Norway: A Socialist Paradise? | America Uncovered


“Do you think the US should try socialism?” “No.” “Yes.” “No.” “Yes.” “No.” “Mmm…Yeah?” Socialism! It’s something more and more Americans seem
to be embracing, according to a recent Gallup poll. Okay, at least about half. Which sounds about right, based on a sample
size of Times Square. But socialism is going to be a hot topic in
the 2020 presidential elections. And we already know how some of the candidates
feel about it. “Here in the United States we are alarmed by the new calls to adopt socialism in our
country.” And clearly Bernie Sanders does not agree. “My view of Democratic Socialism builds
on the success of many other countries around the world.” Countries like Norway. Norway, along with Sweden and Denmark, follow what’s sometimes called the Nordic
Model. So I flew to Norway to sit down with Norwegian economist Eirik
Løkke to talk about how Norway became a socialist
paradise. Hey, is that H&M? Thanks for joining us today, Erik. My pleasure. So, I know in the United States there’s a
lot of people like Bernie Sanders and Alexandria Ocasio-Cortez who talk about
how great socialism is. And, when they’re talking about socialism
they’re not, obviously, talking about Venezuelan socialism. They say they look to Norway and Sweden as
models. Is the Nordic model socialist? In my view, definitely not. Again, it kind of depends on how you define
socialism, doesn’t it? I mean, traditionally we define socialism
as planned economy and let the government have all the means
to kind of organize the economy like they did in the Soviet Union, the old
communist states. In that sense, Norway, Sweden and Denmark
has never been socialist country. I think they mix it up with the fact that
we have a fairly large redistribution. Which, we arguably do, but socialism, in terms
of an economic system, they probably should look more to the disaster
in Venezuela, Cuba, than the Nordic countries. In fact, the Nordic countries, when you rank economic freedom and you can
go to think tanks like Cato, Heritage Foundation, World Economic
Forum, The World Bank, all of them rank the Nordic countries very
high, just measuring economic freedom, the exact
opposite of socialism. Really? How does that compare to the United States? Well, the United States also tend to be high
up, so- I’m just curious, is Norway higher or- Well, it- Lower? In many of the different rankings it kind
of depends on which kind of indicators you use. Obviously Norway has a bit more regulated
labor force than the U.S., but, generally speaking, U.S. also come up
very high in those rankings. But, Nordic countries come up, I would think
if you have like an average of all the rankings, higher than the U.S. in terms of economic
freedom. Really? Is it democratic socialism? Is that something different? Well, democratic socialism is something different
than communism and following the debate very closely I would
say that Bernie Sanders and Alexandria Ocasio-Cortez, for the most part, are within a democratic
system. They want to use democratic means to expand
the government’s role in the economy. And, in some way you could say that democratic
socialism is fairly close to social democratic policy as we normally have
it in Europe and the Nordic countries. Yeah, I would say that it makes a lot of sense
to separate old school socialism and communism as you
see in Cuba and Venezuela. Which is not democratic in separation to more, well I would disagree that Norway has a very
democratic socialism. Even though, again, we have fairly large redistribution. But, while there is probably some nuances
here but again, I wouldn’t call the Nordic model socialist
in any way. So do you think some of the policies they’re
proposing are similar to the system in Norway? Well, in some ways and I think for American
viewers it’s very important to understand that very
often when you talk about socialism in the U.S., I mean some, even on the conservative side
like to think that Obama was some kind of socialist, which I
find ridiculous. I once found a book that was called “Comrade
Obama.” Right, I think it’s ridiculous. I think that Obama, if you would put him in
like a Nordic sense he would be more like center-right. But, the point is that in the Nordic countries we have what you call in the U.S. socialized
medicine or a single payer system. And, I think every time you hear about you
wanting to go from a different model in the U.S. the more like a mix between private and public
you have in the U.S. with Medicare and Medicaid system. But, the insurance systems to where it’s what
you have government finances you have most in over that’s kind of communism. It kind of stops all discussion. But, I mean, you can have a single payer system like you do in the U.K. and like you do in
the Nordic countries without like turning socialism at the same time. That’s certainly my view. Okay, how would you define the Nordic model,
then, if you’re not calling it socialism? I would say that it is a compromise between
center-right and center-left in terms of that you have a very open economy. It’s based on free trade. It’s based on private enterprises, very productive, well functioning capitalism with a high level
of redistribution. I mean, higher social spending is not equivalent
with socialism. So, when Ocasio-Cortez or Bernie Sanders or
more left leaning politicians in the U.S. propose increasing social spending
and attribute that to Nordic and European countries, I wouldn’t call that communist or socialist
