Nordic countries: the myth of socialist paradises

Anonymous · February 13, 2021, 11:59:22 AM

Swedish researcher and author, wrote the book "Scandinavian Unexceptionalism: Culture, Markets and the Failure of Third-Way Socialism," which provides a very good explanation of the realities in Nordic countries. Let me summarize the book for you in case you don't have time to read it.

Culture—Not the Welfare State—Lead to Nordic Countries' Success

"A Scandinavian economist once said to Milton Friedman (American economist, 1976 Nobel Prize laureate in economics): 'In Scandinavia, we have no poverty.' Milton Friedman replied: 'That's interesting, because in America, among Scandinavians, we have no poverty, either.'" —Quoted by Joel Kotkin, Chapman University professor

The welfare state is not the reason for the Nordic countries' success. The Scandinavian societies had achieved low income-inequality, low levels of poverty, and high levels of economic growth before the development of the welfare state.

Before the implementation of welfare state policies, between 1870 and 1936, Sweden's growth rate was the highest among industrialized nations. However, as the welfare state was gradually adopted between 1936 and 2008, the growth rate of Sweden fell to 13th.

According to Dr. Sanandaji, "High levels of trust, a strong work ethic, civic participation, social cohesion, individual responsibility and family values are long-standing features of Nordic society that predate the welfare state. These deeper social institutions explain why Sweden, Denmark, and Norway could so quickly grow from impoverished nations to wealthy ones as industrialization and the market economy were introduced in the late 19th century. They also played an important role in Finland's growing prosperity after World War II." (All quotations in this article are taken from Sanandaji's book unless otherwise noted.)

The book indicates that religion, climate, and history all seem to have played a role in forming these special cultures. These countries have homogeneous populations with similar religious and cultural backgrounds. Protestants tend to have a very strong work ethic; a very hostile natural environment make Scandinavia a difficult place to survive unless a farmer works exceptionally hard; many farmers own their own land and have complete control over the fruits of their labor, so it has been financially rewarding to work hard.

Culture matters. It is the culture, free-market capitalism, and the rule of law that has made the Nordic countries prosperous, and made it possible to implement welfare policies without serious adverse consequences. It is also the culture that has fostered the success of the descendants of Scandinavian immigrants to America. Most of those migrants came to America in the 19th century before the implementation of welfare state policies. They were not elite groups, but their descendants are more successful than their cousins in Scandinavia, which suggests that the welfare state policies have impeded the growth of economy.

Southern European countries, such as Italy, France, and Greece, have adopted similar welfare state policies as Nordic countries, but have had much less favorable outcomes. Again, this strongly suggests that culture really matters.

https://www.theepochtimes.com/a-moms-research-part-1-nordic-countries-are-not-socialist-paradises_3695026.html?utm_source=newsnoe&utm_medium=email&utm_campaign=breaking-2021-02-12-3">https://www.theepochtimes.com/a-moms-re ... 21-02-12-3">https://www.theepochtimes.com/a-moms-research-part-1-nordic-countries-are-not-socialist-paradises_3695026.html?utm_source=newsnoe&utm_medium=email&utm_campaign=breaking-2021-02-12-3

Anonymous · February 13, 2021, 12:15:08 PM

Welfare State Policies Weaken the Nordic Cultures and Values

"It took time to build up the exceptionally high levels of social capital in Nordic cultures. And it took time for generous welfare models to begin undermining the countries' strong work ethic." —Dr. Nima Sanandaji, Swedish Researcher

Policies help to shape the character of a society. As Scandinavians became accustomed to high taxes and generous government benefits, their sense of responsibility and their work ethic gradually deteriorated.

When asked during a 1981–84 survey if "claiming government benefits to which you are not entitled is never justifiable," 82 percent of Swedes and 80 percent of Norwegians agreed. But in a similar survey in 2005–08, only 56 percent of Norwegians and 61 percent of Swedes agreed with the statement.

Generous welfare benefits reduce the incentives for taking a job or working hard. It also weakens parents' incentives to teach their children to work hard. More and more people have become dependent on government welfare payments. And the dependency would pass from one generation to the next. This growing population in turn voted to support more welfare and bigger government, and therefore higher taxation, which has pushed the Nordic countries toward more extremes of socialism.

