One of the great delusions of our day is that Scandinavian countries are “socialist” and so America should be socialist too. Senators Bernie Sanders and Elizabeth Warren and others of the ultra-Left repeatedly claim that Norway, Sweden and Denmark (sometimes they include Finland and Iceland too) are prosperous because they are socialist.
Lars Rasmussen knows better. As Danish Prime Minister, he declared in 2015, “I know that some people in the U.S. associate the Nordic model with some sort of socialism. Therefore, I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy.”
A market economy is a capitalist one in which property is largely private and prices are free to reflect supply and demand. It is synonymous with “free enterprise.” In a socialist economy, by contrast, government owns or controls the means of production and heavily regulates and redistributes everything else. We sometimes call that a “planned” or “command” economy because the plans of market participants are bulldozed by the commands of those in political power.
The Heritage Foundation’s annual Index of Economic Freedom is one of two excellent sources for comparing how “capitalist” or how “socialist” a country is. The US, which showed up among the top ten (freest or most capitalist) for years, now ranks #25 in the latest (2023) Index. Denmark and Sweden are more capitalist than America, at #9 and #10, respectively. Norway comes in at #11. Nearby Finland, technically not a Scandinavian nation, checks in at #12. The world’s socialist countries—Cuba (#175), Venezuela (#174) and North Korea (#176)—are at the other end of the scale; and not by coincidence, they are also among the very poorest.
The other go-to source is the Fraser Institute’s Economic Freedom of the World Index. The methodologies and categories of the two indices differ somewhat, producing in turn some differences in country rankings, but the findings are broadly similar: In Fraser’s most recent Index, Denmark is #10, Finland is #21, Norway and Sweden are tied at #37. Iceland, like the other four a “Nordic” nation, ranks #19. At #6, the US does better in the Fraser Index than it does in the Heritage Index.
Type “Scandinavia socialism” or “Nordic socialism” into the search engine at FEE.org, and you’ll find numerous articles that address the misinformation on this topic—articles not authored by charlatans, demagogues and class warriors who deploy obsolete data, but thoughtful and well-researched pieces by actual economists and native Scandinavians who know what they’re talking about.
The allegedly socialist countries that seem to work do so not because of the socialism they have but because of the capitalism they possess in abundance—strong evidence that the freer economies are, the better off the people are. Go full socialism and you get a miserable basket case such as Venezuela. The fact is that while Nordic nations dabbled in welfare-state style socialism a half-century ago, they learned some lessons from the resulting stagnation. They reversed course. They are now among the freest, most capitalist countries on the planet according to both the Fraser and Heritage Indexes.
I’ve said it before and I’ll say it again: Socialism devastates an economy until some form of capitalism is allowed to rescue it. That’s the story of such places as post-war Japan, Hong Kong, and Germany. I can think of no instance in all of history in which capitalism produced economic disaster that socialism subsequently remedied. It just never happens, and that should be totally predictable. Socialism offers no theory of wealth creation; it’s nothing more than crackpot schemes for the concentration of power and income redistribution, robbing Peter to pay Paul for Paul’s vote.
“Free markets and small government made Sweden rich,” explains Swedish economist and Cato Institute fellow Johan Norberg. “The experiment with socialism crashed us.”
Voicing a conclusion of people across the political spectrum, the Social Democratic Minister of Finance Kjell‐Olof Feldt stated “That whole thing with democratic socialism was absolutely impossible. It just didn’t work.”
Nima Sanandaji, author of Scandinavian Unexceptionalism, tells us that “Nordic societies did not become successful after introducing large welfare states.” He writes,
They were economically and socially uniquely successful already in the mid-20th century when they combined low taxes and small welfare states with free-market systems. Over time, the generous welfare states of Nordic nations have created massive welfare dependency, gradually eroding the strong norms of responsibility that undermine the region’s success. This, combined with the growth-reducing effects of a large state, explains why Nordic countries have gradually, over the past decades, moved towards less-generous welfare, market reforms, and tax cuts.
The Economist magazine described the Scandinavian countries in 2013 as “stout free traders who resist the temptation to intervene even to protect iconic companies.” They are among the easiest countries to do business in. Through tax cuts, deregulation, and privatization, they’ve dismantled much of the socialism that nearly ruined their economies.
The claim that socialism is alive and doing well in Scandinavian countries is shameless propaganda, hopelessly wrong and out of date. Those who make such ridiculous claims betray their real agenda of government control by never telling you these facts: 1) Sweden has a 100 percent nationwide school voucher program for schooling instead of the costly, underperforming socialized education system we have here; 2) None of the Scandinavian countries has a nationally-imposed minimum wage law; 3) Scandinavian countries all have lower corporate income tax rates than the US; and 4) In these nations, “property rights, business freedom, monetary freedom, and trade freedom are strong,” as Sanandaji points out. The same folks hawking “Scandinavian socialism” never tell you to check out those Fraser and Heritage indexes either.
For more on this topic, see Socialism: Force or Fantasy, especially the recommended readings at the bottom. Don’t miss this additional and very important point: So-called “democratic socialism” is at war with itself; the longer and deeper that any nation pursues it, the more the socialist aspect squeezes out the democratic part. Whenever they come to power, democratic socialists steal not only your “stuff” but anything they can get their hands on—elections, the media, the schools, your children, even your vocabulary.
The Nordic countries of Denmark, Norway, Sweden, Finland and Iceland have generous welfare states—which they have purposely been reducing—but it’s not socialism that pays the bills. As always, capitalism pays the bills that socialism piles up—that is, until, as Margaret Thatcher put it, the socialists “run out of other people’s money.”
This article was adapted from an issue of the FEE Daily email newsletter. Click here to sign up and get free-market news and analysis like this in your inbox every weekday.
I have my own way of expressing that same truth: “The only thing socialism does for poor people is give them lots of company.” Or, “Socialism irons out the business cycle by eliminating the boom part.”