policies. I would just call that higher social spending,
but you have to separate those things, I think. And when you say greater redistribution, you
mean through taxes? Exactly. Through taxation. Exactly. So these social services are funded by the
taxpayers. What does your average Norwegian citizen get
that an American does not? A lot of things. Healthcare is one very, which is often discussed
in the U.S. where you can see a really big difference
between European countries, Nordic countries, and the U.S. countries and
even between U.S. and Canada. So, healthcare, I would say, is the most obvious
example. But, also in terms of kindergarten, childcare
and typically— I have an 18 month old daughter, she goes
to kindergarten each week, every day, and I pay around 3000 Norwegian kroners. That’s around $300 a month. And that, also, is a very good way of making
sure that you can have both parents working. I know that in most states, if not all states
in the U.S., I don’t have all the details but certainly
kindergarten and the way of childcare in the U.S. is much
more expensive. You hear the stories of when European researchers
or Europeans come to work in the U.S. they have a totally
different system in terms of kindergarten. So, that would be two obvious examples where
we have a lot, where we receive services in the Nordic countries
what you don’t get in the U.S. While the U.S. has a slightly lower tax rate
but again, is expected to pay for these services themselves. So, Norway didn’t always have the Nordic model. How has implementing this high taxation and
social services, how has that affected the economy? Well, that’s a big question. If you look from the 19th century, 20th century, Norway actually had, in many ways, lower tax
than the U.S. After Second World War, which probably was
what you could call what resembling democratic socialism the most
with social democratic party, labor party totally dominating politics and
the government in Norway for almost 30 years. Where we had a lot more planned economy, much more regulations and also the tax rate
and the government share of GDP rose steadily. But, in the 70s you started to get, what do
you call, stagnation all over Europe. You also had some instances of this also in
Norway, so you had a small crisis because ever-increasing
social spending and more regulation seemed to come to a halt. So, while you had the Thatcher and Reagan
revolution in the U.K. and the U.S., you got a micro version of it in Norway with
the conservative party doing their best elections in the late 70s
and early 80s and dominated much of the politics and government
in Norway through the 80s. But, even more important, remember when Margaret
Thatcher called Tony Blair her greatest success? You could see the resemblance to Norway when
the fact that the social democratic party, both in the U.K. and most of the Nordic countries
started drifting away from the old regulation social spending. With Tony Blair the foremost example in the
U.K., in Germany and you also had this in the Nordic
countries where the center-left started adopting more like
the third way. Introducing more competition market policy. So, I would think it’s a kind of mixed bag
this. And, also, remember that internationally there
weren’t that many people in academia or wherever talking
about the Nordic model before the 1980s. But, what happened in the 80s was a lot of
liberalizations away from regulation. They were cutting a lot of red tapes, even
though you didn’t cut down taxes. You did a lot of other things, which made
the Nordic countries more competitive. To offer free markets. Exactly, free trade, free markets, less regulation, introduce competitions in different sectors
in the tele-sector, in postal services. The housing market in Norway is extremely
liberal. Much more liberal and less regulated than
most parts of the U.S. So, you have a lot of areas that has less
regulation and more competition. And, also an important feature in the Norwegian
case was that we had important tax reform in 1992, which simplified the tax code, broadened the
base and lowered the taxes. Especially on the corporations and on martial
taxes. Interesting, because that is not something
I could imagine Bernie Sanders suggesting. But, Bernie Sanders in many ways are living
in the Nordic countries of the 70s. I mean, and he’s not the only one. I’m remembering Marco Rubio got a question
about Bernie Sanders from a Swedish journalist and he just said, “Oh, you’re from Sweden, well Bernie Sanders
should be prime minister of Sweden.” But, he would be far too left leaning to be
prime minister in even Norway and Sweden, in my view. Because he’s stuck in the 70s. There was a lot of reforms made from the late
70s, early 80s. Again, the Thatcher, Reagan revolution had
us. Well, the people on the left would say the
neo-liberal era, call it what you want, there’s some truth in it in terms of market
efficiency, less regulation also got attention through
the social democratic parties. So, sort of what you’re saying is the Nordic
countries backed off from what you would describe as
pure socialism, freed up the markets, allowed for- Less regulation. Less regulation. So backing off from socialism is what actually improved the economy to get
it to where it is today? Yeah, in my view, and I think most economists
would agree on that. You get slightly nuanced how high the tax