Anonymous · February 13, 2021, 12:16:10 PM

Are Scandinavians More Tolerant of High Taxes? No.

"Fiscal illusion distorts democratic decisions and may result in 'excessive' redistribution." —Jean-Robert Tyran, Swiss Economist, and Rupert Sausgruber, Austrian economist

Scandinavians have not been fully aware of the cost for a bigger government. Politicians have created a "fiscal illusion" in which a large portion of taxes is indirect or hidden, like those in effect before wages are paid, in the form of employers' fees or employers' social security contributions, and those included in the listed price of goods, like VAT. These taxes eventually fall on all people, but they are not aware of them.

Dr. Sanandaji described a survey conducted in 2003: "The Swedish public was asked to estimate the total amount of taxes they paid. The respondents were reminded to include all forms of direct and indirect taxation. Almost half of the respondents believed that the total taxes amounted to around 30–35% of their income. At the time of the survey, the total tax rate levied on an average income earner, including consumption taxes, was around 60%."

According to a database of the Organization for Economic Co-operation and Development (OECD) and Dr. Sanandaji's calculations, from 1965 to 2013, all Nordic nations' tax burdens have increased significantly, but most of their visible taxes have decreased, except in Denmark.

This has successfully created an illusion that government expansion would not cost much. So why not elect politicians that expand government size and increase welfare?

Anonymous · February 13, 2021, 12:17:09 PM

A Failed Socialist Experiment in Sweden

"Sweden is the world champion in 'jobless growth'." —Headline of a 2006 article in the Swedish business daily Dagens Industri

From the beginning of the social democratic era in the 1930s until the 1960s, Nordic countries had remained relatively free-market-oriented, and had similar tax levels as other industrialized nations.. It was at the beginning of the 1970s when radical social democratic policies were adopted, and the fiscal burden and government spending reached high levels.

Sweden went the furthest toward socialism among Scandinavian nations since the late 1960s. The basic idea was to replace free markets with a model closer to a socialist planned economy. "Not only did the overall tax burden rise, but the new system also discriminated heavily against individuals who owned businesses. As politics radicalized, the social democratic system began challenging the core of the free-market model: entrepreneurship."

According to Swedish economist Magnus Henrekson, in 1980, "the effective marginal tax rate (marginal tax plus the effect of inflation) that was levied on Swedish businesses reached more than 100 percent of their profits." This means that a private entrepreneur would actually lose money if he or she made a profit. Henrekson draws the conclusion that the tax policies were "developed according to the vision of a market economy without individual capitalists and entrepreneurs."

The result of the policy is obvious: the establishment of new businesses dropped significantly after 1970. In 2004, "38 of the 100 businesses with the highest revenues in Sweden had started as privately owned businesses within the country. Of these firms, just two had been formed after 1970. None of the 100 largest firms ranked by employment were founded within Sweden after 1970. Furthermore, between 1950 and 2000, although the Swedish population grew from 7 million to almost 9 million, net job creation in the private sector was close to zero."

As for the jobs in the public sector, they increased significantly until the end of the 1970s. At that point, the public sector could not grow larger because taxes had already reached the highest possible level. "When the welfare state could grow no larger, overall job creation came to a halt—neither the private sector nor the public sector expanded."

At the beginning of the 1980s, "employee funds" were introduced in Sweden. It was to take away a portion of companies' profits and transfer them to funds controlled by labor unions. The purpose was to achieve socialism moderately by gradually transferring the ownership of private companies to the unions. "Although the system was abolished before it could turn Sweden into a socialist economy, it did manage to drive the founders of IKEA, Tetra Pak, H&M, and other highly successful firms away from the country."

The dreadful policy of "employee funds" was finally abolished in 1991, which is around the time that Sweden faced its most severe economic crisis since WWII. It took almost two decades for the employment to reach its pre-1990 level. As a comparison, it took only seven years for Sweden to recover, in terms of employment, from the Great Depression in the 1930s.

