The Nordic Democratic-Socialist Myth

Nima Sanandaji:

Although Bernie Sanders failed to win the Democratic presidential nomination, the Vermont senator’s campaign did succeed in mobilizing thousands of progressive activists. Their energy and support seems closely connected to Sanders’s quest to introduce a Nordic-style welfare model in the United States. As Sanders explained at the very first Democratic debate last October, “I think we should look to countries like Denmark, like Sweden and Norway, and learn from what they have accomplished for their working people.”

But it’s evident that the left wing of the Democratic party would also push for these ideas under a future Hillary Clinton administration. Indeed, Ezra Klein, the editor of the liberal news website Vox, wrote last fall that “Clinton and Sanders both want to make America look a lot more like Denmark — they both want to pass generous parental leave policies, let the government bargain down drug prices, and strengthen the social safety net.”

The current president and the last Democratic president share this vision, too. In his book Back to Work (2011), Bill Clinton argues that Finland, Sweden, and Norway offer greater opportunities for individuals to climb the social ladder than the U.S. does. Barack Obama recently gathered the leaders of the Nordic countries in Washington, explaining that “in a world of growing economic disparities, Nordic countries have some of the least income inequality in the world — which may explain one of the reasons that they’re some of the happiest people in the world.”

It is not difficult to grasp the American Left’s admiration for Nordic-style democratic socialism. These countries combine relatively high living standards with low poverty, long life spans, and narrow income distributions — everything the Left would like America to have. There is, however, a simple fact that seems to have escaped those who idealize Nordic-style social democracy. As I show in my forthcoming book Debunking Utopia: Exposing the Myth of Nordic Socialism, 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.” A recent paper by economists Anthony Barnes Atkinson and Jakob Egholt Søgaard reaches a similar conclusion for Denmark and Norway.

Cultural norms and mores are hugely important in a country’s development — the Scandinavian countries are a prime example. In modern management literature, people from the Nordic countries are described as honest and hard-working. Attitude studies show that they have unusually high levels of societal trust. Historic sources tell us that these attributes were already evident among the Nordic people centuries ago. While some scholars attribute this 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?

In 1960, well before large welfare states had been created in Nordic countries, Swedes lived 3.2 years longer than Americans, while Norwegians lived 3.8 years longer and Danes 2.4 years longer. Today, after the Nordic countries have introduced universal health care, the difference has shrunk to 2.9 years in Sweden, 2.6 years in Norway, and 1.5 years in Denmark. The differences in life span have actually shrunk as Nordic countries moved from a small public sector to a democratic-socialist model with universal health coverage. Moreover, 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.

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