Socialism and Capitalism in Venezuela and Norway
Does AOC and Bernie Sanders Represent a Norwegian or Venezuelan Future for the US?
As a Scandinavian married to an American I’ve been looking with great interest at the surge in popularity of candidates advocating a more Scandinavian style approach to economics.
However there are two competing narratives emerging in the US. The American left speaks of turning the US into a sort of prosperous Scandinavian welfare state, with high wages for workers, free health care and education paid for by taxes.
The right prefer instead to speak of how AOC and Bernie Sanders are going to turn the US into a failed state like Venezuela. Who is right?
Let me just start by saying, that the whole Venezuela idea is ridiculous, but there is still a value into going through the details of why this idea is so wrong.
What is Socialism?
The first fundamental problem is agreeing on what socialism is. When the success of Scandinavian countries are pointed to the American right has four typical counter points:
- Scandinavian countries are not socialist, but rather capitalist.
- All their wealth was produced back when they were capitalist and they have been going downhill ever since they went socialist.
- Scandinavians themselves, don’t call themselves socialist.
- Scandinavia is social democratic, not socialist, which is totally different.
The claim is essentially that Scandinavian countries are not real socialism but Venezuela is. To which I would ask, by what metric?
Instead of arguing over which country “feels” more socialist, let us look at the data.
But before doing that it is important with some disclaimers. Venezuela has been through a turbulent time since Hugo Chávez died in 2013. The reality on the ground has changed rapidly since then and statistics will not always be up to date. So what I am really comparing here is The Venezuela that existed under Hugo Chávez, or right after his death.
However I don’t think this is an unfair comparison, as the claim is that Hugo Chávez turned Venezuela into a socialist country.
Public Sector Employment
While we can disagree on the specifics, it should not be controversial to claim that in a socialist society, more people work in the public sector than in the private sector.
Statistics on this shows unsurprisingly that Cuba has the highest level of public sector employees. 77% of their employees work in the public sector.
And unsurprisingly the capitalist high castle of the US, only has 15.8% in the public sector.
Venezuela has 29% (2014) of its worker in the public sector. That is terrible right? Shows how extremely socialist they are! No, in fact it doesn’t. Norway is considerably higher at 37.8%. Same goes for another Scandinavian, Denmark at 31.4%.
Perhaps more shocking is that Singapore, which has the image of super capitalism, has 32.0% of its workforce in the public sector. What?!
Government Run Companies
In fact Singapore has a rather large public sector. Many of its top companies are government owned.
Government-linked corporations play a substantial role in Singapore’s domestic economy. As of November 2011, the top six Singapore-listed GLCs accounted for about 17 percent of total capitalization of the Singapore Exchange (SGX).
The Norwegian government owns 33% of the Norwegian stock exchange. This includes full or partial ownership of oil companies, hydro-electric power plants, banks, aluminum production, transportation, defense industry, liquor stores etc.
Whether this is more or less than in Venezuela I could actually not obtain information about. The point is that it is quite broad.
Taxes
How about the tax burden. Conservatives like to talk about how socialist countries are high tax.
Norway has the third highest tax rate as percentage of GDP at 54.8%. Venezuela in contrast is way down the list at 25%. In fact this is below the American rate of 26%.
Political History
If we look at the political history of Norway and Venezuela, that is where we see the really big difference. Norway clearly has a more socialist political history. Since 1900s Venezuela has had 6 different occasions where the military has sized power and suspended democracy. If you go further back in history, there are even more cases.
Norway has history of military rule, unless you count the German occupation of Norway during WWII.
Without studying Venezuelan history in detail, it becomes quickly apparent just skimming through, that it’s political history is nothing like that of say the US or Norway. There is a large number of different political leaders and dramatic and violent changes in government, political exiles, corruption charges, political splits and infighting through the whole post war period.
If one compares with Nordic countries such as Norwegian and Sweden, is that they have far more political stability and peaceful transition of power. Sweden has since the 1930s been almost exclusively run by social democrats. There are been few changes of prime ministers. Typically Swedish prime minsters have been in power for a long time. The same experience is found in Norway. The social democratic Norwegian Labour party has been in power for most of the period since the 1930s.
On the American right it is popular to make the counter argument, that Venezuela the leaders of Venezuela calls themselves socialists and are committed to the abolishment of capitalism. The Nordic countries in contrast they say are social democrats, meaning they strongly support a capitalist economy with just a bunch of welfare services.
