The Myth of Scandinavian Socialism

Many leftists often point to the "superiority" of Scandinavian "socialism." Leftists often use Denmark and Sweden as their examples, since they are the most successful Scandinavian nations. I already covered this issue in an earlier post, but I feel it is important to rehash this topic and to post a refutation of this leftist fallacy. For this post, we shall define Scandinavian countries as Denmark, Sweden, Norway, Finland, and Iceland. Some might dispute whether we should consider Finland and Iceland as Scandinavian, because of cultural differences (Finland) and geographical barriers (Iceland), though we the point of this post is not to argue whether or not these countries are Scandinavian, but to dispute the fact that they are indeed successful socialist states.

First of all, most leftists will use the USA as the measure of laissez faire capitalism. We all know that this is completely false, so I won't go into detail refuting this casuistry here but I'd like to point several things out: Hong Kong, Singapore, Ireland, and Australia were all rated as "more free," according to the Heritage Index of Economic Freedom. It would probably be better to compare these Scandinavian nations to Hong Kong or Ireland than to the United states.

Furthermore, Scandinavian nations are not nearly as socialist as leftists claim they are. Although the United States ranks higher than these nations on the Index of Economic Freedom, Scandinavian nations are more free in several decisive areas. Denmark has greater business freedom, monetary freedom, investment freedom, financial freedom, freedom from corruption, and labor freedom while having comparable property rights and trade freedom scores to the U.S.  Sweden has greater business freedom and freedom from corruption, while having comparable trade freedom, monetary freedom, property rights enforcement, investment freedom, and financial freedom to the United States. Finland has greater business freedom, monetary freedom, and freedom from corruption than the United States, while having comparable property right enforcement, financial freedom, and trade freedom. Norway, the least successful Scandinavian nation, has greater freedom from corruption than the United States while having comparable business freedom, trade freedom, and property right enforcement. Iceland has greater business freedom, fiscal freedom, and freedom from corruption, while having comparable trade freedom and property right enforcement. In many ways, Scandinavian countries are more "laissez faire" than the United States.

To finish of this deal, here are some articles, excerpts, etc. about the failure of specific welfarist policies the Scandinavian countries follow, change occurring in these nations, and the like:

The Sweden Myth (LvMI)

How the Welfare State Corrupted Sweden (LvMI)

Sweden: Poorer Than You Think (LvMI)

Can the United States Learn from the Nordic Model? (Cato)

Sweden: From Capitalist Success to Welfare-State Sclerosis (Cato)

Should Scandinavia Be Our Model? Podcast (Cato)

Should the United States Be More Like Scandinavia? Policy Forum (Cato)

Johnny Munkhammar in Defense of Free Market Capitalism in Sweden Weeky Video (Cato)

Sweden Repeals Wealth Tax (Cato)

Sweden is a Tax Haven? (Cato)

The Welfare State Causes Sickness (Cato)

If the Swedish State is Socialist, What is Ours? (Cato)

New Challenge to the Nordic Welfare Model (Cato)

Introduction to Economics Review (Mackinac)

Free Enterprise in Action Review (Mackinac)

Institutions and Analysis (Mackinac)

Where Are the Omelettes? (Mackinac)

Scandinavian Irony (FEE)

Are High Taxes the Basis of Economic Growth? (FEE)

Sweden: Tightening the Screws (FEE)

Swedish Welfare (The New American)

Sweden after the Swedish model.

EU vs USA.

NORWAY: LOWER LIVING STANDARDS THAN THE US

Here is one more thing of interest to everyone interested in living standards in Scandinavian countries vs. the US. First, according to the International Monetary Fund, the World Bank, and the CIA World Factbook, the USA has a higher GDP per capita than any Scandinavian nation with the exception of Norway. Norway has one of the highest GDP per capita in the world, right after free market paradises such as Luxembourg and Liechtenstein, and oil rich nations such as Qatar and Kuwait.

Although Norway's GDP per capita seems to be boosted by huge oil and natural gas production, do Norwegians actually enjoy higher living standards than Americans? I dare say that they don't. A quick look around worldsalaries.org shows that:
1. Americans enjoy higher average disposable (after tax) AND gross (before tax) income than Norwegians do.
2. Americans enjoy a significantly lower cost of living than do Norwegians (1.00 vs. 1.487).

Wow, I've never realized the Economic Freedom facts about the Scandinavian nations before. Great post! 

I have some sceptisism about Economic Freedom Indices (or is it Indexes), because there are so many things that are difficult to quantify. And there are many mistakes also. The most nasty thing in the Scandinavian countries is that the tax structure is so complex and wide that it isn't always clear how much the government actually taxes the people.

