Friday, August 12, 2011
Does Scandinavian Socialism Work?
Posted By Steven Plaut On August 12, 2011 @ 12:35 am In Daily
Mailer,FrontPage | 1 Comment
There is nothing like a good stock market bear run to get all the
media wags out and chattering about the "death of capitalism."
Invariably the same folks take to lecturing the rest of us about how
the only hope for humankind is "social democracy" in the form of
It would be hard to understate the extent of romanticizing and fantasy
concerning Scandinavia's economic and social systems to be found among
the Western "intellectual classes," and that clearly includes the left
wing of the Democrat Party. Scandinavians themselves are often not
as convinced that Scandinavian socialism is all it is cracked up to
be, and Sweden's own ex-Prime Minister Carl Bildt (current Foreign
Minister) has pronounced it a failure.
Scandinavian countries are "socialist" in some senses and vibrantly
capitalist in other senses. They are "socialist" in the sense that
they have very high taxes with very generous social welfare services
provided by the state, the famous "cradle-to-grave" welfare state.
They are vibrantly capitalist in the sense that they have low levels
of interference in markets by the government, low levels of
regulation, low levels of nationalization of industry and capital, and
almost no protectionism. Interestingly, Scandinavian countries,
especially Sweden, manage to maintain those levels of taxes and
expenditures while achieving high levels of national wealth and
production, and a standard of living among the world's highest. As a
result Western groupies of Scandinavia hold its "socialism" up as the
model for the rest of the world and certainly for the bastions of
capitalist inequality and class conflict, especially the
The wealth and riches of Sweden of course are at least in part the
byproduct of Swedish cowardice and moral depravity. Sweden sat out
both World Wars, and emerged from them with its economy completely in
tact. In fact, "neutral" Sweden made money trading with Hitler's
Germany and providing the Nazi war machine with war materials, even
while its fellow Scandinavian nations were being overrun, brutalized
Be that as it may, Sweden in particular and Scandinavia in general are
hailed as the great champions of humanism and egalitarianism, as the
countries that have cured poverty and eliminated hardship and material
suffering. Here is not the place for an overall assessment of
Scandinavian societies, which – like all countries – have their
positive points and also their problems. The question here is whether
Scandinavian "socialism" is really the panacea for poverty.
Sure enough, poverty rates are comparatively low in Scandinavian
countries compared with most of the rest of the world. In fairness,
it should be noted that they are not the ONLY countries with low
poverty rates. Ultra-capitalist Switzerland, which no one would
mistake for a socialist country and which has a population similar in
size to that of Sweden, appears to have poverty rates lower than those
in the Scandinavian utopias. But there is a serious analytic issue
that must be addressed and it is this: Are poverty rates in
Scandinavian countries low because Scandinavian-style "socialism"
works, or are they low because Scandinavians work?
Let us begin by noting that while the dimensions of poverty are
relatively small by international standards, Scandinavian countries
definitely do have poverty. Scandinavian "socialism" has not
Poverty rates of course are highly dubious things to compare across countries.
The definition of "poverty" and its measurement are both highly
problematic, and both vary dramatically, making inter-country
comparisons difficult. In all countries there are serious problems
with the measures. Wealthy people are sometimes counted as part of
the population below the poverty line, as long as their current income
happens to be low. Examples are retired people and students. The
poverty statistics are based on reported incomes, meaning that lots of
people living high on the hog are counted as poor because they do not
report their income at all to the tax authorities, earning income from
the "shadow economy." Poverty is generally measured by income, not
consumption. It is often measured as a percent of median income, not
by material hardship, or by the rather silly "Gini coefficient." If
every single person discovered a petroleum well in his yard, poverty
rates would not change much.
