THE MYTH OF SUCCESSFUL SCANDINAVIAN SOCIALISM
Socialists like to point to Sweden as an example of how a heavily regulated economy can outperform a free market one. But they’re wrong. Socialism nearly wrecked Sweden, and free market reforms are finally bringing its economy back from the brink of disaster.
The real source of Sweden’s relatively high standard of living has nothing to do with socialism and everything to do with Sweden avoiding both world wars and jumping into the industrial revolution when its economy was one of the freest, least regulated, and least taxed in Europe.
Sweden’s high degree of economic freedom in the late nineteenth and early twentieth centuries gave rise to many extraordinary inventors and entrepreneurs, such as Alfred Nobel, inventor of dynamite; engineer Sven Wingquist, who invented the self-aligning ball bearing; Gustaf Dalén, who founded the gas company AGA; and Baltzar von Platen, who invented the gas-absorption refrigerator. Volvo, Saab, and the telecommunications company Ericsson were also founded during this era.1
Thanks to its relatively free economy and its ability to avoid war (having fought no war, and diverted no resources, including “the ultimate resource,” people,2 to destruction since 1809), Sweden was able to enjoy the highest per-capita income growth in the world from 1870 to 1950.3
Starting in the 1930s, Swedish politicians became infatuated with fascist-style, socialist “planning.” Fascism, of course, fell out of favor, but in the postwar era Sweden expanded its “planned, socialist society” with an ever-growing welfare state. Government spending as a percentage of Swedish GDP rose from what would today seem a relatively modest 20 percent in 1950 to more than 50 percent by 1975.4 Taxes, public debt, and the number of government employees expanded relentlessly.5 Swedes were, in essence, living off of the hard work, investments, and entrepreneurship of previous generations. The country remained relatively prosperous, but could not avoid economic reality. It is impossible to maintain a thriving economy with a regime of high taxes, a wasteful welfare state that pays people not to work, and massive government spending and borrowing. By the 1980s, Sweden’s collapse of economic growth and a government attempt to jumpstart the economy with a massive expansion of credit resulted in economic chaos, with stock market and real estate bubbles that burst, and interest rates that the Swedish central bank pushed up to 500 percent.6 By 1990, Sweden had fallen from fourth to twentieth place in international income comparisons.7 This precipitous economic decline led to a revolt against the socialist regime. More conservative governments sharply reduced marginal income tax rates; abolished currency controls; deregulated bank lending; privatized several government enterprises; deregulated the retail, telecommunications, and airline industries; and implemented deep government spending cuts. But it was a long road back thanks to the incredible burden of Sweden’s welfare state. A 2009 study by the Swedish Economic Association discovered that the Swedish economy had failed to create any new jobs on net from 1950 to 2005.8 Thanks to conservative reforms, however, progress was finally being made, and Sweden’s national debt went from 80 percent of GDP in 1992 to 40 percent by 2008.9
While conservative reforms are restoring Sweden’s economy, the social and economic effects of many decades of socialism will take years to undo. For instance, so many Swedes live off of government “sick benefits” and “early retirement,” that the actual unemployment rate in Sweden is probably at least three times higher than the “official” government unemployment rate. Thousands of Swedes are paid by the government to participate in “labor market political activities” whose “only purpose is to reduce the official unemployment rate.”10
Swedish socialism has also created a new type of “socialist man.” As described by Swedish economist Per Bylund, “[W]hen handing out benefits and therefore taking away the individual’s responsibility for his or her own life, a new kind of individual is created—the immature, irresponsible, and dependent. . . . [T]he welfare state has created . . . a population of psychological and moral children. . . .”11 The children and grandchildren of the welfare state, writes Bylund (as opposed to earlier generations) are indoctrinated at an early age in the government schools that they have a supposed “right” to “free” education, health care, an income, and anything else they might desire. Of course, no one can have a “right” to such material things unless someone else can be compelled to pay for them. Generations of Swedes, however, have been taught that they have a “right” to live at someone else’s expense.
They also believe that their elders—their own aged parents and grandparents—should be taken care of by someone else, namely the state. Consequently, writes Bylund, “most elderly in Sweden either live depressed and alone in their homes, waiting for death to come their way, or they have been institutionalized in public elderly collective living facilities with 24/7 surveillance so as to alleviate the burden on the younger working generations.”12
Similarly, Swedish parents tend to believe that children “should absolutely not intrude on their parents’ right to a career, long holidays abroad, and attending social events.”13 The Swedish welfare state, says Bylund, has created “egotistical monsters” by “handing out privileges and benefits to everybody at ‘nobody’s’ expense.”14
Despite Sweden’s economic recovery after the mid-1990s, socialists might be surprised to learn that it is still poorer than Mississippi, the lowest-income state in the United States.15 Another surprise for socialists is that Sweden has been privatizing portions of its socialized healthcare, social security, and education sectors; and private health insurance is booming because of the inevitable rationing, shortages, and long wait times of socialized healthcare.16
DANISH SOCIALISM, ANYONE?
Denmark is another Scandinavian country that is trying, with good reason, to flee from its socialist past. More than a quarter of the working-age population (eighteen to sixty-six) is on the government dole; for every one hundred persons employed full time, there are about sixty working-age welfare recipients.17 More than 1.5 million people in a country of approximately 5.5 million people live full-time on taxpayer-funded welfare handouts. This requires a very heavy tax burden, including, using 2016 numbers, a marginal income tax rate of 55.6 percent (on incomes of $55,000 and above), a 25 percent national sales tax, and a wide variety of other taxes, including an additional 180 percent tax on automobile purchases.18 “Green taxes” on such things as heating, electricity, water, and gasoline increased dramatically in the 1990s when the socialist Social Democrats were in power.
Danish economist Per Henrik Hansen estimates that the “total tax level . . . approaches 70 percent.” He calls this “a relentless and debilitating” force against “personal economic achievement and . . . accumulation of wealth.”19
It might be no surprise, then, that as in Sweden, many Danish voters have turned to conservative and free market parties to bring Denmark back to economic sanity. Indeed, the classical liberal Venstre Party was in power in a coalition with the Conservative People’s Party from 2001 to 2011, and was elected on its own in 2015.
The real lesson, it seems, of Scandinavian socialism is that it wrecks economies and eventually leads to the election of classical liberal and conservative parties to try to undo the damage.