One of the positive aspects of a particular political party holding power for several years or even decades in a particular city, state, or country is that you can see if their policies really work or not. They don’t have an opposing party to limit their influence so there are no excuses, such as, “Things would be a lot better in our fair city, but ‘Party X’ hindered our plans in the last election.”
This is not to say that natural disasters or excessive good fortune can’t temporarily skew the metrics (e.g., for the former: 9/11; Katrina and for the latter: Norwegian oil reserves), but, all things being equal, the effects of public policies implemented over several years will make themselves known. One reason the American Left is constantly holding up the Nordic countries as an economic and social model to their audiences is that they have a hard time finding models here in the US that they can point to as paragons of sustained, successful “progressivism.”
Urban blight, thy name is Detroit, Chicago, St. Louis, Philadelphia, Newark, Baltimore, and Oakland– all of which have been run by Democratic mayors for decades. An editorial in Investor’s Business Daily sums it up well: “When Democrats are in control, cities tend to go soft on crime, reward cronies with public funds, establish hostile business environments, heavily tax the most productive citizens and set up fat pensions for their union friends. Simply put, theirs is a Blue State blueprint for disaster.”
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Economist Stephen Moore points out that “Chicago is so broke that its bonds are junk status, and Mayor Rahm Emanuel had to go hat in hand … to the state capital, Springfield, for bailout money to pay the bills.” Only a little more than half of the city’s pension liabilities are covered.
Younger, hipper Millennials out here in the Pacific Northwest, point to Portland, Oregon, as an urban utopia. The coffee shops, vegan restaurants, greenbelts, tattoo shops, and microbreweries may be groovy but, as Eric Boehm notes, Portland is hurtling towards bankruptcy and virtually “has no assets to offset unfunded liabilities of $2.3 billion … for its pension and disability plan for police and firefighters.”
The vast majority of the most fiscally insolvent states in the US are blue states: New Jersey, Illinois, Massachusetts, Maryland, and California have massive debt obligations, low cash on hand, and, as the Mercatus Center avers, “…unfunded liabilities continue to be a problem as unfunded pensions and healthcare benefits continue to drive each state into fiscal peril.”
My home state of California is drowning in red ink. Aaron Bandler notes that a recent report “shows that the California Public Employees Retirement System (CalPERS) received less than one percent on its investment, putting the country’s biggest pension fund at a stunning $100 billion shortfall.”
With the blue state/blue city model crumbling all around them, and the implosion of models abroad past and present (e.g., USSR, Cuba, and Venezuela), it’s easy to see why the American Left would gaze with fondness across the Atlantic, thousands of miles away, to the “democratic socialism” of Scandinavia. And, as I’ve written more than once in this magazine, fallen human nature often has a gravity pull towards the utopian and the quasi-utopian.
Utopianism is as old as the Tower of Babel and as new as the debacle in Venezuela. It will never go away this side of eternity because it is written into our Adamic DNA. We seem to be a hippie commune waiting to be started.
Bernie Sanders said, “I think we should look to countries like Denmark, like Sweden and Norway and learn what they have accomplished for their working people.” Fulsome praise for the Nordics has also come from Bill and Hillary Clinton, Barack Obama, and left-leaning academics such as Jeffrey Sachs and Paul Krugman.
The Left has constructed a beloved mythology concerning the Nordic countries that is easily de-mythologized when held up to close scrutiny. Few books are more readable and effective in the debunking process than Nima Sanandaji’s Debunking Utopia: Exposing the Myth of Nordic Socialism.
Sanandaji is an author, researcher and president of the think tank European Centre for Entrepreneurship and Policy Reform. He is of Kurdish-Iranian descent and migrated with his family to Sweden as a child in 1989.
Though Sanandaji’s general economic philosophy is right-of-center on most issues, he is not a doctrinaire economic conservative in the American tradition: i.e., someone who wants to privatize almost everything. For example, he supports such policies as public funding of child care and schooling and is simpatico with universal health care in certain countries.
His book is not an “Everything is bad in Scandinavia” screed but is more of a nuanced approach that seeks to embrace the traditional Persian saying: “You can learn at least as much from the mistakes of others as from their successes.” Along the way certain myths of the Left are exposed, making the book well worth the purchase price:
Myth #1: At present, all five Nordic countries are run by robust, social democracies.
Not true. A social democracy is where the government takes control of some but not all sectors of the economy (e.g., education, health care, elderly care, child care, etc.) and is combined with democracy and the free market.
