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Even Newly Corrected Data Doesn’t Support Claims That Scandinavia Is Socialist


A little more than a week ago, I presented in The Federalist a case for why some of the central arguments for “Nordic socialism” are deeply flawed. I used data from the World Inequality Database (WID), a public collection compiled by a team of economists led by Thomas Piketty (author of “Capital in the Twenty-First Century”) often cited by socialist publications.

Drawing upon statistics in the database, I made the following assertions to debunk self-serving exaggerations regarding the levels of socialism in in northern Europe:

  • Despite what some may claim, Norway is not the world’s most socialist country.
  • Norway’s inimitable geography and natural energy resources make it an anomaly.
  • By and large, the country’s state-owned enterprises function like private corporations.
  • The Norwegian Sovereign Wealth Fund exists to preserve the country’s fiscal solvency and is the largest driver of the government’s wealth.
  • Most Nordic wealth is privately, not publicly, owned.

These statements are still correct, but to my surprise, much of the WID data I used to illustrate these points was flawed. Within hours of The Federalist publishing my article, one of the economists who works with Piketty, Gabriel Zucman, informed the socialist People’s Policy Project that a portion of their data I had used was erroneous.

Zucman recognized this was their mistake and added that the information should not have been available for public consumption on the WID website. To understand how this happened and confirm the accuracy of additional data, I contacted Zucman, but he declined to comment.

WID materials say it is a public information initiative that aims to highlight disparities in wealth and income in the United States and around the world. Its funders include the Paris School of Economics and the Ford Foundation. The database is used in the World Inequality Report and has been cited in at least 500 media articles within the past year.

In the following section, I will explain what happened with the WID numbers, but feel free to skip it and continue to where I revisit my original story with updated data and new insights.

What Happened with the WID Data?

For my story, I downloaded data directly from WID’s portal to demonstrate various ways the levels of socialism in the Nordic countries are often overstated. Two-and-a-half days prior to publication, I reached out to two WID economists to double-check their data. As I noted in the initial article, neither one responded.

To argue that socialism is prevalent in Norway, among democratic socialists’ preferred tactics is to point to the share of the country’s national wealth that is publicly owned (59 percent in 2015). This is calculated by dividing Net Public Wealth by Net National Wealth (the sum of Net Public Wealth and Net Private Wealth). These data sets, and more, are available in the WID.

Another stream of data available in the WID is Market Value National Wealth (MVNW). For my article, I calculated the public ownership of national wealth by dividing Net Public Wealth by MVNW. I used this approach because when I tested the percentages it yielded for Norway, the United States, and China from 1980 to 2015, the results were identical to data that socialism advocates cite.

This approach made sense since I wanted to use their preferred numbers to make my case and because the matches between the data sets meant that more than 200 underlying statistics had to also be the same. Given the improbability of the matches merely being a coincidence, I assumed that, as far as the inequality database was concerned, MVNW was equal to Net National Wealth. My assumption was right for three of the seven countries I cited in my article (Norway, the United States, and Sweden), but for reasons that remain unclear, it was wrong with regards to Mexico, Finland, Denmark, and Korea.

Since my article was published, I have revisited the WID statistics for 21 countries and discovered matches between MVNW and Net National Wealth (NNW) for 15 of them across hundreds of data points. I’ll defer to economists to discern why these discrepancies exist.

Norway Is a Model of State Capitalism, Not Socialism

As I mentioned, proponents of socialism have been citing a statistic showing the Norwegian government owns most of the country’s wealth. Some contend this makes Norway the most socialist country in the developed world, even more socialist than Venezuela. The goal of this talking point is to get Americans to associate socialism with the Nordic region, rather than socialist disasters in Latin America.

This argument is fallacious for various reasons. One of its most glaring issues is that geography makes Norway an anomaly. 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, which deposits revenues into what is now a $1 trillion sovereign wealth fund (SWF) that invests in companies like Microsoft, Amazon, and Apple.

To recap: 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 run by wealthy energy industry executives. This company is publicly traded, operates on the profit motive, and deposits its surplus revenues into a trillion-dollar investment fund whose largest equity holdings include stakes in some of the largest American corporations. If this sounds like a peculiar form of socialism, it’s because it is not socialism.

If anything, Norway is an interesting case study in state capitalism. As the 2018 World Inequality Report notes, the Norwegian public wealth fund helps protect the country against fluctuations in oil prices: “Norwegian public property has therefore largely been accumulated for fiscal and financial purposes.” The guide 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.”

This means that, unlike in Hugo Chavez’s Venezuela, where the government used taxes on oil to fund redistribution programs, the Norwegians use their public wealth fund to accumulate capital and cut taxes. Which of the two sounds more socialist to you?

The Effects of Debt and Mathematical Rules

Next, at least some of the Norwegian government’s share of the country’s wealth can be attributed to its debt management, in addition to math and accounting rules. Given the formula for calculating a government’s share of a country’s wealth as shown above, the lower a country’s public debt, the higher its Net Public Wealth will be, thus, the higher its state-owned share of national wealth. Conversely, the higher its private debt, the lower its Net Private Wealth, and the less concentration of wealth in the hands of the state.

To highlight this mathematical relationship and how the state-owned share of national wealth figure can be a misleading statistic, let’s pretend that two imaginary countries—Corellia and Dagobah—have similar economic systems and business laws, and the same public assets, private assets, and private debt totals. However, Corellia’s public debt is much larger than Dagobah’s.

