Bernie Sanders' Scandinavian Utopia Is An Illusion
It seems as though Bernie Sanders’ Scandinavian Shangri-La primarily exists in his own fantasy world. (Photo by Bill Pugliano/Getty Images)
Throughout his campaign, Bernie Sanders has stressed that he wants America to be more like Scandinavia. No surprise there, given that the presidential hopeful is a self-proclaimed Democratic socialist.
In an interview with ABC’s “This Week,” the Vermont Senator said “In those countries, by and large, government works for ordinary people in the middle class, rather than, as is the case right now in our country, for the billionaire class.”
Sanders’ argument takes its starting point in the perception that the Scandinavian so called third-way economic model between socialism and capitalism works well, and that the U.S. could reach the same socio-economic outcomes and prosperity by simply expanding the size of government.
If one studies Nordic politics, economy and history in depth, however, it becomes evident that like with most urban legends, the reality of Sanders’ utopia is wrong. Causality rather runs in the other direction.
Success precedes the contemporary welfare state
The Swedish economist Tino Sanandaji argues in his book “Scandinavian Unexceptionalism” (2015) that a key factor contributing to the Northern European success story has its roots in cultural factors. The Nordics, Sweden in particular, historically developed remarkably high levels of social trust, a robust sense of work ethics and social cohesion, beliefs which pre-dated the formation of the modern welfare state.
The relative success of Nordic countries like Sweden, in terms of being characterized by high living standards, long life expectancy and low crime rates combined with a considerable degree of social cohesion and even distributions of income, precedes the contemporary welfare state as well.
Sweden’s laissez-faire reforms
In the mid-1800s, Swedish Minister of Finance Johan August Gripenstedt, who had discovered the economist Claude Frédéric Bastiat’s ideas following a visit to France, introduced extensive economic laissez-faire reforms. He deregulated the financial sector, and promoted free enterprise, free competition and free trade. These reforms prompted Sweden’s transition to capitalism with the Scandinavian country reaching one of the fastest global economic growth rates by 1890.
During the subsequent prosperous 60 years, tax rates were lower than in other European countries and in the U.S. It was in 1950 when Stockholm’s taxation levels first increased to 20% of GDP, although they remained comparatively low.
Sweden wasn’t always this free. The 30 years to come were characterized by the growth of the generous cradle-to-grave welfare state which Sanders begrudges, based upon government intervention, an increase of tax rates and the re-regularization of previously free markets. The country’s total tax burden reached a crescendo in 1990 at 52.3%, having a negative effect on business and job creation.
The golden years of socialism weren’t great for the economy
These socialist golden years, which saw a peak of big government, were not so golden for economic performance. While Sweden’s growth was second in the world in 1970 (Japan was first), it had quickly dropped to the second-lowest within the OECD in 1990.
It seems as Sanders’ Scandinavian Shangri-La primarily exists in his own fantasy world. The Nordic countries enjoyed productive economic systems before the welfare states we know today were established.
The Senator — who prides himself in promoting a Scandinavian brand of “democratic socialism” – also tends to forget that Sweden began to reverse its economic model during the 1990s by implementing reforms that would have made his Republican contenders proud: State-owned companies were sold and financial markets were once again deregulated while public monopolies were replaced with competition.
The success story of nations such as Sweden were hence not achieved thanks to the welfare state model, but perhaps despite its existence.
The other side of the welfare system
Rather than persistently suggesting that the U.S. should embrace a Scandinavian utopia as a means to create equality – an argument about as intelligent as telling an average-looking person to look like a Swedish supermodel – it is time for Sanders to reveal the other side of the equation: that extensive welfare systems are financed by high taxes on ordinary working families who produce the wealth of America.
The Senator should acknowledge that the only way to finance these generous benefits is by imposing a tax hike for the same middle class income earners he claims to represent rather than the “billionaire class” that “cannot have it all.”
The truthful lesson learned from the Scandinavian experience is that the Nordic welfare state models are not only problematic to duplicate, but that it can be fundamentally unwise for country like America to do so.