Is Scandinavian Success Due to Socialism?

Hillary Clinton and Bernie Sanders claim the success of Scandinavian countries is due

to socialism and the US should emulate them. We explore the veracity of those claims.

By: George Noga – April 24, 2016

     To be more responsive to current events, this week’s posting takes on a topic that has dominated the news in recent weeks. As usual, none of the media has gotten the story right. Moreover, I had planned to address this issue anyway because there is a lack of awareness and understanding among most Americans about Scandinavia. The MLLG five-part series,Inequality in America, is now rescheduled to begin May 1st.

     For as long as I remember, whenever I have discussed politics or economics with liberal interlocutors, they invariably cite Scandinavian countries (usually Sweden) as veritable Utopias and as proof that socialism can work; recently, both Bernie Sanders and Hillary Clinton did the same. Let’s begin with a brief economic history of Sweden.

    Sweden was agrarian in the nineteenth century and so dirt poor it sent waves of immigrants to the USA. Beginning in the final quarter of that century, Sweden turned to free enterprise. Because of property rights, free markets and capitalism, Sweden grew rich. Circa 1970, Sweden took a hard left turn; taxes soared, welfare expanded and private enterprise was discouraged. The result was crime, drug addiction, massive bureaucracy, welfare dependency and emigration by successful Swedes.

     By the 1990s Swedes had come to view socialism as a colossal failure. They rolled back subsidies and taxes and again encouraged free markets. Leftist governments were replaced with right-leaning ones; they embraced free trade and economic freedom. The stories of Norway and Denmark are similar to that of Sweden. Today all three enjoy dynamic market economies, albeit with robust social insurance programs and concomitantly high middle class taxes. Politically, they continue to move rightward.

     Nordic countries are able to adopt vigorous social programs only because of highly successful capitalist, market economies that produce wealth, combined with their acceptance of high middle class taxes. Socialism never has created anywhere near the degree of wealth necessary for a Scandinavian level of social benefits. Sweden is not prosperous because of socialism; it is prosperous because it survived socialism!

     Scandinavian countries are considered economic successes; however, they don’t compare favorably with America. If Sweden were a US state, it would be among the very poorest alongside Mississippi. In terms of purchasing power, Sweden is 30% more expensive than America. In Denmark, the top 10% control 80% of the wealth, a higher percentage than in the USA and not exactly a socialist paradigm of equality.

     Following are the four principal truths we should take away from the economic experience of Scandinavian countries – Bernie and Hillary take note.

1. They are not prosperous because of socialism. They tried socialism; it proved to be a monumental failure economically and socially; the people, understanding this, thoroughly rejected and repudiated it and replaced it with a capitalist, market economy.

2. The only possible way to generate the wealth to afford extensive social programs as found in Sweden, Denmark and Norway is from a relatively unfettered capitalist, market economy. Socialism has never produced a successful economy.

3. The only way to pay for the social programs is through ultra high taxes on the middle class – 20 percentage points higher than in the USA. The taxes always must fall on the middle class because there never are enough rich people to pay for it all.

4. The Scandinavian model only works in small, homogeneous populations with deeply shared and ingrained values, social and cultural cohesion, and a middle class willing to accept extraordinarily high rates of taxation. It can’t be emulated in the USA.

The next MLLG post on May 1st begins our five-part series: Inequality in America