Paraphrasing a philosopher of his era, Winston Churchill
once said, “Those that fail to learn from history are doomed to repeat
it.”
Churchill was himself a devoted student of history.
His research for his multi-volume biography of his
ancestor, John Churchill, 1st Duke of Marlborough, likely informed his
strategic military thinking as Prime Minister during WWII.
Churchill was also a fierce critic of socialism in his
time.
Socialism as we know it today is based on a different
view of history, one that says history is headed in a particular direction and
you just need to see where it is heading to “be on the right side of history”.
Socialism was thought to be the waveof the future in Churchill’s time, just as it was thewave of the future when Karl Marx was
writing about it in the mid to late 1800’s.
In fact, a wave is an apt analogy for socialism.
Enthusiasm for socialism has crested and then crashed
down many, many times in the last couple of centuries.
Today, some enthusiasts are again riding high on the
socialism wave.
Some of them are too young to know better, while others
simply refuse to learn the lesson from previous crashes they have witnessed.
Given previous spectacular failures of full-fledged
socialism in Eastern Europe, Latin America, Asia and Africa—usually resulting in
violence, poverty, and suppression of individual rights— advocates of socialism find themselves on the
defensive.
When asked why we should try a system that has repeatedly
and spectacularly failed, a common fallback is to cite Sweden and other Nordic
countries as examples we should learn from.
It may surprise some of my colleagues that this is one
point where I agree with the socialists.
We should examine and learn from Sweden’s experience.
In fact, an excellent summary of Sweden’s experience from
the 1950’s to today has been complied by the Swedish economist Johan Norberg.
His video, “Sweden: Lessons for America” is available on
YouTube as part of the Free to Choose network.
A short paper similarly titled “Sweden’s Lesson’s for
America” has been published by the CATO Institute.
I recommend these to all my colleagues on both sides of
the aisle.
We can learn a lot from Sweden.
As Norberg points out, by about 1950, Sweden was the
fourth richest country in the world, and had the fifth freest economy.
In other words, Sweden became wealthy through economic
freedom.
Then, it started to adopt socialist policies.
At first, it was just a few welfare programs, but between
1960 and 1980, government spending doubled from 31 percent of GDP to 60 percent
of GDP, and of course that meant sky high taxes.
This is the time period that older socialists remember
fondly.
Sweden was surfing on top of the socialist wave and
seemed to have it all: prosperity, massive government spending, and a highly
regulated economy.
However, even the best surfers cannot ride a wave forever.
All waves eventually come crashing down.
Sweden’s socialist policies started to kill off the
wealth creation that was needed to fund all that government spending.
Norberg points out that Sweden was 10 percent richer than
the G7 countries on a per capita basis in 1970, but by 1995, it was more than
10 percent poorer than the G7.
During that time, not a single net job was created in
Sweden’s private sector and inflation took away almost all the value of any
wage increases.
As Margaret Thatcher famously said, “The problem with
socialism is that you eventually run out of other people's money.”
One of the most iconic Swedish companies is IKEA. Its
stores all around the world are painted the color of the Swedish flag.
During Sweden’s experiment with socialism, IKEA moved to
the Netherlands, where it is headquartered to this day.
But, by the 1990’s Sweden realized its mistake and reversed
course.
Yes, it did elect a center-right government in the 1990s.
But, importantly, the left-wing Swedish Social Democrats also recognized their
mistake.
Norberg quotes a Social Democrat Minister of Finance,
“That whole thing with democratic socialism was absolutely impossible. It just
didn’t work. There was no other way to go than market reform.”
So, yes, let’s learn from Sweden.
We don’t have to go down the socialism road.
It’s a dead end.
Yes, Sweden still has much higher government spending and
a more extensive welfare state than the United States.
But, in order generate the wealth to pay for it, Sweden
has pro-growth policies.
They don’t pretend that they can finance all that
spending by just taxing the rich.
In fact, Sweden’s tax code is much less progressive than
ours.
Most Swedish tax revenue comes from an income tax system
flatter than ours and consumption taxes.
Norberg points out that the top 10 percent in Sweden pay
less than 27 percent of the taxes whereas in the United States the top 10
percent pays 45 percent.
Moreover, taxes on employers and capital are modest to
attract investment and remain competitive on the global stage.
The Trump tax cuts finally made our corporate income tax
competitive with Sweden’s.
That’s right, the Trump tax cuts made our corporate tax
more like Sweden, but now Democrats want to make it much less competitive once
again.
They are making the mistake Sweden made decades ago and
has now corrected by restoring pro-growth policies.
As Norberg says, “You can have a big government, or you
can make the rich pay for it all. You can’t have both.”
Everybody in Sweden, rich, middle class, and even lower
income, pays high taxes.
That’s the deal the Swedes have made.
If that’s the deal Democrats are offering Americans, they
should be honest instead of pretending it’s possible to fund Swedish style
government spending by just soaking the rich.
They should explain that hard working Americans will have
to fork over close to half their income to the government in return for cradle
to grave welfare state benefits.
But, I think they know that would be unpopular here.
The United States is not Sweden.
Americans, who declared independence and fought a Revolutionary
War over taxes, are on the whole much less tolerant of giving over their hard
earned dollars to the government to spend.
I would urge my colleagues across the aisle to learn the
lessons from Sweden, including their counterparts on the center-left in Sweden.
Do not kill job creation and wealth creation.
Do not let soaring inflation steal the wages of American
workers.
If you want to look to Sweden, look to the Sweden of
today, not 1980.
Better yet, if you want a model in the region, look to
Sweden’s dynamic neighbor across the Baltic Sea, Estonia.
Its history has led it to be even more resistant to the
failed, outdated ideology of socialism.
Estonia has the most competitive tax code in the OECD and
a fast growing economy.
No wonder it’s pushing back on the Biden administration’s
proposed global minimum tax.
Our actions now will determine what kind of life our kids
and grandkids will have in the future.
We ought to learn from history so we can shape a brighter
future.
History is clear: economic freedom is the ticket to broad
prosperity, not socialism.