Here are what I found to be wrong about what it had to say about my country, Finland:

heritage.org claims that ”Finland has moderate tax rates. The top income tax rate is 32 percent, and the top corporate tax rate is 26 percent.”

To put it simply, that talk about ”moderate taxes” is a joke. The personal federal income tax is ”only” 32 percent, but additionally you have to pay communal tax which is flat tax and usually somewhere between 18 and 22 percent of your income. The tax rate has to be that high, because the government forces communitys to give certain free services to the people. And you have to pay the Value Added Tax for every product you buy. VAT is generally 22 percent, but only 12 for food items and 8 percent for travelling and culture.

Americans occasionally complain when the price of gasoline is over 2 dollars per gallon. But remember that because of the gasoline tax, in Finland it was recently a big happy news when the cost of gasoline fell under 1 euro per litre (that is to say under $5.30/gallon). And there are additional paternalistic taxes for tobacco and liqueur. So if you smoke, you have to pay roughly 30 cents for every cigarette you use :)

I'm pretty sure it's covered when the index says:

In the most recent year, overall tax revenue as a percentage of GDP was 43.3 percent.

That said, economic freedom indices do have their problems. It is indeed impossible to measure how harmful certain regulations are and then to compare them to other regulations and taxes. But generally speaking, we can say which economies are more or less regulated. As we've seen, for the most part, Scandinavian countries are less regulated than the U.S.

Of course, that isn't to say that Finland and other Scandinavian countries don't have their own problems, which is why I included the links at the bottom.

Aragon:

To put it simply, that talk about ”moderate taxes” is a joke. The personal federal income tax is ”only” 32 percent, but additionally you have to pay communal tax which is flat tax and usually somewhere between 18 and 22 percent of your income. The tax rate has to be that high, because the government forces communitys to give certain free services to the people. And you have to pay the Value Added Tax for every product you buy. VAT is generally 22 percent, but only 12 for food items and 8 percent for travelling and culture.

Yes, that's what I always say when debating taxation. Basically, one pays the following taxes: income tax, social security and VAT. Social security might be optional, depending on the nature of your income. However, the VAT applies to all personal consumption. One can sometimes get around the income tax for some products if they own a company, as it can be considered reinvested profit, which gets deducted. But generally, most people pay all of these plus certain special taxes (where it applies). So the total taxes can easily amount to 40-50% of the income even in the least socialist European countries (flat, "low" income tax).

Another interesting detail about the scandinavian countries is a largely homogeneous population.  How this pertains to the theory of socialism (especially in regards to the calculation problem) is irrelevant for the time being. 

Under a multitude of social pseudo-insurance programs, a homogeneous population more closely resembles an "insurable risk" (e.g., class probability) than a heterogeneous population. 

To take the example of health care (and I have no idea how the Swedes do it), the scandinavians have a much narrower normal distribution than do Americans, taken as a population.  Any individual Swede is far less likely to reside in the "tails" so to speak, than an individual American in his own country. 

Some people replying to this thread clearly need to read it before responding.

Eduard - Gabriel Munteanu:

Yes, that's what I always say when debating taxation. Basically, one pays the following taxes: income tax, social security and VAT. Social security might be optional, depending on the nature of your income. However, the VAT applies to all personal consumption. One can sometimes get around the income tax for some products if they own a company, as it can be considered reinvested profit, which gets deducted. But generally, most people pay all of these plus certain special taxes (where it applies). So the total taxes can easily amount to 40-50% of the income even in the least socialist European countries (flat, "low" income tax).

This was refuted already before Eduard posted:

krazy kaju:

I'm pretty sure it's covered when the index says:

In the most recent year, overall tax revenue as a percentage of GDP was 43.3 percent.

That said, economic freedom indices do have their problems. It is indeed impossible to measure how harmful certain regulations are and then to compare them to other regulations and taxes. But generally speaking, we can say which economies are more or less regulated. As we've seen, for the most part, Scandinavian countries are less regulated than the U.S.

Of course, that isn't to say that Finland and other Scandinavian countries don't have their own problems, which is why I included the links at the bottom.

 

david_z:

Another interesting detail about the scandinavian countries is a largely homogeneous population.

Well, not any more it isn't!

20% of "Swedes" are already muslims (by immigration or birth by immigrants during the last 20 years). Sweden with 9 million citizens recieved 100 000 (one hundered thousand) Iraqi refugies during the one year of 2008 alone. By 2035 a MAJORITY of the "Swedes" will be ARABS. Your "homogeneous population" variable should factor that in in krder to compare it to for example Gaza and how standards of living hav been there for the last half century...

