Several weeks ago, as I fell down the YouTube rabbit hole, I came across an interview with Swedish author, Johan Norberg. I was struck by the way in which he described social and political themes, so I asked him if he’d do an interview.
Although Norberg is affiliated with the CATO Institute, his primary work is as an author. He’s written multiple books over the last two decades, including “In Defense of Global Capitalism,” “Financial Fiasco,” and his most recent, “Progress: Ten Reasons to Look Forward to the Future.”
In the following interview, Norberg discusses the meaning of classical liberalism, the rise and fall of socialist policies in Sweden, socialism as a philosophy, and why young people are drawn to politicians who promote socialistic ideas.
Read on for a fascinating discussion:
Q: What drew you to the CATO Institute?
A: Well, I love their stuff. That’s how it started. Then I read the reports, and the books, and everything coming out of there. I thought, “This is incredibly useful in everything I do, it seems like a reliable source for data and ideas, and it seems quite close to my own classical liberal ideas.” It seemed like a perfect fit.
Q: When you say “classical liberal,” what does that mean?
A: This is really the traditional, classical European expression for ideas of free markets, free men, and limited government. The classical liberal idea of a limited government, giving people as much freedom as possible in the economic, political, and social spheres. It’s totally confusing every time I go to the United States, and we talk about liberalism there, and it means quite the opposite.
Q: In a speech before the Free Market Foundation, you outlined the rise, fall, and subsequent rise of Sweden’s economic standing. Can you give an abridged version of that history lesson to our readers? Why and how did Sweden rise, then fall, then rise once again?
A: This is an incredibly important story because for some reason, the “Swedish model” got very famous for the way it appeared for about 15 or 20 years in the 1970s and 1980s. That was the moment in time when everybody looked at Sweden and thought, “something interesting is going on there,” and for some reason, that perception froze in time, in that era — but it’s just a tiny bit of Swedish history, and also, I would say, a scary example of what could go wrong.
The short version of our long history is that in the middle of the 19th century, Sweden was one of the poorest countries in Europe. My ancestors in Northern Europe starved for lack of modern industry, railways, food trade, and agricultural productivity. However, at that time, in the 1850 and 1860s, we had a group of classical liberal Swedish politicians who really opened Sweden up. They democratized politics, deregulated markets and businesses, and turned Sweden into a free trade nation. Suddenly, we could make exports to richer countries, we could begin to mechanize the old trades, and increase productivity dramatically, and we had 100 years of growth that basically turned Sweden from one of the poorest counties in Europe into one of the world’s richest countries.
This was the moment in time when the “Swedish model” was open markets, free trade, and a very limited government. During the period in which we grew the fastest, our government spending wasn’t more that 10% of GDP, and as late as the early 1950s, our government was smaller, and our taxes were lower than in the rest of Europe and in the United States — so that’s really something people tend to forget when they tell people to look at the successful “Swedish model.” We were one of the richest countries on the planet — in 1970, the fourth richest — before we built the welfare state, before we had this third way, semi-socialist model. So, we created that wealth first. But when you’re rich, you want to spend it, and that’s what they did.
In the 1970s, the Social Democrats in charge began to redistribute big time, and they began to regulate businesses, and for a period of some 20 years, we doubled the size of public spending in Sweden. This is exactly the thing that people still think about when they talk about the “Swedish model” in the U.S. and other places. People said, “Look, this is a country that has begun to tax and spend and regulate much more than we do, and they’re incredibly rich. Everything seems to be working quite well.” Of course, we were rich because we had created all that wealth — but it’s like that old joke. How do you end up with a small fortune? You start with a big fortune! Then you just make some mistakes, and lose most of it — and that’s what we did.
The period in the 1970s and 1980s was the one period in Sweden’s economic history where we really began to lag behind other countries, and mess up in a big way. It all ended in a terrible crisis after an inflation boom in the early 1990s, when we, for a period of time, had an interest rate of 500% to try and protect our currency. It all came tumbling down.
After that, we began to return to some of our roots. We began to deregulate markets again, began to liberalize and produce things like private providers in healthcare, a school voucher system on a national level, and partially privatize pension, and so on. Since then, Sweden has done much better again.
This is the whole irony of the story. When people like Bernie Sanders and others talk about the successful socialist “Swedish model,” they talk about those 15 to 20 years of awful economic and social results when real wages didn’t increase at all.
Q: When you see people like Sen. Bernie Sanders (I-VT) and other Democrats running to the left, touting the virtues of “democratic socialism,” what do they mean? Following that, what does it really mean?