Since Corellia’s high public debt reduces its Net Public Wealth in the numerator, it produces a smaller percentage, resulting in Dagobah appearing more “socialist” on paper, despite the two countries being nearly identical.

Similarly, debt is a significant driver of the share of state-owned public wealth of Nordic countries, especially in Norway. Among the countries where 2014 debt data are available in the World Inequality Database, Norway had the fourth-lowest average public debt and was second only to Denmark in private debt. In fact, its private debt was 75 percent higher than the WID mean[i].

To further demonstrate the effect of debt on state ownership of Norway’s Net National Wealth and the limits of this statistic as a reliable measure, I adjusted Norway’s public and private debt figures to match global averages in the WID. Assuming Piketty’s data is correct, this simple modification alone cuts the government’s ownership of the country’s wealth by six points to 50 percent.

In other words, the Norwegian government’s low public debt makes the numerator (Net Public Wealth) larger, while the country’s high private debt makes the denominator (Net National Wealth) smaller—thus, resulting in a higher percentage of the country’s wealth in the hands of the state.

SWF Drives Norway’s State Ownership of National Wealth

Furthermore, we must also account for the role that Norway’s SWF has played in fueling the state’s accumulation of wealth. Socialists have attempted to downplay the fund’s effects by noting that revenue transfers did not commence until 1996. But a simple comparison of Norway’s national wealth before and after 1996 reveals the fund’s importance.

In the 16 years before it began making deposits into the SWF, the Norwegian government’s share of the country’s wealth grew by a little less than four percentage points. Meanwhile, from 1996 through 2015, the state-owned percentage grew by 22.1 points. This means that of the 25.7-point growth in state ownership from 1980 to 2015, 86 percent happened after transfers into the SWF began.

As such, claims of “Nordic socialism” based on public wealth figures must consider the dominance of Norway’s SWF, whose primary function is to protect the country’s fiscal solvency, not to mitigate inequality through redistribution as socialists seek to do.

Now Adjust for the Sovereign Wealth Fund 

Lastly, to understand state-ownership levels in the Nordic countries as a whole, I added the Net Public Wealth of Norway, Sweden, Finland, and Denmark and divided that sum by their aggregate Net National Wealth, resulting in two-thirds of Nordic wealth in private hands as of 2014. This positions the four governments’ combined share of national wealth (32.6 percent) on par with that of China (32.2 percent).[ii] While this figure is high, as I will demonstrate, it fails prove that the Nordic region is a socialist paradise.

As Erik Magnus Sæther of Oslo Economics explained to me in an e-mail, “The net financial wealth is dominated by the sovereign wealth fund in Norway due to the petroleum resources. The human capital is however 10 times higher than the financial capital (net present value). Most Norwegians invest in housing due to the beneficial tax regime and their wealth is underreported […] as you only have to report a fraction of its value.”

Accordingly, I examined Norway’s public financial assets, which are listed at $960 billion for 2014, to ascertain the fund’s effect on Norwegian public wealth. Since it’s impossible to know how Oslo would have managed the country’s assets in the absence of the SWF, I developed a hypothetical scenario based on an average of the public assets of the other Nordic countries.

According to this estimate, in the absence of the Sovereign Wealth Fund:

  • The Norwegian government’s share of the country’s Net National Wealth would be cut from 56 percent to its 1983 level of 31 percent.
  • Among the Nordic countries, this would place Norway in about the same position as Finland (31.7 percent).
  • It would also reduce the total state-owned share of national wealth of the four to 24.4 percent, meaning that 75 percent of Nordic wealth would be in private hands.[iii]

A different model based on 36.5 percent of Norwegian wealth being owned by the state (the same percentage as in 1995, the last year before the initiation of SWF transfers) placed three-fourths of the national wealth in private, rather than collective, hands.

A Few Final Thoughts

As I previously mentioned, not only am I a registered Democrat, I was raised by a single mom who cared for senior citizens as a social worker for the state of Florida. When led by honorable people and confined to constitutional limits, I believe government can be a force for good. But there are fundamental differences between communities coming together to help those who cannot help themselves and Karl Marx’s gospel of envy.

Proponents of “democratic socialism” often point to Norway, where 59 percent of the country’s wealth is in government hands, as a real-life example of their ideas. This is a fallacy. Multiple factors make Norway and the Nordic region unique and contribute to an above-average concentration of wealth in government hands in a manner that is neither representative of socialism or easily replicable. These factors are:

  • Abundant natural resources.
  • State-owned enterprises (SOEs) that mostly function like profit-seeking corporations.
  • Norwegian SOEs depositing excess oil revenues into a $1 trillion sovereign wealth fund that has been the main driver of growth in the country’s publicly-owned wealth.
  • Debt levels that place upward pressure on the state-owned share of national wealth due to math and accounting rules.

Failing to account for these and other factors can distort our understanding of Norway, and the Nordic region more broadly. Indeed, a closer analysis points to these countries being a better example of a combination of state-led capitalism and market-based economies that fund generous welfare states than socialist doctrine in action. Those who seek “democratic socialism” would be better-served if they searched outside of northern Europe.

[i] Based on WID data that I have been unable to verify with the WID given its decision not to comment for this article.

[ii] The combined Nordic state-owned wealth figure was also lower than that of two countries in the WID, but this cannot be confirmed since WID declined to comment.

[iii] Of course, a simple subtraction of Norway’s SWF from Net Public Wealth would lower the percentage of the state-owned wealth even further, but this is inadvisable since we do not know what Norway’s SOEs or its government would have done with its oil revenues in the absence of the fund.