Last week, I saw back to back studies on Nordic countries reported by the far-left UK Independent and Barron’s magazine. We’re probably going to hear more about how great socialism is from socialists, and since they seem to point to Nordic countries as proof, we should probably look at the studies and see what the truth is.
Let’s start with the report from Barron’s. You’ll have heard of Barron’s if you’re an investor.
Although there are areas—especially in taxes and labor market regulation—where socialist elements still exist in the Nordics, the region is by no means socialist today. In fact, according to the Heritage Foundation’s index of economic freedom, Sweden, Norway, Finland, Iceland, and Denmark rank among the 30 most capitalist countries in the world.
These countries used to be socialist in the 1970s and 1980s. Socialism means a huge government work force, high taxes, massive regulation of private sector businesses, and massive spending on welfare programs. You didn’t have to marry before having children, the government would give you welfare. You didn’t have to take care of yourself, the government would give you free health care. You didn’t have to save for retirement, the government would give you a pension.
The article mentions one country in particular – Sweden. And here is what socialism looked like in Sweden:
In 1960, for every 100 “market-financed” Swedes (i.e. those who derived their income predominantly from private enterprise), there were 38 who were “tax-financed” (i.e. dependent on the public sector for their income, whether as civil servants or as recipients of payments from the state). Thirty years later, that number had risen to 151—in other words, there were significantly more people living off of the state than paying into the system. This reflects Sweden’s move away from a capitalist free-market economy to a socialist model.
When people talk about socialism, they mean more people living off the state than paying into the system.
But socialism can’t last forever. Eventually, the people in the private sector realize that they are keeping less and less of what they earn, and they stop working, or just leave. The article notes that IKEA, which started out in Sweden, moved out to avoid paying the 57% corporate tax rate.
Eventually, and this is the part that Bernie Sanders is ignorant about, Sweden slashed or eliminated taxes across the board, then cut their government spending on welfare, subsidies and gv:
A major tax reform in 1990/91 slashed corporate taxes from 57% to 30%. Income from shares was exempted from taxation, while capital gains from shares were taxed at only 12.5%.
The top marginal income-tax rate was set at around 50%, a reduction by 24 to 27 percentage points for the majority of the workforce. The proportion of earners taxed at a marginal rate of over 50% dropped from over half to only 17% paying income tax to the central government.
The reforms continued over the following years: in 2004, the estate tax of up to 30% was scrapped. Today, there is no estate tax in Sweden. The abolition of the wealth tax, which had already been cut, came into effect retroactively as of 1 January 2007. The corporate tax rate continued to decline, getting cut from 30% to 26.3% in 2009 and to 22% in 2013. Property tax rates were also cut substantially.
Between 1993 and 2000, social spending dropped from 22.2% to 16.9% of GDP, economic subsidies from 8.7% to 1.8% and public-sector payroll costs from 18.2% to 15.6%.
Sweden might be a little further ahead of some of the other Nordic countries. Over in Finland, they are still climbing out of it, and the massive government spending is so hard for socialists to cut.
Here’s a story from Finland about their government-run health care system – the same kind that Bernie is always bragging about, and telling us how well it works in Finland.
Far-left Reuters reports:
Finland’s coalition government resigned on Friday a month ahead of a general election, saying it could not deliver on a healthcare reform package that is widely seen as crucial to securing long-term government finances.
Healthcare systems across much of the developed world have come under increasing stress in recent years as treatment costs soar and people live longer, meaning fewer workers are supporting more pensioners.
Nordic countries, where comprehensive welfare is the cornerstone of the social model, have been among the most affected. But reform has been controversial and, in Finland, plans to cut costs and boost efficiency have stalled for years.
The very health care systems that Bernie lectures American voters about are all in decline and failing:
Other Nordic countries have also grappled with the need to cut costs. Sweden is to gradually raise its retirement age and has opened up parts of the healthcare system to the private sector in a bid to boost efficiency.
Denmark will gradually increase the retirement age to 73 – the highest in the world – while cutting taxes and unemployment benefits to encourage people to work more.