2021-08-25 06:59:54 UTC
“Compassionate” Capitalism and Socialism
by David Bruining, July 13, 2019, fee dot org
“Compassionate” capitalism: a better name for what Nordic
countries practice. It is certainly true that Sweden,
Finland, Norway, & Denmark have notable economic successes.
It's certainly false that they have been achieved thru
socialism. Nordic countries focus on combining a free
market system with several social programs.
This nexus gives way to programs such as free education,
free health care, & a guaranteed pension program for
retirees. For this to take place, the citizens must place
an enormous amount of trust in their govt & their policy-
makers. The economy, work, & welfare must work hand-in-
hand. Policymakers must address ever-changing social
challenges & then pass solutions thru a democratic process.
Many Different Derivations of Socialism
Places like Sweden & Norway have cut the gap between the
rich & the poor while still preserving the basic benefits
of capitalism. This type of capitalist model is reliant
upon creative destruction, a term coined by Joseph
Schumpeter in 1942: the process of industrial mutation that
incessantly revolutionizes the economic structure from
within, incessantly destroying the old one, incessantly
creating a new one.
Nordic nations seem to flawlessly use this system, &
progressives continue to say this is socialism: “My policies
most closely resemble what we see in the UK, in Norway, in
Finland, in Sweden,” Rep. Alexandria Ocasio-Cortez told
60 Minutes. But where does it fall under American standards?
Can we learn anything from this derivation of socialism?
There is a lot behind the Nordic model and a lot more
behind why it so greatly praised.
Capitalism is a dynamic system, constantly changing and
evolving because of opportunities for profit and property.
This ideal seamlessly fits with many other economic systems
that naturally evolve—much like the Nordic model.
Progressives like to believe that America is in need of
such an economic evolution. The poor are so far away from
the rich that socialism—of all things—is a necessity.
Americans, we're told, need equality across all sectors,
all markets, and all classes.
Frankly, Schumpeter did not have equilibrium in mind when
he philosophized creative destruction. Instead, he wished
for a paradigm where inventors & entrepreneurs would
improve, creating a type of disequilibrium that would
actually benefit the constituents of the system. A socialist
ideal where all are equal on all grounds was not the
backbone of creative destruction, nor that of any Nordic
model, nor that of any common sense economy. Why would
anyone want to kill the goose that lays the golden egg?
But there are myriad other differences that the Nordic
model holds when compared to socialism. First, the beginning:
Nordic nations developed their current economic system after
years of a free economy with free trade. They would be
nothing without this foundation. The wealth previously
created allowed the govt to begin its social programs by
imposing high tax rates. Never should the govt begin with
extensively high rates & expect its citizens to keep pace.
The Economist magazine describes the Nordic countries as
“stout free-traders who resist the temptation to intervene
even to protect iconic companies.” Does this sound like
socialism? Certainly not. What’s more, both Norway & Denmark
are easier places to do business than the US, according to
DoingBusiness dot org. The govt benefits didn’t create the
wealth of these nations—the wealth of the populous created
the govt benefits.
Second, govt interference: a staple of labor laws in the US
is not found in Nordic governances. A minimum wage set by
the federal govt does not exist in Nordic or Scandinavian
nations—& yet they still survive! Unions & organizers help
to set wages, but the govt does not get involved in the
negotiation process. This decentralized system is arguably
the best way to do things. Businesses are free to pay less
for unskilled work (apprenticeships/internships) & unskilled
Having a min wage is almost suicide for small businesses.
They can't hire the workers they need because they aren't
making enough profit, so those businesses will continue
to stay small. The min wage makes it difficult for a biz
to grow. For example, US politicians recently enacted our
min wage on all of the US territories, including American
Samoa. In Samoa, the largest employers on the island were
tuna canner factories.
Once the min wage was enacted, it destroyed the competition
on the island, the factories closed down, & the unemployment
rate skyrocketed. Samoa didn't need the min wage; pols
simply wanted to feel good about their actions & not look
at the consequences. The lack of govt involvement allows
for people to be paid according to their worth, not by
what Big Brother deems their worth to be.
