Update, August 29, 2018: After this article’s publication, the authors of data on which some of its argument is based told another publication the data was actually faulty. The author of this article has accordingly updated his argument in a new article.
I woke up early one recent morning, scanned the news, and stumbled upon a tweet praising an “informative and fun podcast episode” that promised to set the record straight on Scandinavian socialism. Having read a decent amount about the Nordic model, I was curious to see what kind of wisdom Matt and Elizabeth “Liz” Bruenig, of the People’s Policy Project and Washington Post, respectively, had in store.
After a light-hearted intro, Liz began with “Norway is not socialist?” alluding to a recent Forbes article that contradicted claims that Scandinavia is a socialist paradise. This prompted a 30-minute rebuttal from Matt of people he described as “takesters” and a case for why the Nordic countries, particularly Norway, are indeed socialist, sprinkled with occasional “booms,” uh-huhs,” and “yeahs” from Liz whenever she thought he had made a good point. For those who have not heard the show, think: a wonky version of Diamond and Silk for Bernie bros.
Matt thinks Norway is the most socialist country in the world. To support this contention, he focused on three points in his podcast, which he has made frequently on Twitter and his blog:
- The Norwegian government owns nearly 60 percent of the country’s wealth (defined as net public wealth as a percentage of net national wealth).
- Norway has dozens of state-owned enterprises (SOEs) that control most of the country’s energy and national resources.
- The country has a sovereign wealth fund valued at more than $1 trillion.
I agree these three points could serve as perfectly valid indicators in determining Norwegian socialism, but do they really prove that Norway is the most socialist country on earth? Much to my wife’s displeasure, I shared my disagreement with Matt and Liz, which turned into an all-day Twitter feud. Unfortunately, the Bruenigs have since deleted the exchange.
‘Dan the Man’ Illustrates Confirmation Bias
Pushing back against the Bruenigs’ contention of Norway being the “Most Socialist Country in the World” (MOSCOW for short) reminded me of how I, as a kid, must have spent at least 100 hours in circular arguments with friends about which quarterback was the greatest of all time. In my 13-year-old mind there was little doubt that Dan Marino was the best passer ever because he held the NFL’s most important passing records, including most career completions, passing yards, and touchdowns.
“Dude, but he’s never won a Super Bowl and Joe Montana has clinched like four of them!” Of course, I had all sorts of rebuttals to this gaping hole in my theory, because I really wanted to believe that “Dan the Man” was numero uno. The other kids had a point, though. Intuitively, one should expect the GOAT QB to have at least one ring, right?
Similarly, I think the Bruenigs really want to believe that Norway is the most socialist country in the world and that Scandinavia is really socialist, despite obvious problems with the claim. I don’t doubt the sincerity of their beliefs. They’re among the most visible proponents of “democratic socialism” in the country. So there is a direct relationship between the credibility of their advocacy and the degree to which Norway is socialist.
Since few people would argue that Oslo is a bad place to live, the more Norway is perceived to be a socialist country, the stronger their case for democratic socialism. That’s why Matt and Liz Bruenig like to write and talk a lot about Norwegian socialism.
If Scandinavia Is Socialist, So Were Mexico and Reagan
Among the evidence for Norway being the MOSCOW, often cited these days is a statistic showing the government of Norway owns 59 percent of the country’s wealth. The Bruenigs and others argue this even makes Norway more socialist than China and Venezuela are.
The data point originates from research led by economist Thomas Picketty in the World Inequality Report (WIR). To calculate what percent of a country’s national wealth is state-owned, Picketty divided net public wealth (public assets minus public debts) by market value national wealth (net private wealth plus net public wealth). Like my Marino GOAT theory, however, there are glaring issues with this argument.
The most obvious issue is that under this measure of socialism, Norway is not the most socialist country in the world, Mexico is. A look at WIR’s country-level data shows that 60 percent of Mexico’s national wealth was state-owned in 2009 (the most recent year available) compared to just half of Norway’s (50.5 percent) that same year. The same WIR data shows the Korean government owns 21,205 percent of the country’s wealth, which would make it 359 times more socialist than Norway, but I digress. (I reached out to two of the economists who worked on this report to clarify this, but they have not responded as of the writing of this article.)
Was Mexico the world’s most socialist country nine years ago? Hardly. In 2009, Mexico’s president was Felipe Calderon of the conservative National Action Party. Far from being a Marxist, at a 2007 address in Davos, Calderon criticized “state control of the economy” and warned of Latin America’s embrace of socialism as “a move toward the past.” Furthermore, his tenure was marked by deregulation and pro-business policies.
Since few people would deny that Mexico is a mixed, market-based economy, this should raise red flags about the WIR statistic’s reliability as a lead indicator of a country’s level of socialism.