Anonymous · February 13, 2021, 12:18:26 PM

Finally, Welfare Reform

"Sweden was the more socialist of the Scandinavian countries a few decades ago. It is also the country that has reformed the most." —Dr. Nima Sanandaji, Swedish Researcher

Beginning in the 1990s, almost all Nordic nations realized that welfare reform is inevitable, except Norway. In 1969, one of the largest offshore oil fields in the world was found in Norwegian waters. The oil wealth makes it possible to sustain its generous welfare systems. Since Sweden and Norway are quite comparable in many ways except for welfare reform, it is a great experiment to see the impact of the reform.

The reform in Sweden includes reducing welfare benefits, lowering taxes, liberalizing the labor market, and implementing gate-keeping mechanisms for receiving sickness and disability benefits. After the reform, from 2006 to 2012, the population supported by government benefits decreased from 20 percent to 14 percent in Sweden. In comparison, the population supported by government benefits in Norway decreased by only less than 1 percent in the same period of time.

For young Norwegians, there is very little incentive to work hard. Employers are therefore turning to foreign labor, including from Sweden. Between 1990 and 2010 the number of young Swedes employed in Norway increased by more than 20 times because of higher wages in Norway brought by oil revenues. According to a survey of Norwegian employers, three out of four answered that Swedish youth work harder than Norwegian youth.

After the reform, during the global financial crisis in 2008 and 2009, Sweden showed impressive economic performance. The reforms lead to greater economic freedom, stronger incentives for work, and less reliance on government welfare.

Denmark and Finland also reformed their welfare systems. Even in Norway, some market reforms have been made. More are likely to come.

A Caution to Americans

The Nordic nations are returning to their free market roots. They have learned their lessons through their forays into welfare states or even tentative socialism, and have turned around from a dead end. We Americans should not fall for leftist propaganda and rush into a future that is doomed to failure.

@realAzhyaAryola · February 13, 2021, 01:23:07 PM

Great thread.

cc · February 13, 2021, 02:27:09 PM

Good info Seoul

Anonymous · February 13, 2021, 02:37:07 PM

I've been to Norway when my husband was working on jobs there..

I didn't get to know how the country functions though as a tourist.

Anonymous · February 13, 2021, 03:03:22 PM

If "socialism" means government ownership of the means of production, which is the classic definition, Sweden never qualified.

When little Sweden's economists were second in academic standing only to big Britain's, in the early 20th century, they were "liberal" in the European sense: free-traders opposed to central planning and governmental ownership. None of Sweden's manufacturing or extractive industries has ever been socialized, this in contrast, for example, to the experiment after 1946 in the world's first innovative economy, when the Labour party's Clause IV nationalized the Bank of England, coal, inland transport, gas, steel, health services, and much else. Sweden never followed even the more modest example of America's temporary nationalization of railways during the First World War. Sweden's Systembolaget, the state liquor store, was sold off in 2008, as it has not yet been in all the U.S. Apoteket, the maddeningly inefficient Swedish-government drug-store monopoly, was privatized, too, praise the Lord.

Anonymous · February 13, 2021, 03:20:38 PM

I like Sweden and Denmark's economic models. Their economies are much freer, offer more choice and have far less job killing red tape than Canada and the US. In that way, they're like Singapore, where I will probably immigrate to.

However, despite their liberal economic reforms, Swedish cities are starting to resemble Baltimore. The Swedish experiment with multiculturalism has been an abject failure. Denmark seems to be putting the brakes on it, while Sweden doubles down on stupid.

Anonymous · February 13, 2021, 03:46:24 PM

The big potatoes in Sweden are owned by reclusive millionaires worthy of Newport, R.I., or Rancho Santa Fe, Calif. Consult Stieg Larsson and The Girl with the Dragon Tattoo. When Saab Autos began its descent into bankruptcy, no Swede suggested that the government give the company billions on the security of its worthless stock. When Volvo became a Chinese company, no Swede objected. Compare the determination of the Bush and Obama administrations in proudly capitalist America to socialize General Motors and Chrysler — Chrysler for the second time. Or compare the plans on the left of the Democratic party to solve any problem by expanding the government instead of solving the problem, such as monopoly in the provision of U.S. health care. "In many fields," noted a Swedish diplomat, "we have more private ownership compared to other European countries, and to America. About 80 percent of all new schools are privately run, as are the railroads and the subway system." Compare Amtrak, with eight stops in West Virginia, compliments of Senator Robert Byrd.

