Does Socialism Work in Scandinavia? (Part 2)

Authored by: Matt Palumbo

In part 1, I examined parts of the popular claim that the Scandinavian nations (Sweden, Norway, Denmark) are successful examples of socialism. I pointed out, among other things, that:

  • By definition, the Scandinavian nations aren’t socialist. They’re capitalist countries with high taxes and big welfare states.
  • Scandinavian Americans, who are mainly the descendants of immigrants from 200+ years ago, are wealthier and have lower poverty rates than Native Scandinavians.
  • Scandinavian countries got rich while their taxes were low, and government small. Growth has slowed since changing course.

But there’s still no denying that the Scandinavian nations have generous welfare states, so rather than argue over the definition of socialism, let’s examine some of the alleged benefits of the Scandinavian welfare states.

Inequality

One of the main advertised benefits of the large welfare states of Scandinavia are levels of income inequality among the lowest rates in the world. But, just like their general prosperity, the relative income equality of Scandinavia predates the welfare state.

According to one study of income inequality in Sweden in particular, during the period between 1903 and 2004: “We find that, starting from levels of inequality approximately equal to those in other Western countries at the time, the income share of the Swedish top decile drops sharply over the first eighty years of the twentieth century. Most of the decrease takes place before the expansion of the welfare state and by 1950 Swedish top income shares were already lower than in other countries” (Source: Page 56).

And income inequality isn’t the only kind of inequality. The Scandinavian nations have plenty of wealth inequality. In the United States, the top 1% owns roughly 35% of all the wealth. In Sweden, the top 1% controls roughly 25-40% of total wealth. High taxes have proven unsuccessful at alleviating that “problem.” According to one study, the share of the richest Swedes who inherited their wealth is around, 2/3, with only a third being entrepreneurs. In America, the majority of wealth is self-made, while in Sweden, it’s generational.

Ironic, isn’t it, that the high-tax country is the one with more unearned wealth?

Free College

American readers will undoubtedly see a lack of crushing student debt as the main benefit of “free” college. And in Scandinavia, you can get a college education free of charge…. and still graduate tens of thousands of dollars in debt. Since I’ve written an entire article on this subject, I’ll simply hyperlink to the full version to save space, while summarizing the main problems with free college, that:

  • In 2013, average college debt among graduating students was $19,000 in Sweden, compared to $24,800 in America. It’s presumably room and board responsible for debt in Sweden. After all, why commute when tuition is covered?
  • When everyone has a college degree, nobody does. An American college graduate earns 65% more than a high school graduate, while in Sweden, college graduates earn only 25% more.
  • As a result of the lack of ROI described above, Swedish graduates have the highest debt-to-income ratios of any group of students in the developed world.

In Denmark, there’s a phenomenon known as “eternity students,” which are those who goof around and sometimes never graduate, simply enjoying free classes (and a monthly government stipend to keep themselves afloat). Students are also much more likely to pursue “fulfilling” (translation: liberal arts) degrees when the government is footing the bill. Denmark has only one-third the engineers as the OECD average.

Socialized Medicine

While the Scandinavian nations have a system of universal healthcare/socialized medicine, don’t call the U.S. cheap, as the U.S. government spends more on healthcare than the Scandinavian nations on a per-capita basis.

The difference is that healthcare is a simply a heck of a lot more expensive in America. For all our governments spends, that money is just funding Medicare and Medicaid (which have drastically worse healthcare outcomes than private insurance).

Of note though, while America is the only developed nation without universal coverage, we still boast the highest cancer survival rates in the world.

Just consider the implications of the table below; that for every million people that are diagnosed with the following four cancers in America, 738,000 will have survived after five years. In Denmark, only 510,000 will have survived.

For a more full case against socialized medicine, see the second chapter in my book The Conscience of a Young Conservative (free PDF).

The Welfare State

Few disagree that there should be a safety net for when hard times come unexpectedly – but there’s a difference between a safety net, and a hammock.

In Scandinavia, it’s clear which they are.

Despite being one of the healthiest nations in the world, in the early 2000s, 10% of Sweden’s entire workforce was on paid sick leave at any given time. And why wouldn’t they, when the government would pay 80% of their salary? The average number of sick leaves taken per Swede per year more than doubled when the government increased the percentage of salary they’d pay from 75% to 80%. The paid sick leave system has since been reformed and tightened.

In Denmark, roughly 9 percent of the workforce (in 2012) was on disability, 33,500 of them under the age of 40, and in Norway last year, while the unemployment was below 3%, 20% of the working age population was on either unemployment or sick leave benefits. All of these countries lack the sick populations to justify such figures.

As I pointed out in part 1, Scandinavians are wealthier in America than they are in Scandinavia, and is it any surprise, when there isn’t the temptation of excessive benefits? In America we saw massive reductions in poverty when Clinton-era welfare reform added a work requirement to receive benefits, and it looks like Scandinavia could use the same.

In some regards, Scandinavia is moving in the right direction.  Since the early 1990s, when a financial crisis put their budgets in crisis, Sweden deregulated a number of key industries (airlines, telecommunications, and electricity), lowered taxes, partially privatized their pension system, sold off a number of state-owned enterprises, and began cutting public spending. In 2015, Denmark announced caps to the amount one can receive in both welfare and unemployment benefits. Denmark also began working on welfare reform plans in 2013, and has already implemented caps on certain benefits.

There’s much to be learned from the benefits of privatization and a move towards freedom as seen in the Scandinavian nations.

Socialism doesn’t work there, but capitalism does.

And for more on that, stay tuned for part 3….

 

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