Next, Norway is an anomaly because of geography. As economist Dan Mitchell pointed out last month, the Norwegian government’s share of national wealth is artificially high due to its ownership of the country’s energy sector and $1 trillion sovereign wealth fund (SWF), which invests in companies like Microsoft and Apple.
To recap: Through sheer luck, Norway has some of the world’s largest oil and gas resources; 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.
Moreover, as the very same WIR report the Bruenigs drew their data from states, the Norwegian public wealth fund protects the country against fluctuations in oil prices: “Norwegian public property has therefore largely been accumulated for fiscal and financial purposes.” The study also noted that “Norway’s large positive net public wealth generates capital income that is mostly used to finance further foreign capital accumulation, which in the long-run can be used to reduce taxes and to finance more public spending.”
In other words, unlike 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?
Third, the Norwegian government’s share of the country’s wealth is heavily driven by state capitalism. Bruenig has attempted to downplay the SWF’s effects on the Norwegian government’s share of national wealth by noting that revenue transfers did not commence until 1996. However, a simple comparison of Norway’s national wealth before and after 1996 reveals the role of the SWF in driving the state’s ownership of wealth.
From 1980 to 1995, the Norwegian government’s share of the country’s wealth grew 3.6 points, from 32.9 to 36.5 (or 11 percent). From 1996 to 2015, it grew 22.1 points, from 36.5 percent to 58.6 percent (a growth of 61 percent). Of the 25.7-point growth in the Norwegian government’s share of the country’s wealth from 1980 to 2015, 22.1 of those points (86 percent of the growth) came after the SWF transfers began.
|Year of Data||Country||Net Public Wealth||Market Value Wealth||State-Owned Share of National Wealth|
|2015||Norway||$ 1,196,148,783,500||$ 2,041,067,698,806||59 percent|
|2016||Sweden||$ 595,217,058,008||$ 2,638,682,328,533||23 percent|
|2014||Finland||$ 299,380,761,828||$ 16,255,504,196,214||2 percent|
|2014||Denmark||$ 118,006,294,880||$ 1,984,401,789,722||6 percent|
Lastly, more than 90 percent of Scandinavia’s combined wealth is privately owned. To get a better sense of just how socialist Scandinavia is according to the Bruenig standard, I divided the combined net public wealth of Norway, Sweden, Finland, and Denmark by the aggregate market value net national wealth of the four, resulting in 9.6 percent of Scandinavia’s wealth under government ownership, meaning that a little over 90 percent is in private hands.
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).
As such, not only does the Bruenig standard fail to prove Scandinavian socialism, it points to Scandinavia being less socialist than the average non-Scandinavian country, including the United States under what was arguably the most conservative presidency of our lifetime. Boom.
Some Final Personal Thoughts
It may surprise some to learn that I’m a millennial JFK Democrat. As a two-time Barack Obama voter who drove 14 hours to volunteer for Hillary Clinton’s presidential campaign, I appreciate the invitation to share my thoughts with the readers of The Federalist. This is a discussion that more people across the political spectrum should engage in, but it’s one that some refuse to have.
It’s incumbent upon every generation to stand up for the values and ideals that make America exceptional. I believe some ideas are worth fighting for, especially those that brought my family to this country. To quote President Kennedy, I am willing to “support any friend, oppose any foe to assure the survival and the success of liberty.”
As a Catholic who was raised in a modest home by a single mom, I think we can all do more to help those who cannot help themselves. But the agenda of democratic socialists—which includes nationalizing major industries, eliminating private ownership of businesses, and abolishing capitalism—helps no one.
As Bruenig himself noted in an off-handed, yet revelatory, comment in the July 14 episode of his podcast (18:25), “state-owned enterprises are not going to fix poverty.” So, then what’s the point? I’m afraid there is none. As millions in my community learned the hard way: Socialism does nothing to improve the lives of those its proponents argue they’re fighting for. It only makes them poorer.
If we’re going to have “good-faith arguments,” a good place to start would be to abandon discredited myths about Scandinavia, begin telling the full truth about “democratic” socialism, and stop pretending that the experiences of 5 million Norwegians who live in one of the freest economies in the world better represent this system than the lives of the 42 million people in Venezuela and my family’s native Cuba that suffer under this ideology daily.
Regardless of party labels, we need to come together and call out democratic socialism for what it is: a scam being perpetrated on the American people by a few who prey upon the blitheful ignorance of many in the hope it will net them political power. It must be vociferously denounced with an equally fierce defense of our shared American values.
Update: After this article was published, one of the economists who leads WID issued an apology for having released flawed data that this article uses, about which the author had attempted to contact the economists beforehand. More to come.