Debunking Nordic Socialism

The Data Show That Socialism Works, Part 2

Introduction

The idea of changing the definition of socialism away from its past atrocities, is not a new one. It is also not new for US socialists to look at Northern European countries, specifically as something they would like to emulate. But around 2018, possible as early as 2015 when Bernie Sanders announced his bid for presidency, came the idea about how to recategorise socialism to narrowly fit these Northern European countries as socialism. Completely ignoring the fact that those countries don’t see themselves as socialist and completely ignoring the countries that actually did or do, but haven’t turn out that well.

Originally, it was difficult for liberals to accept. After all, these Northern European countries are have largely capitalist markets, so how can they be considered socialist?

So they hand waved these ideas away while conceding ground that they could not be countered.

In this article, I will counter them.

Socialist Institutions

The biggest shift in this discussion was decided by modern socialist-inspired thinkers that the best way to judge if a country is socialist, is by how many socialist institutions it has. If those institutions go above a certain percent of the economy or above a total number of workers in the economy, then it socialist. By socialist, the implication is not held in private ownership.

Those institutions could be:

• General government services: public schools, public healthcare, police, army.. all these are ‘socialist’

• State owned enterprise: post office, public utilities, DMV..

• Social wealth funds: usually some sort fund that invests in the market with the purpose of gaining interest and growing the fund. An example would be a pension fund.

• Worker co-operative: where the company is owned by the workers.

• Labour unions: a mechanism to negotiate together on behalf of the workers.

Under this new definition, all developed countries in Europe have quite a high percentage of socialist institutions. In addition, proper socialist countries like the USSR, Mao or modern China and Venezuela would qualify for the title of socialist. And that leads us to the next requirement..

Democratic Socialism

While the definition of socialism has become much looser to include European countries, there needed to be some criteria to disqualify all the old socialist countries that didn’t pan out the way they were intended. What would that be?

Well, all those old socialist experiments and even some modern day ones, ended in authoritarianism and corruption. So to filter them out, we need a criteria of “democratic”. If the country cannot be properly ruled by its people, then it must not really be democratic.

Now, when you say “I don’t like socialism, because I don’t want a repeat of the USSR”, socialist’s reply will be “when I say socialism, I mean Norway or Sweden”.

Why is This Wrong?

For starters, we just excluded all the countries that do call themselves socialist and replaced them with Northern European countries that do not.

Is this dishonest? well, yes.

Not only do these countries not consider themselves socialist, they have no intention of being ones in the future. They do not believe in the class-struggle paradigm. They follow the class-collaboration paradigm.

Putting that aside, I would like to focus on 3 concrete concepts that will debunk Nordic Socialism for good.

1 - Small Countries

Every time a ranking is published on the richest countries, or the most innovative, or the most competitive, the happiest or safest... small countries almost always occupy most of the top positions.

Small countries are countries with fewer than 10 million inhabitants.

Among the top 10 richest countries per capita, 9 of them are small countries. Out of the top 25 richest countries in the world per capita, 17 are small countries.

As it happens, all the Nordic countries are small. With the exception of Sweden being 10.5 million which makes it just above small, but still pretty close.

Why are small countries richer?

• The main reason that small countries do better, is because they small. This means that they typically cannot produce everything they need and as a result, have to be open to international trade and competition. Small countries are typically very economically free. Economic freedom is one of the key factors that contribute to economic growth. This is due to the fact that countries with greater economic freedom tend to have more efficient markets, better protection of property rights, and less government interference in the economy. These factors make it easier for businesses to start and grow, allowing for the creation of more jobs and higher wages. This, in turn, leads to higher levels of consumption and investment, which drives economic growth.

• Small countries tend to have much less bureaucracy. They don’t need so many political structures or its harder to justify them. Citizens tend to be more aware of costs involved. Usually, they simply cant afford it.

• If a small country sets up a government service such as healthcare, these systems would be small and not complex, in real terms. Meaning, it would be easier for a small country to implement a labour-intensive government service such as healthcare than it would be for a large country, due to it being less complex and would not be as effected by the diseconomies of scale.