And that was just a humble note to the statician...

 

Have to agree wit my countrymen.

To me the most horrible thing in our country is that we have this called collective agreement. This means that the coverment together with the trade union and emplyers come together and negotiate collective agreements establishing rates of pay, working hours, holidays and other terms of employment in specific industries.

Both employees and employers in Finland are highly organised. Every trade union has a negotiating partner representing the employers in its industry. This high level of organisation enables national employer and labour confederations to negotiate very broad collective agreements, which then serve as guidelines for collective bargaining by individual industry trade unions and employers’ federations.
The Finnish government often supports this centralised process by adjusting its social and taxation policies according to the national
labour market agreement. The government also consults the trade unions and the employers in detail over any proposed amendments to
the laws that affect working life. For example any proposal to change the law on hours of work will automatically be considered by a working
group including trade union and employer representatives. Working groups of this kind generally continue to negotiate for as long as it
takes to reach a common understanding. The outcome of this three-sided collective bargaining process between the employers, the trade unions and the government is the comprehensive incomes policy settlement (TUPO). The TUPO settlement covers general pay increases, job security, hours of work, training and equality between men and women at work.

The three-sided collective bargain system is a good example how the socialism works in this country.

I can honestly say, from the dozen or so people I have met from France and Sweden the only thing those people complained about was the need for MORE socialism, if they complained at all about their country.  Mostly they would reserve their hatred for Republicans in America though.  Likewise of the 4 people from Canada I know only one hates the healthcare over there.

Now  immigrants from Arabic countries and Indians (of which I know many of both) who have been to both America and Europe (mostly France and Sweden.  I'm not counting the UK) they almost unilateraly prefer America.

If that is an honest sample, it confuses me.

Pampered brats vs people trying to work for a living.

Dondoolee:

Now  immigrants from Arabic countries and Indians (of which I know many of both) who have been to both America and Europe (mostly France and Sweden.  I'm not counting the UK) they almost unilateraly prefer America.

Unsurprisingly, since most Asian/Arabic immigrants tend to be independent businessmen (small restaurant or shop owners) whereas the entrepeneurial, self-reliant spirit of the average European seems to have all but vanished.

All I ever get to hear about businessmen is that they "abuse" lower taxes on investment to finance their cars. Duh!

half of my family immigrated from Syria in the 50's, and I know a large portion of arabs in northwest Ohio because of it.  I would say that is a fair stereotype, while they were mostly somewhat apolitical, or where until Bush kind of forced them not to be.

Sphairon:

Dondoolee:

Now  immigrants from Arabic countries and Indians (of which I know many of both) who have been to both America and Europe (mostly France and Sweden.  I'm not counting the UK) they almost unilateraly prefer America.

Unsurprisingly, since most Asian/Arabic immigrants tend to be independent businessmen (small restaurant or shop owners) whereas the entrepeneurial, self-reliant spirit of the average European seems to have all but vanished.

I think that the issue is more complicated than that. Where taxes are high, the incentives for cheating with taxes are high too. And this is what the million of never-oppressed middle class arab immigrants and their children in Sweden do.  They and every member of their phantastically huge families (on doctored papers) take social welfare from the tax payers, at the same time as they all work for the family restaurant. Since the most anti-PC antisemitic jewish mass murdering gas chamber nazi thing imaginable to do in Sweden, is to apply the same law on non-Swedes as on Swedes, this multi-billion mafia grows out of control by leaps year by year. 50 years from now, Sweden will again be etnically homogenously, since practically all of its then 100 million inhabitants will be arabs, and "our" living standard will be at the Gaza level forever with war and foreign aid being the by far two dominating "industries"....

Actually, this increasing lawlesness is the only sign of liberalization taking place in Sweden!

Has the tension of cultures increased, even with the lefties, because of the immigration situation?  

Add these to the list:

Sweden after the Swedish model.

EU vs USA.

 

Jon Irenicus:

Add these to the list:

Sweden after the Swedish model.

 

Trivia: The writer of that pdf was a member of the Swedish Riksdag (for the "Liberal People's Party", and I do not remember him being very libertarian. The think-tank (Timbro) that is hosting the pdf has a high-up member blaming libertarianism for the financial crisis. I haven't read the PDF, but I would guess that it's not 100%.

ProudCapitalist:

I think that the issue is more complicated than that. Where taxes are high, the incentives for cheating with taxes are high too. And this is what the million of never-oppressed middle class arab immigrants and their children in Sweden do.  They and every member of their phantastically huge families (on doctored papers) take social welfare from the tax payers, at the same time as they all work for the family restaurant.

