by Rand Paul
On a recent trip to Prague, I had the opportunity to talk with a true hero of liberty, Vaclav Klaus, the first prime minister of the Czech Republic after the fall of the Iron Curtain and the president of the Czech Republic from 2003 to 2013. President Klaus has been one of Europe’s leading voices for free market capitalism since the Czechs gained their freedom in the Velvet Revolution.
As we were having lunch together, Klaus observed that the socialist dogma being preached to today’s youth is actually worse than it was under Soviet rule, when teachers taught Marxism because they had no choice, but it was obvious that they did not accept its utopian propaganda as they were living every day under socialism’s bleak reality. Klaus contrasted that with the academic climate in American universities today, where “intellectuals” who are true believers are zealously promoting socialism to young people. He laughed at the bitter irony that “there are more true believers of Marxism at the University of California Berkeley than we had in all of communist Czechoslovakia.”
In a speech to the Victims of Communism Memorial Foundation in Washington, President Klaus warned, “We have to fight communism in its new disguises, in its new clothes, which are sometimes so chic and colorful that they camouflage their true content.” Today’s socialists use attractive disguises like income and lifestyle equality while providing zero specifics as to how they will bring it about. When pressed about the level of government control their plans would require, they obfuscate and demur.
Even Bernie, in the past few years, shies away from calling for outright state ownership of production. In fact, Bernie does not present his ideology as pure socialism, but rather dresses it up in its more palatable form: “fairness.” In an interview with Time he now argues: “I don’t believe government should own the means of production, but I do believe that the middle class and the working families who produce the wealth of America deserve a fair deal.” Who knows exactly what a “fair deal” means, but I suspect that it’s code for state-enforced redistribution of wealth.12
Today’s new socialists have no clue what socialism means. Which makes them doubly dangerous, because they don’t understand that, throughout history, enforced equality or enforced fairness starts out sounding “noble” but inevitably evolves into a society ruled by truncheon.
Marion Smith of the Victims of Communism Memorial Foundation decided that since today’s youth seem infatuated with socialism, he’d survey them to find out what they thought socialism really was. Smith found that 69 percent of millennials couldn’t really define socialism.13
Over time, Bernie’s direct support for Russian, Venezuelan, and Cuban socialism has evolved into less specific calls for income equality and fairness and fewer specifics about how that jives with historical examples of socialism. Seems Bernie’s socialism is now a “kinder, gentler socialism.” You know. The kind without the gulag.
To date, though, Bernie has made no attempt to disavow his support for democratic “Scandinavian” socialism. So let’s take a look at the Nordic form of socialism the left so loves.14
Typically, political scientists have defined socialism as a society in which the government owns the means of production. But the past century has given us example after example of governments that appear to have economies that function in the middle space between capitalism and socialism. In fact, even the U.S. economy is somewhere between capitalism and socialism.
Some economists argue convincingly that an economy with diffuse price controls inevitably leads to de facto control of production and a form of socialism.15 Some also argue that when the state owns the main industries of a country but not all industry, that economy shares aspects of socialism.
Chapter 11
Bernie Sanders Is Too Liberal to Get Elected in Denmark
If socialist wannabes in America fail to look at the facts, the United States might finally succumb to socialism. The American left’s love affair with Scandinavian socialism is dangerous because it holds the possibility of hoodwinking enough of the populace into voting to replace the capitalist system that made America great with the socialist system that made Stalin all powerful and the people all hungry. They say the republic dies when the majority discovers it can vote to take other people’s stuff. Let’s hope that day remains elusive.
How pervasive is the left’s admiration for Scandinavian “socialism”? Well, it’s definitely not limited to Bernie and his campaign followers. Hillary name-drops Sweden and Denmark as well. You can even go back twenty years and find Bill Clinton waxing poetic about Denmark. Bill even claimed that “Finland, Sweden and Norway offer more chances for individuals to out-earn their parents than the United States does.” No news on Chelsea moving to Scandinavia anytime soon.1
But it is Bernie who is most enamored. In fact, according to CNN, “Bernie Sanders’ American Dream is in Denmark” and “Bernie Sanders . . . won’t stop talking about” the Danes.