2 - Trust

The Nordic countries have a high degree of interpersonal trust. They trust each other. They trust their government. They trust their businesses (hence the class-collaboration mentioned earlier).

Now, the reason why they have this high degree of trust is a more complex issue, but it could be partly due to the following reasons:

• The relatively small size of the Nordic countries may make it easier for individuals to trust one another, as they are more likely to know and interact with each other on a regular basis.

• The culture of the Nordic countries may be more conducive to trust, with an emphasis on individual autonomy and self-sufficiency (Protestant work ethic).

• The Nordic countries are relatively small and isolated, which may have contributed to the development of more homogeneous populations over time. The region has a long history of shared cultural and historical experiences, which may have further contributed to a sense of shared identity among the populations of the Nordic countries.

Now, it is very important to note that a lot of (actual) socialist countries had issues with corruption. These conditions of high trust and smaller bureaucracies, could be strong reasons as to why these countries have not suffered such high degrees of corruption.

3 - The Bladerunner Curse

This last part is more to do with the claim of socialist institutions than the Nordic countries themselves.

A bit of a detour, but bear with me. A lot of people are under the impressions that society is run by large corporations. The aim stated by socialists that the government should turn corporations into socialist institutions over time, ignores the fact that companies do not live forever.

The Bladerunner curse is an observation made about the movie ‘Bladerunner’ that came out in 1982. In this dystopian future, there can be seen large visible commercials for companies across the city. As it turns out, most of these companies have died out. The expectation was that in the future, these companies would still be around and only getting larger.

But companies are actually quite fragile:

• Out of 10 new companies, 6 close within the first year. 3 continue, but their profits are low or break-even. 1 does succeeds.

• The average age of a company (that survives beyond 1 year) is 11 years and the average age of a company on the S&P 500 is 15 years.

The idea of capitalism and creative destruction is that new companies will be created continuously and replace the old ones - in a sort of life-cycle.

Therefore, in an economic system where companies would be eventually taken over by the government in one way or another, there would be no incentive for new companies to form. This would lead to a downwards spiral of lack of competition, lack of innovation, government protectionism, high unemployment, high prices and eventually, the economy grinding to a halt.

This undermines the whole premise of this socialist approach.

What socialists have not yet learned is that if you are unhappy with the distribution of an economic system and you make changes to it, you risk hurting the production side of that economic system.

The Nordic countries have liberal economies that have high degrees of economic freedom and do not suffer from this issue.

Conclusion

So what would you reply with, the next time you hear “when I mean socialism, I mean Sweden or Norway”?

You can say:

“The Nordic countries are small countries with liberal economies, high degree of interpersonal trust, small bureaucracies and small welfare systems in real terms. They do not consider themselves socialist and do not believe in the socialist principle of class struggle.”

Further Reading

• “The Success of Small Countries” - by Credit Suisse https://www.credit-suisse.com/media/assets/corporate/docs/about-us/research/publications/the-success-of-small-countries.pdf

• “The Nordic Models” - by Hannes Gissurarson https://www.academia.edu/39536308/The_Nordic_Models

• “In Defense of Small States” - by Hannes Gissurarson https://www.academia.edu/39536271/In_Defence_of_Small_States

• "Small States in World Markets: Industrial Policy in Europe" by Peter J. Katzenstein and J. David Richardson, which examines the economic development of small states in Europe and the role of industrial policy in their success.

• "Small States in the Global System: The Role of Diplomacy in International Relations" by Paul G. Roeder, which explores the diplomatic strategies and tactics used by small states to assert their interests in the international system.

• "Small States and the Global System: A Study of International Economic Relations" by John J. Kirton, which analyses the economic relations between small states and larger states in the global system.

• “Small States, Smart Solutions: Improving Connectivity and Increasing the Effectiveness of Public Services” - by Edgardo M. Favaro https://ideas.repec.org/b/wbk/wbpubs/6416.html

Bonus

• Comparison between Norway and Venezuela