Third, education: The Nordic economy is the ultimate "zip
codes should not define a child’s future" supporter. While
education is free, the choices citizens have are impeccable.
This could be because it is extremely similar to the
libertarian point of view (as defined by economist Milton
Friedman in his 1955 essay, “The Role of Government in
Education”). Nordic govts gift their citizens with voucher-
like education coupons. These vouchers can be redeemed for
schooling anywhere, whether public schools, govt-run
charter schools, or private schools.
Acc. to the Inst. for the Study of Labor, this privatization
of schooling “improved average educational performance both
at the end of compulsory school & in the long run in terms
of high school grades, university attendance, & years of
schooling.” This school choice benefits the citizens, kids,
& the future of the nations. Just as Turning Point USA
promotes school choice, so do Nordic & Scandinavian nations.
Socialists, however, are not the ones promoting free choice.
Lastly, how it evolved: Nordic nations have not always been
so progressive; in fact, they are beginning to take a step
back. Until the 150s, Nordic countries were the top free-
market, competition-based nations in the world. In the 70s,
however, intense social govt & regulatory systems were put
in place with high tax rates. All of the economic growth
came to a sad end. For example, Sweden’s economic growth
fell to 1% lower than the rest of Europe & 2% lower than
By the 90s, govt spending was up to 70% of GDP, & the debt
to GDP ratio accumulated to 80%. Even the unemployment
rate rose 5%. As soon as policymakers saw this socialist
makeover gone wrong, things changed. In 1991, legislatures
privatized parts of health care, introduced schooling
vouchers, & cut back on money-wasting welfare programs.
Between 1995-2000, the debt-to-GDP ratio was cut by 40%, &
citizens earned more income thanks to the new 28% income tax.
Inflation and Taxes
In fact, that tax was lowered to 22% in 2013. So countries
like Sweden took an extremely progressive stance, realized
it didn’t work, then converted to an even more free-market
Why make the US learn for itself that socialism doesn’t
work when we can simply trust Sweden’s experiment? The
lesson learned is not what the Left teaches. Due to dereg-
ulation, Sweden has actually exceeded economic growth
compared to all other European peers by at least 1% per
year. This is not a result of progressivism or socialism.
It is the opposite.
Progressives grossly overuse the comparison of Nordic
nations to socialist ones, but the Nordics are actually a
poor example because they practice a predominantly free
market system. The only likeness between the two is the
social programs. To add insult to injury, the Nordic
economies don’t completely fall apart—& kill millions of
people on the way down—like socialist systems do.
So here’s why progressives claim this is a product of
socialism: They need a good example. There are zero, none,
no good examples of socialism—anywhere. As soon as a
progressive system is somewhat close to—yet so far away
from—a socialist state, progressives will take credit &
proclaim it is socialism. They need something, anything,
to justify their position & prove that socialism all-of-
a-sudden works. The truth is: it doesn’t.
No One Size Fits All
And nations that try it end up destroying any advantage
they had in the world & return to a system of freedom or
suffer the consequences. Look at Venezuela: 1,600% inflation,
-17% GDP growth, & 44% unemployment (expected in 2020).
It's thru willful ignorance that opponents of capitalism
continually propose this economic model but can’t tell the
difference between an insolvent economy & a prosperous one.
The Nordic model is not a be-all & end-all system. Neither
is capitalism, nor socialism.
Most economies develop, change, & become better over time.
History is the best teacher for guidance in the evolution
process. The left does not deserve to take credit for the
glamours, the accomplishments, & the benefits of a free
market system & slap the socialist sticker on it. They
define Nordic & Scandinavian models as progressive, but
this is no longer an argument of definition.
This is about whether the left will stop lying to the
American people & making socialism appear beneficial.
Younger people in particular are prone to this rhetoric:
Everything important to them is “free” under socialism,
thanks to Bernie Sanders & others like him. The young do
not know because they have not been told the consequences.
It is time they were told the truth.