A: I think that they haven’t really looked at the examples that they talk about because if they did, they would realize a couple of things. I think they just want America, and its wealth, and its work ethic, but they just want a more equal distribution of everything, and more government services. The other things — the wealth, the work culture, and so on — are supposed to then stay the same. That’s the thing that Sweden proves is not really possible. You can’t just transplant a political system into another culture, and think that it would work the in the same way.
If we’re talking about those preconditions for a moment — we had Social Democrats in Sweden who said that this is the best place in the world to experiment with socialism because we already had these great foundations to make it work. We had wide-spread social trust, so people trusted one another, and they trusted the government. A strong Lutheran work ethic means we would work even though taxes might make it less economically beneficial. People would never accept welfare if they could work. We had already built all this wealth. What some of them said is, “If it doesn’t work in Sweden, it can’t work anywhere.”
What happened — even in Sweden — this began to undermine our foundations in various ways. Cultures don’t exist in vacuums, and if there are no institutions, no incentives that encourage them, they begin to fall apart — and that’s what happened in many ways. Work ethic decreased; our tradition of not accepting government benefits if they weren’t needed began to erode as well. It used to be that when we were asked something like, “under what circumstances is one justified in accepting government benefits to which one is not entitled,” we were always ahead of everyone else, 80% to 90% would say, “never.” That has begun to erode down to some 50% to 55%, which is higher than many other countries, but it tells you something about what has changed.
In the early 2000s, because of generous government sick leave benefits, Sweden — objectively speaking, one of the healthiest populations on the planet — were off “sick” from work more than any other population on the planet. Especially during events like the soccer World Cup in 2002, for example, the number of men taking short-term sick leaves increased by some 40%, and Sweden didn’t even make it past the final eight. It tells you that Swedes began to exploit the system, and some of the Social Democrats said, “Look, we’ve become a country of cheats.” This was not the way it was supposed to be.
The generation growing up with strong economic incentives to work and stay away from government benefits — they’re doing well, but then in the next generations, as taxes grew and government expanded, we got less of this work ethic.
This then is the question for all the Americans who want the Swedish system in the United States. First of all, it’s problematic because you don’t have some of those preconditions; you don’t have that trust in others and in government, and that others would never use government benefits to which they weren’t entitled, and so on. So, from a worse starting point, America would have to try to implement this.
What I’ve always tried to explain to Americans who want the “Swedish model” is that you wouldn’t get a bigger version of Sweden in the U.S., you would get a bigger version of the government institutions in the U.S. that don’t work. You would get sort of a large-scale version of the U.S. Post Office.
Additionally, and this is important, something the up-and-coming Swedish fans in the U.S. seem to miss, is that they think they can combine big government with squeezing the rich. For them, it seems like they’re almost synonymous, as if that’s the way it would work. The rich can pay more, and then we’ll get this government. That’s a fundamental misunderstanding of what the Nordic social model is about because it’s not about squeezing the rich. If we did that with a government of this size, we would lose the rich, we would lose the big companies. We would lose the most important taxpayers.
The Nordic welfare states have always treated the big companies and the richest best in many ways. They always get the exemptions and the deductions they need. When it comes to the tax burden, generally, the latest study I saw showed that in the United States, the top 10% of earners paid almost 50% of all income taxes. In Sweden, the top 10% of earners paid just a quarter of total taxes. So, what the “Swedish model” does is it taxes the middle-class and the low-income earners much more heavily than the U.S. We do that with income taxes, but also with a national VAT tax on consumption, highly regressive at 25% on everything that you consume.
That’s what the Swedish socialists discovered. You can have a big government, or you can squeeze the rich, and give it to the poor. You can’t do both because in that case, you simply ruin the economy.
Q: What’s your opinion of socialism as a philosophical concept and as a form of government?
A: There are many ways to describe it. It’s basically trying to reorganize society from above. It’s really a way of not accepting the spontaneous outcome of millions of everyday choices regarding how to work, what to work with, whom to reward by paying them, by buying their goods and services. So, in a way, it’s authoritarianism applied to the economy. As a result of that, it’s the economic system that is the hardest failure of the 20th century. We’ve never seen a system be so totally discredited everywhere it’s been tried. The basic reason is that one person at the top — or a few politicians and bureaucrats — if they are trying to guide the system of prices and economic rewards, as well as which businesses to benefit, it’s a way of replacing millions of decisions every minute made by people in their local circumstances based on their local knowledge, and replacing it with only the knowledge of a few people at the top. They always have less knowledge; they can’t try out the many experiments that millions of people can try over time, and that’s why it fails again and again.