Sanders is quoted as saying: “In Denmark, there is a very different understanding of what ‘freedom’ means . . . they have gone a long way to ending the enormous anxieties that comes with economic insecurity.” Sanders plays the income inequality trope: “Instead of promoting a system which allows a few to have enormous wealth, they have developed a system which guarantees a strong minimal standard of living to all—including the children, the elderly and the disabled.”2
The irony is that while American socialists want to become like Scandinavian socialists, Scandinavian socialists want to become more like American capitalists. I remember hearing a fellow senator put it this way: “The American left wants to become Western Europe. Western Europe wants to become Eastern Europe. Eastern Europe, sick of socialism and communism, wants to become American capitalists!” Indeed, the Danes seem a bit squeamish about all the attention from Bernie and want to make sure that the rest of the world knows they are not, in fact, socialist and are open for business.
It’s not just the “socialist” label that might concern the Danes. Denmark’s economic success is inseparable from free trade and low corporate income taxes. Bernie’s policy decisions are the opposite of policies the Danes believe foster their success.
Indeed, before Republicans lowered the U.S. corporate tax in 2018, Denmark’s corporate tax was significantly lower than ours. Bernie, on the other hand, has not been a fan of free trade or lower corporate income taxes.
In the MSNBC New Hampshire Democratic presidential debate, Bernie responded, “I do not believe in unfettered free trade. I believe in fair trade which works for the middle class and working families, not just large multinational corporations. I was on the picket line in opposition to NAFTA. We heard people tell us how many jobs would be created. I didn’t believe that for a second because I understood what the function of NAFTA, CAFTA, PNTR with China, and the TPP is, it’s to say to American workers, hey, you are now competing against people in Vietnam who make 56 cents an hour minimum wage.”3
On corporate taxes, Bernie’s opinion has been consistent: In the fall of 2018, on one of the Sunday shows, Bernie emphatically argued that if the Democrats retake the Senate, corporate taxes would “absolutely” go back up. However, the Scandinavian countries Bernie professes to admire believe the opposite. They support low, competitive corporate taxes and have embraced the free trade agreements.4
The Danes are vocal in distancing themselves from Bernie’s policies and quite emphatically don’t want to be known as a bad place to do business. The executive editor in chief for Politiken, a Danish newspaper, writes: “There is this idea that we are a heavily regulated society with a closed economy. The opposite is true.”5
As Chris Moody of CNN writes, “In terms of pure semantics, few Danish politicians today would characterize themselves as ‘socialist’—even a ‘democratic socialist’—as Sanders does. The word has largely fallen out of fashion in recent decades.”6
Lars Christensen, a Danish economist, writes: “When I hear Bernie Sanders talk about himself as a democratic socialist, it’s a little bit 1970s. The major poli
tical parties on the center-left and the center-right would oppose many of the proposals of Bernie Sanders on the regulatory side as being too leftist.”7
Chapter 12
No, Bernie, Scandinavia Is Not Socialist
Ludwig von Mises, the famous Austrian economist, was once asked by his doctoral student Murray Rothbard if “he could single out one criterion according to which he could say that an economy was essentially ‘socialist’ or whether it was a market economy.”
Rothbard recounts Mises’s answer: “Somewhat to my surprise, he replied readily: ‘Yes, the key is whether the economy has a stock market. That is, if the economy has a full-scale market in titles to land and capital goods. In short: Is the allocation of capital basically determined by government or by private owners?’”1
By that definition, let’s look at Scandinavia. Sweden has had a continuous public stock exchange since 1819 and Norwegian companies are traded there. Finland has had a stock exchange since 1912. Iceland and Denmark have their own public stock exchanges. It seems that, by Mises’s definition, Scandinavia may be less socialist than the left believes.
