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Are Scandinavian Countries Socialist?

One of the odd things about the modern resurgence of socialism is that its most fervent advocates seem confused about what socialism actually is. I discuss this problem in my new book, The Socialist Temptation, but I thought it worthwhile to expand on one particular aspect of the question—are modern Scandinavian countries actually socialist?

This question must be asked because it is a common rhetorical device of “democratic socialist” politicians to wave away objections about the horrors of past socialist regimes (see my previous blog post) by saying that all they want is to be like Scandinavia. For instance, here is Rep. Alexandra Ocasio-Cortez on Anderson Cooper in January 2019:

Anderson Cooper: When people hear the word socialism, they think Soviet Union, Cuba, Venezuela. Is that what you have in mind?

Rep. Alexandria Ocasio-Cortez: Of course (LAUGH) not. What we have in mind—and what of my—and my policies most closely resemble what we see in the U.K., in Norway, in Finland, in Sweden.

Socialism, in its simplest definition, is popular control of the means of production, distribution, and exchange, either by public ownership or through bureaucratic oversight and control. Are those the policies of the United Kingdom or Sweden?

The U.K. is easy to deal with. The British people rejected the socialist ownership model in 1979, leading to a long run of privatizations and deregulations. Even the Labour Party began moves to privatize the Royal Mail when it was in government in 2008 (the privatization was completed by the coalition government in 2013). Britain is overwhelmingly a free market economy.

There is actually a similar story in Sweden. Like Britain, Sweden had been a free market for many years and had grown rich as a result when socialist politicians were elected and began to bring the economy under the control of the state. This led to a significant decline in Sweden’s wealth relative to other countries and crushed entrepreneurialism.

Swedes, like the British, decided that enough was enough and elected a series of reformist governments that made Sweden largely a free market country once again. Industries were privatized, microeconomic reforms and deregulation helped free businesses from bureaucratic control, and finally in 2007 the hated wealth tax was abolished.

Moreover, Sweden introduced other reforms that make it more free market in some areas than the United States. School choice, for example, is not only the model for education in Sweden, its introduction had the support of the teachers’ unions. Social Security has also been partly privatized. This all means that Sweden has an economic freedom index score of 74.9, barely below America’s index score of 76.6.

So what is AOC talking about? She does not want to privatize Social Security or introduce school choice. She is presumably talking about Sweden’s large and extensive welfare state (despite the partial privatizations) and its large tax intakes. In effect, she may be talking about Sweden as a social democracy rather than a democratic socialist country (I explain the difference more in The Socialist Temptation).

Yet it is worth taking a look at that tax regime. Sweden has a large, broad, and flat tax base. As I explain in The Socialist Temptation, Sweden takes a bigger slug out of your income and imposes top tax rates at a much lower income than the United States does, and imposes a high value added tax on consumption.

As the Tax Foundation says:

Scandinavian countries provide a broader scope of public services—such as universal healthcare and higher education—than the United States. However, such programs necessitate higher levels of taxation, which is reflected in Scandinavia’s relatively high tax-to-GDP ratios. Adopting such public services in the United States would naturally require higher levels of taxation. If the U.S. were to raise taxes in a way that mirrors Scandinavian countries, taxes—especially on the middle class—would increase through a new VAT and higher social security contributions and personal income taxes. Business and capital taxes would not necessarily need to be increased if policymakers were following the Scandinavian model. In fact, the corporate income tax rate would decline.

It is important to note that the Swedish tax system is much more regressive than America’s. To impose policies that “closely resemble” those of Sweden, AOC would have to significantly increase taxes on the middle class, yet her rhetoric is purely centered on raising taxes on the very rich. In essence, under the Swedish system, citizens prepay for health and social services. This is very different from the “free” model of health and social services that AOC and her colleagues’ rhetoric implies.

Moreover, there is another fly in AOC’s Scandinavian ointment. Recent election results in Denmark have shown that there is a strong bias under that welfare state system against immigration, as the ruling Social Democratic party there has grown strongly nativist. In Sweden, meanwhile, restrictions on employment for immigrants and other demands of the welfare state system have led to increasing tension between immigrants and natives. In those countries, the old adage “democracy, welfare, immigration–pick any two” seems to be accepted on all sides of the political debate. This does not sit well with American Democratic Socialists’ stance on immigration.

The lesson of this is that when AOC says that her version of Democratic Socialism is what’s on offer in Scandinavia she clearly cannot see the disconnect between her policies and those actually on offer in Scandinavia. So we must assess her policies based not on this misleading analogy but what her policies actually represent—and the answer to that is that they have much more in common with Cuba and Venezuela than they do the Nordic countries.

None of this is to say that the Scandinavian countries are perfect—and I shall tackle that question in a short paper expanding on this blog post that will also examine the suggestion sometimes made that the Scandinavian countries are able to be capitalist precisely because they have a large welfare state.