Most importantly, the view that social spending is wasteful needs to be seriously challenged. The frequently used argument against the welfare state is that it reduces economic growth by making the poor workshy and the rich reduce their wealth creation, given the tax burden involved.
However, there is no general correlation between the size of the welfare state and the growth performance of an economy. To cite a rather striking example, despite having a welfare state that is 50% bigger than that of the US (29.4% of GDP as against 19.2% of GDP in the US, in 2009), Finland has grown much faster. Between 1960 and 2010 Finland's average annual per capita income growth rate was 2.7%, against 2% for the US. This means that during this period US income rose 2.7 times while Finland's rose by 3.8 times.
The point is that the welfare state – if well designed and coordinated with labour market policies to re-train people and get them back into work – can encourage people to be more accepting of change, thereby promoting growth. Firms in countries such as Finland and Sweden can introduce new technologies faster than their US competitors because, knowing that unemployment need not mean penury and long-term joblessness, their workers do not resist these changes strongly.
Cambridgen yliopiston taloustutkija Ha-Joon Chang painottaa artikkelissaan, etteivät hyvinvointirakenteet ole este dynaamiselle taloudelle. Chang vertaa Yhdysvaltojen ja Suomen kasvuvauhtia vuosina 1960-2010 ja Suomi on kasvanut merkittävästi nopeampaa vauhtia, huolimatta kaksi kertaa suuremmasta panostuksesta julkisiin turvaverkkoihin.