while maintaining economic competitiveness. The policy emerged through Denmark’s tripartite negotiation system, where farmers, labor unions, and government representatives collaborated to design a system that both reduces emissions and supports agricultural innovation. This exemplifies how democratic capitalism can align market incentives with sustainability goals through inclusive stakeholder engagement.

The SDGs provide a framework for a holistic, systems-thinking approach to explore the connections among various sustainability challenges. Many of these connections are readily evident through the SDG framework. For example, SDG #1 “No Poverty” is directly connected with SDG #8 “Decent Work and Economic Growth,” because good jobs and decent work are the best way to alleviate poverty. SDG #13 “Climate Action” clearly connects with SDG #7 “Affordable and Clean Energy,” because the climate crisis demands an energy infrastructure enabling access to affordable, reliable, sustainable, and modern energy.

Beyond obvious links, the SDGs also involve more subtle interdependencies. Educating girls, a combination of SDG #5 “Gender Equality” and SDG #4 “Quality Education,” is one of the most effective ways to address SDG #8 “Decent Work and Economic Growth” and SDG #3 “Good Health and Well-Being.” Girls who receive education are likely to earn higher wages and experience upward mobility, thereby fostering economic growth. They are less likely to marry as children or against their will. Their agricultural plots are more productive and their families are better nourished. A less apparent connection is that educating girls is one of the most effective means to tackle SDG #13 “Climate Action.” As Project Drawdown demonstrates, educated girls and women are “more effective stewards of food, soil, trees, and water.”Footnote ⁴⁵ Educated women possess enhanced resilience and a greater capacity to handle shocks from natural disasters and extreme weather events, equipping them and society at large to confront the impacts of climate change.

The SDGs have effectively framed emerging global challenges, demonstrating their adaptability and relevance in diverse contexts. Covid-19 came after the launch of the SDGs, but the SDGs helped show how interconnected that crisis was with our other challenges. As a global pandemic, Covid-19 is connected with SDG #3 “Good Health and Well-Being” and SDG #8 “Decent Work and Economic Growth,” as the global economy took a significant hit and unemployment initially rose worldwide. Those at the lower end of the economic spectrum were disproportionately hit, which fits squarely into SDG #10 “Reduced Inequalities” and SDG #1 “No Poverty.” Throughout the world – certainly in the US – women bore the disproportionate brunt of increased work in the home, such as homeschooling children, which SDG #5 “Gender Equality” represents and connects with SDG #4 “Quality Education.”

The seventeen SDGs are linked to 169 targets, which are linked to 231 performance indicators. This breakdown focuses the higher-level SDGs into more specific domains and tracks measurable progress.Footnote ⁴⁶ (Some targets have multiple performance indicators, resulting in more performance indicators than targets.) For example, SDG #12 “Responsible Consumption and Production,” has a suite of eleven targets (12.1, 12.2, 12.3, etc.) and thirteen performance indicators (12.1.1, 12.2.1, 12.2.2, 12.3.1, etc.).

Target 12.3 sets ambitious objectives: to halve per capita global food waste at the retail and consumer levels and reduce food losses along production and supply chains, including post-harvest losses, by 2030. Corresponding to this target is Performance Indicator 12.3.1, the “Global Food Loss Index,” which employs methodologies developed in partnership with the UN Food and Agriculture Organization (FAO) to gauge and monitor advancements.Footnote ⁴⁷ Addressing food waste is crucial, as its contribution to climate change is so substantial that if it were a country, it would rank as the third-largest greenhouse gas emitter, behind only the US and China.Footnote ⁴⁸ The connection between Target 12.3 and SDG #13 “Climate Action,” exemplifies the myriad interrelations that become evident upon a closer examination of the SDGs.

The Stockholm Resilience Center embraced the SDGs, relating them to planetary boundaries in their 2018 report, “Transformation Is Feasible: How to Achieve the Sustainable Development Goals within Planetary Boundaries.” In it, they describe the adoption of the SDGs in 2015 and the Paris Climate Agreement in 2015 as a “global turning point.” Referring to the establishment of the SDGs, the report stated:

The report also underlined the urgency of the challenges, highlighting the growing scientific consensus that humanity’s activities threaten to destabilize the Earth’s systems, putting future prosperity at risk. Establishing the SDGs represents a global triumph, but significant transformational action is still needed.

Triangle of Tensions: Efficiency–Equality–Sustainability

The twentieth-century economic discourse was largely dominated by what this work terms the “efficiency–equality tension.” This framework, exemplified in Arthur Okun’s seminal 1975 work Equality and Efficiency: The Big Tradeoff, conceptualized economic policy as a binary choice between maximizing market efficiency and promoting social equality. Neoclassical economists like Milton Friedman emphasized efficiency, arguing that market mechanisms would naturally optimize social outcomes, while welfare economists highlighted the necessity of redistributive policies to ensure equitable development.

However, this binary framework proved inadequate as environmental challenges emerged that markets failed to address. The presumption that price mechanisms would automatically resolve sustainability issues – such as the notion that timber price increases would naturally prevent deforestation – revealed a fundamental misunderstanding of ecological systems’ irreversibility. The dismissal of environmental concerns as “doomsday prophecies” by influential economists, including Friedman and Okun, reflected a theoretical blind spot that would have significant consequences.Footnote ⁵¹

While the shared error among economists to assume that markets would fix sustainability problems may be forgivable up to the mid twentieth century, by the latter part of the century, the problems had become too conspicuous to ignore. The 1987 Brundtland Report highlighted the undeniable changes human activity has had on our planet:

Hence, it is imperative to consider sustainability alongside efficiency and equality in this modern context.

Furthermore, we may be well served to shift our perspective from viewing these as tradeoffs to seeing them as tensions.

The concept of tensions, rather than tradeoffs, better captures the dynamic interplay between these forces. While tradeoffs suggest zero-sum relationships, tensions acknowledge the potential for productive synthesis and mutual reinforcement. As Okun observed, capitalism and democracy – representing efficiency and equality respectively – may actually require each other, with equality providing “humanity to efficiency” and efficiency bringing “rationality to equality.” This insight suggests the possibility of similar constructive tensions with sustainability.Footnote ⁵³

This work introduces the “Triangle of Tensions,” whereby sustainability constructively joins the efficiency and equality dimensions, as shown in Figure 2.4. This theoretical framework extends Okun’s binary model by incorporating sustainability as a third critical dimension of economic development, creating a more comprehensive analytical tool for understanding contemporary challenges. Okun articulated how efficiency and equality bring something of value to one another – rationality to equality and humanity to efficiency. Likewise, sustainability brings constructive considerations to efficiency and equality, as depicted within the Triangle of Tensions.

Figure 2.4

Triangle of Tensions.

Figure 2.4 Long description

Triangle diagram titled Triangle of Tensions presents three foundational elements of sustainable development: Efficiency, Equality, and Sustainability. Each is positioned at one corner of the triangle.

• - Efficiency is associated with Practicality and Rationality.

• - Equality is associated with Humanity and here-and-now presence.

• - Sustainability is associated with Conservation and Intergenerationality.

Arrows connect each corner, representing the constructive tensions between the three forces. The diagram emphasizes mutual influence rather than binary tradeoffs, highlighting how these elements together shape sustainable development.

The sustainability dimension enriches this framework in two crucial ways. First, it introduces conservation principles alongside efficiency considerations, challenging the assumption that maximum resource exploitation equates to optimal efficiency. Second, it expands the temporal scope of equality beyond contemporary distributional issues to encompass intergenerational justice. The sustainability dimension encourages consideration of equality for future generations, thereby addressing the potential problems associated with “present bias” identified in behavioral economics research.Footnote ⁵⁴

The interplay of these three dimensions is illustrated in the popular children’s book The Lorax by Dr. Seuss, which presents an exemplary tension between short-term efficiency and long-term sustainability. The Once-ler invented the Super Axe Hacker, a symbol of industrial age efficiency that could whack off “four Truffula Trees at one smacker.” The Once-ler and his relatives secured handsome profits through the efficiency gains, but at an extreme cost to both sustainability and equality – devastating the environment while displacing the local inhabitants who depended on the Truffula Forest. This literary representation, published amid growing environmental awareness in the 1970s, captures the fundamental tensions between immediate efficiency, sustainability, and equality that characterize many contemporary development challenges.

The Triangle of Tensions framework helps illuminate complex policy decisions, such as when development projects potentially harm local biodiversity but bring much needed economic benefits to underprivileged communities. Like the endowment metaphor introduced earlier, which illustrates how overconsumption of principal diminishes regenerative capacity, the Triangle of Tensions framework demonstrates how privileging short-term efficiency over sustainability impairs Earth’s systems for future generations. Recognizing these three-way interactions – efficiency, equality, and sustainability – represents a foundational step toward understanding and managing the inherent complexities and negotiating the tensions in pursuing sustainable development.

