The Myth of Nordic Countries: Not Socialism
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The Myth of Nordic Countries: Not Socialism

Socialism is a political, social, and economic philosophy encompassing a range of economic & social systems characterized by social ownership of the means of production & workers' self-management of enterprises.

Written By: Freedom Economics

What Is Socialism?

Socialism is a political, social, and economic philosophy encompassing a range of economic & social systems characterized by social ownership of the means of production & workers' self-management of enterprises.

Based on this definition, the Nordic countries espoused by Leftist American as "socialist countries", are far from being socialist...


Index of Economic Freedom

Where do the Nordic countries rank?

Contrary to what many people believe, the Nordic countries rank at the top of the Index, which means that they are among the world's most capitalist countries (in regard to wealth creation).

The index is based on 12-factors.

Source: Heritage Foundation


The Nordic Welfare State

Taxes and redistribution of wealth

The Nordic Model includes social benefits such as free eduction, free healthcare, guaranteed pension payments, etc.

These programs are financed with a high personal income tax (different from the corporate tax, which is quite low in these countries - allowing corporations to use capitalism to allow advance the economy without monetary restriction).

Top personal income tax rate:

Source: Heritage Foundation


The Misconception

The Nordic countries are market economies with high taxes to fund their welfare state. However, it is erroneous to think these countries are wealthy because of their high taxes and social programs; specifically, a false causality.

It was not the welfare state that created wealth, but wealth that allowed the welfare state.

It is the free market - by potentiating its citizens' productivity, promoting development, and attracting investment - that has created the necessary amount of wealth to establish such welfare states.


Challenges

The current Nordic welfare state faces some severe problems long term. First of all, these countries are trending in the opposite direction of what made them wealthy in the first place: free market, low government spending, low taxes.

They're trending towards a much heavier government spending model, more government control, and higher taxes.

This is a big concern for many economists who argue this will slow down economic growth, therefore, the creation of wealth to finance the welfare sated. Another problem is the aging population, homogenous population, and the small base of young taxpayers left to pay for the social benefits of the elderly.

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