As far as private ownership, Giancarlo Sopo reports that even using Thomas Piketty’s World Inequality Report (WIR) data, “90 percent of Scandinavia’s combined wealth is privately owned.”
Using Piketty’s data, Sopo writes: “to put these numbers in perspective, Scandinavia has less state ownership of its national wealth today than the United States had under President Reagan (an average of 12.1 percent from 1981–1988). Perhaps even more striking is that a greater share of Scandinavia’s wealth is in private hands (90.4 percent) than in the 17 other countries examined in the WIR study (86.8 percent).”
If government ownership of the means of production is the sine qua non of socialism, the facts argue quite convincingly that the Scandinavian economies simply are not socialist.2
Corey Iacono, a Thorpe fellow, writes at FEE: “In the Scandinavian countries, like all other developed nations, the means of production are primarily owned by private individuals, not the community or the government, and resources are allocated to their respective uses by the market, not government or community planning.” Sounds more like capitalism than socialism.3
So when American socialists brag about Scandinavian “democratic” socialism, someone needs to ask—is Scandinavia really socialist at all? Jesse M. Plunkett describes the typical “conversation between a Republican and a Democrat about socialism” as ending “with the Republican asking, what about Venezuela, Nicaragua, and the Soviet Union?” And the Democrat responding, “What about Sweden, Denmark, and Norway?”
Conservatives point out the shortages, food lines, and outright famines in Venezuela, Stalin’s Russia, and Mao’s China, while American socialists stubbornly cling to the only “socialist” model left that has any claim to success—Scandinavia. Unfortunately for them, the so-called socialist success of Scandinavia is, in fact, due to good old-fashioned private property and capitalism!
Still, the argument from the American left persists. They continue to argue that it is Scandinavian socialism that is succeeding. Matt and Elizabeth Bruenig of the People’s Policy Project make the argument that Norway is both socialist and a success. Norway in recent history is, indeed, unique from her Scandinavian counterparts because of the discovery of oil in the late 1960s. Norway’s GDP rank climbed from 18th in the 1970s to 2nd by 2000 largely because of its oil and gas production from the North Sea. Norway is the number one oil producer in Europe and the 15th in the world.
The Bruenigs argue that Norway is a socialist nation because the Norwegian government owns nearly 60 percent of the country’s wealth. They use Piketty’s World Inequality Report to argue this point.
However, as Giancarlo Sopo reminds them, even the nationalized oil industry has a private component with a private board and much of the government-owned assets in a sovereign wealth fund valued at more than $1 trillion. The Norwegians invest that sovereign wealth fund in private companies like Microsoft and Apple in capitalist countries. As Sopo describes it:
To build a domestic energy industry, the Norwegian government created a partially private company that is run by wealthy oil industry executives. This company is publicly traded, operates on the profit motive, and deposits its surplus revenues into a trillion-dollar wealth fund that mostly invests abroad, including in the largest of American corporations. . . . [U]nlike in Venezuela, where the government used taxes on oil to fund social programs, the Norwegians use their sovereign wealth to accumulate more capital and cut taxes. Which of the two sounds more socialist to you?
Non-oil corporations in Norway pay low corporate rates and individual income tax rates are among the lowest in Scandinavia. While Norway did not institute as many of the market reforms as other Scandinavian countries, its enormous oil revenue, for now, has allowed the Norwegians to finance their exorbitant welfare state.
It’s quite a stretch to argue that socialism created Norway’s success rather than the fortuitous discovery of oil.4
Contrast Norway’s behavior with the Chavez/Maduro model of spending the sovereign wealth rather than investing it.
The problem with interpreting Piketty’s data to conclude that Norway is socialist is that, as Sopo points out, Piketty’s data would also show Mexico or really any country with a large sovereign wealth fund to be socialist.
