EXPOSING THE MYTH OF NORDIC SOCIALISM

National Review on July 26, 2016 published an article on an important book by Nima Sanandaji to be published in August 2016 on the Nordic social system the American left dreams of importing. Excerpts below:

“Debunking Utopia: Exposing the Myth of Nordic Socialism” [is about] the social success of Nordic countries…The social success of Nordic countries pre-dates progressive welfare-state policies. A common misconception is that the Nordic countries became socially and economically successful by introducing universal welfare states funded by high taxes. In fact, their economic and social success had already materialized during a period when these countries combined a small public sector with free-market policies. The welfare state was introduced afterward. That the Nordic countries are so successful is due to an exceptional culture that emphasizes social cohesion, hard work, and individual responsibility.

Today, in contrast, Nordic countries stand out as having high-tax models. Denmark, for example, has the highest tax rate among developed nations. But in 1960, the tax rate in the country was merely 25 percent of GDP, lower than the 27 percent rate in the U.S. at the time. In Sweden, the rate was 29 percent, only slightly higher than in the U.S.

In fact, much of Nordic prosperity evolved between the time that a capitalist model was introduced in this part of the world during the late 19th century and the mid 20th century –during the free-market era.

What might come as a surprise to American admirers of the Nordic countries is that high levels of income equality evolved during the same period. Swedish economists Jesper Roine and Daniel Waldenström, for example, explain that “most of the decrease [in income inequality in Sweden] takes place before the expansion of the welfare state and by 1950 Swedish top income shares were already lower than in other countries.”

…some scholars attribute [the Nordic success] to the Protestant work ethic. It is likely that climate played an equally important role in creating the Nordic success culture. Nordic farmers owned their land but struggled to survive in the unforgiving climate of Scandinavia. In order to thrive, these homogenous societies developed strict work ethics, healthy lifestyles, and a code of individual responsibility out of necessity. To paraphrase the ancient Persian king Cyrus the Great, hard lands breed hard people.

American admirers of Nordic-style social democracy argue that by copying social-democratic policies, the U.S. will copy Nordic social success. But is this true? Hard lands breed hard people.

…the longest average life spans among Nordic peoples are found in Iceland — the small Nordic cousin that has the most distinctly Nordic culture, but also the most limited welfare system. It is equally interesting to look at Nordic Americans, a group that combines the Nordic success culture with U.S.-style capitalism. It was mainly the impoverished people in the Nordic countries who sailed across the Atlantic to found new lives…

Danish Americans today have fully 55 percent higher living standard than Danes. Similarly, Swedish Americans have a 53 percent higher living standard than Swedes. The gap is even greater, 59 percent, between Finnish Americans and Finns. Even though Norwegian Americans lack the oil wealth of Norway, they have a 3 percent higher living standard than their cousins overseas. Perhaps even more astonishing is that Nordic Americans are more socially successful than their cousins in Scandinavia.

They have much lower high-school-dropout rates, much lower unemployment rates, and even slightly lower poverty rates.

Currently, Nordic-style democratic socialism is all the rage among Democrat activists as well as with liberal intellectuals and journalists. But in the Nordic countries themselves, this ideal has gradually lost its appeal. Only one of the five Nordic countries, Sweden, currently has a government headed by social democrats.

The other four countries have center-right governments. Moreover, the Swedish Social Democrats enjoy weaker popular support today than at any point in modern times. They lead a minority government, as the majority of Swedes either support one of the center-right parties or the anti-immigration party.

During the past few decades, the Nordic countries have gradually been reforming their social systems. Taxes have been cut to stimulate work, public benefits have been limited in order to reduce welfare dependency, pension savings have been partially privatized, for-profit forces have been allowed in the welfare sector, and state monopolies have been opened up to the market. In short, the universal-welfare-state model is being liberalized.

…a closer look shows that these policies are not what explain the success of Nordic societies, and that the Nordic people themselves are becoming less enthusiastic about democratic socialism. Unfortunately, the American Left is more interested in the Nordic myth than a nuanced view of the actual benefits — and drawbacks — of democratic socialism.

Nima Sanandaji is the president of the European Centre for Policy Reform and Entrepreneurship. His latest book, “Debunking Utopia: Exposing the Myth of Nordic Socialism” [was published in August].

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