What is Modern Scandinavian Socialism in 2020?
Many look to Scandinavia for answers about socialism, so what exactly is the ideology and thinking of modern Scandinavian socialist parties today?
In particular due to Bernie Sanders and AOC Americans have become curious about what exactly Scandinavian Socialism is or whether it even exists.
I will try to answer questions I often see pop up based on what Norwegian history has been like, how socialist parties in Norway have voted, what policies they have implemented and what their plans are for the future.
Okay so without further ado let us answer some frequent questions.
Are Scandinavian countries socialist?
Yes and no. Strictly speaking all Scandinavian countries have a capitalist economy, however many economists in Norway will characterize our economies as mixed-economies rather than socialist or capitalist. Sometimes our system is referred to as social-democratic. Although not all parties in Scandinavia like this designation since not all parties in Scandinavia are social-democratic parties.
Is Social Democracy Related to Socialism?
Many people today are confused by relation between social-democracy and socialism. While modern social-democratic parties don’t speak much about socialism, all of them have a socialist heritage. Because many people are not aware of this today, even Scandinavians I am providing quotes from the party program of the Norwegian Labour party published in 1981. The very first line says:
I dette programmet legger Det norske Arbeiderparti fram sitt grunnsyn, som bygger på den demokratiske sosialismens prinsipper
For non-Norwegian speakers I can translate this to:
In this party program, the Norwegian Labour party outlines its core values built upon the principles of democratic socialism.
Further down on the same page they write that:
En sosialistisk omforming av samfunnet må ha støtte av folkets flertall og skje på folkestyrets grunn.
Translated to English this reads as:
A socialist transformation of society must have support by the majority of the people and happen through a democratic process.
In other words as late as 1981, the social-democratic Norwegian labour party was committed to a socialist transformation of Norway. In other words people who claim social-democracy has nothing to do with socialism, simply don’t know what they are talking about. Those interested can read the words of Odvar Nordli who was prime minister in Norway from 1976 to 1981 for the labour party. In this speech he describes how democratic socialism is different from the socialism of the USSR and China e.g.
I am sorry for this little detour, but there in my experience it is a very common misconception that social-democracy has nothing to do with socialism. And I believe that has to be clarified before discussing further socialist thinking in Scandinavia today.
Anyway, as said earlier modern Scandinavian countries are not socialist and never has been. Nor has any country for that matter. Instead they are mixed-economies.
Why the “mixed” label, how is Norway e.g. different from American capitalism to take another outlier.
Public Sector Employment
A significant part of service and goods production in Norway does not happen within a purely capitalist system. E.g. in the US only 15.8% of employees work in the public sector. Here are the numbers for Scandinavian countries:
- Norway: 37.8% in public sector.
- Denmark: 31.4%.
- Sweden: 26%
These are quite high numbers as self professed socialist country China has only 29.3% employed in the public sector.
The Norwegian government owns 33% of the Norwegian stock exchange. This excludes government owned companies not listed on the stock exchange.
Like the Chinese government, the Norwegian government typically has full or partial ownership in strategic industries, or industries deemed important to society such as:
- Oil companies
- Hydro-electric power plants
- Aluminum production
- Defense industry
- Liquor stores (to limit alcohol consumption)
Norway has the third highest tax rate as percentage of GDP at 54.8%. Again this is higher than most self declared socialist countries.
The government does not merely pay people to go to college and hospital, but both are actually owned and run by the government. Norway’s health care system is e.g. not like the Canadian one which is a single payer system. The Canadian system is basically “Medicare for all.” That means private companies run hospitals but the government pays for treatment. In Scandinavia this goes a step further. The government also owns and runs the hospitals.
A large number of child care facilities and most retirement homes are also owned and operated by the government. This is one of the reasons why public sector employment is so high in Norway: police, fire fighters, doctors, military, nurses, child care professionals and teachers etc all add up to a lot of people.
Scandinavian Countries are Rated Among the Most Economically Free. Explain That!
If you Google Scandinavia and socialism you will see this pop up as a very popular rebuttal of Scandinavian Socialism. Keep in mind that I have characterized Scandinavia as mixed economies and not socialist. However the argument being attempted to be made here which usually cites the Heritage Foundation Economic Freedom Ranking is that Scandinavian countries cannot possibly have any socialist elements given their high Economic Freedom ranking.