For that matter, using the Bruenig method of measuring socialism, the data actually argue that Scandinavia is less socialist than the United States, contradicting their thesis that Scandinavia is a socialist success story.5
Ever since American socialists’ love fest with Scandinavia began, actual Scandinavians have been pushing back. A Swedish policy analyst named Nima Sanandaji recently published a book called Debunking Utopia: Exposing the Myth of Nordic Socialism.6
Sanandaji’s research uncovered that much of Sweden’s success occurred “before embracing its current welfare state. For the sixty some odd years before 1936, under a relatively low tax, low regulation capitalist market, Sweden’s economy grew faster than the entire world.” Sweden’s taxes were lower than America’s and Sweden led the world in individual income growth. When Sweden’s welfare state grew in the 1970s, GDP began to slow. During this expansion of welfare, Sweden’s GDP ranking dropped from 4th to 13th. As the welfare state grew, Sweden’s economic growth shriveled.
Sanandaji presents copious evidence of Sweden’s capitalist roots. As Jesse Plunkett summarizes him: “Between 1870 and 1950 Sweden had lower taxes than America and the highest per capita income growth in the world.” As the welfare state grew from the 1950s through the 1990s economic growth declined until it “reached an average GDP growth of 0.2% from 1981 to 1993, among the very lowest among the 34 OECD countries.”7
Even during the years that Sweden dabbled with outright socialism, capitalism was never banished. Despite the arguments of today’s socialists, the means of production in Scandinavian countries has always been owned and controlled privately.8
The high taxes and anemic growth in the 1970s and 1980s did eventually lead Scandinavian voters to choose center-right governments that lowered taxes and lessened regulations, resulting in Nordic countries once again leading Europe in economic growth.9
To put it bluntly, today’s American socialists disavow all historical examples of socialism from Stalin to Pol Pot to Hitler to Mussolini to Mao to current Venezuela. In the very same breath, they point to Denmark and Sweden and Norway as great socialist paradises. As we’ve seen, the facts do not support any “socialist” success in Scandinavia. Quite the opposite: it is clear that Scandinavian success came from capitalism and if anything, it has been impaired by big government and the welfare state.
Although today’s socialists shy away from historical examples, it is imperative that we explore why and how socialism, even in its seemingly benign forms, always devolves into state-sponsored violence and why violence is an inevitable consequence of socialism, not merely a historical anomaly.
Chapter 13
Sweden’s Riches Actually Came from Capitalism
The debate is not whether the Scandinavian economies are successful but what caused that success. Professor Jeffrey Dorfman of the University of Georgia accepts Bernie’s assertion that the Nordic countries are economically successful. He writes, “It is certainly true that Sweden, Norway, Finland, and Denmark are notable economic successes. What is false is that these countries are particularly socialist.”
Dorfman explains: “Socialism can take the form of government controlling or interfering with free markets, nationalizing industries, and subsidizing favored ones. The Nordic countries don’t actually do much of those things.”
This debate is essentially, which came first: the chicken or the egg? Which came first: socialism or success? Because today’s socialists hang their collective hats on the great success of Nordic socialism, it is important to determine the roots of that economic prosperity.
Close examination of the “Nordic success story” shows that the only way Scandinavia can afford such generous welfare benefits is that enough capitalism remains to create the necessary tax revenue.1
Once it is clear that most industries are privately owned, prices are not regulated, and a free and open stock market exists, the mirage of “socialist” success evaporates.
Evidence for a capitalist Scandinavia abounds. The Fraser Institute ranks countries based on their fidelity to the free market and the “limited government ideal.” It publishes a worldwide economic freedom index that scores Denmark, Finland, Norway, and Sweden all in the top twenty-seven freest economies.2
Fraser’s economic freedom index also maintains that for corporate taxes Scandinavia is actually more business friendly than the United States.3
In fact, the Scandinavian countries all score higher than South Korea and Japan, which many would consider to be friendly to free markets.4