The Myth of Scandinavian Socialism

List of Scandinavian Countries:

Norway
Sweden
Denmark

Other Semi Socialist Countries to look into:

Finland
Switzerland
Canada

Arguments structure for presentation:

1. If socialism and big government are so bad, then why are scandinavian countries so successful relative to other first world countries like the U.S or countries in Europe?

Are they really so much better?
- Some things are much better in the US.
- In January 09, right after the banking crisis, Unemployment was at 9.8% in Sweden vs 7.3% in the U.S Link Link

Is their socialist style government really more controlling than other governments?
- Scandinavian countries don’t have to run an empire
- Scandinavian countries, while being social-democratic, are all more economically free than the US in many ways
- Large section of schools are privatized as well as in social security

The Nasa effect. Have they really built their wealth on the Socialist model or has this model been introduced after the wealth?
- Scandinavian countries were built on laissez faire capitalism and have declined since the introduction and implementation of their massive welfare state

- The creation of large swedish companies has halted since the 70’s accompanied by the lowest rate of self employment in the OCED

2. Why have some scandinavian social-democratic states been so successful relative to democratic countries during the crisis.

Increases of Freedom through the Recession
- Certain taxes have been cut and some have increased their level of economic freedom through various means during the latest recession:
“Among the 160 countries studied in the Index of Economic Freedom, Sweden ranks 21st, and is one of the few countries that increased its economic freedoms during the financial crisis” LInk

High Savings

- Sweden went to the recession with a surplus Link
- Norway saves a lot of its oil money for the future

• Link Faster Growth in the U.S

• Link Americans Enjoy More Output and Higher Standard of Living
• Link Nordic Countries Have Lower Corporate Tax Rates
• Link Nordic Countries used have competitive taxes rates with the U.S
• Link Despite being Heavily Taxed, Nordic Nations enjoy, relative to other countries, very high amounts of Economic Freedom

• Link Living Standards are Greater in the U.S

• Link Increase in Government Spending leads to Lower Growth

• Link Swedish GDP has been dropping since the 50’s

• Link The Rise in the Government State did not bring prosperity but exactly the opposite

• Link Ease of doing Business Index

0) Leads

• Relative to household in the United States, Swedish family income is considerably less between 1980 and 1999. In fact, the study concludes, average income in Sweden is less than average income for black Americans, which comprise the lowest-income socioeconomic group in this country. The research came from the Swedish Institute of Trade
  

• They have open markets, low levels of regulation, strong property rights, stable currencies, and many other policies associated with growth and prosperity. Indeed, Nordic nations generally rank among the world’s most market-oriented nations.
• And both Iceland and Sweden have partially privatized their social security retirement systems.
• Why are Nordic nations relatively rich? Has the welfare state has helped or hindered these countries’ economic performance?
• The Nordic nations also deserve attention for important reforms. Iceland, for instance, has a flat tax (albeit with a 36 percent rate), personal retirement accounts, and quasi-privatized fisheries. Sweden, meanwhile, has an extensive school choice system and personal retirement accounts.

1. A nation with a big welfare state needs to compensate with ultra-free market policies in other areas if it wants economic growth. Denmark may not be enjoying strong economic performance, but it does reasonably well, particularly compared to some other European nations. The lesson to learn is that a nation that is screwing up on one policy – such as Denmark with fiscal policy – needs to be very careful not to allow mistakes in other areas.

2. An even more important lesson to understand is that Denmark waited until it became a rich nation before it adopted the welfare state. Indeed, this is the story of just about every North American and Western European nation. The burden of government spending didn’t explode until the 1960s. This is important because there is a relationship in the academic literature, known as Wagner’s Law, which revolves around the tendency for rich nations to have big governments. Some people naively conclude that this means big governments lead to more prosperity. But this puts the cart before the horse. Denmark and other western nations became rich first, and then government expanded.

1) Debt

• Link Norway was successful through the financial crisis

During the height of financial meltdown in 2008, Norway actually grew by 2.2 percent.

• Link Norway has kept a relatively low debt to GDP ratio at 49.6% it’s less than half of the U.S’s 102.9%
• Link Anti-Debt: Norway saves lots of oil money for future generations

Norway shines especially brightly: unlike Britain, it is saving its North Sea oil and gas revenues into a sovereign wealth fund, now worth 2.384 trillion kroner (£228bn), or 1.4 times its GDP. Only 4% of the fund goes into the national budget, the rest is saved for future generations.

2) Socialization Level

• Link Government Employment Levels

On average, the share of state employment in total dependent employment across Scandinavia is 32.7%, compared to only 18.5% in the non-Scandinavian countries of the EU-15.” 16 In the United States, government workers account for slightly more than 15 percent of the workforce.

• Link Nordic Countries have Lower Corporate Tax Rates

...every Nordic nation enjoys a lower corporate tax rate than the United States. Corporate income in the United States is taxed at 39.3 percent, while the tax rate in Nordic nations is no higher than 28 percent.

• Link Nordic Countries rank high in Ease of doing business rankings

Another measurement that reveals a similar pattern is the World Bank's Ease of Doing Business Index, which measures the amount of bureaucracy and regulation one has to put up with when starting and running a business in any given country. Here too, the Scandinavian countries score in the top 10s and 20s

3) Health care

4) Income

• Link 2007 U.S has higher income than Nordic countries

- Per capita GDP in the United States is more than 15 percent higher than it is in the Nordic nations.
- The average  person in Nordic nations has barely 51 percent as much private consumption as an average American.
- Norwegians are the most prosperous, but even their private consumption is just 56 percent of U.S. levels. Both the Swedes and the Finns have less than 50 percent of the private consumption of average Americans.