The Greta Reality

In 2018, fifteen-year-old Greta Thunberg began a solo protest outside the Swedish Parliament during the nation’s hottest recorded summer, marked by wildfires. Her actions ignited a global youth movement demanding urgent climate action. Thunberg’s blunt statement – “I am doing this because you adults are shitting on my future” – succinctly captured the frustration of a generation facing the consequences of today’s inaction.Footnote ⁵⁵

Despite Sweden’s top ranking in the SDG Index, Thunberg criticized her country for violating planetary boundaries and failing to safeguard the needs of future generations as outlined in the Brundtland definition of sustainable development. This critique applies broadly, as all OECD nations exceed planetary boundaries. The “Greta Reality” reflects how current overconsumption, particularly in developed nations, is effectively stealing future generations of their ability to meet their needs. Overconsumption today strips future generations of their freedom tomorrow. The Greta Reality also reflects the growing frustration among youth as they watch inaction by older generations in positions of power.

Denial of the Greta Reality persists, particularly in the US President Donald Trump personally attacked Thunberg, tweeting, “Greta must work on her Anger Management problem, then go to a good old fashioned movie with a friend! Chill Greta, Chill!”Footnote ⁵⁶ Senator Dianne Feinstein condescendingly dismissed young climate activists, telling them, “Well, you know better than I do. So I think one day you should run for the Senate, and then you do it your way. But in the meantime, I just won a big election.”Footnote ⁵⁷

Critics have dismissed Thunberg and other youth advocates for not offering detailed policy proposals or for speaking out on matters beyond climate, such as Thunberg’s more recent comments on the Israel–Palestine conflict. But expecting young people to produce comprehensive policy blueprints or remain confined to a single issue misses the point. Youth movements give voice to those who will live with the consequences of today’s decisions. They have every right to speak out about their future – and to demand that those in power take responsibility on matters that will directly impact their generation. These critiques risk distracting from the central issue: that continued denial and delay in addressing climate change are indefensible. The Greta Reality affirms that younger generations are justified in insisting their rights be respected, echoing themes in Kim Stanley Robinson’s The Ministry for the Future, which presents arguments for legal rights for future generations.Footnote ⁵⁸

A significant legal victory in the US, Held v. Montana, where a judge ruled that the state violated children’s constitutional right to “a clean and healthful environment,” exemplifies this growing recognition of the rights of future generations.Footnote ⁵⁹ The case represents a step toward protecting future generations and signals a potential shift from denial to confronting the Greta Reality.

Doughnut Economics

In her influential 2017 book Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, Kate Raworth challenges twentieth-century economists’ notions of limitless growth and disregard for sustainability.Footnote ⁶⁰ Raworth proposed a model that resembles a doughnut, as shown in Figure 2.5, leveraging the round Planetary Boundaries figure as an “ecological ceiling” and the SDGs as the “social foundation.”Footnote ⁶¹

Figure 2.5

Doughnut economics.

Figure 2.5 Long description

Circular doughnut diagram from the Doughnut Economics Action Lab.

• - The inner ring, labeled Social Foundation, includes dimensions such as water, food, health, education, income & work, peace & justice, political voice, social equity, gender equality, housing, networks, and energy.

• - The outer ring, labeled Ecological Ceiling, includes boundaries like climate change, ocean acidification, chemical pollution, nitrogen & phosphorus loading, freshwater withdrawals, land conversion, biodiversity loss, air pollution, and ozone depletion.

The space between the rings is labeled the safe and just space for humanity. Arrows show Shortfall pointing inward and Overshoot pointing outward.

Source: Kate Raworth and Christian Guthier, The Doughnut of Social and Planetary Boundaries, 2017, CC BY-SA 4.0, accessed December 1, 2020, https://doughnuteconomics.org/principles-and-guidelines#license. Based on Raworth, Doughnut Economics.

Doughnut Economics balances environmental safeguards, using the Planetary Boundaries as a UCL, with the fulfillment of fundamental human needs – clean water, food, and healthcare – represented by the SDGs as the LCL. Doughnut Economics visually represents meeting the needs of the present generation without compromising the ability of future generations to meet their own needs.

Doughnut Economics mirrors the Swedish principle of lagom, a word that implies moderation or balance that signifies “the right amount.” Lagom is more than a concept – it’s a way of life. I felt its ubiquitous presence upon moving to the Nordics. My new colleague scolded me soon after arrival for violating the norms of work–life balance. Noticing my early arrivals and late departures, my colleague asked, “Can’t you get your work done during regular hours? Can’t you work efficiently? Don’t you want to spend your free time with your family?”

Doughnut Economics reflects the principle of lagom, ensuring a good quality of life for all without exceeding Earth’s regenerative capacities. Achieving this balance requires the deliberate and ongoing management of the tensions between efficiency, equality, and sustainability. The Nordics have openly embraced Doughnut Economics. In 2020, the City of Copenhagen adopted Doughnut Economics as its guiding economic framework.Footnote ⁶² Various Nordic case studies, from the Oslo fjord to Finnish municipalities, provide tangible examples of its successful implementation.Footnote ⁶³ In 2022, munkmodell (“doughnut model” in Swedish) was added to Swedish dictionaries, recognized by the Swedish Language Council as a representation of an economic system where the goal is to meet people’s needs within the limits of the planet.Footnote ⁶⁴

Half-Earth

E. O. Wilson was an American biologist, researcher, theorist, naturalist, and author best known for his ecology and biodiversity conservation work. In 2016, his book Half-Earth: Our Planet’s Fight for Life was published, in which he advocated for designating half of the Earth’s land and marine environments as protected, human-free zones to safeguard biodiversity and prevent mass extinctions. “Human beings are not exempt from the iron law of species interdependency,” wrote Wilson. “The biosphere does not belong to us; we belong to it.”Footnote ⁶⁵ Half-Earth confronts the reality that humankind is violating Planetary Boundaries and eradicating biodiversity in the process, with dire consequences for future generations of humankind.

Wilson advocates for preserving vast areas of forests, grasslands, deserts, wetlands, and marine zones. However, it’s not just about the total area summing up to 50 percent of the Earth, but connecting the preserves is vitally important as well, where an essential aspect of Wilson’s proposal is to establish wildlife corridors – or biodiversity corridors – to ensure connectivity between protected areas. Such corridors include narrow strips of protected land to connect larger preservations and physical structures like wildlife overpasses, allowing species to migrate, interbreed, and adapt to environmental changes.

Wilson’s proposal may appear radical, but it reflects the scale of the challenges and the elevated need for extreme cooperation and coordination to address them. He writes, “The Half-Earth proposal offers a first, emergency solution commensurate with the magnitude of the problem: I am convinced that only by setting aside half of the planet in reserve, or more, can we save the living part of the environment and achieve the stabilization required for our own survival.”Footnote ⁶⁶

Overcoming Denial

Overcoming denial in the US is especially difficult, given entrenched economic interests and deep political polarization that obscure the scale of sustainability challenges. The issue of science denial obstructs constructive and rational discourse. A 2019 Guardian headline encapsulated this challenge: “US Is Hotbed of Climate Change Denial,” a claim extensively substantiated by academic literature.Footnote ⁶⁷

During her 2019 visit to the US, Greta Thunberg was asked whether climate change is approached differently in Sweden than in the US. She responded that in the US, climate change is treated as something you can choose to believe in, whereas in Sweden, it is accepted as a scientific fact.Footnote ⁶⁸

American corporations realized that casting doubt on scientific consensus can be a powerful strategy to delay regulation and protect profits. As detailed in Merchants of Doubt, the tobacco industry – led by companies such as Philip Morris – pioneered science denial tactics to obscure health risks and resist regulation.Footnote ⁶⁹ The report America Misled: How the Fossil Fuel Industry Deliberately Misled Americans about Climate Change shows how fossil fuel companies like ExxonMobil and Chevron later adopted these same strategies to challenge the scientific consensus on climate change and delay policy interventions such as carbon taxes or carbon markets designed to internalize negative environmental externalities.Footnote ⁷⁰ Similarly, as documented in Soda Science, Coca-Cola funded academic research that diverted attention from the harms of sugary beverages.Footnote ⁷¹

Regulators and lawmakers are not unaware of these denial tactics. In 2019, Professor David Michaels of George Washington University testified before the House Natural Resources Committee in a hearing titled “The Denial Playbook: How Industries Manipulate Science and Policy from Climate Change to Public Health.”Footnote ⁷² His testimony drew on The Disinformation Playbook, a report from the Union of Concerned Scientists, which outlines how business interests deceive, misinform, and buy influence at the expense of public well-being.Footnote ⁷³

Across industries, American capitalism’s profit imperative has consistently incentivized the distortion of science to protect short-term gains at the expense of public health and planetary well-being. Naomi Oreskes, co-author of Merchants of Doubt, has highlighted how this denial pattern extended into the Covid-19 pandemic. In response to public health measures like mask mandates, critics equated collective action with authoritarian socialism – typified by protests and declarations such as, “We don’t live in a communist country! This is supposed to be America.”Footnote ⁷⁴ Such reactions reflect a deep-seated resistance to perceived constraints on individual freedom – even when collective action is essential. This resistance draws from the American identity rooted in rugged individualism and reinforced by neoliberal ideology, which elevates markets as the preferred problem-solvers and casts suspicion on government intervention. Within this framework, American capitalism doesn’t merely permit science denial – it rewards it. When scientific consensus threatens profits or justifies regulation, powerful actors are incentivized to manufacture doubt and stall reform.

