Anybody who has ever taught a course on economics has had to face up to the “But what about the Scandinavian countries then?” question sooner or later.
“How is it”, the question goes, “that Scandinavian countries do so well and are still socialist?”
Timothy Taylor, indefatigable reader of really long reports, helps us answer this question by reading an “extended essay” written by Johan Norberg. Said essay comes in at 97(!) pages, and I happily admit to not having read it. But I have read Taylor’s post on the subject, and urge you to do the same.
- If you describe yourself as a socialist, do you “advocate the abolition of private property and the collective or governmental ownership and administration of the means of production and distribution of goods”?
Because that is the dictionary definition of socialism. - Or do you prefer a “more expansive set of government benefits, including national health insurance, government-provided day care, more generous unemployment insurance, and the like?”
This is where the “Yeah, Scandinavia!” story comes alive. - But Timothy Taylor informs us that describing Sweden as being socialist is very, very far from the truth, and with good reason. They saw what happened to the USSR at close quarters. They liked what they saw in some years, not so much in other years.
- “It (Sweden) liberalized the economy more than other countries did in the mid-1800s, socialized more than others in the mid-1900s, and then reversed course and liberalized again faster than others in the late 20th century.”
- Taylor goes on to describe Sweden’s rather wild swings on the economic model pendulum, ranging from remarkable liberalization in the 1950’s and 1960’s, to a more socialist outlook in the 1970’s and 1980’s, to once again a more liberal outlook 1990’s onwards.
- Taxes on income were as high as 70% at the height of Sweden’s socialism experiment, while corporate taxes were as high as 60%!
- This paragraph is worth (re)quoting in its entirety:
“The combination of high labor costs and inflexible regulatory control basically took down Sweden’s steel, shipbuilding, textile, and mining industries by the late 1970s. Investment sank, productivity gains dropped. Norberg: “Fewer companies were created in Sweden and the ones already in existence did not expand. In fact, by 1990, the Swedish economy had not created a single net job in the private sector since 1950, even though the population had increased by one and a half million people.” Sweden became more equal by subtraction: “Many of the country’s most important companies, entrepreneurs, and individualists left the country, primarily because taxation was suffocating and often made it impossible to pass family companies on to the next generation.”” - Which led to a series of reforms beginning in the 1990’s, under the guidance of Assar Lindbeck. Read Taylor’s blogpost to get a sense of some of these reforms.
- Today, Sweden is a country that seems to accept that the truth lies somewhere in the middle:
“In this most recent shift, Sweden remained a country with a welfare state that is large by US standards, although not especially large by western European standards. However, this welfare state operates along-side an economy that is quite deregulated and open to international trade–my common measures, more so than the US economy. As part of this change, Sweden gave up the idea that it could pay for its welfare state by sticking corporations and the rich with the tax bill. Instead, the middle classes pay the bulk of taxes (for example, through a value-added tax), but also receive the bulk of benefits.” - My favorite sentence from the blog post is this one:
“But it’s not socialism: indeed, it explicitly focuses on supporting market-based energies of capitalism as a method of funding the welfare state” - And that sounds about right to me!
EconForEverybody 