5) How they’ve fared through the economic crisis and reasons as to why they’ve done so well.

6) Education and High School Graduation rate

• Link A Significant Portion of Swedish Schools have been Privatized

Since the change was introduced in 1992 by a center-right government that briefly replaced the long-governing Social Democrats, the numbers have shot up. In 1992, 1.7% of high schoolers and 1% of elementary schoolchildren were privately educated. Now the figures are 17% and 9%.

• Link Uk private educated kids

Around 7% of children in the country are privately educated

• Link USA privately educated kids = 10%

7) Welfare/ Warfare

• Link Nordic countries have much lower military spending

2011: Military Expenditure by percent of GDP
US: 4.7
Norway: 1.6
Sweden: 1.3
Finland: 1.5
Switzerland: 0.9
Denmark: 1.5
Canada: 1.4

8) Family Single parenthood

9) Crime, Incarceration Rate, Levels of Violence

10) Degrees of freedom compared to the U.S

• Link Sweden has more free market than the U.S

Sweden would be more free market than the United States in the Economic Freedom of the World rankings.

In recent years, policy makers have abolished both the death tax and the wealth tax. And the corporate tax rate has been reduced significantly below the U.S. level.

• Link Sweden has more free market than the U.S #2

...first international ranking of property rights, for instance, the United States trails the four Nordic nations in the survey. 39 Norway is number one, Sweden and Denmark are tied for third, and Finland ranks number 11—all above the number 14 ranking for the United States.

• Link Economic Freedom of The World Annual Report

Freedom = Wealth and High Standard of Living

- Nations in the top quartile of economic freedom had an average per-capita GDP of  $37,691 in 2010, compared to $5,188 for bottom quartile nations in 2010 current  international dollars
- In the top quartile, the average income of the poorest 10% was $11,382, compared to $1,209 in the bottom in 2010 current international dollars.
- Life expectancy is 79.5 years in the top quartile compared to 61.6 years in the bottom quartile.

• Link Sweden abolishes Wealth tax while U.S is Performs the Opposite

Fredrik Reinfeldt, Sweden’s youthful 42-year-old prime minister, who won elections last September, said a proposal to eradicate the 1.5 per cent tax on personal wealth

About 77% of American households would see a tax increase compared to their 2012 tax levels, according to the analysis by the Tax Policy Center, Link

• Link1 Link2 Denmark has High Taxes but makes up for its Economic Freedom in other Areas

1) Conversely, Denmark has a very bad tax system, but it has very free market policies in other areas, so it ranks 15 out of 141 countries. (Economic Freedom of the World Ranking index)

2) *  Denmark ranks 113th for fiscal policy in the Economic Freedom of the World report.

But...Unlike the U.S...

*  Denmark is the 5th best nation in the world for protecting property rights and maintaining a sound legal structure.

*  Denmark is the 11th best nation in the world for avoiding over-regulation of credit, labor, and business.

*  Denmark is the 24th best nation in the world for sound money.

*  Denmark is the 25th best nation in the world for freedom to trade across borders.

*  Because very few nations have consistently good scores in all these categories, Denmark ranks 4th among all nations when you combine these important measures of a free market economy, surpassed only by Hong Kong, Singapore, and New Zealand.

11) Historical Advantages

• Link Sweden and Switzerland have stayed out of wars

Another factor which continued Swedish prosperity was the fact that Sweden was able to stay out of both World Wars, and indeed all other wars as well. Sweden is in fact the country with the longest consecutive period of peace, having fought no war since 1809

Sweden has thus enjoyed 5 more years of peace than Switzerland, which participated in the Napoleonic wars in 1814.

Link Self-imposed, permanent, and armed, designed to ensure external security. Switzerland is the second oldest neutral country in the world; it has not fought a foreign war since its neutrality was established by the Treaty of Paris in 1815.

• Link Low government spending in the 1950s in Sweden and also one of the most powerful economies

Even in the early 1950s, Sweden was still one of the freest economies in the world, and government spending relative to GDP was in fact below the American level.

Sweden had the highest per-capita income growth in the world between 1870 and 1950, by which time Sweden had become one of the world's richest countries, behind only the United States and Switzerland, and Denmark

12) Miscellaneous

• Link Levels of government Nordic vs U.S

The public sector in Sweden, Denmark, Norway, Finland, and Iceland consumes, on average, more than 48 percent of economic output. Total government outlays in the United States, by contrast, are less than 37 percent of gross domestic product. Revenue comparisons are even more striking. Tax receipts average more than 45 percent of GDP in Nordic nations, a full 20 percentage points higher than the aggregate tax burden in the United States.

• Link Swedish Economic Performance History

Between 1870 and 1950, average growth in Swedish GDP and productivity was, by some measures, the fastest in the world. In 1970 Sweden was the fourth-richest member of the OECD club of industrial countries. But for most of the past 50 years the story has been one of relative decline, including a deep recession in the early 1990s (see chart 1). By 1998 Sweden had fallen to 16th in the OECDrankings. It has since climbed back a bit, but the relatively strong growth of the past decade should be seen mainly as a rebound from the 1990s through.

• Link List of countries in the OCED