Oligarchic versus Democratic Capitalism, in Short

The distinction between oligarchic and democratic capitalism is fundamental to understanding different varieties of capitalism and their capacity to achieve sustainable development.

Oligarchic capitalism is characterized by:

• Concentrated economic and political power

• Weak democratic institutions

• Limited stakeholder voice

• Short-term focus on shareholder returns

• Resistance to environmental regulation

• Weak labor protections

• Democracy treated by powerful actors as an obstacle to be curtailed or undermined

• Potential drift toward statist capitalism as powerful actors capture state institutions and redirect public authority to private ends

Democratic capitalism, in contrast, features:

• Dispersed economic and political power

• Strong democratic institutions

• Broad stakeholder engagement

• Long-term focus on societal value

• Support for environmental protection

• Strong labor protections

• Democracy embraced by powerful actors, signaling a commitment to disperse power

• The state is transparent and democratically accountable, understood as an extension of the people

These differences profoundly affect how each variety of capitalism responds to sustainability challenges. While oligarchic capitalism often resists changes that might reduce short-term profits, democratic capitalism’s more inclusive decision-making processes facilitate adaptation to emerging societal needs.

Considering different varieties of capitalist systems sets the stage for exploring the potential of realizing sustainable capitalism. By examining the broad possibilities of capitalism and identifying necessary modifications, we aim to transform the tool of capitalism to realize the worthy purpose of achieving sustainable development.

Private Sector Typically Owns Property/Capital

In capitalist societies, property is generally owned by the private sector and can be used to generate profits. The private sector includes individuals, large corporations, small and medium-sized enterprises, cooperatives, and non-profit organizations. Property and capital are often used synonymously and encompass tangible assets like factories, buildings, natural capital (land, trees, water, and minerals), and intellectual property (patented, trademarked, or copyrighted inventions or works). Property also encompasses data like consumer and personal data.Footnote ¹⁰

The US and Nordic nations rank among global leaders in private property protections, with Finland #1, Denmark #4, Norway #6, Sweden #7, US #14, and Iceland #19 in the 2023 International Property Rights Index. Venezuela rated last out of the 125 rated nations.Footnote ¹¹

Capitalist societies are typically easier places to do business. The World Bank periodically assesses the ease of doing business by nation, considering factors like the ease of starting a business, registering property, and enforcing contracts. Its 2019 assessment ranked Denmark #4, US #6, Norway #9, Sweden #10, Finland #20, Iceland #26. At the bottom of the rankings were Venezuela #188, Eritrea #189, Somalia #190.Footnote ¹²

In the Soviet Union, owning property or operating a private business was forbidden. During the Soviet era, the state owned 100 percent of the land. Shortly after the October Revolution in 1917, also known as the Bolshevik Revolution, Vladimir Lenin issued the Decree on Land, abolishing private land ownership. The Soviet state assumed ownership of all land, which remained the case throughout the Soviet Union’s existence until its dissolution in 1991. Similarly, starting a for-profit business was generally forbidden in the Soviet Union.

Private Sector Typically Employs Labor

In capitalist societies, the private sector typically employs labor, whereas the state employs only a minority of the population. In socialist societies, the state typically employs most of the labor – and sometimes all.

In the US and Nordic nations, labor is employed predominantly by the private sector. The private sector in the US employs about 85 percent of labor, with about 15 percent employed by the state (including federal, state, and local governments). In the Nordic nations, about 65–75 percent of labor is employed by the private sector, with the remaining 25–35 percent employed by the state.Footnote ¹³

In the Soviet Union, the state employed nearly 100 percent of labor. Some individuals were allowed to farm small plots of land, growing food for personal consumption or sale at a local market, which could be considered private-sector employment. However, such commerce constituted a small percentage of the overall economy.

Markets Typically Determine Prices and Quantities of Goods and Services

Markets predominantly determine the prices and quantities of goods and services in capitalist societies. Prices and quantities for cars, haircuts, guns, butter, and most other goods and services result from the interplay of market forces. In socialist societies, prices and quantities are typically set by central planners.

Markets are visually represented by the supply–demand curves, depicted as straight lines in Figure 3.1, representing the inverse relationship between price and demand. As a good or service becomes more expensive, demand for it reduces. Conversely, as something becomes less expensive, there will be more demand for it. The market equilibrium resides at the intersection of the supply and demand curves, representing the point where consumer demand aligns with capitalist supply. The market equilibrium is considered the most efficient output for society.

Figure 3.1

The market.

Figure 3.1 Long description

Figure depicts a standard supply and demand diagram. The horizontal axis represents quantity, and the vertical axis represents price. The downward-sloping demand curve intersects with the upward-sloping supply curve. The point of intersection is marked as the market equilibrium, indicating the price and quantity where supply equals demand. This equilibrium point is considered the most efficient allocation of goods and services in a capitalist system. The curves are straight lines, illustrating the inverse relationship between price and demand, and the direct relationship between price and supply.

The US and Nordic economies typically rely upon markets to determine prices and quantities of goods and services. In the 2023 Index of Economic Freedom by the Heritage Foundation, the US and Nordic nations were categorized near the top of the global ratings, indicating a reliance upon markets to determine prices and quantities of goods and services. The index ranked Denmark #9, Sweden #10, Finland #11, Norway #12, Iceland #19, and the US #25, whereby each nation was categorized in the “Mostly Free” tier of nations. (Singapore, Switzerland, Ireland, and Taiwan topped the ranking and were categorized in the tier labeled “Free.”) At the bottom of the ratings were Venuela #174, Cuba #175, and North Korea #176.Footnote ¹⁴

The state typically set prices in the Soviet Union. The State Planning Committee, known as Gosplan, was the primary body responsible for economic planning in the Soviet Union. They set production targets across various sectors and industries, determining the quantities of goods to be produced. The State Committee on Prices, Goskomtsen, set prices based on production costs and were commonly stamped or labeled directly on goods, making them uniform across the Soviet Union. Because prices did not adjust to real-time supply and demand conditions, there were often imbalances, where shortages of certain goods could exist even if there was high demand because production targets were not met or were set too low. Similarly, there might be surpluses of goods that people didn’t want.

Markets Typically Determine Wages and Quantities of Labor

In capitalist societies, labor markets typically determine wages and employment rates. At the heart of the labor markets is the interplay between the labor supply and the labor demand by employers – that is to say, the “capitalists” – who seek to employ the labor. The intersection of the supply–demand curves is the equilibrium wage rate representing the labor price. At that intersection, we also have the equilibrium quantity of labor corresponding to the number of laborers employed at that wage.

For example, if wages are set above this equilibrium through an artificially high minimum wage rate, the likely result is heightened unemployment. As a thought exercise, imagine if a minimum wage of $50/hour is established across the US employers would likely lay off workers and remove their “Help Wanted” signs. An overall reduction in the quantity of labor would result in heightened unemployment. Perhaps a handful of laborers would benefit from the heightened wages but at the cost of undoubtedly far more people who would be laid off and unable to find work elsewhere.

Conversely, if wages are set below equilibrium, for example, if employers have significantly more power than labor and the employers utilize that power to suppress wages, a labor shortage is likely where potential laborers do not find the wages sufficient to take the jobs. Imagine if employers only offer $7/hour in wages. An eight-hour shift would garner only $56, which is unlikely to cover the cost of bus fare and childcare. Laborers would likely elect not to take these low-paying jobs, resulting in a labor shortage. “Help Wanted” signs would likely be prevalent, but the job openings go unfilled.

Presumably, in a capitalist society that is also a functioning democracy, an artificially high minimum wage rate would be reduced through additional legislative action to reduce the minimum wage. Similarly, in a functioning democracy, if wages are artificially suppressed because power is too concentrated with employers, legislative action would presumably be taken to disperse power so the labor markets can function. (Such legislative actions are expected in the marketplace for goods and services when private sector actors achieve concentrated power as a monopoly or oligopoly. Sufficiently dispersed power is necessary for markets to function.) Legislative action, including an increase in minimum wage laws, may also be considered.

In the Soviet Union, central planners set wages and determined labor quantities. The Soviet state determined employment levels, set wages, and assigned jobs often irrespective of individual preferences. Not showing up for your assigned job came with severe consequences. Absenteeism without a legitimate excuse could result in criminal charges for “social parasitism,” tuneyadstvo, a punishable offense under Soviet law. While the Gulags were not typically used for cases of social parasitism, the broader threat of severe punishment, including forced labor, loomed large in the Soviet Union, reinforcing compliance and suppressing personal freedom.

Principles of Capitalism: American Capitalism vis-à-vis Nordic Capitalism

American and Nordic capitalism differ significantly in its principles, giving rise to their unique varieties of capitalism.

