Ben and Bob, along with fellow economist Brad Hobbs, enjoy some excellent but highly taxed Belgian beer in Sweden.
SEPTEMBER 2009
“If I’ve got one major bitch about Sweden,” I said as I sat across the table from Bob at the Duvel Café in Stockholm, “it’s the alcohol prices.”
The Duvel Café isn’t a dive, but it’s not a swanky, high-end bar either. Behind its plain, black, street-front exterior is a five-seat bar with high-alcohol Belgian beers on tap, a few booths, and the uncomfortable wooden window seat that was causing a major pain in my ass. Yet, despite the relative geographic proximity to Belgium, our Belgian beers cost far more than what we were accustomed to paying in the U.S.
“Fucking taxes,” he answered. “Sweden has to pay for its welfare state.” He was right. Sweden taxes alcohol at rates higher than most countries. In fact, Sweden taxes everything. A lot.
Sweden is the first stop on our tour of socialist countries, even though it’s not a socialist country. Wait. What? You heard Sweden was an example of how socialism works? Though lots of people believe Sweden is a socialist country, and some of our politicians try to use that misunderstanding to advance their own agendas, we’re going to present evidence to the contrary. But first, let me give you a little background about Bob and me, so you’ll know where we’re coming from.
Bob grew up in Cincinnati, Ohio. His background is working-class, and he’s a lifelong fan of Cincinnati’s subpar professional sports teams. While earning his PhD at Florida State University in the early 1990s, Bob became involved in a project analyzing quantitative data that would finally settle a question that has long been a point of disagreement among social scientists: whether a more capitalist government or a more socialist government creates conditions that translate to a better quality of life for its citizens.
The idea for Bob’s economic freedom index, published in the Fraser Institute’s annual Economic Freedom of the World report, started with Milton Friedman, the Nobel Prize–winning economist, and Michael Walker, the executive director of the Fraser Institute in Vancouver. Since the mid-1990s, Bob has worked with Professor James Gwartney of Florida State to put out the Fraser Institute’s annual economic freedom index. We’ll talk about the index a lot in this book. Bob was a professor at Shawnee State and Capital University, both in Ohio, and Auburn University in Alabama, before he landed his current gig in Dallas where he is the director of the O’Neil Center for Global Markets and Freedom at the Cox School of Business at Southern Methodist University.
I come from a similar working-class background in Haverhill, Massachusetts, about thirty miles north of Boston, and remain an avid fan of Boston’s decidedly superior sports franchises. Our differing allegiances don’t hurt our friendship. In fact, Bob’s a loyal enough fan of his Bengals to bet me a bottle of liquor, without the benefit of a spread, each time they play the Patriots. I’ve enjoyed drinking those bottles, though I suspect he’s regifting me the booze he’s won from another friend of his who insists on rooting for the Browns.
I earned my PhD at George Mason University and went on to be a professor at San Jose State University in California and Suffolk University in Boston before taking a position as an economics professor and director of the Free Market Institute at Texas Tech University six years ago.
Bob and I became friends at a Mont Pelerin Society meeting in Salt Lake City in 2004. The economist Friedrich Hayek founded the society in Mont Pelerin, Switzerland, in 1947, bringing together accomplished academics from around the world concerned with the spread of socialism and totalitarianism. Over the years, eight members of the Mont Pelerin Society have won Nobel Prizes, including Hayek and Friedman. Today, the society has more than five hundred members—not just academics, but business, political, and intellectual leaders—who share a commitment to defending freedom.
Salt Lake City was dry back in 2004, except for “private clubs,” essentially bars that sold short-term memberships as a cover charge. Bob and I became members and drinking companions at one such club near our hotel, and we climbed our first mountain together in the nearby Wasatch Range. We’ve since shared countless drinks, attended dozens of economics conferences, and climbed many mountains.
Bob and I also share a devotion to freedom and free markets. But our devotion is not mere ideology, it is also informed by economic theory and evidence. Nobel prize–winning economist James Buchanan believed understanding economic principles allows “the average man . . . to command the heights of genius,” but that without these principles “he is a jibbering idiot.”1 In many ways we’re fairly regular guys, but our training in economic theory and our analysis of economic data allow us to see, understand, and explain the world a little differently than most people—and, we hope, help us to avoid being “jibbering idiots.”