This makes readers assume Scandinavian countries are just free wheeling capitalism. However the way the have named this ranking is highly deceptive.
Let us e.g. look at why Norway gets a fairly high ranking compared to many other countries. Norway ranks 28, while e.g. Ecuador ranks 158. When you hear “freedom” you think that it is about what consumers and business owners are allowed to do. But that is not quite what is meant. Let us look at the categories that determine the score.
Rule of Law
Yes that is right, in their evaluation of economic freedom the Heritage Foundation includes “Rule of Law.” The implication thus when saying high economic freedom means less socialist, is that the more socialist you are, the less rule of law exist. That I hope you dear reader can agree, is a highly dubious claim.
Ecuador here gets terrible scores on Property Rights, Judicial Effectiveness and Government Integrity while Norway gets top score. The discrepancy here is mainly down to Norway being a rich developed country with low levels of corruption, fast and effective courts. This has nothing to do with Socialism vs Capitalism.
In this case Ecuador does a bit better because tax burden and government spending is lower in Ecuador than in Norway. These metrics are actually somewhat fair in terms of judging degree of socialism. However the third metric which pushes Norway up a lot makes no sense. Norway gets 97.3 points on fiscal health, near the top, while Ecuador scores lower with 62.3 on fiscal health. This has to do with how well you balance budgets. Again what on earth does this have to do with Economic freedom, Capitalism and Socialism? Are we to deem countries with more reckless spending as more Socialist, while being frugal automatically makes you an upstanding Capitalist country?
Norway does a lot better in this category than Ecuador but the rational is not quite clear. I looked at another country El Salvador for comparison which also scores low.
It seems here that having an inefficient bureaucracy with lengthy delays lowers your score. On Ecuador they get reduced score because:
labour costs are high relative to productivity.
Meanwhile Norway gets great score here because:
A fair legal system, transparent regulations, and political sta- bility make Norway a secure and transparent place in which to do business
And they add another positive:
Monetary stability has been well maintained
Again the rationals given are high to square with the concept of economic freedom. This merely seems to be a score indicating how well a country is run. Norwegian labour market e.g. is strictly regulated. There are lots of protections against overtime work, union friendly laws etc. Yet Norway seems to get few deductions for freedom despite strong union laws, exceptional power of Norwegian unions or tough laws against firing people. Instead we get a pass for having transparent laws and political stability. What gives?
I could go on looking at these factors further in detail, however it goes to show that the Heritage Foundation Economic freedom index actually says nothing about how socialist a country is, unless you judge good government, efficient legal system and balanced budgets for inherently non-socialistic.
Will Socialists Ban All Private Property and Government Take Over All Business?
There is a common perception that all forms of socialism is equal to to Soviet style socialism. However that is only one form of socialism and Scandinavian socialism as championed by socialist parties in Scandinavia since the 30s have always championed a different approach.
In my native Norway we have three parties with socialist roots:
- Rødt (Marxists)
- SV (Socialists)
- AP (Social Democrats)
The labour party AP, is not interesting in this discussion since they mostly accept the current Norwegian arrangement of:
- a mostly capitalist economy
- large public sector
- high taxes
- strong unions
- government ownership of key industries
If we look at the smaller and more radical party Rødt with Marxist roots and their view of property can be instructive (page 16 party program):
Samfunnsvitale virksomheter som helse, utdanning, bank- og finansvesen, infrastruktur, transport og naturressurser må være i offentlig eierskap og underlagt et transparent demokratisk styringssystem. Virksomheter som er så store at de er sentrale for hele landets økonomi, må eies av samfunnet og underlegges demokratisk styring og kontroll. Eksempler på dette er store banker og finansinstitusjoner og store industriforetak knytta til utnyttelsen av norske energi- og naturressurser. De store linjene i økonomien må fastsettes gjennom demokratiske planprosesser.
