OT -- Bernie's Right—America Should Be More Like Sweden

[Bruce]

https://reason.com/archives/2016/04/18/bernies-rightamerica-should-be/


Bernie Sanders thinks the U.S. should look to Sweden and other
Scandinavian countries to "learn what they have accomplished for their
working people." The Vermont senator has said so repeatedly throughout
his campaign for the Democratic presidential nomination, prompting GOP
rival Marco Rubio to say, "I think Bernie Sanders is a good candidate
for president—of Sweden."

As a native of Sweden, I must admit this makes me Feel the Bern a bit.
Sanders is right: America would benefit hugely from modeling her
economic and social policies after her Scandinavian sisters. But Sanders
should be careful what he wishes for. When he asks for "trade policies
that work for the working families of our nation and not just the CEOs
of large, multi-national corporations," Social Democrats in Sweden would
take this to mean trade liberalization—which would have the benefit of
exposing monopolist fat cats to competition—not the protectionism that
Sanders favors.

In fact, when President Barack Obama visited Sweden in 2013, the three
big Swedish trade unions sent him a letter requesting a meeting. Their
agenda: a discussion of "how to promote free trade." The chairman of the
largest Social Democratic trade union scolded the American president for
his insufficient commitment to the free flow of goods.

This reality will not endear my home country to American socialists, but
it's better to be hated for the right reasons than to be loved for the
wrong ones, as the saying goes. Being more like modern Sweden actually
means deregulation, free trade, a national school voucher system,
partially privatized pensions, no property tax, no inheritance tax, and
much lower corporate taxes. Sorry to burst your bubble, Bernie.

Disco-Era Socialism
Sanders isn't completely deluded, of course. Sweden and the other
Scandinavian countries have experimented with very big government and
semi-socialist ideas. There's just one problem: That experiment
coincided almost perfectly with the region's only sustained period of
economic decline over the last 100 years.

Sanders' image of Scandinavia is just like the rest of his policies:
stuck in the 1970s. Until that decade, Sweden and Denmark had grown much
faster than other European countries and had become richer than most
other countries on the planet, in large part by limiting government and
embracing markets. (Norway is a special case, because oil and gas make
up 22 percent of GDP, just a few percentage points below Venezuela. So
unless Sanders' policy proposal is to strike oil, the Norwegian example
is not relevant.)

During its laissez faire period, between 1850 and 1950, Swedish income
per capita increased eightfold as the population doubled. Infant
mortality fell from 15 to 2 percent, and life expectancy increased by a
whopping 28 years. And all this happened before the welfare state was
even a glint in the taxman's eye.

As late as 1950, total taxes as a percent of GDP in Denmark and Sweden
were not just lower than in other European countries but lower than in
the U.S.: 20 and 19 percent, respectively, vs. 24 percent in America.

It was at this point, when we Scandinavians had satisfied our thirst,
that we thought that we could turn our backs to the well. We began to
regulate. We increased taxes and beefed up the public sector. It's easy
to see how foreigners observing the implementation of these unorthodox
policies might confuse cause and effect. But those who think the
semi-socialism made us rich would also probably look at a snapshot of
Bill Gates and conclude that you become the world's wealthiest man by
giving your money away.

Instead, the Scandinavian countries became a real life version of the
old joke about how to make a small fortune; you start with a large one.
Sweden took democratic socialist policies further than its neighbors,
and as a result its economy fell more steeply. Slowly but steadily the
policies of Prime Ministers Tage Erlander and Olof Palme eroded
productivity and the long-renowned Scandinavian work ethic. In 1970,
Sweden was 25 percent richer than the OECD average. Twenty years later,
the average had almost caught up with us. Once the fourth richest
country on the planet, Sweden was now the fourteenth.

It was a disaster for entrepreneurship and employment. During this time,
not a single job was created in the private sector (on net), despite a
growing population. As of 2000, just one of the 50 biggest Swedish
companies had been founded after 1970.

As the Social Democratic finance minister Bosse Ringholm admitted in
2002: "If Sweden would have had the same growth rates as the OECD
average since 1970, our common resources would have been so much bigger
that it would be the equivalent of 20,000 SEK ($2,400) more per
household per month."

During this brief Bolivarian turn, many Swedish intellectuals feared
that their country would become an Orwellian nightmare. The Social
Democrats toyed with an incredibly unpopular plan to socialize private
businesses, and Parliament implemented a general rule saying that any
economic transaction that had the intention of lowering one's taxes was
illegal even if the transaction itself was legal. IKEA founder Ingvar
Kamprad and many other entrepreneurs, plus all of our famous sports
stars, fled the country.

Sweden's most famous author, Vilhelm Moberg, wrote that the government
was out of control, and that we were turning into a third way between
democracy and dictatorship "where everybody is discontented and
disappointed." Our most famous film director, Ingmar Bergman, was
snatched by the police at the Royal Theatre on charges of tax crimes
(later dropped). He had a nervous breakdown and left the country.

Our most famous author of children's books, Astrid Lindgren, had to pay
more than 100 percent in marginal income tax, prompting her to write a
bitter, satirical essay about the kind old witch Pomperipossa and
vicious tax authorities: "She had thought that the rights of everybody
would be respected in a democratic country. People should not be
punished and persecuted because they happened—with or against their
will—to make money in an honest way." But in the end, she finds a
solution to her problems: "But suddenly it struck her—woman, you must be
able to get welfare benefits! Oh, wonderful thought! And then
Pomperipossa lived on welfare happily ever after. And she never wrote
another book."

Kjell-Olof Feldt, the Social Democratic minister of finance from 1983 to
1990, admitted in a 1992 book that some of the government's program was
"unsustainable," some of the policies "absurd," and the tax system
"perverse." These policies also collapsed after a debt- and
inflation-fuelled boom in the late 1980s.

Whatever these unsustainable and perverse policies did, they did not
help the working people that Sanders claims to represent. Real wages in
Sweden fell by around 5 percent between 1975 and 1995. Nominal wages
increased, but runaway inflation devoured it.

Boom Time
But in the early 1990s Sweden began to abandon its brief detour into
Bernienomics. It deregulated, privatized, reduced taxes, and opened the
public sector to private providers. The two decades that followed saw
real wages increase by almost 70 percent.


--
Bruce

"It is the duty of the patriot to protect his country from it's
government." -- Thomas Paine