levels should be, of course. But, the broad consensus, I would say, in Norway and the Nordic countries is that
free trade, open economy, efficient competition, well functioning capitalism, to say it in one sentence, is a very important
key feature of the Nordic model. And, on the other side, the center-right and
conservatives have accepted a high level of social spending to a large
extent in Norway. And, that’s very important. If you compare Norway to Sweden and Denmark, Norway has oil, which Sweden and Denmark do
not have. There’s a lot to say about we have handled
our oil wells. In many ways we have done it extremely well
in terms of building up a sovereign wealth fund. And politicians have made kind of a general
rule not to use all the oil money too fast and
are generally sticking to it. But, the fact is, that because of the oil
wells we are able to have lower taxes and higher
social spending than what else would have. Like, you in the U.S. you have to just keep
a higher, what do you call, a higher debt. Debt keeps rising in the U.S. because you
don’t want to do anything with Social Security and don’t want
to raise taxes. So, while we have oil money in reserves that’s
also how we solved the financial crisis in 2008. We did exactly what most other countries did. Cower, cycle, pinch in politics but we had
money in reserve so we didn’t have to- From the oil. From the oil, from the oil reserves. So, we didn’t have to go through the kind
of austerity that many other countries did. So, that’s very important to bear in mind
when you compare Norway to Sweden and Denmark. Okay, and just one other point I want to make
sure I’m clear on, you’re saying that a lot of the policies being
pushed by some politicians in the U.S., I don’t want to hammer on Bernie Sanders, but some of the policies that are being pushed
are actually further left I guess, than you would say is
what, the system in Norway and Sweden and Denmark
is? Most definitely, most definitely. Very interesting. So I guess the question is, the system of
higher taxation and social services, is that something that’s sustainable, is there
a debate about, is this the best way or if it’s the best way
for the system to work? There’s definitely an ongoing debate in Norway. But, for the moment, as I mentioned earlier, we have oil wealth and the demographics in terms that many more people is going to
retire in about, yeah the baby boomers, 10-15 years. Which meaning that the social spending, which
are non-discretionary, is going to get even higher. So, you need to finance it some way. In the short period time we have enough oil
money to kind of add up but in the long run there
has been a… every four years we have a so-called, not
a so-called, a government committee which see the forecast for the next 50, 60 years in terms of sustainable
economics. And, what that tells us is that moving forward
to 2050, 2060 it’s not sustainable, if the development continues. If we’re going to make sure that it’s enough
income to match the expenditure we need to raise
the taxes or we need to lower quality or just cut back on social spending. So, there’s definitely an ongoing debate, but I would say that it’s kind of crippled
because of the oil money. It’s like when you don’t have to do anything. And, politicians normally have four years,
four years for their politics. They’re not too interested in moving forward
with reforms before it’s absolutely necessary. Oh, so you’re saying that because of the oil the system is crippled from implementing any
kind of change that will adapt to the situation? It’s not any kind, certainly, the most important
things. We had successfully, in my view, been able
to have reforms in terms of pensions, which makes it more
lucrative to work more. We need to do even more in this area to make sure that we have enough people working
to pay for social expenditure and the growing population
in years to come. But, both the political system and the political
debate is very much, how should you put it, crippled by oil money. Everybody seems to recognize and admit and
understand that in the long run we have to do something but
it’s not the long run yet. That this might not be sustainable, but we’re
not there yet. Exactly. Because I can imagine why it’s very dangerous to rely on the oil because Venezuela relied
heavily on the nationalized oil system and that went south and had tremendous ramifications
for the Venezuelan economy. Now, they had a different system than Norway in terms of like the politics, but that is an example of relying on nationalized
oil to provide these social services that then when it disappears
what happens next. Exactly, I mean there’s so many differences
between Venezuela and Norway. So, I mean the comparison holds in many ways. But, what is absolutely true, we have an enormous
challenge in terms of making ourselves and our country
less dependent on oil. Around 20% of expenditure comes from the oil
today. This is how much we use every year in our
national budget. But, we have a sovereign wealth fund, which
is six, seven times as much as the national budget
in reserves. Wow. So, we have handled our oil policy fairly
well. We have almost a general principle within
the politics which is across the aisle, both center-right and center-left has accepted that we have to save for later. So, in many ways that is impressive for Norwegian
politicians. But, we need to do much more in terms to make
sure that we have a sustainable development in
the years to come. Okay, so 20 years from now, when there’s more
