Presidential candidate Bernie Sanders has not been shy about his vision for America. As a democratic socialist, Sanders looks fondly upon the Scandinavian countries, such as Norway, Sweden, and Denmark, where there are generous welfare states that provide virtually free education and health care, plus other social benefits.
While some argue that replicating the so-called Nordic model in the United States is undesirable on principle, others question whether it is feasible: is it possible to sustain Scandinavian-style socialism in America?
Given the high levels of taxation in these countries and Americans’ long-standing antipathy toward taxes, it seems unlikely on its face. While Norway’s top marginal tax rate is 39 percent (lower than America’s 46 percent when state taxes are factored in), it is 57 percent in Sweden and 60 percent in Denmark.
Moreover, the U.S. could not sustain Scandinavia-style socialism simply by gouging the rich. In these countries, not only are taxes high for top earners, but the tax structure is also rather “flat,” meaning their citizens contribute at similar rates. The U.S., to emulate these countries, would have to largely even out its highly progressive tax code.
However, the case of Norway shows that heavily taxing income is not the only way to sustain a generous welfare state. Surrounded by waters rich with oil and gas, Norway has capitalized on its proximity to natural resources to fill its coffers since the 1970s. The petroleum industry generates approximately 30 percent of Norway’s revenue, which comes not only from a 78 percent tax rate on profits from petroleum, but also from being a majority shareholder in the formerly state-run oil company, Statoil.
In other words, while blessed with good geography (and perhaps lucky to have negotiated offshore boundaries with a drunken Danish diplomat before either country appreciated the stakes), Norway exploits its natural resources believing that they “belong to society as a whole,” and thus the wealth generated from these resources should be shared among the entire population.
Again, skeptics argue that such a model likely cannot be replicated in the United States. As one critic wrote, “however splendid Norway may be, ‘tiny population nestled atop huge fossil fuel deposits’ is probably not a strategy that the U.S. can emulate.”
Or is it?
In 2013, the Institute for Energy Research released a study claiming that the U.S. government, through its possession of large quantities of onshore and offshore territory, owns oil and gas assets worth an estimated $128 trillion (yes, trillion). That is enough wealth to eliminate the federal debt and still have more than $350,000 left over for each man, woman, and child in the country.
Perhaps, if the government were to allow the extraction of these resources and to husband the resulting revenue as shrewdly yet generously as Norway, such a lavish welfare state could be attainable after all (though whether such extraction would be environmentally responsible or politically feasible are separate questions).
Others argue that while Scandinavian-style socialism (not to be confused with Soviet communism) might not be incompatible with capitalism, adopting such a system could do irreparable damage to the American economy and way of life.
However, evidence shows that economic redistribution can actually strengthen an economy. In Scandinavia, guaranteeing virtually free education and health care not only reduces poverty, it also leads to greater equality of opportunity: studies reliably show that social mobility is significantly greater in Norway and Denmark than in the United States. One Gallup poll found that only 5 percent of Danes do not believe they could change their lives if they wanted to.
Such personal freedom also translates into economic freedom. In its 2015 Index of Economic Freedom, the conservative think tank, Heritage Foundation, gave Denmark a score of 76.3 (ranked 11th) for its economic freedom. It gave the U.S. a score of 76.2, putting it in twelfth place. Not far behind were Sweden, with a score of 72.7 (ranked 23rd), and Norway, with a score of 71.8 (ranked 27th).
This economic freedom explains the innovations and successful companies that have come out of Scandinavia, including Skype, Spotify, IKEA, Nokia, H&M, and Angry Birds.
On the whole, the evidence shows that the Nordic model produces healthy, wealthy, happy, and well-connected societies. The multi-metric Legatum Prosperity Index from 2014 ranks Norway as the most prosperous society, followed by Denmark at number 4 and Sweden at number 6. The U.S., not far behind, ranked number 10.
The evidence shows that the Nordic model produces healthy, wealthy, happy, and well-connected societies.Andrew Gripp, IVN Independent Author
Finally, critics fear that a more expansive welfare state will lead to bureaucratic inefficiency and the potential for waste, fraud, and abuse. However, the Scandinavian countries are also leaders in government accountability.
As Michael Booth, the author of The Almost Nearly Perfect People, described Sweden: “The home of Skype and Spotify is also a leader in e-government: you can pay your taxes with an SMS [text] message.”
Norway, mindful not to squander its wealth, is extremely careful with its petroleum revenues: it prudently invests a large portion of this wealth through the Government Pension Fund to ensure the country has money to sustain itself for decades while it transitions away from a resource-reliant economy.
Transparency International’s Corruption Perceptions Index from 2014 mimics the other lists in its rankings: Denmark ranked first with a score of 92, Sweden fourth with a score of 87, and Norway fifth with a score of 86. The United States was tied for 17th with a score of 74.
It is these sorts of indicators that led The Economist to conclude, regarding the feasibility of balancing capitalism with Scandinavian socialism, that “The proof is there. You can inject market mechanisms into the welfare state to sharpen its performance. You can put entitlement programmes on sound foundations to avoid beggaring future generations.”
Perhaps, if the United States intensifies its energy production and enacts the appropriate reforms, America could emulate and sustain Scandinavian-style socialism after all.
Photo Source: EPA