Markets Typically Determine Wages and Quantities of Labor

A fundamental difference in labor markets between the US and Nordic nations is the levels of labor union participation. In the US, only about 10 percent of laborers are members of labor unions. Across the Nordic countries, the figure is closer to 70 percent, with some variations, with Denmark, Finland, Sweden about 70 percent, Norway closer to 50 percent, and Iceland one of the highest in the world, nearing 90 percent.Footnote ⁴³ The differences manifest most conspicuously in determining wages for labor through collective bargaining arrangements, as discussed in the subsequent section on wages.

Differences in labor union participation reflect differences in US and Nordic varieties of capitalism, where Hall and Soskice categorize the Nordics as coordinated market economies partly because of the strength of the labor unions. Nordic countries have some of the highest unionization rates in the world. Collective bargaining is widespread, and cooperative relations are practiced between employers and unions. In contrast, with liberal market economies like the US, labor relations are often more adversarial and decentralized.

Some US audiences can associate strong labor movements or high union membership rates with socialism. This perception partly stems from the Cold War era, during which anti-communist sentiments in the US sometimes linked labor movements to socialist or communist ideologies. Historically speaking, such a linkage between socialists and labor movements existed in the Nordic region in the late 1800s and early 1900s, as will be further explored in Chapter 4. Still, such connections have dissipated in modern Nordic nations.

Labor unions can also play a significant role in specific regions or sectors, negotiating for wages and working conditions on behalf of the workforce. While the market forces inherently push towards an equilibrium, these external influences can either hasten or hinder the labor market’s responsiveness to changes in supply or demand. The result is an ever-evolving dynamic, balancing employer demands with employee welfare within the broader context of societal and economic progress.

In the US, labor unions have been equated with socialism by those who view unions’ collective bargaining and worker rights advocacy as socialistic or a slippery slope toward socialism. The equation of labor union participation with socialism in the US is likely due to the association of labor unions with Marxism, as Marx critiqued labor exploitation by capitalists, and unions often state a primary purpose to protect workers from such exploitation. However, as the Nordic experience demonstrates, labor unions can coexist with capitalism.

More Varieties of Capitalism

While we have focused on comparing American and Nordic capitalism, examining additional varieties of capitalism can further illuminate how different institutional arrangements affect economic and social outcomes. Many more typologies of capitalism exist, each offering unique insights into how market economies can be structured.

Hall and Soskice delineated between LMEs and CMEs in their 2001 Varieties of Capitalism. Scholars like Kathleen Thelen added nuance to Hall and Soskice’s work, exploring how variations in power structures within the categories, such as the strength or weakness of labor unions, can influence a nation’s vocational training system, further connecting labor unions and educational opportunities to the varieties of capitalism discourse.Footnote ⁵⁷

More recently, advocates for “stakeholder capitalism” have become increasingly prevalent. Stakeholder capitalism is rooted in a stakeholder view of the firm. It asserts that businesses should create value for all stakeholders, not just shareholders, and that a firm’s success is intimately connected to the well-being of its customers, employees, suppliers, communities, and shareholders. The shareholder view of the firm is most closely associated with R. Edward Freeman, stemming from his 1984 book Strategic Management: A Stakeholder Approach. Stakeholder capitalism is commonly juxtaposed vis-à-vis shareholder capitalism, rooted in the shareholder view of the firm. Shareholder capitalism is, therefore, most associated with Milton Friedman and his 1970 offering “The Social Responsibility of Business is to Increase its Profits.” The Business Roundtable, a group of CEOs from major US corporations, advocated for a shift from shareholder capitalism to stakeholder capitalism with their 2019 restatement of the corporation’s purpose. More recently, World Economic Forum founder Klaus Schwab further popularized stakeholder capitalism with his 2021 book Stakeholder Capitalism: A Global Economy that Works for Progress, People and Planet.Footnote ⁵⁸

Stakeholder capitalism is rooted in democratic ideals and measures to disperse power throughout society to prevent a concentration of power with capital owners. As such, it exhibits strong connections with “democratic capitalism.” Democratic capitalism is affiliated with Michael Novak, mainly stemming from his 1982 book The Spirit of Democratic Capitalism. Novak describes democratic capitalism as rooted in an ethical and cultural system that respects human dignity and individual-level freedoms, producing a more just, humane, and prosperous society.Footnote ⁵⁹ Democratic capitalism and the closely related ideas of stakeholder capitalism are based on ethical foundations and practical considerations for building a good society.

The labels for varieties of capitalism intersect and overlap. They do not have precise black-and-white criteria but are oftentimes more conceptual. Depending on the analysis at hand, different suites of labels are more valuable than others.

Role of the State to Realize Sustainable Capitalism

An effective state is critical in steering market forces toward addressing transgressed planetary boundaries, such as climate change and biodiversity loss. Historical precedents, like the success of the Montreal Protocol in addressing ozone depletion, illustrate the essential interaction between state policies and establishing the necessary market incentives to spur private sector innovation.

The successes of Nordic capitalism in SDG #7 “Affordable and Clean Energy” highlight the importance of a democratically accountable state to craft policies that align markets with sustainable development goals. The state’s “visible hand” has been vital in shaping policies to internalize negative externalities, transition away from fossil fuels, and foster a labor market oriented toward green jobs. These policies have garnered public support by ensuring that the benefits of the green transition outweigh the short-term costs.

Additionally, Nordic successes in SDG #5 “Gender Equality” demonstrate the state’s pivotal role in advancing societal goals. Policies such as paid parental leave, universal childcare, and pay transparency have increased female workforce participation and narrowed the gender pay gap, offering a model of how state interventions can support equity within a capitalist framework.

Realizing sustainable capitalism will require overcoming entrenched attitudes toward the state, particularly in the US, where Cold War rhetoric has framed government as an impediment to freedom.

In his 2022 book Governance and Business Models for Sustainable Capitalism, Atle Middtun underscored the critical role of a democratically accountable state in achieving sustainable capitalism. Middtun highlighted the state’s crucial role in coordinating activities like internalizing negative externalities and coordinating public investments in sustainability projects approved through democratic vetting. Middtun argued, “The state needs to be part of the equation for civilizing capitalism … The democratic state can credibly represent the public interest better than other actors.”Footnote ⁶⁴ Middtun emphasizes that large-scale coordination aligned to sustainable development can occur in a capitalistic context, provided the democratic apparatus of the state is strong. He stresses he is not advocating for a variety of socialism but instead emphasizes the need for more attention to democracy as we consider constructions of capitalism. “This is not an argument for going back to projects under a public command and control economy,” highlighting Middtun’s awareness that such proposals of state involvement are likely to attract charges of Soviet socialism.

Figure 3.3 illustrates a conceptual typology of capitalism and socialism based on two key dimensions: power concentration in society and state involvement. This framework helps visualize how democratic capitalism, as distinct from oligarchic capitalism, combines decentralized power with an active, democratically accountable state.

Figure 3.3

Typologies of capitalism and socialism.

Figure 3.3 Long description

Two cross two matrix categorizes political-economic systems along two axes: the horizontal axis shows State Involvement in Society, increasing from Low to Medium on the left, to High on the right, and the vertical axis shows Power Concentration in Society, increasing from Low at the bottom to High at the top. The four quadrants are: Top Left, Oligarchic Capitalism, High Power, Low Medium State; Top Right, Oligarchic Socialism, High Power, High State; Bottom Left, Democratic Capitalism, Low Power, Low Medium State; Bottom Right, Democratic Socialism, Low Power, High State. This typology highlights how systems differ by both power distribution and state involvement.

Realizing sustainable capitalism very likely depends on achieving democratic capitalism. Democratic capitalism involves a well-functioning, transparent, and democratically accountable state committed to helping coordinate a society’s capitalist activities toward sustainable development, where the populace is committed to sustainable development and holds its democratic institutions accountable. At the heart of democratic capitalism is democratic accountability and the dispersion of power in society – a stark contrast to oligarchic capitalism, where power is overly concentrated, and the interests of a narrow few are more likely to be represented in political decisions than the interests of the broader public.

