Socialism is enjoying a prominence in American public debate not seen since the years before the Second World War. Representative Alexandria Ocasio-Cortez, among others, has stressed that she wants America to be more like Scandinavia. No surprise there, given that the youngest congresswoman to take office in American history is a self-proclaimed Democratic Socialist.
In defense of her ideas—which include a Green New Deal, Medicare for All, and a guaranteed job plan for all Americans, to be paid for by a proposed 70 percent marginal tax rate—Ocasio-Cortez has referred to Nordic countries as successful democratic socialist models that the United States should seek to emulate. When asked during a January 2019 interview with 60 Minutes if she wanted to turn the U.S. into a version of Venezuela or the Soviet Union, the millennial congresswomen demurred with an incredulous smile, responding that “my policies most closely resemble what we see in the U.K., in Norway, in Finland, [and] in Sweden.”
One can understand the American left’s admiration for Nordic-style democratic socialism. At first glance, Nordic countries appear to combine relatively high living standards with low poverty, with narrow income distributions, fully government-funded education, generous parental-leave policies, and long lifespans—everything the left would like America to embrace. Their argument takes its starting point in the perception that the Scandinavian “third way” economic model—combining the wealth creation of capitalism with the safety net of socialism—works well, and that the U.S. could reach the same socioeconomic outcomes and prosperity by expanding the role of government.
However, a closer look at the politics, economy, and history of the Nordic nations makes evident that, as with most urban legends, the reality of Ocasio-Cortez’s Nordic utopia is quite different from the dream. As the political philosopher Richard Weaver once quipped, the problem with the next generation is that it has not read the minutes of the last meeting. Before Americans try to become more like Scandinavia—whose combined population is roughly comparable to that of the greater New York City metropolitan area, although less diverse—it would be wise to explore how Scandinavia became Scandinavia.
In his 2015 book Scandinavian Unexceptionalism, Swedish researcher Nima Sanandaji argues that the Nordic states, Sweden in particular, historically developed remarkably high levels of social trust and cohesion along with a robust work ethic. These societal qualities predate the formation of the modern welfare state. One can reasonably assume, as leading Swedish economist Assar Lindbeck suggested in 2003, that societal norms in favor of work, or against living off handouts from others, originally emerged in societies where it was challenging to survive without working. The Northern European work ethic can be traced back to the hostile physical environment of preindustrial Scandinavia, which historically required farmers to work exceptionally hard for their farms to survive and yield a profit. The population gradually came to develop a collective ethos and social norms based on initiative, social trust, dedicated labor, and individual responsibility combined with sound institutions and high levels of civic participation.
These factors in the Nordic success story were noted over a hundred years ago by the German sociologist Max Weber, who suggested that Northern European countries tend to have a higher living standard than other parts of Europe due to their “Protestant work ethic.” Despite coming from the poorest rungs of Nordic society, the 2 million Scandinavian immigrants who traveled across the Atlantic to pursue the American dream following the Civil War—long before the establishment of Scandinavia’s modern welfare states—soon gained the reputation of being hardworking, disciplined, and honest.
A Scandinavian economist once told Milton Friedman, “In Scandinavia we have no poverty”—to which Friedman replied, “That’s interesting, because in America among Scandinavians, we have no poverty either.” Although both overstated their arguments, today the approximately 12 million Americans of Scandinavian origin are still prospering with similar or lower poverty levels and higher living standards than their Nordic brethren despite living in the American system Ocasio-Cortez wants to change.
Charles Walgreen, son of a Swedish immigrant, established Walgreen’s, America’s largest drugstore chain. Swedish-born Johan Nordstrom created the Nordstrom retail empire. Eric Wickman founded Greyhound, America’s biggest bus line. Indeed, historically, Swedish Americans have been better off than Swedes at home in Sweden, with considerably higher average income rates, writes Sanandaji, based on data from the U.S. Census Bureau and the European Statistical Office.
Contrary to the prevailing narrative, we also find that the relative success of Nordic countries like Sweden—as measured by high living standards, long life expectancy, and low crime rates, combined with a considerable degree of social cohesion and even distribution of income—actually precedes the contemporary welfare state.
Eleven years before Adam Smith published his classic, The Wealth of Nations (1776), regarded as the foundation of economic liberalism, the Swedish Parliament Member Anders Chydenius published The National Gain (1765), which advocated for the necessity of free markets in fostering economic prosperity. During the following century, these ideas were embraced by Swedish Minister of Finance Johan August Gripenstedt, who introduced extensive economic laissez-faire reforms, deregulating the financial sector while promoting free enterprise, competition, and trade during his tenure from 1856 to 1866.
