Bernie’s Foolish Crush on Sweden

By Rich Lowry

Tuesday, October 20, 2015

Scandinavia is the American Left’s Shangri-La. It is the land of social democracy and of all good things. It is the answer to any objection that new welfare benefits can’t be adopted here: But look how well they work in Sweden.

Bernie Sanders reverted to this article of faith when challenged over his socialism at last week’s Democratic debate. He invited America to sit at the knee of Scandinavia. “I think we should look to countries like Denmark, like Sweden and Norway,” he said, “and learn from what they have accomplished for their working people.”

There are a couple of things wrong with the Left’s romance with these countries, as Swedish analyst Nima Sanandaji notes in a recent monograph. It doesn’t fully appreciate the sources of Nordic success, or how Scandinavia has turned away from the socialism so alluring to its international admirers.

The first thing to know is that Scandinavia is inhabited by Scandinavians, a hardworking, responsible people who have had high levels of social trust and cohesion for a very long time. These are splendid qualities for any place to have. As Sanandaji points out, Scandinavia already had high life expectancy and other health indicators before it expanded its welfare state, and already had more equal societies.

You can take the Scandinavians out of Scandinavia, but not the Scandinavia out of the Scandinavians. Sure enough, they have thrived here in the United States outside of their social-democracy hothouse. The descendants of Scandinavian immigrants have median incomes 20 percent higher than the U.S. average, and their poverty rate is half the average, according to Sanandaji.

No one remembers, but Scandinavia wasn’t always a watchword for social democracy. Indeed, Sweden was such a free-market success story that Republicans should be citing it in their debates. It started as a poor country in the late 19th century, then achieved takeoff under a dynamic capitalist system into the middle of the 20th century. Its boom coincided with the time when its taxes were lower than in the U.S. and the rest of Europe.

When Bernie Sanders and his ilk hold up Scandinavia as an exemplar, they are really thinking of a couple of decades beginning in the early 1970s when Sweden and others got their full Sanders on.

In Sweden, the effective marginal tax rate topped 100 percent in some circumstances. There is a reason that IKEA founder Ingvar Kamprad fled the country in 1973. Sweden instituted a scheme to confiscate corporate profits and hand them over to labor unions. The idea was, in the words of a Swedish economist, to have “a market economy without individual capitalists and entrepreneurs.”

This was about as logical as it sounded — and delivered predictable results. The socialist golden years weren’t so golden for economic performance. Entrepreneurship plummeted. Job creation and wages sputtered.

The Scandinavian story the past few decades has been a turn against socialism. Taxes have fallen, and markets have been liberalized. Kamprad returned to Sweden.

It became obvious that generous-enough welfare benefits can undermine the initiative of even the heartiest Scandinavian stock, and these countries have been adjusting accordingly. An article in the New York Times a couple of years ago recounted the backlash against welfare dependence in Denmark. It cited a study that projected in 2013 that only three of 98 municipalities would have a majority of residents working.

If no one will mistake these countries for Texas, they allow enough economic openness to stay vibrant. “Scandinavian countries,” Sanandaji writes, “compensate for high taxes and labor market rigidities by following liberal policies in other areas, such as business freedom and openness to trade.” Denmark, of all places, is ranked 11th on the Heritage Foundation’s index of economic freedom, right above the United States.

Nothing will undermine the Left’s faith in the Scandinavian model, but Bernie Sanders could learn a thing or two from the reformers in the countries that he so admires.