In addition to historical advocates like Michael Novak, contemporary proponents such as Rebecca Henderson, author of the 2020 book Reimagining Capitalism,Footnote ⁶⁵ argue that capitalism’s survival depends on the health of democracy. Henderson notes, “The decline of democracy is a mortal threat to the legitimacy and health of capitalism.” She added, “I’m not optimistic, but I am hopeful. The decline of democracy is a mortal threat to the legitimacy and health of capitalism – and business leaders are increasingly recognizing this.”Footnote ⁶⁶

A recent example of democratic capitalism in action is Denmark’s 2024 decision to become the first country to implement a carbon tax on the agricultural sector. This policy emerged from Denmark’s hallmark tripartite negotiation process involving labor unions, farmers, and government representatives. The inclusive and democratic nature of the framework ensured that key stakeholders shaped the outcome. Farmers supported the tax as it provided a market-driven mechanism for sustainability, rewarding innovation, and offering financial support for adopting greener practices. The state’s role was indispensable in establishing the market conditions necessary to internalize externalities like livestock emissions, advancing progress on SDG #13 “Climate Action” by reducing greenhouse gas emissions, SDG #15 “Life on Land” by restoring carbon-rich soils, and SDG #12 “Responsible Consumption and Production” by promoting sustainable agricultural practices. Crucially, the tax also aligns with SDG #8 “Decent Work and Economic Growth,” as it is designed to safeguard jobs and ensure farmers’ livelihoods are supported during the green transition. This inclusive and coordinated approach not only demonstrates the potential of democratic capitalism to align market incentives with sustainability goals but also brings Denmark closer to realizing a version of sustainable capitalism.Footnote ⁶⁷

American Property Rights and John Locke

John Locke profoundly shaped American property rights through his emphasis on individual ownership, views reflected in the Declaration of Independence and the U.S. Constitution. His Two Treatises of Government (1689) argued that Native Americans lacked legal claims to land ownership due to the absence of European-style boundaries – a mistaken view that nonetheless became foundational to US law.Footnote ⁴

According to Locke, the fundamental natural rights consist of “life, liberty, and property.” Thomas Jefferson echoed Locke in drafting the second paragraph of the US Declaration of Independence, with a crucial substitution: “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.” Here, Jefferson deliberately replaced “property” with “the pursuit of happiness.”Footnote ⁵

American Property Rights … for Whom?

French observer Alexis de Tocqueville, during the early 1800s, was astounded by the American ethos of granting individuals more freedom and opportunities than Europe’s aristocracies. In his seminal work, Democracy in America, he noted the incredible opportunity for European immigrants to enjoy greater freedom and obtain property in the US. Long before the phrase “‘American Dream’” was coined, the US embodied its core principles of freedom and opportunity for many.Footnote ⁶

In the early stages of American capitalism, property ownership was restricted mainly to white adult males, excluding other groups from the benefits of economic opportunity.Footnote ⁷ Using my family history as an example, my great-great-grandfather, Knut Strand, migrated from Norway and arrived in the US in 1861. Shortly after that, he was given a large plot of land in Wisconsin following the passing of the Homestead Act of 1862, which the Strand family would farm for generations. Knut was a peasant in Norway with no prospects of acquiring land, but in the US, he received land based on his status as a white adult male. James Baldwin observed that immigrants like my great-great-grandfather “became white upon their arrival to America,” and white was power.Footnote ⁸

Historian Moses Finley characterized the US South as a “genuine slave society,” meaning the institution of slavery profoundly impacted virtually all aspects of society. But what set the young US apart from previous slave societies, like ancient Greece and ancient Rome, was the newfound marriage between the process of racialization and the institution of slavery. The racialization of who was classified as white or black took shape during the era of the transatlantic slave trade. European colonizers developed racial categories to legitimize and perpetuate the enslavement of Africans, creating a hierarchy where whiteness was associated with power and freedom. At the same time, blackness was linked to subordination and enslavement. The comingling of racialization with the institution of slavery had long-term impacts on African Americans’ social and legal rights, continuing post-abolition.Footnote ⁹

To many Europeans, the US symbolized the promise of expanded freedoms and opportunities for immigrants like my Norwegian ancestors. However, racial categorization significantly influenced those who enjoyed expanded freedoms in the US, including the freedom to own property, and those who did not.

1800s: American Industrial Revolution – Efficiency 1.0

The American Industrial Revolution began with the US’s first industrial factory in 1790, a water-powered textile mill in Webster, Massachusetts. This transformation drove rapid factory expansion and migration from rural to urban areas. While innovations like the cotton gin (1794) revolutionized production and boosted economic output, these advances came with stark social costs: brutal conditions for enslaved people in the South that Frederick Douglass described as nothing short of hell,Footnote ¹⁰ and factory workers labored in unsafe conditions for long hours, six days a week. Child labor was rampant, and the wages were meager, highlighting capitalism’s dual nature of wealth creation and inequality.

1870–1914: Second American Industrial Revolution – Efficiency 2.0

A wave of progress swept across America in the wake of the Civil War, spanning from 1870 to 1914. The Second American Industrial Revolution, also known as the Technological Revolution, brought remarkable economic advancements and significant efficiency improvements. The culmination of the transcontinental railroad in 1869, a feat of human engineering, knitted together the East and West coasts and opened new doors for trade.

Iron and steel production spiked, providing the sinews for the growing skeletal frames of ever-larger factories. Steam power proliferated. Ground-breaking strides in energy sources – petroleum and widespread electrification – breathed life into the American behemoth. Coupled with leaps in real-time communication, facilitated by telegraphs and telephones, the pace of life quickened.

Dubbed the “Gilded Age,” the period from 1870 to 1900, this period in American history showcased dazzling economic growth that masked deep societal fractures. The fledgling nation was churning out wealth, growing in influence, and earning a place on the global stage. But beneath the glittering surface, gross inequalities festered.Footnote ¹¹ In 1890, the Danish-born Jacob Riis unveiled this stark contrast in his illuminating work, How the Other Half Lives. Riis lifted the veil on the burgeoning slums of New York City, exposing the dire conditions where countless laborers eked out their existence.Footnote ¹²

1930s and Beyond: The New Deal – Advances in Equality

The New Deal, initiated by President Franklin D. Roosevelt in response to the Great Depression following the 1929 stock market crash, marked a profound shift in American government policy toward a more active role in economic stabilization and social welfare. Key programs like the Social Security Act provided immediate economic relief and redefined the social contract between the government and its citizens, paving the way for a more inclusive approach to prosperity.

World War II dramatically reshaped American industrial capacity. The war effort created unprecedented public-private partnerships and government coordination of industry, laying the groundwork for what President Eisenhower would later term the “military-industrial complex.” This wartime experience fundamentally altered the relationship between American government and industry, with many of these coordination mechanisms persisting into peacetime and influencing Cold War industrial policy.

As World War II was nearing its brutal end, the New Deal programs were later expanded to encompass the Servicemen’s Readjustment Act of 1944, popularly known as the G.I. Bill. This act extended a lifeline to returning World War II veterans, providing benefits such as tuition and living expenses for further education, medical coverage, a year’s unemployment compensation, and concessional rates for home mortgages and business loans.

These measures provided numerous Americans born into poverty in the 1920s with a real opportunity for upward mobility in the 1940s and 1950s. The prospect of higher education, business ownership, and homeownership was no longer a distant dream. With the safety net of medical coverage and unemployment insurance, many G.I.s climbed the corporate ladder or successfully ventured into politics, fueling the growth of a prosperous middle class.

In the 1940s, American capitalism underwent a moderate shift toward stakeholder capitalism. A prominent example is the Johnson & Johnson corporation, commonly known as J&J. Robert Wood Johnson, chair of J&J, crafted the “J&J Credo” in 1943. This credo delineated a commitment to stakeholders, prioritizing the needs of patients, doctors, nurses, parents, employees, and communities while acknowledging the responsibility to pay a fair share of taxes and safeguard natural resources. The concluding line signified a balance in corporate ethics. It read, “Our final responsibility is to our stockholders” and “when we operate according to these principles, the stockholders should realize a fair return.”Footnote ²¹

1950s: American Boom, Wealth Dispersal

In the prosperous era of the 1950s, the US witnessed an expanding middle class, courtesy of the New Deal policies and the G.I. Bill. Wealth concentration in the US declined from just under 45 percent of total wealth held by the top 1 percent in the 1930s to below 30 percent by the 1950s, reflecting a more equitable distribution, as illustrated in Figure 4.1.

Figure 4.1

Wealth inequality in the US: Share of wealth held by the top 1%.

Figure 4.1 Long description

Line graph shows the share of wealth held by the top 1% of Americans from 1870 to 2010. The vertical axis ranges from 10% to 50%, while the horizontal axis spans from 1870 to 2010 in decade increments. The line starts under 20% in 1870, rises steeply through the early 20th century, peaking near 50% around 1930. It dips slightly, then peaks again in the late 1930s or early 1940s. After 1945, the line declines steadily, reaching a low around 1980, below 25%. From the 1980s onward, the line trends upward, reaching close to 40% by 2010. The overall pattern is a rise, fall, and then rise again in the top 1% share of U.S. wealth.

Source: Adapted from Suresh Naidu and Noam Yuchtman, “Labor Market Institutions in the Gilded Age of American Economic History,” in The Oxford Handbook of American Economic History, ed. Louis P. Cain, Price V. Fishback, and Paul W. Rhode (Oxford: Oxford University Press, 2018), 329–354.; see also Jesper Roine and Daniel Waldenström, “Long-Run Trends in the Distribution of Income and Wealth,” Handbook of Income Distribution, vol. 2, ed. A. B. Atkinson and F. Bourguignon (Amsterdam: Elsevier, 2015), 469–592; and Emmanuel Saez and Gabriel Zucman, “Wealth Inequality in the United States Since 1913: Evidence from Capitalized Income Tax Data,” Quarterly Journal of Economics 131, no. 2 (2016): 519–578.