As of this writing the Bernie Sanders brand of socialism would not be popular with a majority of Scandinavians. Sanandaji writes that “…conservative [center-right] parties are in power in most Nordic nations while anti-immigration parties with a populist touch have been gaining ground.”
As of February 2016, Swedish Social Democrats had never polled so poorly in modern history. Sanandaji concludes that Sanders wouldn’t even be welcome in this party which has grown more and more fiscally conservative.
Myth #2: With their low crime rates, high living standards, long life expectations, low child mortality rates and even income distribution, Scandinavian countries are the best places to live in the world. This is caused and maintained by their large welfare states.
The former statement is worthy of debate; the latter is false. Sweden, Norway, Denmark, Iceland and Finland are all among the Top Ten in the OECD (Organization for Economic Cooperation and Development) Better Life Index 2015.
However, what is so often overlooked is Myth #3: the Nordic countries were always high tax, big government, big welfare state countries. This shift began around 1960 and Scandinavia had great metrics concerning quality of life issues before they embraced democratic socialism.
In fact, between 1870 and 1936 and even up until 1970, Sweden was an economic juggernaut. Famous companies such as Volvo and IKEA were founded and were helped by low taxes and business-friendly policies.
Sanandaji writes: “In 1960, when the Nordics had small welfare states, Norway had the highest life expectancy in the world, followed by Iceland in second place, and Sweden and Denmark in fourth and fifth. In 2000, during the peak of the Nordic welfare states, Norway and Denmark had dropped out of the top-ten league” while Sweden had slid to tenth and Iceland (not a big welfare state in comparison to the other four countries) held the fourth position.
Similar findings can be produced for other issues such as infant mortality and equal income distribution. Sanandaji rightly asks why the Left doesn’t laud Japan and Switzerland for their high life spans. Could it be they aren’t praised because they have smaller welfare states and lower taxes than the Nordics?
The same question could be asked about Slovenia, the Czech Republic and the Slovak Republic concerning their high levels of income equality with, again, lower taxes and a smaller welfare state. The Left is selective in choosing its paragons of economic virtue.
With the OECD Better Life Index in Scandinavia looking good during the peak of democratic socialism in 2000 and even better in its more capitalistic, smaller government era in 1960, could it be that there is something else at work in these countries creating these good metrics besides public policy? This brings us to Myth #4: Public policy is more important than culture in influencing quality of life.
A related question would be, “Why haven’t countries with similar public policies (e.g., Greece, Spain, Portugal, and France) had similar outcomes?” Much of the answer is rooted in culture.
Sanandaji makes a compelling case that the Nordic countries have a unique culture that creates prosperity because they are characterized by ethnic homogeneity, high levels of trust and cooperation, punctuality, honesty, hard work, physical exercise, and healthy diets. In recent decades, some of these norms have faded in Scandinavia but they explain why a country could offer generous welfare benefits in decades past and maintain economic health: if your country is honest and hard-working, then few will be on the public dole, and the ones who are will get off as soon as they are able.
If, according to the Left, public policy is the key to prosperity, then you would expect Nordic Americans to fare worse in America with a lower tax, smaller government, and less government subsidies model. This highlights Myth #5 which falls apart like a cheap suit: the American Dream is more fully realized in Scandinavia than America itself.
In fact, Danish Americans have a 55 percent higher living standard than Danes; Swedish Americans beat Swedes by 53 percent; and Finnish Americans outpace Finns by 59 percent. And, even though Norwegian Americans don’t benefit from huge oil reserves from their country of origin, they have a 3 percent higher living standard than their cousins overseas.
Culture is more important than politics: Nordic Americans also have higher high school graduation rates, lower unemployment and lower poverty rates than Scandinavians. When Milton Friedman was told by a Swedish economist, “In Scandinavia we have no poverty,” he cleverly replied, “That’s interesting, because in America, among Scandinavians, we have no poverty either.”
Many other falsehoods are exposed in Sanandaji’s book: the peak of democratic socialism did not adversely affect Nordic economies (see Sweden 1970-1991); Scandinavian countries are an egalitarian paradise for women; generous welfare benefits have not become a narcotic and torn the Nordic social fabric; and immigrants generally do well in Scandinavia.
To the Nordics’ credit, in many ways, they have learned from their mistakes: Welfare generosity has been reduced; taxes have been cut; the public sector has become smaller; and economic freedom has increased. Economic numbers have improved since the halcyon days of democratic socialism. Perhaps Bernie Sanders and the leaders of our blue cities and states could learn a thing or two from the outcomes emerging from these reforms.
(Photo credit: Hansjorn / Wikimedia)