I'm going to preface this piece by outlining that Scandinavian countries aren't socialist. Sure, Social Democratic parties have contributed greatly to the political development of those nations, but those countries score higher on economic freedom indices than the United States for a reason. Property rights, contract enforcement, and free markets are both culturally and politically enshrined in those nations. In fact, there are *less* regulations in Scandinavia than in the United States. What you have in Scandinavia are strong states, not overbearing ones. The free market ideal is more present there than in the United States, and you can hardly argue their citizenries aren't free. The political leaders of those countries self-describe as capitalist, for the most part. As final evidence, consider Anders Chydenius' The National Gain, an economic theory book published before The Wealth Of Nations. The roots of proper market institutions wind back far in Scandinavia. If you agree with me that proper capitalism requires strong cultural values, you'll find too that those work-ethical and thrifty values are found strongly in Scandinavia.
Now, let's get on to the good stuff: why can Scandinavian-style economics improve personal freedom? Well, I'd first posit that poverty is coercive. There is little else that impedes the freedom of the individual more than being hungry, homeless, insolvent, or sick. As libertarians, we should be looking at the *ends* of freedom, not the means. Deontological liberty is often not liberty at all. While it's true that naught but bad ends can come of bad means, taxation, intelligent regulation, and good bureaucracy are hardly bad means. Scandinavian governments often take a more positive view of liberty than we do in the US. It's more akin to the values of Estonia or Luxembourg (countries I'd consider to be the Neoliberal ideal and which I will argue for in a different thread). Their social programs are simply designed and focus on efficiently delivering the benefits to the recipient, with lower amounts of means testing (which is at the end of the day tax-like). There is no Kludgeocracy, a term coined by Steven Teles to describe programs of accumulated complexity. Scandinavian governments also feature strong state capacity. When a Scandinavian official determines a decision, it is enacted competently and efficiently. The governments there can cultivate fair markets, technological growth, and poverty reduction much easier than in the US.
A common deontological libertarian claim is that government spending reduces liberty. It doesn't. When a Swede receives his healthcare for free, is he less free? of course not. Sure, the taxes may be higher, but many of the "worse" taxes are lower, and the overall person is richer in Scandinavia. You must look at the net transfers after the fact. The Scandinavian is much more able to take advantage of the strong markets in Scandinavia because of what his government provides for him. Freedom is much more about regulation than taxation. Some may argue that the US economic growth shows it needs to be more cutthroat than cuddly. I say that isn't true. In fact, I'd suggest that it shows that due to our economic advantages, it should be far easier for us to expand and simplify the safety net.