[Marxism] Bernie Sanders’s Scandinavian fantasy

Louis Proyect lnp3 at panix.com
Thu Feb 27 20:02:24 MST 2020

Washington Post, Feb. 27, 2020
Bernie Sanders’s Scandinavian fantasy
By Fareed Zakaria

Sen. Bernie Sanders (I-Vt.) says that his proposals “are not radical,” 
pointing again and again to countries in Northern Europe such as 
Denmark, Sweden and Norway as examples of the kind of economic system he 
wants to bring to the United States. The image he conjures up is of a 
warm and fuzzy social democracy in which market economics are kept on a 
tight leash through regulation, the rich are heavily taxed and the 
social safety net is generous. That is, however, an inaccurate and 
highly misleading description of those Northern European countries today.

Take billionaires. Sanders has been clear on the topic: “Billionaires 
should not exist.” But Sweden and Norway both have more billionaires per 
capita than the United States — Sweden almost twice as many. Not only 
that, these billionaires are able to pass on their wealth to their 
children tax-free. Inheritance taxes in Sweden and Norway are zero, and 
in Denmark 15 percent. The United States, by contrast, has the 
fourth-highest estate taxes in the industrialized world at 40 percent.

Sanders’s vision of Scandinavian countries, as with much of his 
ideology, seems to be stuck in the 1960s and 1970s, a period when these 
countries were indeed pioneers in creating a social market economy. In 
Sweden, government spending as a percentage of gross domestic product 
doubled from 1960 to 1980, going from approximately 30 percent to 60 
percent. But as Swedish commentator Johan Norberg points out, this 
experiment in Sanders-style democratic socialism tanked the Swedish 
economy. Between 1970 and 1995, he notes, Sweden did not create a single 
net new job in the private sector. In 1991, a free-market prime 
minister, Carl Bildt, initiated a series of reforms to kick-start the 
economy. By the mid-2000s, Sweden had cut the size of its government by 
a third and emerged from its long economic slump.

Versions of this problem and these market reforms took place all over 
Northern Europe, creating what is now called the “flexicurity” model, 
combining flexible labor markets with a strong and generous safety net. 
I remember meeting the Danish prime minister, Poul Nyrup Rasmussen, who 
enacted many of the reforms in Denmark in the 1990s. He emphasized that 
the first part of the model was key: ensuring employers had the 
flexibility to hire and fire workers easily, without excessive 
regulation or litigation.

In addition, he stressed, countries such as Denmark had to stay 
extremely open, erecting no barriers to free trade, to gain access to 
markets abroad and keep their local companies competitive. When looking 
across Northern Europe today, one finds many innovative market-friendly 
policies such as educational vouchers, health-care deductibles and 
co-pays, and light regulatory burdens. None of these countries, for 
example, has a minimum wage.

It is true that these countries have a generous safety net and, in order 
to fund it, high taxes. What is not often pointed out, however, is that 
in order to raise enough revenue, these taxes fall disproportionately on 
the poor, middle and upper middle class. Denmark has one of the highest 
top income tax rates in the Organization for Economic Cooperation and 
Development, 55.9 percent, but that rate is applied to anyone making 1.3 
times the average national income. In the United States, this would mean 
that any income above $65,000 would be taxed at the rate of 55.9 
percent. In fact, the highest tax rate in the United States, 43 percent, 
applies to income that is 9.3 times the national average, which means 
that only those with incomes over approximately $500,000 pay this rate.

The biggest hit to the poor and middle classes in Northern Europe comes 
because they, like everyone, pay a national sales tax (value-added tax) 
of about 25 percent. These countries raise more than 20 percent of their 
taxes this way. In the United States, the average sales tax rate is 6.6 
percent and accounts for only 8 percent of tax revenue.

One final statistic: A 2008 OECD report found that the top 10 percent in 
the United States pay 45 percent of all income taxes, while the top 10 
percent in Denmark pay 26 percent and in Sweden 27 percent. Among 
wealthy countries, the average is 32 percent. The basic point is worth 
underlining because the American left seems largely unaware of it, and 
it has only become more true over the past decade: The United States has 
a significantly more progressive tax code than Europe, and its top 10 
percent pays a vastly greater share of the country’s taxes than their 
European counterparts.

In other words, bringing the economic system of Denmark, Sweden and 
Norway to the United States would mean embracing more flexible labor 
markets, light regulations and a deeper commitment to free trade. It 
would mean a more generous set of social benefits — to be paid for by 
taxes on the middle class and poor. If Sanders embraced all that, it 
would be radical indeed.

More information about the Marxism mailing list