This is in Norwegian but I can translate the essence. They are not speaking of a complete nationalization. In fact their plans are not far from what Norway is already doing with respect to government ownership. They say that the following aspects of society should be nationalized and run by the sate:
- Large Banks and Finance Institutions
- Large Companies related to extraction of natural resources and Energy
The only things that deviate from current Norwegian practice is that Banks and Financial institutions are today only partially owned by the State. Rødt wants all the large banks and financial institutions under Government ownership. This is somewhat similar to China. Although Rødt seems to be okay with smaller Banks and Financial services not being government owned.
Energy companies are partially or fully government owned in Norway today. Examples are Equinor and Statkraft. In the past these have been fully government owned. Rødt implies and expansion of Government ownership but not a radical change from current practice.
This leaves most business outside direct government control, even by the policies desired by the most radical Marxist party in Norway. So how will the rest of business be run and owned. Both Rødt and SV advocate for workers cooperatives or other forms of ownership which democratize the economy. Basically the idea is that they want workers or employees to have influence on the economy and their workplace.
This is partly in place in Norway. Many companies related to agriculture are cooperatives e.g. In larger companies 1/3rd of the company board members are elected by employees giving more democratic control over companies at the expense of capitalist owners. Rødt and SV basically want to expand these sorts of mechanisms.
However if one looks at the party program of Rødt again (page 15) they say:
Både privat eie av produksjonsmidler og markeder vil kunne eksistere på mindre prioriterte områder.
Translated they are saying that for less prioritized areas private enterprise and markets may exist. Basically this means they don’t see a problem with some capitalist ownership as long as it does not affect what they deem most important to the welfare of the population.
Keep in mind this is the most radical of the socialist parties in Norway. SV is more open towards private enterprise in their vision of a socialist society, even if they want strategic industries to be government owned and more cooperatives or other forms of ownership given workers a bigger say in how companies are run.
Does a Socialist Economy have Free Markets?
In previous question we saw that even Norway’s Marxist party would like to allow some markets.
The larger democratic socialist party SV is more positive to markets. Here is from page 33 of their party program:
Et sosialistisk samfunn har behov for så vel sentral planlegging som markedsmekanismer. Alle skal ha rett til å påvirke økonomien, og menneskers behov skal styre produksjonen. Samfunnsmessig styring er nødvendig for å ivareta hensynet til miljøet og rettferdig fordeling av samfunnets ressurser. På en del områder er likevel et marked den beste måten å organisere forholdet mellom konsumenter og produsenter. Utjevning av økonomiske forskjeller vil gjøre at markedet i langt større grad vil reflektere ulike ønsker og behov, og ikke først og fremst ulik kjøpekraft slik som i dag. Rettferdig fordeling er en forutsetning for et velfungerende marked.
While day state their goal is a socialist economy, they don’t see a conflict with that and having markets. That is important to notice, because many people wrongly believe that Socialists want to control everything and that there will be no market freedom.
Rather they have a bit more nuanced view. They state that both central planning* and market mechanisms will be needed in the economy. They acknowledge that that in several areas markets are best suited to organize the relationship between consumers and producers.
They also point out that through evening out large income differences there are less need of planned economics because the demand in the market will then better reflect people’s actual needs.
What is the Role of Planned Economics in a Socialist State?
So unlike popular conception, socialists today are not seeking a complete planned economy. However they want parts of the economy based on planned economics. Why is that? What do they see as the benefits?
The belief is that in several areas markets don’t reflect well the needs of society.
- The environment. Markets seek as much consumption and profits as possible which often goes against environmental concerns. Socialists want more deliberate control toward less resource consumption and pollution.
- Public sector tasks like education, health care and childcare.
Problem with Private Schools
The second point requires some elaboration. You can research this yourself, but one typically finds that e.g. private education tends to lead to grade inflation. In Norway e.g. we have some private high schools. People only go their to get high grades. They almost exclusively specializing on teaching to the test. Grades in Norway are composed of grades from local tests and final exam. Final exam grading is done by outsiders. If a school grades well, then a student will get very similar score on final exam as on the other tests.
However we find that with private school the grades received directly by the school tends to be significantly higher.
Students on the NTG private school e.g. got 5.2 on average in mathematics (higher is better). During independent examination their grade average fell to a mere 2.5.
Sweden e.g. which has a lot of private schools have seen a rapid decline in their school performance after they began using private school extensively. A lot of this is due to private school causing grade inflation.