The ensuing era, characterized by reduced inequalities, fueled consumerism as a rising middle class yearned for modern conveniences. Technological advancements led to the production of increasingly affordable products. The Federal-Aid Highway Act of 1956 was the most significant American public works project to date, and the US Interstate Highway System further facilitated commerce and increased automobile transportation. The automobile became a potent symbol of American prosperity and freedom.

1960s–1970s: Sustainability Problems Emerge … and Denial

By the 1960s, the environmental costs of economic growth became undeniable. Rachel Carson’s Silent Spring exposed both sustainability issues and the industry’s prioritization of profits over environmental concerns.Footnote ²⁷ A New York Times review characterized Carson as “crying wolf” and engaging in “public-relations stunts,” arguing that “rising prices act as an economic signal to conserve scarce resources, providing incentives to use cheaper materials in their place, stimulating research efforts on new ways to save on resource inputs.”Footnote ²⁸ In short, markets will solve it.

In response to Silent Spring, the chemical industry deployed the first known industry-wide coordinated denial campaign. These efforts included public relations campaigns portraying Carson as a hysterical woman and “cat-loving spinster.”Footnote ²⁹ Strategic denial and personal attacks would become the template that the tobacco and fossil fuel industries would later follow.

The 1972 Limits to Growth by Donella Meadows and colleagues employed sophisticated computer modeling that demonstrated continued industrial growth would soon exceed Earth’s regenerative capacity for renewal (Chapter 2).Footnote ³⁰

1980s–1990s: Market Triumph and Growing Concerns

The 1980s saw neoliberalism and its market ideology triumph globally, while environmental degradation accelerated. By the 1990s, evidence was clear that market mechanisms alone were not addressing sustainability challenges. Climate change emerged as a crucial concern, but economies were booming and corporate denial campaigns continued to delay meaningful sustainability action.

2000s: American Shareholder Capitalism in Trouble

The 2001 Enron scandal exposed the fundamental flaws of shareholder-driven American capitalism, where the pursuit of short-term profits led to corporate fraud, destroyed careers, and erased retirements, highlighting the urgent need for more responsible corporate governance.

The 2008 collapse of Lehman Brothers marked a pivotal moment in the global financial crisis, triggering a severe liquidity crisis that extended far beyond Wall Street. Excessive leverage and unchecked financial speculation had created systemic risks that threatened the entire financial system. Jonathan Levy succinctly captured the severity of the situation: “In 2008, capitalism nearly collapsed.”Footnote ³¹

However, the American capitalist system was preserved through substantial governmental action, including injecting billions of taxpayer dollars into Wall Street institutions, banks, and other crucial sectors of the economy. Some criticized the rescue efforts as “socialism for the rich, capitalism for the poor,” harkening to Martin Luther King Jr.’s critique of American capitalism decades before. The intervention revealed the self-destructive nature of unchecked capitalism and the state’s vital role in preserving it.

Concurrently, the escalating impacts of climate change and growing inequalities have heightened scrutiny of American capitalism in practice. As American corporations grow increasingly powerful and influential, a critical reassessment of the business role in these challenges is reflected in public discourse. This reassessment found support from Larry Fink, CEO of BlackRock, who has advocated for stakeholder capitalism in his influential annual letters since the early 2010s. Fink’s call for balancing shareholder interests with those of other stakeholders marks a significant shift from the shareholder-centric doctrine championed by Milton Friedman. By 2019, the Business Roundtable, which includes leading US CEOs, formally embraced stakeholder capitalism, committing to prioritize broader societal interests alongside shareholder returns.Footnote ³²

In 2023, California launched a landmark lawsuit against major oil companies – including ExxonMobil, BP, Chevron, Shell, and ConocoPhillips – for systematically downplaying climate change risks. This legal action, seeking compensation for future climate-related damages, signaled a broader push to hold corporations financially accountable for environmental impacts, challenging the traditional focus on shareholder value maximization.

That same year, BlackRock CEO Larry Fink’s retreat from “ESG” terminology amid accusations of promoting a “woke” agenda revealed mounting resistance to stakeholder capitalism. By 2024, this ideological conflict escalated as several US states, including Texas and Florida, sued major asset managers over their ESG strategies’ alleged impact on energy prices.

In December 2024, the underlying tensions of American capitalism erupted when the murder of UnitedHealthcare’s CEO was met with a disturbing level of public approval. The response revealed a deep erosion of public trust in American capitalism, which many had come to view as an oligarchic system protecting corporations and wealthy elites at the expense of ordinary people.Footnote ³³

The erosion of American capitalism into oligarchy was laid bare at the January 2025 Trump inauguration. The world’s three wealthiest individuals – Bezos, Zuckerberg, and Musk – were seated ahead of elected officials and cabinet nominees, a striking visual cue of economic power eclipsing democratic norms. Musk’s subsequent appointment to lead the newly created Department of Government Efficiency – following a $250 million campaign contribution – underscored the consolidation of political authority by private wealth.Footnote ³⁴ In political theory terms, this moment reflected the shift away from Madisonian principles of distributed power and checks and balances central to American democracy,Footnote ³⁵ toward a fusion of power emblematic of oligarchic rule.Footnote ³⁶

1800s: Nordic Property Rights and Markets

In the 1800s, the Nordics implemented a comprehensive system of property rights. By the early part of the century, land ownership extended to peasants in Denmark, Norway, and Sweden. Such rights to property set in motion a significant shift in agriculture in Sweden, where the newly anointed landowners utilized various means like crop rotation, trenching, and stone removal to enhance productivity.Footnote ³⁷

Unlike American capitalism, the Nordic model was not significantly shaped by the institution of slavery on domestic soils. As noted by Líndal Sigurður, the Nordic nations largely eradicated slavery by the thirteenth century.Footnote ³⁸ Nevertheless, the Nordic nations still played a role in the grim history of slavery, as exemplified by Denmark’s colonization of the former Danish West Indies and benefiting from trading in goods derived from the labor of enslaved people.Footnote ³⁹

By the 1840s, Sweden sold timber-rich land to private entities, boosting tax revenue.Footnote ⁴⁰ Rising foreign interest in Nordic natural resources, especially from the US, significantly fueled economic growth through burgeoning trade relationships. Concurrently, robust patent laws were being established and anti-corruption measures were enforced, further strengthening the Nordic economic foundation.

The expansion of financial institutions and liberal lending practices in the 1800s marked a critical step in Nordic capitalism’s evolution. More individuals were able to participate in market activities, secure credit, and invest in real estate and businesses.Footnote ⁴¹

1800s Nordic Education, Folk Schools, and Bildung

Despite relative poverty, the Nordic countries were pioneers in education during the 1800s. As early as 1814, Denmark introduced compulsory elementary education, a practice soon adopted by Norway and Sweden. This Nordic commitment to universal education played an instrumental role in shaping their modern societies.

Central to their educational philosophy were folk schools, underpinned by the German concept of “Bildung.” Bildung, a term with no direct English translation, encompasses the idea of personal growth combined with social responsibility to oneself, the community, and the world. The ethos of Bildung would prove to be a moral compass guiding the pragmatic development of Nordic capitalism in the century-plus to follow, giving rise to a version of democratic capitalism, commonly called stakeholder capitalism, we recognize in practice in the Nordics today.

1870s–1900: Nordic Industrial Revolution and the Seeds of the Nordic Social Democracies

The Industrial Revolution is commonly described as having arrived in the Nordic region around 1870, lagging England by over a century, the US by about eighty years, and Germany by some 40 years or so. The Nordic nations proved themselves attentive benchmarkers, learning from the successes and failures of industrialization elsewhere and corresponding developments.Footnote ⁵²

In the 1880s, Germany introduced pioneering social insurance laws under Otto von Bismarck that have proven foundational to the concept of the modern welfare state. Legislation included national sickness, accident, and old-age insurance (pension).Footnote ⁵³ These reforms were significant because they represented one of the first systematic efforts by a state to provide social protection to its citizens on a national scale, thereby setting precedents for what would later be recognized as key components of welfare states. The Nordic nations were closely watching.

