Politics: March 2018 Archives

An interview with Swedish author Johan Norberg explores the reality behind the Left's fantasies about Nordic socialism. Read the whole thing, but notice below the historical context that preceded the Swedish welfare state and the effect it had on the Swedish work ethic. To borrow Ronald Reagan's phrase, the safety net has become a hammock.

First, Norberg describes the economic and political liberty that transformed Sweden in the late 19th century:

Q: In a speech before the Free Market Foundation, you outlined the rise, fall, and subsequent rise of Sweden's economic standing. Can you give an abridged version of that history lesson to our readers? Why and how did Sweden rise, then fall, then rise once again?

A: This is an incredibly important story because for some reason, the "Swedish model" got very famous for the way it appeared for about 15 or 20 years in the 1970s and 1980s. That was the moment in time when everybody looked at Sweden and thought, "something interesting is going on there," and for some reason, that perception froze in time, in that era -- but it's just a tiny bit of Swedish history, and also, I would say, a scary example of what could go wrong.

The short version of our long history is that in the middle of the 19th century, Sweden was one of the poorest countries in Europe. My ancestors in Northern Europe starved for lack of modern industry, railways, food trade, and agricultural productivity. However, at that time, in the 1850 and 1860s, we had a group of classical liberal Swedish politicians who really opened Sweden up. They democratized politics, deregulated markets and businesses, and turned Sweden into a free trade nation. Suddenly, we could make exports to richer countries, we could begin to mechanize the old trades, and increase productivity dramatically, and we had 100 years of growth that basically turned Sweden from one of the poorest counties in Europe into one of the world's richest countries.

This was the moment in time when the "Swedish model" was open markets, free trade, and a very limited government. During the period in which we grew the fastest, our government spending wasn't more that 10% of GDP, and as late as the early 1950s, our government was smaller, and our taxes were lower than in the rest of Europe and in the United States -- so that's really something people tend to forget when they tell people to look at the successful "Swedish model." We were one of the richest countries on the planet -- in 1970, the fourth richest -- before we built the welfare state, before we had this third way, semi-socialist model. So, we created that wealth first. But when you're rich, you want to spend it, and that's what they did.

As usual, ignorant people without a sense of history or cause and effect decided that because the system wasn't perfect, they would break it and substitute something new.

In the 1970s, the Social Democrats in charge began to redistribute big time, and they began to regulate businesses, and for a period of some 20 years, we doubled the size of public spending in Sweden. This is exactly the thing that people still think about when they talk about the "Swedish model" in the U.S. and other places. People said, "Look, this is a country that has begun to tax and spend and regulate much more than we do, and they're incredibly rich. Everything seems to be working quite well." Of course, we were rich because we had created all that wealth -- but it's like that old joke. How do you end up with a small fortune? You start with a big fortune! Then you just make some mistakes, and lose most of it -- and that's what we did.

The period in the 1970s and 1980s was the one period in Sweden's economic history where we really began to lag behind other countries, and mess up in a big way. It all ended in a terrible crisis after an inflation boom in the early 1990s, when we, for a period of time, had an interest rate of 500% to try and protect our currency. It all came tumbling down.

After that, we began to return to some of our roots. We began to deregulate markets again, began to liberalize and produce things like private providers in healthcare, a school voucher system on a national level, and partially privatize pension, and so on. Since then, Sweden has done much better again.

This is the whole irony of the story. When people like Bernie Sanders and others talk about the successful socialist "Swedish model," they talk about those 15 to 20 years of awful economic and social results when real wages didn't increase at all....

We see the usual Leftist ignorance of human nature, assuming that behavior will remain unchanged when the incentives change. (An important factor Norberg doesn't address is the undermining of Christianity by Socialists and liberals. How do you maintain a "strong Lutheran work ethic" when people are no longer strong Lutherans?)

...we had Social Democrats in Sweden who said that this is the best place in the world to experiment with socialism because we already had these great foundations to make it work. We had wide-spread social trust, so people trusted one another, and they trusted the government. A strong Lutheran work ethic means we would work even though taxes might make it less economically beneficial. People would never accept welfare if they could work. We had already built all this wealth. What some of them said is, "If it doesn't work in Sweden, it can't work anywhere."

What happened -- even in Sweden -- this began to undermine our foundations in various ways. Cultures don't exist in vacuums, and if there are no institutions, no incentives that encourage them, they begin to fall apart -- and that's what happened in many ways. Work ethic decreased; our tradition of not accepting government benefits if they weren't needed began to erode as well. It used to be that when we were asked something like, "under what circumstances is one justified in accepting government benefits to which one is not entitled," we were always ahead of everyone else, 80% to 90% would say, "never." That has begun to erode down to some 50% to 55%, which is higher than many other countries, but it tells you something about what has changed....

This definition of socialism is spot-on: "Authoritarianism applied to the economy."

[Socialism is] basically trying to reorganize society from above. It's really a way of not accepting the spontaneous outcome of millions of everyday choices regarding how to work, what to work with, whom to reward by paying them, by buying their goods and services. So, in a way, it's authoritarianism applied to the economy. As a result of that, it's the economic system that is the hardest failure of the 20th century. We've never seen a system be so totally discredited everywhere it's been tried. The basic reason is that one person at the top -- or a few politicians and bureaucrats -- if they are trying to guide the system of prices and economic rewards, as well as which businesses to benefit, it's a way of replacing millions of decisions every minute made by people in their local circumstances based on their local knowledge, and replacing it with only the knowledge of a few people at the top. They always have less knowledge; they can't try out the many experiments that millions of people can try over time, and that's why it fails again and again....

To the idea that socialism would be great, but it's never been implemented correctly:

If your system is dependent on it being run by the best of people, and anything else results in chaos and poverty and breadlines, it's probably not a good system. I think that's what we've learned from history. The best political theorists and economists have always said that we should always try to organize society and our laws and our politics to make sure that bad people can create as little damage as possible because we always end up with wrong people in certain places implementing stupid policies at the wrong moment. If you have a system that only works if that never happens, then you probably have the wrong system.

There's much more good stuff in the interview: Why young people are drawn to socialism, the real cause behind "failures" of capitalism, why you have to squeeze the lower and middle class to have socialism.

You'll find more of Johan Norberg's work at his website.