Other Factors, Not Socialism, Triggers Northern Europe’s Success – Pacific Research Institute

Other Factors, Not Socialism, Triggers Northern Europe’s Success

The history of failure, destruction, and death lying in the wake of nearly every socialist experiment is well-known in our country today. Modern-day proponents of socialism cannot point to a single instance of their failed dogma being successful in any country comparable in size or complexity to the United States.

The Soviet Union, the Union of Soviet Socialist Republics, was an abject failure requiring the violent subjugation, suppression, and murder of tens of millions of innocent people. During the period in which China practiced real communism, tens of millions of innocent people were murdered and starved to death in one of the greatest avoidable tragedies in human history.

Medium-sized countries that have flirted with socialism end up failing as well, often in catastrophic, society-destroying ways in places like Venezuela and Cuba.

Other nations with proud histories stretching back many hundreds or thousands of years, like Italy and Greece, have held together.  But these nations continuously oscillate between stagnation and debt crises as their growth remains low while government promises expand. These nations have only recently begun to grapple with the long-term implications of their overly-generous welfare states, low and falling economic growth projections, and the  innovation-destroying realities of socialism.

Modern-day American proponents increasingly point to four small nations in northern Europe that they claim are bucking the trends of inevitable demise and failure brought about by embracing socialism. Listen to any young proponent of socialism and you’ll inevitably hear them mention Denmark, Norway, Sweden, or Switzerland.

At the outset, it should of course give any thoughtful person pause considering why the supposed “socialist exemplars” are all clustered in the same small part of world, all populated by people with a similar and often shared histories, and are all no larger than a medium-sized American metropolitan area. This is not merely a coincidence, of course.

Thomas Sowell, the great American economist, and social critic has persuasively argued for the importance of culture in determining economic outcomes. It is no accident, for example, that Germans are prominent in the piano industry both at home and abroad (e.g. Steinway, Schnabel).  The same can be said for Italians, who have translated thousands of years of viticulture knowledge into prominence among wine-makers from America to Argentina.

We should not dismiss this rich history of trade and innovation that explain much of the modern success of the supposed socialist success stories. It is likely that these nations would find themselves among the upper echelon of successful nations regardless of their economic organization.

To explain the economic success of these nations, we must also consider that specific advantages and peculiarities can have an outsized influence on their prosperity not possible for a nation more than fifty times their size (as is the U.S.).

For example, when extolling the virtues of Norway’s economic system and the supposed prosperity it has brought about, American socialists rarely mention the more than 1 trillion dollars in invested assets in their national “Oil Fund,” which amounts to approximately $200,000 per citizen of wealth from which the returns can be used to pay for their government largesse.

Or consider Switzerland, which has for centuries benefitted from its reputation as a safe haven for despotic European royalty, Russian oligarchs, and African tyrants to park their ill-gotten gains – no questions asked! As a result, Switzerland benefits from holding banking assets nearly five times larger than their total economic output, surely not a replicable strategy for subsidizing one’s welfare state.

There are other more academic reasons why socialism appears to fail less spectacularly in small nations.  Consider Ludwig von Mises’s “knowledge problem,” which tends to increase with scale as the necessary information to set prices becomes harder with population and economic growth. The challenges related to controlling economic production in a large country inevitably require consolidation of power by the State. When coupled with the propaganda machine necessary to indoctrinate a population about “an international cabal of capitalists,” you gain an understanding of how 100 million people died at the hands of communists and socialists in the 20th century alone.

In future columns, I will discuss other falsehoods in the narrative of socialist success stories, including how their success is often predicated on benefitting from our economic dynamism and that of other nations. It is also important to discuss how the long term viability of nearly every socialist nation, by their accounts, looks increasingly bleak by virtually any marker of well-being and success, including economic growth, population growth, debt burdens, etc.

We must view the current socialist experiments in Western and Northern Europe for what they are.  A few generations of people, who inherited arguably the greatest natural and social endowments on the planet, have decided to temporarily enjoy wealth beyond their economic means with ever more lavish promises to themselves, while praying that they have passed before the demographic and economic realities of their decisions materialize.

This manner of experimentation is a privilege that small and largely unimportant nations can afford. The United States of America, as the creator and guarantor of the modern free world cannot afford to take this risk, nor should we. 

Damon Dunn is a fellow in business and economics at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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