Is Sweden the Beacon of Democratic Socialism?

Why are generations of young Americans enamored with socialism as a better alternative to capitalism when everything in their abundant and privileged lives comes from free market capitalism?

Socialism, the state’s ownership of the means of production, production planning, and distribution, has been repackaged by clever Marxists like Bernie Sanders and AOC under the name of Democratic Socialism, a term borrowed from Sweden to make socialism more attractive and palatable to Marxist useful idiots who do not understand much economics or history, even those with college degrees.

Young generations want to have what 10.29 million (2019) Swedish citizens have – a “robust” welfare for all without any labor effort on their part, they would stay at home and find themselves. What is the economic reality though behind free stuff? Taxpayers must foot the bill through heavier taxation.

Starting in the 1970s, for twenty years Sweden tried to maintain capitalism with a generous welfare state, a “bridging policy,” with disastrous unintended consequences – high inflation, “overheated real estate and financial markets, a negative real rate of interest” followed by a recession and high unemployment.

Lou Perez, a writer, actor, and producer, interviewed two Swedish officials, asking them about their mythical Democratic Socialism. Sweden today is Democratic but not Socialist, he was told. Johan Norberg, a libertarian economist from the Cato Institute, indicated that Sweden is a “capitalist economy based on free market and open trade with a fair among of government redistribution of the proceeds.” https://www.youtube.com/watch?v=QcX6BUZlEw4

Sweden experimented with socialism between 1970-1990. “It ended in a spectacular failure. Yet, all of you seem to remember only these 20 years,” said Norberg.  Prior to the experiment, Sweden was quite wealthy as a country due to its decades of competitive capitalist business models, low taxation, remaining neutral during WWII, and probably trading with both sides of the conflict.

The socialist experiment implemented many programs that transformed Sweden in the 1970s into one of “the most advanced welfare society that had ever existed.” Presided over by prime minister Olof Palme, the public sector’s share of GDP increased by 50 percent. The Swedish welfare state established a health insurance system, parents’ allowances for daycare for all, free abortion, free education for six years, five weeks paid vacation, retirement age lowered from 67 to 65, and generous pensions of two-thirds of the highest earning fifteen years of work.

This universal welfare society was a centrally planned economy run by the state which included economic policies, taxation, trade, monetary policy, and fiscal policy. The system in place was financed, owned, and run by the state. The state controlled pension funds and built one million housing units with state-guaranteed loans for a population of eight million. The bureaucracy to oversee all these state-controlled organizations was enormous.

According to Kjell Östberg, for 40 years Sweden was controlled by the social democratic party; it had more than one million members, dominating most of Sweden’s large cities.  The labor force was organized around the blue-collar workers’ union LO, to the tune of 90 percent of the workforce.

Social democrats influenced life from cradle to grave. They held 45-50 percent of the seats in Parliament. In their youth, half of the members of government had belonged to the blue-collar union LO.

Swedish citizens were shaped into equality, socially and economically, by the heavy influence, funding, and control of the state:

-          Young people met at youth associations and dances in People’s Parks, remarkably like the organization of the communist youth in the Soviet bloc

-          Citizens bought apartments in the cooperative housing association called HSB, not unlike the Soviet style

-          Swedes bought food at Konsum and gasoline at the cooperative OK gas stations

-          Workers were trade union members, corporate members of LO

-          Married men were active in the workers’ commune, just like Soviet life

-          Married women were members in the social-democratic women’s organization

-          Families watched movies at the People’s House, produced by studios owned by the workers’ movement,  definitely a déjà vu for those who lived under Soviet socialism

-          Swedes could join study circles facilitated by the Workers’ Educational Association

-          Citizens got their news from the party’s many newspapers

-          Children participated in activities organized by the Young Eagles

-          Retirees joined the PRO organization

-          People were buried by Fonus, the worker’s movement funeral home

-          Abortions were free and on demand

-          All children were enrolled in free public childcare

-          The parents’ insurance gave families seven months of leave from work with full pay from the state insurance ministry; mother and father had to decide how they split the seven months of leave

-          Education was “democratized” – nine years of primary education, high school, free teaching materials, free school meals, doubled child benefits payments given to all children up to the age of sixteen and then extended to high school, all universities were run by the state, tuition was free, and students received aid for living expenses (government grants and loans payable within 20 years)

-          Sick pay guaranteed employees 90 percent of their wages

-          Local health centers owned by the state charged 7 SEK ($1) per visit

-          Hospital care was paid by state health insurance

-          Pharmacies and parts of the medical industry were also controlled by the state

-          State communal housing companies built and owned the new units

-          Higher rents were subsidized by the state via a generous housing allowance

Was Sweden Headed Toward Socialism in the 1970s? (jacobinmag.com)

Politicians had established a government ownership of business. The size of the government doubled, its share of the GDP also doubled, taxes increased, and the state regulated everything. For twenty years of heavy socialism, 1970-1990, the wealth of Sweden declined. The experiment with Democratic Socialism failed because “the policies were perverse, unsustainable, and absurd,” wrote the Democrat Socialist Minister of Finance Kjell-Olof Feldt.

To begin the roll back of the socialist welfare state, the size of government was reduced, markets and industries were deregulated, and taxes were decreased; the economy began to flourish again.

Andreas Bergh, economist, stated that “around 1980, the marginal income tax was at its highest, around 90 percent.” Corporations refused to pay such high taxes and moved their income and businesses to other countries. The high tax rates resulted in high loss of tax revenue as corporations found new ways to plan for tax avoidance. Outsourcing and corporate tax evasion became the norm. https://www.youtube.com/watch?v=QcX6BUZlEw4

Johan Norberg said that the Swedish tax system does not “squeeze the rich, it squeezes the poor” because they and the middle class do pay their taxes. They do not move their households to other countries, they do not have tax lawyers, and they do not have huge deductions.

According to Norberg, most income tax payments in Sweden come from payroll tax of 30 percent and local regional income tax also of 30 percent. Both these taxes are flat, not progressive. There are also excise taxes and VAT (ad valorem) tax of 25 percent.

Compare that to the two American payroll taxes, Social Security payroll tax of 12.4 percent and the Medicare payroll tax of 2.9 percent. Our state taxes vary but are much lower and sales taxes are, on the average, no higher than 10 percent. Our federal taxes combined with the state taxes are well below the 60 percent that Swedish citizen pay. We do have excise taxes that are included in the price of a product or service.

The self-identified American democrat socialists conveniently remember only the twenty-year period when Sweden was the most generous socialist welfare state on the planet. It did not go so well for them, and they eventually reversed course.

American democrat socialists want to emulate Sweden’s twenty years of incredible welfare. All blue states have extremely high tax rates and struggle to fund their generous welfare programs, usually taking from the productive and giving to the unproductive and illegal, and expecting to be bailed out by federal grant-in-aid and omnibus bills.

Bruce Bawer, a prolific bestselling author, wrote in 2020, “the fact remains that Swedes are, by nature, collectivist, statist, consensus-oriented, and anti-individualistic – scared to challenge received opinion and eager to join in ostracizing those who do.” Whitewashing the Swedish Nightmare - American Renaissance (amren.com)