These reforms prompted Sweden’s transition to capitalism and are credited with its achieving, by 1890, one of the fastest global economic growth rates. During the subsequent prosperous 60 years—when such internationally successful companies as IKEA and Volvo were founded—tax rates were lower in Sweden than in other European countries as well as in the United States. Taxation levels rose to 20 percent of GDP only in the 1950s. The formally neutral country had not officially participated in the First or Second World War, which had devastated other European industrial nations.
Sweden’s period of classical economic liberalism did not last. The decades that followed were characterized by the growth of the generous cradle-to-grave welfare state envied by Ocasio-Cortez, Senator Bernie Sanders, and their fellow progressives. They featured government intervention, an increase of tax rates, and the regulation of previously free markets. The country’s total tax burden peaked in 1990, at 52.3 percent, with a corresponding negative impact on business and job creation.
These socialist golden years were not so golden for economic performance. While Sweden’s growth was second in the world in 1970 (Japan was first), it quickly dropped by 1990 to the second-lowest within the Organization for Economic Co-operation and Development (OECD). A subsequent financial crisis in the 1990s saw GDP growth sink and unemployment spike, while the government raised interest rates to a staggering 500 percent in an effort to avoid devaluing its currency.
The Swedish model has been put to severe tests in more recent years, including by the integration of refugees into the job market. This has prompted calls for the country’s social contract to be revised. Factors ranging from rigid labor-market regulations, generous welfare benefits provided even to highly taxed people, and discriminatory societal attitudes have been holding many immigrants back. Sweden has one of the developed world’s largest differences between labor-market participation by native and foreign-born workers. Unemployment problems have resulted in de facto segregation, with social exclusion and unrest spreading in several parts of the country.
Immigrants who move elsewhere with an entrepreneurial spirit often have a better experience. In 2006, Swedish economic historian Benny Carlson compared the experiences of the large Swedish-Somali immigrant group with those of Somali-Americans in Minnesota. He quotes two immigrants who jointly summed up this disparity. “There are opportunities here,” said Jamal Hashi, manager of an African restaurant in Minneapolis. His countryman who immigrated to Sweden tells a different story: “You feel like a fly trapped under a glass. Your dreams are shattered.”
It seems as if Ocasio-Cortez’s Scandinavian Shangri-la exists in her own fantasy world. The truth is that Scandinavian countries enjoyed prosperous economic systems before the welfare states we know today were established.
If the congresswoman were truly interested in learning from the Nordic experience, she would note that Sweden began to revise its economic model based on lessons drawn from its recession of the 1990s by implementing reforms that would have made many of her Republican colleagues on the other side of the aisle proud.
As the ideal image of socialism lost its sparkle, state-owned companies were sold and financial markets were deregulated, while public monopolies were replaced with competition. Sweden needed healthy companies and skilled workers, so top tax rates were rolled back. Many government welfare programs were redesigned. These reforms laid the ground for today’s competitive Swedish market-oriented economy based on openness and the promotion of global free trade.
Like beauty, the success of the Scandinavian welfare states seems to be in the eyes of the beholder. What we find when we examine Nordic politics, economy, and history—as exemplified by Sweden—suggests that the Northern European success story was not achieved thanks to the welfare state model funded by high taxes, but perhaps despite its existence.
In her novel The Story of Gösta Berling (1891), the Swedish Nobel Prize–winning author Selma Lagerlöf describes the fate of the fictional character Kevenhüller. He forsakes the privileges of his aristocratic birth in Germany to improve mankind with his mechanical inventions. After traveling throughout Europe, he finally reaches Sweden, where his meeting with a wood nymph transforms his life. She reciprocates his kindness to her by granting him the ability to realize one single wish. Frustrated by his inability to replicate his inventions, Kevenhüller ultimately destroys them all and goes mad.
The fate of Kevenhüller’s inventions has parallels to today’s visionary wishes to transplant Nordic-style democratic socialism to the U.S. Rather than persistently suggesting that the American dream can be realized by expanding government or raising taxes, it is time for Ocasio-Cortez and others to realize that duplicating Scandinavian welfare policies in the hope of achieving the same socioeconomic outcomes without recognizing the context-dependent conditions that made them possible in the first place might be harder than they think.
Rather, it is time for leading voices on the progressive left to reveal the costs of maintaining Nordic welfarism in the form of higher taxes on ordinary middle-class working families who produce America’s wealth.
Nordic nations offer valuable lessons for U.S. policymakers—lessons that do not fit traditional ideal stereotypes of glorified democratic socialist utopias or failed socialist experiments on the Road to Serfdom. The true lesson to be learned from the Scandinavian experience is that the Nordic-style welfare-state models are hard to replicate in societies that are fundamentally different, and they’re flawed at home.