The problem is that when students become customers, incentives get skewed. Schools don’t want to be too demanding or risk loosing students and income. Many teachers on private school can attest to being instructed to not fail students.
A problem with market based health care is that profit rather than health concerns primarily drive the system. Companies naturally seek to maximize profits in a market. That means pushing for as many and as expensive procedures as possible.
This causes a major problem in the US with unnecessary health care, driving up total costs.
That is one of the reasons why Socialists see planned economics fitting better with the goals of a health care system. That and the fact that the goal is not maximum profits for health care corporations but the best possible health for the population.
That companies sell you an overprices smart phone is less of a problem than companies selling you unnecessary invasive surgery e.g.
SV e.g. has advocated for regulations somewhat aligning with the Repair manifesto. They want requirements that products:
- Are made to be easier to be repaired and thus reused and not thrown away quickly.
- Easier to recycle.
- Longer warranty, to encourage manufacturers to make more durable products.
Will Everybody Earn the Same in Socialist Society?
It is a common misconception that socialism implies that everybody gets the same. However if you look through the party programs of all socialist inspired parties in Norway, there is no such view being advocated.
Socialism is mainly about reducing excessive inequality, not about making everybody exactly the same. When Socialist talk about everybody being equal it is more in the sense of everybody having equal value. E.g. that just because you are a prodigy your human worth should not be measured higher than that of a disabled child.
Some of this equality will be achieved through a redistributive tax system. However if you compare a fairly equal society like Norway to a more unequal place like the US, it is not primarily redistribution through the tax system which contributes to equality.
Rather it is through a more socialist inspired structures in the workplace. Union membership and union power is much higher in Scandinavian countries. Scandinavian countries have what is called sectorial bargaining, which means unions exist for specific types of jobs rather than for specific companies. Hence a workplace may have several different unions present representing different types of workers.
Such a system was banned by the US supreme court in 1933, which is why e.g. in the US a union in a workplace has absolute monopoly. In Scandinavia you pick the Union you want. However unions tend to cooperate a lot so they have a lot of power at national level. These unions have tended to push up wages for low wage earners while keeping them somewhat lower for high wages. Thus the spread in wages is much smaller in Scandinavia than in the US long before taxes do any kind of redistribution.
A Socialist economy will not fundamentally change this aspect. Because e.g. employees will typically will have more power at companies, top management and CEO positions will most likely not pay as high wages, since they will simply not be offered as high wage.
Here is e.g. SV view on workers and income (page 5):
SVs mål er et arbeidsliv med full sysselsetting der alle arbeidsplasser er arbeiderstyrt eller demokratisert på andre måter. Merverdien av arbeidet skal i størst mulig grad tilfalle felleskapet og de som arbeider.
Roughly translated workplaces should be democratized and the surplus value from work should to as large degree as possible accrue to those who work and citizens as a whole.
What modern socialists mean when they talk about a socialist society is actually not that dramatically different from the kind of social democracy that exists in Nordic countries today.
It does not mean the end of markets or capitalism but rather and diminished importance to capitalism. A few more companies will be nationalized and in most other companies workers will get a bigger say in deciding what is produced, how profits are shared, hiring etc.
No socialist party is providing a clear blueprint on how this kind of workplace democratization will happen but rather point to possible solutions such as increased union power, cooperatives, more voting rights on corporate boards etc. These are not entirely new systems but rather an expansion of existing system. It is more about degree than about kind.
Hence modern democratic socialism does not imply a full government take over, nor does it mean everything becomes a command economy. Money, markets, supply and demand etc will still exist.
Nor does private property stop existing. Even the more radical Marxists in e.g. Norway wants to allow you to run your own small company. And nobody will be denied owning their own house, TV and property.
Why should you care about Scandinavian Socialist Parties?
And finally why should you care about Scandinavian Socialists and what I write here? For the simple reason that these parties have actually been in power for many years and are still represented in parliament. They have a track record of voting and they have had to appeal to actual voters.
This is very different from say Socialist parties in the former East block, the USSR and China which have never had to answer to voters. Their policies are hence not a reflection of what voters want but what they need to stay in power.