Q: The argument put forward by many advocates of socialism is that it simply hasn’t been done “correctly.” All the failures aren’t related to real socialism, but how it was improperly implemented, and the bad actors who co-opted the movement. What would you say to the people who make such an argument?
A: If your system is dependent on it being run by the best of people, and anything else results in chaos and poverty and breadlines, it’s probably not a good system. I think that’s what we’ve learned from history. The best political theorists and economists have always said that we should always try to organize society and our laws and our politics to make sure that bad people can create as little damage as possible because we always end up with wrong people in certain places implementing stupid policies at the wrong moment. If you have a system that only works if that never happens, then you probably have the wrong system.
I do notice this again and again. The latest example is Venezuela. So many people on the American Left and the European Left said that “this time it’s going to work.” He had all that oil, so how could it possibly fail? So now, this is socialism; everything else was a failure. Then, as usual, they promised everything, but ended up with no toilet paper in stores, and starvation. And that’s the moment they began to say, “Oh, it wasn’t real socialism.” Suddenly it’s not real socialism because it doesn’t give them the results that they dreamed about.
Say there was a restaurant with a dish called “socialism,” and every time someone ate it, they got sick from it. You shouldn’t go for the excuse that, “Oh, they did it the wrong way this time.” Perhaps it “wasn’t the right chef,” or “we didn’t use the right ingredients, but the next time will be different.” And you do it 100 times, and the guests always leave feeling ill. Then you should really avoid this “socialism” dish, even if they say that they could prepare it in a better way next time.
Q: Another argument I hear is that capitalism in the United States is failing, or has failed. Now, the free market in the United States is heavily controlled, meaning it’s not as free as people believe. What would you say to those who see the United States as the prime example of allegedly “failed” capitalism?
A: I agree. The United States isn’t a perfect free market in any way. There is a lot of government intervention, cronyism, occupational licenses, tariffs, and problems in so many ways. However, “almost capitalism,” or “fairly close to free market capitalism” has created the richest countries on the planet with the lowest levels of destitution that the world has ever seen, whereas “almost socialism,” or “trying to experiment with socialism,” and ending up with something similar always results in massive poverty and chronic undernourishment. That’s the main difference that has to be remembered.
When it comes to certain areas in which the U.S. economy has failed, I think we should look at that, and we should separate where it’s failed from the areas in which it creates great results because it does have some of the most competitive businesses and best production that the world has ever seen in some areas — often where it is the most open. It has often failed when we have the most regulation in place.
Q: Why are young people in the United States so drawn to socialism?
A: They’re young, so they haven’t seen socialism fail so many times yet, whereas those who are a bit older have seen these promises come and go, always resulting in disaster. That’s one aspect of it. When you start out in life, you’re a kid, and you’re dependent financially on your parents or on something else, it feels like the resources are just there because you’re not part of producing that wealth yet. So it seems like it’s just a an economic pie out there. What we do know from psychology is that when people look at an economic windfall, and are asked how to distribute it, people always go for an equal share. You have to add things like, “So, what happens if someone worked harder?” or “what happens when we had an equal share, and someone consumed everything, but the other person saved some of theirs, worked harder, started a business, made more money, what should we do then?” Then people say that, "Oh, they should definitely have a larger share than those who just wasted their money."
The younger you are, the further away you are from normal work-life, and businesses, and the modern economy. The closer you are to that situation, where you don’t really see how the wealth is being created, how it takes all these millions of people working hard every day to produce it, you can toy with those ideas. It’s easy to make up ideas on how we can share the wealth without ever thinking about if it’s just or what happens to the total amount of wealth in the long run if we do this. I think that’s part of it.
It’s also — something that I do admire among young people that I know is that they don’t have much patience for problems, and they just want to solve them immediately. When you’re young, it’s easy to think, “Let’s put a political solution there. Let’s just do it, whatever the problem is.” And it takes some time understanding political operations, either by experiencing them firsthand or learning from history, to begin to discover that it’s not really that simple; that’s not the way it works; and that almost all the good solutions we have are a result of all these millions of different entrepreneurs and innovators and free thinkers who just experimented with bizarre ideas. Then it turns out that one of them is brilliant, and that’s where we’ve gone forward. It never happens because of a government plan. But this is not intuitive, and it takes some time and some hard knocks before you understand it.
I’d like to thank Johan Norberg for answering my questions with such incredible insight. You can read more about the Swedish author on his official website, Johannorberg.net, and you can purchase his latest book, “Progress: Ten Reasons to Look Forward to the Future,” on Amazon.
Additionally, Norberg has a documentary coming out on PBS, called “Sweden: Lessons for America.” Look for that soon.