This book is a truthful accounting of our travels, and so includes our sometimes excessive drinking, low-grade misogyny, and salty language. We are white, middle-aged, American males who are not “woke” and don’t even know what “intersectionality” means. If that offends you, you can put this book down and read one of our boring academic journal articles instead. It will make the same points but without the local color.
In this book, though, we’re aiming for a popular audience that will appreciate not just our economic insights but our down-to-earth honesty. We wrote this book because too many people seem to be dangerously ignorant of what socialism is, how it functions, and its historical track record. We also wanted to get drunk in Cuba, and this was a great way to write off our expenses.
* * *
In the spring of 2016, a Harvard survey found that a third of eighteen- to twenty-nine-year-olds supported socialism.2 Another survey, from the Victims of Communism Memorial Foundation, reported that millennials supported socialism over any other economic system.3
The Young Democratic Socialists of America, which had only twelve chapters on college campuses at the end of 2016, burgeoned to nearly fifty chapters by fall 2017.4 Twenty-year-old Michelle Fisher, the national co-chair of the organization, said, “I think people in my generation—people who grew up post-Cold War—I don’t think socialism is as much a scarlet S as it is for older folks. . . . The taboo for me was never there.”5
Obviously not. The Victims of Communism survey found that 31 percent of millennials had a favorable view of Che Guevara; 23 percent thought well of Vladimir Lenin; and 19 percent approved of Mao Zedong, so at least two out of ten millennials apparently think that mass murder in the interest of socialism isn’t so bad. That’s one of the taboos that’s fallen.
But it isn’t just young people who ignore or deny socialism’s pernicious past. In 2017, the New York Times ran a weekly column, “Red Century: Exploring the history and legacy of Communism, 100 years after the Russian Revolution.”6 While the columnists and topics varied from week to week, there was little focus on the intentional mass killings carried out by socialist regimes. Nor was there much mention of the economic insanity of socialist governments that resulted in millions of people starving to death. In an entire year’s worth of columns, only one discussed how socialism led to economic stagnation. Overwhelmingly, the Times treated us to columns about how socialism was merely an advanced form of liberalism, highlighting the allegedly green policies of “Lenin’s Eco-Warriors” and instructing us on “Why Women Had Better Sex Under Socialism.”
At about the same time, Bernie Sanders, a self-proclaimed democratic socialist, made a strong run for the Democratic Party nomination for president, getting 43 percent of the vote in the 2016 Democratic primaries.
How can so many Americans view socialism so favorably, when in practice it has led to misery and mass murder? The answer is that, like the New York Times, many people assume that socialism is merely a more generous form of liberalism.
The Victims of Communism survey found that only a third of millennials could define socialism correctly. In the first Democratic Party debate, Sanders was asked how a socialist could win a general election in the United States. He pointed to “countries like Denmark, like Sweden and Norway,” as examples of his version of socialism.7 But those countries aren’t socialist.
Sweden does have a big welfare state, government-provided health care, and generous unemployment benefits, and the drinks at Duvel Café were indeed highly taxed. But welfare and entitlement programs, however highly prized by socialism’s acolytes, are not the defining components of socialism.
The economic freedom index that Bob helped create is probably the best way to measure whether a country has a more capitalist or socialist system. The index uses a zero-to-ten scale, with higher scores indicating a more capitalist system. If a country earns a high score on the index, that generally means that country keeps government taxation low, respects private property rights, maintains the value of its currency, lets people trade freely, and keeps regulations to a minimum.
So how does Sweden stack up? Overall, Sweden gets a 7.54 rating, which is good enough for twenty-seventh place out of the 159 countries in the study. Sure, Sweden taxes the bejesus out of its citizens. Its tax-and-spend score is very low indeed—3.64 out of 10. It regulates labor markets quite a lot (6.81) as well, but overall it does a good job protecting property rights (8.35), avoiding inflation (9.71), allowing free trade (8.28), and only lightly regulating credit markets (9.90) and businesses more generally (8.08). Of the other Nordic countries Comrade Bernie mentioned, Denmark rates 8.0 and Norway 7.62. All three rank in the top fifth of the most economically free countries in the world.
