Debate Desk
Does Socialism Work Better Than Capitalism in the Nordic Countries?
The Nordic countries run market economies with high taxes and open trade; their own leaders reject the label socialist.
The claim
Supporters of expanded government say Denmark, Sweden and Norway prove that high taxes and generous benefits produce happy, healthy, equal societies, and that America could do the same if it only had the will. They call it democratic socialism and point to long lives and strong safety nets.
The answer in three points
- The Nordic countries are market economies. They protect property, trade freely, and in several cases have no minimum wage set by law. What they add is a large welfare state paid for mainly by broad taxes on ordinary workers and consumption.
- Their leaders say so. Denmark's prime minister told a Harvard audience in 2015 that Denmark is far from a socialist planned economy and is a market economy. Socialism means public ownership of production, which they do not practice.
- The model cannot be copied by taxing the rich alone. Nordic governments collect a large share of revenue from middle-income households through value-added taxes and payroll levies. Americans who want the benefits must be told honestly about those bills.
The honest conversation, then, is not capitalism against socialism. It is about how large a welfare state a free economy can carry and who should pay for it. The Nordic countries answer with broad taxes and open markets, and some of them have cut back parts of their state in recent decades to keep it going. Americans can learn from that without adopting the label or ignoring the bill.
The numbers
- Denmark's prime minister Lars Løkke Rasmussen said in a speech at Harvard's Kennedy School in 2015 that Denmark is far from a socialist planned economy.
- The OECD's Revenue Statistics report that consumption taxes and social contributions make up a large share of tax revenue in the Nordic countries, and Denmark relies on a value-added tax of 25 percent, per the Danish tax authority.
- The Heritage Foundation's Index of Economic Freedom has ranked Denmark among the freer economies in the world for years, showing that high spending can sit beside open markets.
What they will say next
"Look at their happiness scores." Survey scores reflect many things, including trust, culture and small homogeneous populations. They do not show that the tax system caused the result, and Americans in the same surveys report high satisfaction with their own freedom to choose.
"Their health care is better." Outcomes depend on lifestyle, population and measurement. Most Nordic systems rely on a mix of public and private delivery and allow patient choice and competition, so the lesson is not a single-payer government.
"Then we should tax like them." Then say so to the middle class, because that is where the money comes from. The honest comparison includes the price tag.
"They have lower poverty and more mobility." Some measures show that, and some show less mobility than advertised. Americans of Nordic descent do about as well as their cousins in the old country, which suggests the culture and institutions matter at least as much as the size of the welfare state.