Don't get me wrong, but that is, in my view, part of an entrepreneurial mentality: taking profits where chances arise. I don't think these Arabs would actually start pillaging Europe if it weren't for the welfare state; much rather, they recognize this faulty and prone-to-abuse system as what it is and act accordingly.

Sort of like a PDA which doesn't have a clause in its contract definining standard reactions to criminal charges by other PDAs. It'll be full of pirates and criminals in no time who demand enforcement of their purchased protection.

Or, to use a more real-world example, a stock broker who is shorting a specific company big time as soon as he realizes that their pension plan is unsustainable. Sure, they still produce what's in demand, but how long and what then?

As they say, the market figures out the best business models. That's true for political systems as well.

Since the most anti-PC antisemitic jewish mass murdering gas chamber nazi thing imaginable to do in Sweden, is to apply the same law on non-Swedes as on Swedes, this multi-billion mafia grows out of control by leaps year by year.

Same thing over here in Germany and, I'd reckon, in the rest of Western Europe as well. Except maybe Ireland.

Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4

If there's any "myth" involved, the most fundamental one would be the conception of Scandinavian social democracy as "socialist." Social democracy is merely a different breed of capitalism, which falls into the category of the more leftist Rhine capitalism rather than the more rightist form of Anglo-Saxon capitalism. The Anglo-Saxon model, of course, illustrates the inefficient nature of attempting to implement a "free market" economic framework, which is a utopian fantasy with no applicability outside of the textbook.

Conversely, social democracy, though short of the efficiency that socialist economic structure is required to guarantee, produces greater efficiency gains than the Anglo-Saxon model, whilst promoting positive social benefits that Anglo-Saxon capitalism and more "centrist" forms of capitalism (such as the liberal democratic model), fail to provide, as indicated by Headley et al.'s Is there Normal 0 false false false EN-US X-NONE X-NONE a Trade-Off Between Economic Efficiency and a Generous Welfare State? A Comparison of Best Cases of `The Three Worlds of Welfare Capitalism,’ for instance.

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Normal 0 false false false EN-US X-NONE X-NONE "A crucial debate in policy-making as well as academic circles is whether there is a trade-off between economic efficiency and the size/generosity of the welfare state. One way to contribute to this debate is to compare the performance of best cases of different types of state. Arguably, in the decade 1985-94, the US, West Germany and the Netherlands were best cases - best economic performers - in what G. Esping-Andersen calls the three worlds of welfare capitalism. The US is a liberal welfare-capitalist state, West Germany a corporatist state, and the Netherlands is social democratic in its tax-transfer system, although not its labor market policies. These three countries had rates of economic growth per capita as high or higher than other rich countries of their type, and the lowest rates of unemployment. At a normative or ideological level the three types of state have the same goals but prioritise them differently. The liberal state prioritises economic growth and efficiency, avoids work disincentives, and targets welfare benefits only to those in greatest need. The corporatist state aims to give priority to social stability, especially household income stability, and social integration. The social democratic welfare state claims high priority for minimising poverty, inequality and unemployment. Using ten years of panel data for each country, we assess indicators of their short (one year), medium (five year) and longer term (ten year) performance in achieving economic and welfare goals. Overall, in this time period, the Netherlands achieved the best performance on the welfare goals to which it gave priority, and equalled the other two states on most of the goals to which they gave priority. This result supports the view that there is no necessary trade-off between economic efficiency and a generous welfare state."

Dondoolee:

I can honestly say, from the dozen or so people I have met from France and Sweden the only thing those people complained about was the need for MORE socialism, if they complained at all about their country. 

I think there are two components to this. One is that European social democratic policies do work from the perspective of some people. So as you get these supposedly free services and welfare and are taken care of, you obviously are not going to bite the hand that feeds you. Even if that hands takes the food from your pocket to begin with. You have to keep in mind that the issues with the welfare state are largely unseen and most people don't bother with the details. This will probably change drastically within the next 10 years, but for now people are content and don't care.

The second component is the way people are fed political views by the government. For example, Finns are told from an early age that being born in Finland is like winning the grand prize in the lottery. This message is then permeated throughout the life of a Finn by State media. In the end, you have a person who has never truly questioned the status quo. No "normal" Finn is even able to question the status quo, since any mention of a non-welfare society is met by irrational emotions, not by rational consideration. For example, I have NEVER heard the media in Finland (private or public) talk about decreasing government size. That type of thinking simply does not exist in Finland in any great quantity.