Bernie Sanders thinks the U.S. should look to Sweden and other Scandinavian countries to "learn what they have accomplished for their working people." The Vermont senator has said so repeatedly throughout his campaign for the Democratic presidential nomination, prompting GOP rival Marco Rubio to say, "I think Bernie Sanders is a good candidate for president—of Sweden."
As a native of Sweden, I must admit this makes me Feel the Bern a bit. Sanders is right: America would benefit hugely from modeling her economic and social policies after her Scandinavian sisters. But Sanders should be careful what he wishes for. When he asks for "trade policies that work for the working families of our nation and not just the CEOs of large, multi-national corporations," Social Democrats in Sweden would take this to mean trade liberalization—which would have the benefit of exposing monopolist fat cats to competition—not the protectionism that Sanders favors.
In fact, when President Barack Obama visited Sweden in 2013, the three big Swedish trade unions sent him a letter requesting a meeting. Their agenda: a discussion of "how to promote free trade." The chairman of the largest Social Democratic trade union scolded the American president for his insufficient commitment to the free flow of goods.
This reality will not endear my home country to American socialists, but it's better to be hated for the right reasons than to be loved for the wrong ones, as the saying goes. Being more like modern Sweden actually means deregulation, free trade, a national school voucher system, partially privatized pensions, no property tax, no inheritance tax, and much lower corporate taxes. Sorry to burst your bubble, Bernie.
Sanders isn't completely deluded, of course. Sweden and the other Scandinavian countries have experimented with very big government and semi-socialist ideas. There's just one problem: That experiment coincided almost perfectly with the region's only sustained period of economic decline over the last 100 years.
Sanders' image of Scandinavia is just like the rest of his policies: stuck in the 1970s. Until that decade, Sweden and Denmark had grown much faster than other European countries and had become richer than most other countries on the planet, in large part by limiting government and embracing markets. (Norway is a special case, because oil and gas make up 22 percent of GDP, just a few percentage points below Venezuela. So unless Sanders' policy proposal is to strike oil, the Norwegian example is not relevant.)
During its laissez faire period, between 1850 and 1950, Swedish income per capita increased eightfold as the population doubled. Infant mortality fell from 15 to 2 percent, and life expectancy increased by a whopping 28 years. And all this happened before the welfare state was even a glint in the taxman's eye.
As late as 1950, total taxes as a percent of GDP in Denmark and Sweden were not just lower than in other European countries but lower than in the U.S.: 20 and 19 percent, respectively, vs. 24 percent in America.
It was at this point, when we Scandinavians had satisfied our thirst, that we thought that we could turn our backs to the well. We began to regulate. We increased taxes and beefed up the public sector. It's easy to see how foreigners observing the implementation of these unorthodox policies might confuse cause and effect. But those who think the semi-socialism made us rich would also probably look at a snapshot of Bill Gates and conclude that you become the world's wealthiest man by giving your money away.
Instead, the Scandinavian countries became a real life version of the old joke about how to make a small fortune; you start with a large one. Sweden took democratic socialist policies further than its neighbors, and as a result its economy fell more steeply. Slowly but steadily the policies of Prime Ministers Tage Erlander and Olof Palme eroded productivity and the long-renowned Scandinavian work ethic. In 1970, Sweden was 25 percent richer than the OECD average. Twenty years later, the average had almost caught up with us. Once the fourth richest country on the planet, Sweden was now the fourteenth.
It was a disaster for entrepreneurship and employment. During this time, not a single job was created in the private sector (on net), despite a growing population. As of 2000, just one of the 50 biggest Swedish companies had been founded after 1970.
As the Social Democratic finance minister Bosse Ringholm admitted in 2002: "If Sweden would have had the same growth rates as the OECD average since 1970, our common resources would have been so much bigger that it would be the equivalent of 20,000 SEK ($2,400) more per household per month."
During this brief Bolivarian turn, many Swedish intellectuals feared that their country would become an Orwellian nightmare. The Social Democrats toyed with an incredibly unpopular plan to socialize private businesses, and Parliament implemented a general rule saying that any economic transaction that had the intention of lowering one's taxes was illegal even if the transaction itself was legal. IKEA founder Ingvar Kamprad and many other entrepreneurs, plus all of our famous sports stars, fled the country.
Sweden's most famous author, Vilhelm Moberg, wrote that the government was out of control, and that we were turning into a third way between democracy and dictatorship "where everybody is discontented and disappointed." Our most famous film director, Ingmar Bergman, was snatched by the police at the Royal Theatre on charges of tax crimes (later dropped). He had a nervous breakdown and left the country.
Our most famous author of children's books, Astrid Lindgren, had to pay more than 100 percent in marginal income tax, prompting her to write a bitter, satirical essay about the kind old witch Pomperipossa and vicious tax authorities: "She had thought that the rights of everybody would be respected in a democratic country. People should not be punished and persecuted because they happened—with or against their will—to make money in an honest way." But in the end, she finds a solution to her problems: "But suddenly it struck her—woman, you must be able to get welfare benefits! Oh, wonderful thought! And then Pomperipossa lived on welfare happily ever after. And she never wrote another book."
Kjell-Olof Feldt, the Social Democratic minister of finance from 1983 to 1990, admitted in a 1992 book that some of the government's program was "unsustainable," some of the policies "absurd," and the tax system "perverse." These policies also collapsed after a debt- and inflation-fuelled boom in the late 1980s.
Whatever these unsustainable and perverse policies did, they did not help the working people that Sanders claims to represent. Real wages in Sweden fell by around 5 percent between 1975 and 1995. Nominal wages increased, but runaway inflation devoured it.
But in the early 1990s Sweden began to abandon its brief detour into Bernienomics. It deregulated, privatized, reduced taxes, and opened the public sector to private providers. The two decades that followed saw real wages increase by almost 70 percent.
Photo Credit: Joanna Andreasson using photo by Michael Vadon/Creative Commons