From the 1890s to the early 1900s, the Nordics followed Germany’s lead and began establishing social security systems for accident, sickness, unemployment, and old-age insurance (pension) to mitigate risk at the societal scale. Although these programs were not universally accessible, they marked a crucial step towards creating a more comprehensive social safety net.Footnote ⁵⁴

1900–1930s: Social Democrats Gaining Power

During this era, social democrats steadily amassed power across the Nordics, while navigating pressure from revolutionary socialist factions. By the dawn of the twentieth century, the social democrats had secured a relatively robust footing, their cause fortified by influential pioneers like P. Knudsen of Denmark, Sweden’s Hjalmar Branting, and Christian Holtermann Knudsen from Norway. The 1917 Bolshevik Revolution in Russia heightened concerns among Nordic capitalists about the spread of revolutionary socialism.Footnote ⁵⁹

The journey to democratic stability in the Nordic nations was marked by considerable turbulence in the early twentieth century. In 1920. Denmark experienced a serious constitutional crisis known as the Easter Crisis (Påskekrisen), when King Christian X attempted to dismiss the democratically elected government and install a conservative government aligned with his preferences. This last-ditch effort by the monarchy to reassert control was met with strong popular resistance, including threats of a general strike. The crisis represented a crucial test of Denmark’s democratic institutions. When the king backed down, it marked a decisive victory for the principle of parliamentary democracy.Footnote ⁶⁰

Finland faced the most severe democratic test during the Finnish Civil War of 1918, shortly after declaring independence from Russia. The conflict between socialist “Reds” and conservative “Whites” ended in a White victory that consolidated parliamentary democracy but exposed deep societal divisions. Sweden’s transition to democracy, while relatively peaceful, involved significant political struggles before universal suffrage was finally achieved in 1921. Norway’s democratic institutions were tested during its 1905 separation from Sweden, though the transition was ultimately peaceful and resulted in a stable constitutional monarchy. Iceland’s path to democracy was comparatively smooth, achieved through gradual independence from Denmark (sovereign state in 1918, full independence in 1944).Footnote ⁶¹

The influence of the Soviet Union cast a long shadow across the region during this period. In 1919, Bolshevik leader Vladimir Lenin convened the third annual Communist International (Comintern) organization gathering in Moscow. During this assembly, attended by the Norwegian Labor Party, Lenin declared social democrats to be strategic adversaries to socialists, given their willingness to cooperate with capitalist forces. He argued that nothing short of a socialist revolution, as outlined by Marx, would suffice in overthrowing capitalist structures.Footnote ⁶² Ironically, the threat of revolutionary socialism ultimately encouraged more constructive engagement between Nordic capitalists and reform-minded social democrats.

Amid ongoing pressure from more radical socialist elements, the Nordic region remained steadfast in its commitment to social democracy and democratic means, increasingly distancing itself from the Soviet Union’s authoritarian path.

In Denmark, social democrats had garnered 37 percent of the vote by 1924, becoming the largest party in parliament for the first time.Footnote ⁶³ This electoral success owed much to the leadership of Thorvald Stauning, who served as prime minister from 1924 to 1942, making him Denmark’s longest-serving prime minister. Stauning’s political acumen proved crucial in building the foundations of Danish social democracy, particularly evident in the landmark Kanslergade Agreement (Kanslergadeforliget) of 1933. Named after Stauning’s apartment in Copenhagen, where the negotiations took place (allegedly over copious amounts of beer into the early morning), this agreement brought together Social Democrats, liberals, and conservatives to establish comprehensive social reforms during the Great Depression.Footnote ⁶⁴ The agreement exemplified the cross-party cooperation necessary to serve broader societal interests, a distinctive feature that would come to characterize Nordic social democracies.

Sweden was also gaining recognition as a leader within the burgeoning social democracy movement.Footnote ⁶⁵ The economist Thomas Piketty referred to Sweden as “the quintessential social democracy,” lauding its commitment to equitable prosperity. He described this as a compelling case study in rapid societal change, noting that a mere decade before its transformative reforms of 1910–1911, Sweden was one of the world’s most inegalitarian societies.Footnote ⁶⁶ These reforms demonstrated a stark turnaround, making Sweden an emblematic figure in the social democracy landscape.

1930s–1950s: Nordic Model Taking Shape

The Nordic model began to take its modern form in the 1930s, gradually growing over the years to include state-supported healthcare, old-age and disability pensions, income maintenance during occupational injury, sickness, and unemployment, and mechanisms to ensure fair wages, such as collective bargaining structures.Footnote ⁶⁷ Referred to interchangeably as the “welfare state” or the “well-being state,”Footnote ⁶⁸ the Nordic Model’s primary goal, as argued by Brandal and his colleagues in The Nordic Model of Social Democracy, is to promote individual freedom.Footnote ⁶⁹

1950s–1970: Commitment to Universalism

In the aftermath of Childs directing the global spotlight onto Nordic capitalism, a fascinating “second wave of Nordic welfare legislation” began to unfurl characterized by universalism. As Mary Hilson outlines in her book The Nordic Model, prior welfare expansions, while ambitious, were not always universal. The “wage-earner” model prevalent before the 1950s, tied social insurance eligibility to wage-earning employment, leaving many, such as home workers, small-business owners, seasonal workers, and numerous farmers, out in the cold.Footnote ⁷⁶

From the 1950s, the Nordic model underwent a significant shift, with universalism becoming the default. Universalism is today widely recognized as a defining characteristic of the Nordic model, credited with fostering social cohesion. Importantly, universal social programs avoided divisive “othering,” such as the portrayal of one group burdened by another – think “rich paying for the poor.” In this way, universalism reduced the impact of political whims on social programs, creating a shared project that all political parties and citizens could embrace.

The 1950s also saw the implementation of robust data-collection systems, which served as the keystone for evidence-based decision-making. Nordic healthcare systems provide a vivid example of individual-level data collection ensuring the quality and efficiency of care. This has led to the creation of high-quality longitudinal datasets dating back to the 1950s for every citizen, making Nordic societies known as an epidemiologist’s dream.Footnote ⁷⁷

Over the decades, Nordic model builders proved themselves to be pragmatic above all else. Hugh Heclo and Henrik Madsen captured this essence with their characterization of the Swedish approach as “principled pragmatism.”Footnote ⁷⁸ This pragmatism shaped their approach to capitalism, pragmatically using markets where effective, but seeking alternatives where markets failed. It was evident in their approach to healthcare, where they opted for efficient, universal healthcare systems and education when market solutions fell short.

Meanwhile, across the Atlantic, in the US an ideological discourse around universal healthcare was emerging. In the 1960s, Ronald Reagan famously argued against the adoption of universal healthcare, claiming it would lead toward Soviet-style socialism and erode personal freedoms, reflecting the intense ideological debates of the period. Reagan offered a radio address in 1961 as a spokesperson for the American Medical Association, stating, “One of the traditional methods of imposing statism, or socialism, on a people has been by way of medicine.”Footnote ⁷⁹ He added, if universal healthcare became policy, “we will awake to find that we have socialism … and you and I are going to spend our sunset years telling our children, and our children’s children, what it once was like in America when men were free.”Footnote ⁸⁰

Nordic societies largely avoided ideological labeling, instead pragmatically evaluating policies and programs based on their effectiveness. The Nordic model’s benefits were acknowledged across the political spectrum, with even Danish conservatives boasting about their role in the welfare state’s expansion during the 1960s.Footnote ⁸¹ Although debates were common, the broad support for universal safety nets underscored the welfare state’s practical benefits to Nordic societies. This pragmatic approach has been seen as a key factor in their success in recent generations.

1970s–1980s: The Nordic Model on Trial

By the 1970s, the mounting environmental costs of industrialization were too conspicuous to ignore in the Nordics, similar to elsewhere. Norwegian philosopher Arne Næss led a burgeoning environmental movement in the Nordics rooted in the concept of Deep Ecology,Footnote ⁸² and the Nordic nations established national environmental protection agencies to address the mounting environmental crises (Chapter 2).Footnote ⁸³

The 1973–1974 oil crisis severely tested the Nordic model, particularly in Sweden. The country’s response of raising tax rates to extreme levels (Astrid Lindgren famously faced a 102 percent rate) triggered high-profile exits, including IKEA founder Ingvar Kamprad, filmmaker Ingmar Bergman, tennis star Björn Borg, and members of the celebrated Swedish musical group ABBA.

In 1980, Childs authored Sweden: The Middle Way on Trial, revisiting the Nordic model as its imperfections were on full global display and leveraging the publicity of prominent figures like Astrid Lindgren and Ingmar Bergman. Childs critically addressed the stifling tax rates that undermined economic efficiency.Footnote ⁸⁴ Like Childs, Staffan Marklund’s Paradise Lost scrutinizes the Nordic region from the mid-1970s to the mid-1980s, charting its shift from an idealized beacon to a region grappling with real challenges. Marklund portrays not a collapse but a tempered view, recognizing significant flaws and the ongoing necessity for adaptation.Footnote ⁸⁵

Childs, revising his earlier, at times utopian portrayal of the Nordic model, adopts a more critical yet hopeful stance. While acknowledging issues, he remained optimistic about Sweden’s capacity to address contemporary challenges. This sentiment is echoed in a contemporary review, suggesting, “if any country can solve these modern problems…then it will be Sweden.”Footnote ⁸⁶ The period invited more nuanced discussions of the Nordics, highlighting the achievements and the trials of the Nordic model.

1990s: Continued Challenges but Nordics Emerging Stronger

After recalibrating its tax levels to a more reasonable level, Sweden eventually bounced back in the 1990s to again be considered a successful system. However, it was not without a financial crisis, first coming in the early 1990s. The largest Nordic banks were shaken by a fundamental financial crisis, and Sweden and Finland were hit particularly hard, experiencing consecutive years of negative economic growth.

