by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Although Bernie Sanders failed to win the Democratic presidential nomination, the Vermont senator’s campaign did succeed in mobilizing thousands of progressive activists. Their energy and support seems closely connected to Sanders’s quest to introduce a Nordic-style welfare model in the United States. As Sanders explained at the very first Democratic debate last October, “I think we should look to countries like Denmark, like Sweden and Norway, and learn from what they have accomplished for their working people.”
But it’s evident that the left wing of the Democratic party would also push for these ideas under a future Hillary Clinton administration. Indeed, Ezra Klein, the editor of the liberal news website Vox, wrote last fall that “Clinton and Sanders both want to make America look a lot more like Denmark — they both want to pass generous parental leave policies, let the government bargain down drug prices, and strengthen the social safety net.” …
… A common misconception is that the Nordic countries became socially and economically successful by introducing universal welfare states funded by high taxes. In fact, their economic and social success had already materialized during a period when these countries combined a small public sector with free-market policies. The welfare state was introduced afterward. That the Nordic countries are so successful is due to an exceptional culture that emphasizes social cohesion, hard work, and individual responsibility.
Today, in contrast, Nordic countries stand out as having high-tax models. Denmark, for example, has the highest tax rate among developed nations. But in 1960, the tax rate in the country was merely 25 percent of GDP, lower than the 27 percent rate in the U.S. at the time. In Sweden, the rate was 29 percent, only slightly higher than in the U.S. In fact, much of Nordic prosperity evolved between the time that a capitalist model was introduced in this part of the world during the late 19th century and the mid 20th century – during the free-market era.
What might come as a surprise to American admirers of the Nordic countries is that high levels of income equality evolved during the same period. Swedish economists Jesper Roine and Daniel Waldenström, for example, explain that “most of the decrease [in income inequality in Sweden] takes place before the expansion of the welfare state and by 1950 Swedish top income shares were already lower than in other countries.” A recent paper by economists Anthony Barnes Atkinson and Jakob Egholt Søgaard reaches a similar conclusion for Denmark and Norway.