Anonymous · February 13, 2021, 04:29:05 PM

I can't find as many specifics on the Finnish economic model as I can for Sweden.

Anonymous · February 13, 2021, 04:44:16 PM

Scandianavian countries are conformist. Not as much as Oriental countries, but still conformist.

Thiel · February 14, 2021, 01:46:45 PM

I have Scandianavian ancestry(Icelandic). Bernie Sanders confuses social cohesion with socialism.

I like John Stossel. He explains in this article why the state controlling the means of production doesn't work.

As the Democratic Socialists of America put it, "Society should be run democratically – to meet public needs, not to make profits for a few."

Sounds nice. If socialists are elected, then we'll have a more just society.

But Venezuela's socialists were elected.

"They can start off democratically elected," says economist Ben Powell, director of the Free Market Institute at Texas Tech, but "once they centralize control over the economy, it becomes impossible to 'un-elect' them."

Hugo Chavez was elected but became an authoritarian who chose his successor, Nicolas Maduro. Maduro now gets "elected" by having opponents arrested and "ordering state employees to vote for him or they lose their job," says Powell." Socialism always becomes authoritarian?" I ask.

"Everywhere you try socialism, that's what you get," he replies. "It's hard to exercise political freedom if you don't have economic freedoms. If you're dependent upon the state for your livelihood, you lose your ability to use your voice to oppose (the state) because you can be punished.

And if the state directs the economy, some government department must manage millions of production decisions and prices. That never works. No bureaucrat can anticipate the needs and wants of millions of people in different places. No politician can match the wisdom of decentralized entrepreneurs making subtle adjustments constantly.

Celebrities like Rosario Dawson, Susan Sarandon and Danny DeVito star in videos selling "democratic" socialism as "public schools" and "interstate highways."

They are not wrong. "Some industries are government-owned," replies Powell, but "when you look at things that are inefficiently done – public education, our congested streets – (it's clear) socialized industries don't work well."

"They do in Scandinavian countries!" say socialism's promoters.

That's myth No. 4.

Scandinavia does have big welfare programs, but capitalism pays for them.

The socialists call Sweden socialist, but that's just wrong. "Volvo is a private company," says Powell. "Restaurants and hotels are privately owned. Markets organize the vast majority of Swedish economic activity."

Sweden did once try socialism. The result was high taxes, inflation and economic decline. Sweden recovered only when it ended its socialist experiment. It cut taxes, government spending and sold state-owned businesses.

After economically ignorant politicians like Bernie Sanders called Scandinavia "socialist," Denmark's prime minister even came to America to say: "Denmark is far from a socialist planned economy. Denmark is a market economy."

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In fact, in rankings of economic freedom, Denmark ranks as more free market than the United States.

Myth No. 5: Socialism is completely different from fascism.

In Congress, Rep. Louie Gohmert called Hitler a "socialist." Rep. Steve Cohen took offence, shouting, "It's the Nazis that were terrible, not the socialists!"

But Nazis were "national socialists." There are differences between fascism and socialism, but "both replace market decision-making with command and control," says Powell. Fascism "leaves private ownership in nominal terms" but neither system allows individual freedom. "You lose... control over your own future. Only under capitalism do you have the freedom to say, 'No.'"

Socialism appeals to people today because it promises "equality and social justice," but look at its track record. In Russia, Cuba, North Korea, Nicaragua, Vietnam and China, socialism has meant a loss of freedom.

Socialist experiments also failed in Israel, India, Great Britain, Afghanistan, Syria, Algeria, Cambodia, Somalia, etc. There are no socialist success stories.

Only capitalist countries create real wealth.

"The history of humanity is poverty, starvation, early death," Powell points out. "In the last 20 years, we've seen more humans escape extreme poverty than any other time in human history. That's because of markets!"

Yet, millions vote for socialism.

https://torontosun.com/opinion/columnists/stossel-socialism-never-works">https://torontosun.com/opinion/columnis ... ever-works">https://torontosun.com/opinion/columnists/stossel-socialism-never-works

cc · February 14, 2021, 03:08:06 PM

A good take on it. Stossel is always worth a read or a listen

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Nordic countries: the myth of socialist paradises

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