of an elderly population, if the oil isn’t providing the income it is,
what will happen? Well, there it depends on the choices we make
now and then. But, the choices we face is quite clearly
either we raise taxes, well taxes on the rich and actually most people,
you can’t only tax the rich. That has or certainly can have negative consequences
in terms of making us less productive. They might leave the country. Exactly. So, we might lose tax revenues. So, it is an ongoing debate, of course, within
the economics, how much effect does taxes really have on
growth and so on. I mean, there are some nuances to it but very
few would debate that if you raises taxes too much at
one point there is consequences in terms of less productive,
less eagerness to work and so on. You even have, in Norway, the discussion in
terms of climate change and environmentalism, where we have more people demanding that we
close down our oil production long before it runs out naturally. So we also have, if not a paradox, you have
a certain press from the climate movement, the environmental movement. But, what those people don’t answer, is how are we going to pay for our social
expenditures. The kindergartens, the schools, everything the taxes are paying for in terms
of the services in Norway. So, again, to come back to your question,
what will happen? Well, either we need to raise taxes or we
have to cut down of social expenditure. I mean, that’s the choice we face. Some people say that we can solve this with
enormous productive growth, economic growth. But, I mean, I don’t think it’s wise to forecast
that. I mean, politicians can’t legislate economic
growth. You have to create economic growth. And, most economists would say that it’s a bit of a myth to just expect that you can
raise taxes, get rid of the oil and just somehow magically
the economic growth will continue. And, we can’t expect that the government can
manufacture economic growth because, as you said, the government controlled, the
state-led economic model is what didn’t work, what actually was bad
for the economy. Right, right. So, what is the economic model that makes
everyone rich, happy and comfortable? I’m not sure such a model exists. I think there always is trade-offs, isn’t
it? But, in many ways what you want to do is find the right incentives to make sure that you
produce more wealth. Obviously you have to balance this towards
people like to have spare time, do other things than just work, certainly
that’s what we like to do in Norway. As a New Yorker I don’t understand that. Exactly, exactly. In many ways we have introduced more spare
time in Norway than ever before. So, I’m not sure that can continue, but you have to find the right balance. But, what America, again I just need to say
that America is almost a continent with almost 350 million
people. You have 50 different states, it’s a federal
system. Norway is like one-third of New York, we’re five million, so every comparison you
have to remember is just in sheer size a bit difficult. Well, I was going to ask- Yeah. Can the Nordic model work in the United States? Well, I mean one thing we haven’t mentioned which is a key feature in the Nordic countries, is high levels of social trust. But, there have been some research saying
that Norwegians in the U.S., that is Americans who have Norwegian ancestors
and Nordic ancestors, have just as high a social trust as Norwegians,
Swedes and Danish. But, as you well know, America is a continent
with so many different cultures, so many different ethnicities, political beliefs, so probably the Nordic model would function
better in Massachusetts, Minnesota, Wisconsin, better than in Alabama or Florida or Texas. So, I mean, the federal system in the U.S.
makes it very difficult to implement. I’m not a believer in implementing any system like just to see what it would do here, let’s do it exactly like that in another way. I mean, some people turned with the economic
crisis in Greece, if you were to implement the Nordic model
in Greece it would have been a total catastrophe because like the lack of social trust is absolutely
a key feature, we’re talking about here. But, I think you can, in almost every state, and this is especially to the conservative
movement, as I mentioned earlier, the fact that we have
social expenditures in kindergartens, in childcare and so on. I think that would work very with the ideas
that the government has some role to play for those
who are not absolutely libertarians. But, the conservative movement thinks that
you should back up the family. I think the way the childcare works in the
Nordic countries is something, especially the conservative
movement should look to. Maybe there should be some higher social expenditure, making sure that no child or every child gets
minimum of opportunities. There will always be differences, there will
always, I mean, it was William Buckley, who famously
said that “freedom breeds inequality.” I think it’s absolutely true. But, if you can minimize the difficulties
for the worst off in terms of having a more efficient social
expenditure, I think that is probably the most important
thing you can learn from the Nordic countries. To make sure that you back up families and
spend a bit more making sure that they have access to kindergarten or childcare
or whatever. Well, thank you for joining me today, Erik. That was absolutely fascinating. My pleasure.

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