Bottom line: Sweden is a prosperous, mostly capitalist country. When we were there we could see this with our own eyes. The Swedes were obviously wealthy, their buildings were well maintained, and their beer was good and cold. In fact, what we saw was consistent with the research that uses the economic freedom index to measure the impact of economic freedom on living standards. In a recent review of nearly two hundred academic studies, Bob and his co-author Joshua Hall concluded, “Over two-thirds of these studies found economic freedom to correspond to a ‘good’ outcome such as faster growth, better living standards, more happiness, etc. Less than four percent of the sample found economic freedom to be associated with a ‘bad’ outcome such as increased income inequality.”8
Although Sweden is still mostly free today, it used to be even freer. Our Swedish friend, Johan Norberg, has told the story of how laissez-faire economic reforms made Sweden rich.9 In his telling, back in the early 1860s his ancestors were so poor that they had to mix tree bark into their bread recipe when they were short on flour. Incomes in Sweden at that time were on par with those in the Congo today. Meanwhile, life expectancies were half as long and infant mortality rates three times as high as they are in many modern poor countries.
But nineteenth-century economic reformers liberalized Sweden’s economy and created a prosperous, capitalist country. Our personal favorite reformer, Lars Johan Hierta, is honored with a copper statue about a kilometer from the Duvel Café. We like Lars because he championed free speech, equal rights for women, business freedom, free trade, small government, and the repeal of public drunkenness laws (as long as the drunk didn’t threaten anyone). Cheers to that!
Ben and Bob, along with fellow economist Brad Hobbs, enjoy some excellent but highly taxed Belgian beer in Sweden.
Hierta and other reformers eventually implemented many of their policies, and Sweden grew rapidly. Between 1850 and 1950 incomes increased eightfold, life expectancy rose twenty-eight years, and infant mortality fell from 15 to 2 percent. By 1950 Sweden was one of the richest countries in the world, and it still had a small government. Its total tax burden, at 19 percent of gross domestic product (GDP), was lower than that of the United States and other European countries.
It’s only relatively recently that Sweden’s tax burden and size of government have ballooned. Government spending exploded from 31 to 60 percent of GDP in the twenty years between 1960 and 1980. High taxes and big government spending alone don’t constitute socialism, but they do have consequences. As Sweden’s government grew, its economy stagnated. It was the fourth-richest country in the OECD (a group of rich countries) in 1970, but by 2000 it had fallen to fourteenth place. Sweden grew most when it was freer than it is today. But even today, it remains relatively economically free and prosperous, and its policies are far from socialist.
If Sweden isn’t socialist, then what is? This is where Americans seem to be confused. Propagandists like Michael Moore don’t help when they tweet out things like “Most polls now show young adults (18-35) across America prefer socialism (fairness) to capitalism (selfishness).” Socialism doesn’t simply equal “fairness.” What it really equals is the abolition of private property; in a socialist economy, the government decides what will be produced, how, and for whom.
Most countries are neither purely capitalist nor purely socialist. All capitalist economies allow, for good or ill, some government ownership of resources and centralized economic planning. Likewise, most socialist countries allow some degree of economic freedom—or they would suffer even worse economic consequences.
The Soviet Union during its period of War Communism (1918–21) and China during the Great Leap Forward (1958–62) came closest to abolishing private property. After each of these massive failures, the Communist governments offered limited private ownership of some means of production and allowed small markets to operate, though socialism predominated.
Today, there are only three countries that remain nearly entirely socialist: North Korea, Venezuela, and Cuba. Other officially socialist countries, like China, are only nominally so, but actually allow for so much private ownership and control that they qualify as mixed economies.
We’ll visit these places and also three former Soviet countries that are trying to reform—Russia, Ukraine, and Georgia. We’ll combine our firsthand travel observations with economic theory, history, and empirical social science to try and understand what’s going on in these places.
For us, as travelers, socialist economic policies can be an inconvenience, but for those who live under them, they can impose brutal and unnecessary suffering, which makes us angry—and might make you angry too.
So, with that warning, pack your carry-on, order a stiff drink from the flight attendant, and let’s embark on our tour of the unfree world.