Nevertheless, by the mid 1990s, the Nordic model, although shaken, found its footing again and was increasingly hailed as a model of success. The continued strength of Nordic democracies has proven effective in recalibrating to achieve a “democratic balance of opinion,” according to Peter Linder, after periods of disagreement and discontent.Footnote ⁸⁷

2000s On: The Next Supermodel

By the early 2000s, the Nordic model reemerged as a widely regarded example of economic and social success. In 2013, The Economist featured a special issue titled “The Nordic Countries: The Next Supermodel,” underscoring how Nordic capitalism, deeply rooted in democratic principles, continues to promote shared prosperity.

Americans were introduced to the democratic underpinnings of Nordic capitalism as early as the mid twentieth century through Childs’ seminal work, Sweden: The Middle Way on Trial. However, Childs’ portrayal of Sweden as a compromise between American capitalism and Soviet socialism unintentionally reinforced a misconception that Nordic capitalism was merely a step toward Soviet-style centralization. This mischaracterization persists in some contemporary discussions, where Nordic countries are mistakenly labeled socialist states. In contrast, the role of the State in the Nordics is characterized by transparency, efficiency, and democratic accountability – distinct from the authoritarianism associated with the Soviet model.

Nordic capitalism exemplifies democratic principles through institutions designed to distribute power across society. Strong labor unions, robust cooperative movements, and inclusive social policies ensure that the state remains responsive to the democratic will of its citizens. However, this model did not emerge without tension. Facing the specter of socialist revolution, the Nordic economic elite was compelled to cede some of their power. Today, their descendants benefit from a more equitable and cohesive society – a testament to the strength of democratic capitalism in the Nordic context.Footnote ⁹⁰

American Philanthropy and Nordic Taxes

The US and Nordic approaches to addressing societal issues reflect fundamentally different paradigms. The US system, through tax deductions for charitable giving, empowers private property owners to address social needs through philanthropy – exemplified by institutions like the Ford Foundation. Nordic societies, by contrast, fund comprehensive public services through higher taxation, as shown in Table 4.1. When these taxes deliver efficient services, Nordic citizens generally view them as worthwhile investments.Footnote ⁹¹

Critics of capitalism, from Oscar Wilde to Martin Luther King Jr., have argued that philanthropy represents a fundamental flaw in capitalism rather than a virtue. Wilde contended that philanthropic remedies “merely prolong” rather than cure societal ills,Footnote ⁹² while King warned that philanthropy must not obscure “the circumstances of economic injustice which make philanthropy necessary.”Footnote ⁹³

Policies and Stakeholder Capitalism

The call for stakeholder capitalism by the US CEOs of the Business Roundtable American business leaders is laudable but remains largely unsupported by necessary policy changes. As Anu Partanen suggested in her 2019 New York Times feature, Nordic business leaders have long embraced a stakeholder view of the firm that includes their longstanding support of policies related to robust universal public services. “What Nordic businesses do is focus on business – including good-faith negotiations with their unions – while letting citizens vote for politicians who use government to deliver a set of robust universal public services,” Partanen wrote.Footnote ⁹⁴

In 2019, I was invited to testify at a US congressional hearing hosted by the Small and Medium-Sized Business Committee. The hearing centered on the Business Roundtable’s recent endorsement of a stakeholder view of the corporation, signaling a departure from Milton Friedman’s doctrine of corporate purpose as profit maximization for shareholders.

I recognized the promising change in the discourse by American business leaders. Yet, I stressed the need for impactful policy and practice changes to make the stakeholder concept a reality. Drawing upon Nordic nations’ comprehensive social policies, including paid parental leave and accessible quality healthcare, and the Nordic business community’s widespread support for them, I argued these Nordic policies could provide inspiration and good examples for successfully implementing a version of stakeholder capitalism in the US. This approach could allow US businesses, particularly small and medium-sized enterprises, to focus on their core activities without the burden of providing extensive employee benefits.Footnote ⁹⁵

My proposals, however, faced resistance. For instance, Representative Jim Hagedorn championed American capitalism as unrivaled, viewing any deviation as anti-capitalistic. “Now, Mr. Strand,” he began, “I wanted to talk with you about your testimony because I was concerned that it was going against capitalism and undercutting some of the things that we’ve proven in the United States with our free enterprise capitalist system that really is – there is no better system.” His counterpoint lauded American capitalism as superior on the global stage and crediting it for the majority of all global innovation and providing American citizens with cheap energy. He concluded, “If it weren’t for the United States, which I would subscribe that we’ve done more for the world than the world has done for us, where would we be? And I think it’s most all because of our system of free enterprise capitalism.”Footnote ⁹⁶

Such viewpoints tend to disregard certain facts, such as the heavy subsidies granted to fossil fuel corporations in the US who also frequently pay no federal taxes,Footnote ⁹⁷ and the significant negative externalities related to the production and consumption of fossil fuels that go uninternalized in the prices, making fossil fuel prices cheaper than the costs fossil fuels inflict on society and future generations of people not yet born.Footnote ⁹⁸ It also overlooks the energy innovations from Nordic countries like Denmark, which has become a global leader in wind energy production.Footnote ⁹⁹

Despite these diverse perspectives, our shared global challenges provide a potential platform for unity. In retrospect, during my testimony, none of us could have predicted the imminent global Covid-19 pandemic or its potent demonstration of our global interdependence, and a Nordic innovation would prove central to saving millions of lives in the US and worldwide. The modern ventilator resulted from a series of Nordic innovations involving the medical innovation of pressure ventilation by Danish physician Bjørn Ibsen and its mechanization by the Swedish company Engström.Footnote ¹⁰⁰ This case exemplifies how we benefit from innovations, regardless of their origin.

As debates around the future of capitalism evolve, Danish political leader Peter Hummelgaard’s book Den Syge Kapitalisme (The Sick Capitalism) critically reflects on changes in the Nordic landscape. Hummelgaard offers a stark warning about the gradual adoption of American-style neoliberal policies that amount to what he terms “sick capitalism.” He cautions that capitalism in Denmark is increasingly taking on the appearance of American capitalism with market deregulation and firms discussing profit maximization. This shift, he argues, poses significant risks to Denmark’s traditionally inclusive and cooperative economic practices rooted in democratic principles. Hummelgaard emphasizes that a continued neoliberal trajectory could exacerbate socioeconomic inequality and concentrate power among a wealthy elite, thereby undermining the democratic foundations of Danish society that have been integral to the success of the Nordic model. His offerings align with broader concerns associated with oligarchic capitalism and advocate for a focus on strengthening democratic capitalism.Footnote ¹⁰¹

The varieties of capitalism in practice throughout the world present a rich opportunity to learn from policy innovations irrespective of their origins. The rising interest in stakeholder capitalism in the US logically leads us to study the experiences of regions that have practiced stakeholder capitalism, like the Nordics.

Democracy: The Essential Foundation for Capitalism

The parallel histories of American and Nordic capitalism reveal a crucial lesson: capitalism requires robust democratic institutions and public accountability to function well. When democratic oversight erodes, capitalism often veers into dangerous territory – undermining human welfare, public trust, social stability, and the efficient functioning of markets.

Early American capitalism offers stark examples. Before democratic pressure led to federal regulation, profit-seeking behavior frequently endangered public health. In the late nineteenth century, milk sellers commonly adulterated spoiled milk with chalk or plaster of Paris to mask its condition – contributing to alarmingly high infant mortality rates in American cities. The horrific conditions in Chicago’s meatpacking industry, exposed in Upton Sinclair’s The Jungle (1906), revealed how unregulated capitalism prioritized profits over basic food safety. Public outrage prompted Congress to enact the Pure Food and Drug Act and the Meat Inspection Act in 1906, establishing the Food and Drug Administration – an institution born from democratic demands to hold markets accountable.

The tragedy of the Radium Girls in the 1920s further illustrates this dynamic. Factory workers who painted watch dials with radioactive paint were falsely assured the substance was safe, leading to devastating health consequences, including painful bone deterioration and fatal cancers. It was only through democratic action – spurred by investigative journalism, public outcry, and legislative intervention – that occupational safety standards were strengthened. In each case, it was not market forces but democratic institutions that corrected course. Significantly, these reforms did not impede capitalism but rather legitimized and stabilized it by aligning market activity with public welfare.

The Nordic countries, by contrast, embedded democratic accountability into their economic framework from the outset. Their experience demonstrates that capitalism need not be predatory when constrained and guided by democratic institutions. Strong labor unions, universal social systems, and stakeholder-oriented governance structures help ensure that market outcomes reflect broader societal interests. This democratic foundation has made Nordic capitalism both resilient and equitable, while still fostering economic dynamism.

Recent trends in American capitalism – marked by the oligarchic concentration of wealth and corporate power – underscore the ongoing importance of democratic guardrails. As public accountability weakens, familiar problems resurface: environmental degradation, unequal access to healthcare, and exploitative labor practices. The Nordic experience offers compelling evidence that capitalism functions best when tethered to democratic institutions capable of checking concentrated power and protecting the public interest.