The CEA Gets The Nordics Right – They’re Not Socialist At All

The Guardian’s getting a little antsy about a new report from the Council of Economic Advisers. One which says that socialism isn’t quite all it’s cracked up to be. This would annoy The G as a substantial number of people who read and write that newspaper are actual, proper, socialists. However, the paper is aimed at the Americans and their current flirtation with what they think is socialism. Which isn’t – they’re all talking about social democracy. Even then they’re managing to get it wrong too.

The Guardian:

History repeats itself, observed Karl Marx, the first time as tragedy, the second time as farce.

In the 1950s the “red scare” warned of communists sympathetic to the Soviet Union lurking around every corner of the US. On Tuesday, the White House was back at it, this time raising the spectre of Marx, Bernie Sanders and working mothers in Sweden.

A pre-election report from the White House Council of Economic Advisers sounds the alarm: “Coincident with the 200th anniversary of Karl Marx’s birth [May 1818], socialism is making a comeback in American political discourse. Detailed policy proposals from self-declared socialists are gaining support in Congress and among much of the electorate.”

The report’s better than that, take this for example:

Although they are sometimes cited as more relevant socialist success stories, the experiences of the Nordic countries also support the conclusion that socialism reduces living standards. In many respects, the Nordic countries’ policies now differ significantly from what economists have in mind when they think of socialism. For instance, they do not provide healthcare for “free”; Nordic healthcare financing includes substantial cost sharing. Marginal labor income tax rates in the Nordic countries today are only somewhat higher than in the United States, and Nordic taxation overall is surprisingly less progressive than U.S. taxes. The Nordic countries also tax capital income less and regulate product markets less than the United States does.

All of those things are entirely true and we should keep them in mind next time Polly Toynbee tells us we should be more like Sweden. There are bits and pieces where there’s more than a hint of a whiff:

To economists, socialism is not a zero-one designation. Whether a country or industry is
socialist is a question of the degree to which (a) the means of production, distribution, and
exchange are owned or regulated by the state; and (b) the state uses its control to distribute
the economic output without regard for final consumers’ willingness to pay or exchange (i.e.,
giving resources away “for free”).
1 As explained below, this definition conforms with both
statements and policy proposals from leading socialists, ranging from Karl Marx to Vladimir
Lenin to Mao Zedong to current American socialists.2

Well, if regulation is taken to mean determining production without ownership then that’s more characteristic of fascism than socialism. But then fascism is a form of socialism just don’t tell the lefties that, they’ll not thank you for the information.

This is nicely done though:

We begin our investigation by looking closely at the most extreme, although not uncommon,
socialist cases, which are Maoist China, Cuba, the USSR, and other primarily agricultural
countries (Pipes 2003). Referring to these same countries, Janos Kornai (1992, xxi) explained
that the “development and the break-up and decline of the socialist system amount to the
most important political and economic phenomena of the twentieth century. At the height of
this system’s power and extent, a third of humanity lived under it.”
Socialists in these countries accused the agriculture sector of being unfair and unproductive
(equivalently, food was too expensive in terms of the labor required to produce it) because
farmers, who had been working on their land for generations, were too unsophisticated and
because the market failed to achieve economies of scale. Government takeovers of agriculture,
which forcibly converted private farms into state farms directed by government employees and
party apparatchiks, were advertised as the way that socialist countries would produce more
food with fewer workers so resources could be shifted into other industries.
Although agriculture is not a large share of the U.S. economy, present-day socialists echo the
historical socialists by arguing that healthcare, education, and other sectors are unfair and
unproductive, and they promise that large state organizations will deliver fairness and
economies of scale. It is therefore worth acknowledging that socialist takeovers of agriculture
have delivered the opposite of what was promised.3 Food production plummeted and tens of
millions of people died from starvation in the USSR, China, North Korea, and other agricultural
economies where the state took command.

If Gubmint can’t grow the food then how well is it going to deal with education and health care? Given the existence already of Grievance Studies departments we can probably guess.

Overall it’s an obviously biased – perhaps biased toward reality but that itself is a bias in politics – report but a fair enough one. Anyone who did stand on the Berlin Wall in 1989 and look toward that rubble that socialism created won’t want to repeat the experience. Sadly, it appears that Venezuela hasn’t sunk in in quite the same manner that the Brandenburg Gate did.