As I’ve pointed out through this article that is not the case. In particular in Norway, there is extensive state ownership of the means of production. The leaders of Venezuela calls themselves democratic socialists. Which is actually no different from what has been the case in Nordic countries. That label is seldom used by the Norwegian labour party today. However if you read the party programs since roughly the 30s to the early 1980s, it typically states on the very first line either: “We are democratic socialists” or “we are committed to the principles of democratic socialism.”
Further reading of the party program will display scathing criticism of capitalism as a system as well as spelling out the long term goal being the abolishment of capitalism and replacing it with a socialist economy.
Now I am not saying this actually happened. But a political movement which has been in power for much longer than Hugo Chavez has explicitly stated that it works towards a socialist economy. Yet despite this goal, and the deliberate reforms enacted to get there, Norway has not ended up as an economic basket case like Venezuela.
Challenge: Name a Metric Where Venezuela is More Socialist Than Norway?
So I have gone through numerous easy to measure metrics which by people tend to judge a country as socialist or socialistic. In not a single one of them did Venezuela “excel”.
And that is my challenge to any reader: Come up with something that is easy to measure, where Venezuela is more socialist than Norway?
I’ve tried to study this and I cannot find it. However I found a lot of other things:
- An unprofessional government, caring more about loyalists than having competent people in important positions.
- Lack of transparency.
- Short term thinking and populism.
None of these traits have anything to do with socialism. In fact the Trump administration seems to suffer from pretty much all of the same traits and they can hardly be called socialists. Like Hugo Chávez and Nicolás Maduro, Donald Trump is stacking his administration with yes-men and loyalists, disregarding competency.
Donald Trump also engages in short term populist policies such as debt fueled tax cuts for the rich. These policies may work in the short term. Just like Hugo Chávez’s splurge on social programs with oil money caused rapid reductions in poverty.
Eventually however the negative effects will show up. Hugo Chávez did not put aside any of the money from his windfall profits from high oil prices. Thus it was always just a matter of time before catastrophe would hit his populist regime.
Just as Americans will sooner or later have to repay the debt Donald Trump amass to pay for tax cuts.
The Criminal Nature of the Venezuelan Government
A long running thread through the history of many Latin-American countries including Venezuela is that of weak institutions and populism. Leaders who abuse and break the law. Just look at the sheer number of military take over, use of political violence and extreme corruption. None of this is unique to Hugo Chavez and his people.
It is easy to pin all problems seen in Venezuela on socialism, when in reality Venezuela has long been a troubled country with little regard for rule by law. E.g. the Venezuelan government has simply taken over private enterprise without any compensation.
It is easy to cry and say “look that is what socialists are like,” but neither Nordic, British or French socialist leaders ever took over industries without compensation. Owners of industries nationalized got compensation. So it is not like socialism demands that you act like a bandit. Much of the behavior of the Venezuelan government has to be understood in the context of the political traditions of Venezuela.
I am not stating that to beat my chest and point to us being better people. One must also understand that Norway e.g. has a far more favorable political and economic history. Much of Latin-America is the result of a brutal and violent colonization by countries which themselves lacked strong political institutions. And that isn’t a modern claim. Political economist Adam Smith wrote already in 1776 that Latin America could be expected to have a worse economic development than North America, due to the poor political institutions inherited from Portugal and Spain.
Will Bernie Sanders be a new Hugo Chavez?
No, because Bernie Sander’s is a not a short term thinking populist. Bernie Sander has far more in common with Nordic social democrats who implemented socialist inspired reforms gradually and always tried to remain financially responsible.
Ironically Donald Trump is far more similar to Hugo Chávez: They are/were both boastful, short term thinking populists.
Was Nordic Wealth Created Before Socialism?
Back when I first wrote this article I actually forgot to address this point, so I am tacking it on at the end. A frequent idea among American conservatives is that capitalism created all Nordic wealth and then socialism just coasted along until on the foundations built by capitalism, until socialism wrecked the economy and capitalism had to jump in and fix it again.
One problem with addressing this question is that we don’t really know what these people define as socialism. No Nordic country has ever been socialist, although Nordic countries have been run by socialists who have implemented numerous socialist policies.
So the simplest approach is perhaps to look at the size of the economy before and after social democrats got in power.
The Swedish Case
Sweden is perhaps the easiest case to study here because it was not part of any world wars and social democrats have been in power for a very long time there. The first social democrat got into power in the 20s but it was in 1932 with prime minister Per Albin Hansson that decades of Social Democratic dominance in Swedish politics began. That dominance was almost complete until 2006.