Even if we accept the definitions and measures within each country at
face value, there are still problems in making comparisons across
different currency zones. And some countries, including some
Scandinavian ones, just do not report an official poverty rate of any
Having noted all of that, by most estimates the Scandinavian countries
are in relatively good but not remarkable positions relative to the
rest of the world in terms of the dimensions of poverty. Denmark's
poverty rate, with its bloated welfare state, is 12%, the same as the
poverty rate in the US according to this source. And poverty in
Denmark is growing – it was estimated at 6% back in 1997 in a EU
study. (It should be noted though that Denmark has no official
poverty measure. Neither does Norway.) Most other estimates put the
US poverty rate higher than 12%. Other estimates of poverty rates for
Sweden, Norway and Finland run at about 6%, although some sources put
it much higher. The sources that estimate the US poverty rate as 18%
also estimate the rates for Sweden and Norway at 9%. A Finnish
source estimates Finland's 2010 poverty rate at 14%. We will leave
Iceland out of the comparisons, since the entire population of that
country has been driven into insolvency by events in recent years.
While Scandinavian countries have relatively low poverty rates,
Switzerland's, as noted, is evidently even lower. (I say evidently
because Switzerland has no official measurement of poverty. This web
site puts it at 6.9%, slightly more than half that of Denmark's.) A
summary of other estimates of poverty rates from different sources can
be found here. "Child poverty rates" are a separate story, but are
low in Scandinavian countries, in large part because there are so few
children there being born.
So Scandinavia has not eliminated poverty. The interesting question
is whether the low poverty rates there are thanks to the economic
system or thanks to Scandinavians being hard-working thrifty
disciplined people. That Scandinavians are hard-working is evident
from the fact that in spite of enormous benefits in Sweden for the
unemployed and for those who do not work, creating incentives to avoid
work, Sweden has a labor force participation rate that is one of the
highest in Europe.
One way to test our question is to examine Scandinavians who do not
live in Scandinavia. There is a large Scandinavian population that
lives in the bad-old-selfish-materialist-capitalist United States.
Well, it turns out that Scandinavians living under its selfish
capitalism also have remarkably low poverty rates. Economists Geranda
Notten and Chris de Neubourg have studied Scandinavians living in the
US and in Sweden and compared their poverty rates. They estimate the
poverty rate for Scandinavians living in the United States as 6.7%,
half that of the general U.S population. Using measures and
definitions of poverty like those used in the US, the same analysts
calculate the poverty rate in Sweden using the American poverty
threshold as an identical 6.7% (although it was 10% using an
alternative measure). So low poverty among Scandinavians seems to be
because Scandinavians work, whether or not Scandinavian "socialism"
can be said to work.
But an additional reason for the low poverty rates in Scandinavian
countries is that these are countries that have very few immigrants.
Poverty rates are high almost everywhere in Europe among migrants into
those countries. Scandinavian countries with the exception of Sweden
have very few immigrants, both in absolute numbers and in terms of the
portion of the overall population.
Here are the numbers:
Foreign born as a percent of total population by country:
Country Migrants as Percent of Population
Source: OECD data (based on period close to 2000)
International Migrants in Developed, Emerging and Developing
Countries: An Extended Profile – December, 2010
Because the US, Canada, UK, France and Germany are large countries,
the absolute numbers of their immigrants are also very high, not just
So is poverty low in Scandinavian countries because their "socialism"
works, or because they have relatively few poor immigrants entering?
And if poverty is low because Scandinavian "socialism" works, should
it not be working for migrants in those countries as well?
Separate poverty data for the migrant populations in Scandinavian
countries are available and there are numerous indications that these
are quite high. According to one study, "While first and second
generation immigrants constituted 44% of the poor children in 1997,
they were 65% of all poor children in Sweden in 2008. Only 5% of
native Swedish children live in poverty. For immigrant children with
both parents born outside of the Sweden, the child poverty rate is
39%." Poverty rates have also been shown to be high for immigrants in
Denmark. According to a recent study of poverty rates among
immigrants in all Scandinavian countries, "While native children face
yearly poverty risks of less than 10 percent in all three countries
and for all years investigated the increasing proportion of immigrant
children with an origin in middle and low income countries have
poverty risks that varies from 38 and up to as much as 58 percent."
So Scandinavian "socialism" is doing a remarkably poor job in
eliminating poverty among non-Scandinavians living in those
The conclusion can only be one thing. The low poverty rate among
Scandinavians in Scandinavian countries is thanks to the fact that
Scandinavians work. It is NOT because socialism works!
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