Sorry, socialists; Scandinavian success isn’t your trump card.
While Scandinavia has emerged as one of the world’s leaders in terms of how to run an economy, many advocates of socialism claim that its success is down to large numbers of socialist economic principles. This fanciful perception could not be any more untrue; in fact, the Scandinavian countries extol the virtues of the capitalist economic ideology more than anything else. The fact that even figures such as Senator Bernie Sanders, who claimed that America should look to countries “like Denmark, like Sweden and Norway” for their purported socialist beliefs, believe this woeful and misguided claim, comes as a shocking challenge to the belief that socialism in itself cannot bring about economic prosperity. In theory, this is all well and good: differing ideas are needed to promote healthy, beneficial economic debate which allows countries to further develop. Despite this, when one side of the argument persists with making claims that are inherently flawed and against basic facts and statistics, the debate becomes much less healthy than toxic and useless, and this intuitively benefits no one. Hence, while it could be argued that Scandinavia has some socialist principles that have helped it grow economically, it is completely asinine to brand the whole region with the “socialist” moniker. Frankly, it’s akin to saying that socialism alone works in the first place.
Free market capitalism is perhaps most strongly enforced in the countries which Sanders seems to so idolise. While it is disputed whether laissez-faire economics works in the long term or not, it is a testament to these countries’ resilience and principles that they do not intervene and let large companies go bankrupt if they are not performing or have mismanaged their finances. For example, Sweden allowed Saab, an automobile manufacturer, to go bankrupt, even when there was considerable pressure to bail the company out. Many similar occurrences have taken place with the other Scandinavian nations, affirming the ethos of economic competition that these nations hold so dear. This competition, that is so prevalent in these societies, allows companies to make more and more efforts to innovate and gain a comparative advantage over their rivals, thus increasing the prosperity of these companies, which gives the state more income through taxation with which to fund social services such as healthcare and education. This also results in a reduction in unemployment, again increasing the wellbeing and happiness of the country’s citizens. It stands to reason, therefore, that Denmark is the world’s happiest country. And absolutely none of this is due to socialism.
The reason why countries such as Sweden have evolved into such developed and financially stable economies is also due to capitalist ethos, and most definitively not socialist ones. In the latter half of the 1800s and the early 1900s, Sweden was floundering financially, with it being very poor and economically destitute (1.3 million Swedes left Sweden for America during this time). The capitalist reforms which were then instituted by the Swedish government spurred economic development and growth, incentivising creativity and encouraging investment into small and medium sized enterprises (SMEs). At this point, the country’s taxes were far lower than the majority of Europe’s, raising serious questions to socialists who propose higher levels of taxation. Therefore, despite the fact that the welfare system in Sweden is amongst the best applications of socialism in the modern world, this is only a small cog in the wheel; and to a large degree, has only been made possible through the wonders of capitalist reform that swept the country. After all, the system could have only been financed through money, money which would have been in high relative scarcity had Sweden continued the way it was going.
Scandinavia has also been made into a pseudo-utopia by some socialists, a place where everything is perfect and nothing has ever gone wrong. However, while the region is a massive success story, it is not as prosperous as some would claim it to be. For example, the United States has a higher economic output per person than Sweden, Denmark and Finland, calling into doubt those who claim that the few socialist policies have resulted in an increase in productivity in the Scandinavian region. Moreover, the Organisation for Economic Co-Operation and Development (OECD) also states that the average Dane has an average household debt equal to 310% of his or her disposable income, again making the claim that Scandinavians are more financially prosperous than others seem highly dubious. According to Credit Suisse’s Global Wealth Report of 2014, the wealthiest 10% of people in Norway, Sweden and Denmark possess between 65 and 69% of the wealth of those countries, displaying staggering levels of wealth inequality. While low inequality is frequently espoused by proponents of the socialist economic system as a virtue of Scandinavia, these figures prove that that is not the case, and that, like much of the Western world, Scandinavia also has serious problems regarding wealth inequality.
We do have our share of problems, I admit. Scandinavia is a great place to live, I admit. What I don’t admit, however, is that they’re perfect or that socialist policies have got them to where they are thus far; it’s, in fact, capitalism that has again, saved the day.
I hope you enjoyed the article! If you enjoyed this one, you can find more at my personal blog, shreysfinanceblog.com: A 15 year old’s blog on finance and economics.
Shrey Srivastava, 15