We could look at Swedish economic performance in that period. In 2006 Swedish GDP per capita was 42 918. Back in 1932 it was a mere 6 874 dollars (2011 adjusted dollars). That means the Swedish economy per capita before Social Democrats took over was a mere 6% of what was achieved at the end of their reign.
We can also look at how Swedish economy performed compared to the rest of the world. This shows Swedish growth relative to world GDP growth.
We can see that Swedish economic growth in relative terms continued to be strong in the social democratic period until the 70s when Sweden was not growing faster than the rest of the world.
Combined this makes the argument that Sweden got all their wealth while they were very capitalist ring rather hollow. It is true that both Norway and Sweden had quite economically liberal policies before social democrats gained power. And yes there was strong growth in those years too. But that was such a long time ago that it amounts to a very tiny fraction of modern day GDP.
Swedish Social Democracy vs Democratic Socialism
Of course conservatives will try to counter that social democracy has nothing to do with socialism and is just free wheeling capitalism with social programs on top of it. Why else does Sweden top rankings on economic freedom?
That would be a gross misrepresentation. We can get a sense of how wrong this characterization is by looking at historical party programs from Swedish social democrats. The reference to socialism and getting rid of capitalism is not as clear as in the Norwegian Labour party program, but it is clear that they consider themselves part of the larger socialist movement. Here are some examples. Let us look at the 1960s program first, which was at the height of social democracy.
One of the first paragraphs makes a clear reference to socialism. Here is the Swedish text (my emphasis):
Denna socialistiska samhällsuppfattning är uttryck för viljan att förverkliga de idéer om frihet och jämlikhet, samarbete och broder- skap, som tagits i arv från tidigare kulturtraditioner, som omformats av nya erfarenheter och som ständigt skänkt styrka åt strävandena att bereda människorna ett friare och rikare liv. Sina djupaste rötter har socialdemokratins idéer i övertygelsen om varje människas okränk- barhet och alla människors lika värde.
Basically this can be translated
This socialist view of society is the expression of the desire to realize the ideas of freedom and equality, cooperation and brotherhood inherited from previous cultural traditions, which have been transformed by new experiences and which have always given strength to the efforts to prepare people a freer and richer life . Their deepest roots have the ideas of social democracy in the conviction of every person’s inviolability and the equal value of all people.
Disclaimer: I used google translate as I found the translation pretty good and a lot faster. Being Norwegian my Swedish is not completely fluent.
Here is another part which clearly shows a typical socialist bend:
Genom utvecklingen av statlig, kommunal och kooperativ företagsamhet har olika former skapats för en demo- kratisering av äganderätten.
Through the development of national, municipal and cooperative corporations different means of democratizing property rights has been achieved.
Looking at this in the context of the rest of the text, it is clear that Swedish social democrats where not happy with merely slapping some social programs on top of capitalism. They wanted a fundamental transformation of society:
Important human needs have not been satisfied, when the capital owners’ expectations of profit have been an insufficient driving force. Together this leads profit interest to seek through advertising and other forms of influence, control consumption without sufficient consideration for the urgency of different needs. The needs, which can only be satisfied through collective efforts, run the risk of getting out of the way for the consumption that is stimulated by private entrepreneurial interest.
Clearly they had issues with the consumption culture of capitalist society. Something I only realized quite late in life, that capitalism does not really seek to meet your needs in modern society. Most of the effort is instead geared towards infusing an artificial need and desire in the population to drive higher consumption of things we frequently don’t need and often makes us unhappy or unhealthy. Social democrats early realized this fundamental flaw of capitalism.
Let me also quote from the 1975 party program, which further underscores the clear socialist connection to social democracy:
For social democracy, the demand for economic democracy is as self-evident as the demand for political democracy. Social Democracy opposes an arrangement that gives capital owners the right to exercise power over people. It combats any concentration of economic power in a few hands. It wants to set the direction of production and the distribution of production results under democratic control. The goal is to make all people equal participants in the task of managing and improving the productive assets in society.
This is classic socialist speak. Socialism is all about democratic control of the means of production as an alternative to capitalist control of the means of production. In practice Swedish social democrats just like Norwegian social democrats achieved this largely by building a social corporatist society. This was an alternative to full nationalization. They promised to not nationalize industries in exchange for industry to accept more democratic control of private enterprise to serve the public good.
In practice this means things such as stronger employee protection, stronger protection of labour unions, rules requiring companies to acknowledge union participation in important company choices, etc.
I hope I have managed to make a convincing case that social democracy is not merely about raising taxes and using it to pay for free health care and education. What goes on in the workplace and in companies is also a major component of what social democracy is about.
