Economic Theory

The Myth of Scandinavian Socialism

Bernie Sanders has single-handedly brought the term “democratic socialism” into the contemporary American political lexicon and shaken millions of Millennials out of their apathy towards politics. Even if he does not win the Democratic nomination, his impact on American politics will be evident for years to come.

Sanders has convinced a great number of people that things have been going very badly for the great majority of people in the United States, for a very long time. His solution? America must embrace “democratic socialism,” a socioeconomic system that seemingly works very well in the Scandinavian countries, like Sweden, which are, by some measures, better off than the United States.

Democratic socialism purports to combine majority rule with state control of the means of production. However, the Scandinavian countries are not good examples of democratic socialism in action because they aren’t socialist.

In the Scandinavian countries, like all other developed nations, the means of production are primarily owned by private individuals, not the community or the government, and resources are allocated to their respective uses by the market, not government or community planning.

While it is true that the Scandinavian countries provide things like a generous social safety net and universal healthcare, an extensive welfare state is not the same thing as socialism. What Sanders and his supporters confuse as socialism is actually social democracy, a system in which the government aims to promote the public welfare through heavy taxation and spending, within the framework of a capitalist economy. This is what the Scandinavians practice.

In response to Americans frequently referring to his country as socialist, the prime minister of Denmark recently remarked in a lecture at Harvard’s Kennedy School of Government,

“I know that some people in the US associate the Nordic model with some sort of socialism. Therefore I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy.”

The Scandinavians embrace a brand of free-market capitalism that exists in conjunction with a large welfare state, known as the “Nordic Model,” which includes many policies that democratic socialists would likely abhor.

For example, democratic socialists are generally opponents of global capitalism and free trade, but the Scandinavian countries have fully embraced these things. The Economist magazine describes the Scandinavian countries as “stout free-traders who resist the temptation to intervene even to protect iconic companies.” Perhaps this is why Denmark, Norway, and Sweden rank among the most globalized countries in the entire world. These countries all also rank in the top 10 easiest countries to do business in.

How do supporters of Bernie Sanders feel about the minimum wage? You will find no such government-imposed floors on labor in Sweden, Norway, or Denmark. Instead, minimum wages are decided by collective-bargaining agreements between unions and employers; they typically vary on an occupational or industrial basis. Union-imposed wages lock out the least skilled and do their own damage to an economy, but such a decentralized system is still arguably a much better way of doing things than having the central government set a one-size fits all wage policy that covers every occupation nationwide.

In a move that would be considered radically pro-capitalist by young Americans who #FeelTheBern, Sweden adopted a universal school choice system in the 1990s that is nearly identical to the system proposed by libertarian economist Milton Friedman his 1955 essay, “The Role of Government in Education.”

In practice, the Swedish system involves local governments allowing families to use public funds, in the form of vouchers, to finance their child’s education at a private school, including schools run by the dreaded for-profit corporation.

Far from being a failure, as the socialists thought it would be, Sweden’s reforms were a considerable success. According to a study published by the Institute for the Study of Labor, the expansion of private schooling and competition brought about by the Swedish free-market educational reforms “improved average educational performance both at the end of compulsory school and in the long run in terms of high school grades, university attendance, and years of schooling.”

Overall, it is clear that the Scandinavian countries are not in fact archetypes of successful democratic socialism. Sanders has convinced a great deal of people that socialism is something it is not, and he has used the Scandinavian countries to prove its efficacy, while ignoring the many ways they deviate, sometimes dramatically, from what Sanders himself advocates.

This article was first published by the Foundation for Economic Education (FEE).

4 thoughts on “The Myth of Scandinavian Socialism”

  1. Posted 26/02/2016 at 16:49 | Permalink

    If you look at his policies, Bernie is a social democrat, not a democratic socialist.

    As you say, “Scandinavian countries are not in fact archetypes of successful democratic socialism”. Correct, they are examples of successful social democracies. This is what Sanders is campaigning for – not a system where the means of production are owned by the state (a socialist system), but a system where wealth is redistributed fairly and not concentrated so drastically at the top (a social democracy). This is what Scandinavian style welfare states have achieved, and they have the lowest rates of wealth inequality in the Western world.

    While as you say Scandinavian countries have largely adopted more free-market systems since the 1990s, they have kept the welfare state due to the strong welfare consensus among citizens and governments. This means that even right wing parties in Scandinavia support the welfare state to a degree that would be considered very left wing in the US. Access to free education and healthcare ensured that all citizens in Scandinavian countries, regardless of what income bracket they start are born into, have a genuine chance at success.

    You say “Sanders has convinced a great number of people that things have been going very badly for the great majority of people in the United States, for a very long time.” He hasn’t had to convince them of anything, the great majority can feel and see that things are getting worse for them. They are, in relative terms, getting poorer and poorer by the year, whilst watching bankers and CEOs bring home millions in bonuses that cannot possibly be justified by their individual productivity. It’s not some myth he is spinning. This is why his message resonates with so many people and why people are excited about him.

  2. Posted 27/02/2016 at 20:03 | Permalink

    I have to correct you, “income” inequality is low in sweden, not “wealth” inequality which is rather average among developed economies and growing particularly fast in comparsion with other countries. This is largely to do with the fact that swedes have incredibly low savings rates, which is in its self due in part to the fact that their all encompassing welfare state acts as a disincentive to save and for people to build up capital for themselves.

  3. Posted 28/02/2016 at 19:24 | Permalink

    I guess Sanders labels himself and Scandinavia as socialist as a way of disarming opponents from the right. The likes of Mondale were crucified for being Liberal but Sanders has set the agenda instead of capitulating. Of course, social democracy can mean different things t different people as well, and certainly can include quite a lot of state ownership or support for cooperatives. The point about Trade Unions is fine- but it would require legislation and government encouragement to increase sector-wide bargaining in the US. Don’t see the IEA pushing for that somehow…

  4. Posted 01/03/2016 at 14:05 | Permalink

    Interesting piece, and highlights the semantic difference between the US perspective of socialism (anything left of Obama) and Europe (left of Corbyn?)

    I can see why Sanders wants to use the Scandi model, whatever its called. It’s not scary for the Americans, who would never accept socialism as we understand its meaning. In fact Sanders isn’t really much left of Obama, who was unable to get his social packages past the Republicans.

    I do wish the IEA would stop taking every opportunity to take a swipe at minimum wage in its various forms. In the free market that is democratic politics, if people want a minimum age then they get it.

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