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HARDBOUND

What’s Left of Socialism
Economists and authors Robert Lawson and Benjamin Powell go on a global bar crawl to prove that socialism might not be our savior from capitalism

How can so many Americans view socialism so favorably, when in practice it has led to misery and mass murder? The answer is that, like the New York Times, many people assume that socialism is merely a more generous form of liberalism.

The Victims of Communism survey found that only a third of millennials could define socialism correctly. In the first Democratic Party debate, Sanders was asked how a socialist could win a general election in the United States. He pointed to "countries like Denmark, like Sweden and Norway," as examples of his version of socialism. But those countries aren't socialist.

Sweden does have a big welfare state, government-provided health care, and generous unemployment benefits, and the drinks at Duvel Café were indeed highly taxed. But welfare and entitlement programs, however highly prized by socialism's acolytes, are not the defining components of socialism.

The economic freedom index that Bob helped create is probably the best way to measure whether a country has a more capitalist or socialist system. The index uses a zero-to-ten scale, with higher scores indicating a more capitalist system. If a country earns a high score on the index, that generally means that country keeps government taxation low, respects private property rights, maintains the value of its currency, lets people trade freely, and keeps regulations to a minimum.

So how does Sweden stack up? Overall, Sweden gets a 7.54 rating, which is good enough for twenty-seventh place out of the 159 countries in the study. Sure, Sweden taxes the bejesus out of its citizens. Its tax-and-spend score is very low indeed-3.64 out of 10. It regulates labor markets quite a lot (6.81) as well, but overall it does a good job protecting property rights (8.35), avoiding inflation (9.71), allowing free trade (8.28), and only lightly regulating credit markets (9.90) and businesses more generally (8.08). Of the other Nordic countries Comrade Bernie mentioned, Denmark rates 8.0 and Norway 7.62. All three rank in the top fifth of the most economically free countries in the world.

Bottom line: Sweden is a prosperous, mostly capitalist country. When we were there we could see this with our own eyes. The Swedes were obviously wealthy, their buildings were well maintained, and their beer was good and cold. In fact, what we saw was consistent with the research that uses the economic freedom index to measure the impact of economic freedom on living standards. In a recent review of nearly two hundred academic studies, Bob and his co-author Joshua Hall concluded, "Over two-thirds of these studies found economic freedom to correspond to a 'good' outcome such as faster growth, better living standards, more happiness, etc. Less than four percent of the sample found economic freedom to be associated with a 'bad' outcome such as increased income inequality."

Although Sweden is still mostly free today, it used to be even freer. Our Swedish friend, Johan Norberg, has told the story of how laissez-faire economic reforms made Sweden rich. In his telling, back in the early 1860s his ancestors were so poor that they had to mix tree bark into their bread recipe when they were short on flour. Incomes in Sweden at that time were on par with those in the Congo today. Meanwhile, life expectancies were half as long and infant mortality rates three times as high as they are in many modern poor countries.

But nineteenth-century economic reformers liberalized Sweden's economy and created a prosperous, capitalist country. Our personal favorite reformer, Lars Johan Hierta, is honored with a copper statue about a kilometer from the Duvel Café. We like Lars because he championed free speech, equal rights for women, business freedom, free trade, small government, and the repeal of public drunkenness laws (as long as the drunk didn't threaten anyone). Cheers to that!

Hierta and other reformers eventually implemented many of their policies, and Sweden grew rapidly. Between 1850 and 1950 incomes increased eightfold, life expectancy rose twenty-eight years, and infant mortality fell from 15 to 2 percent. By 1950 Sweden was one of the richest countries in the world, and it still had a small government. Its total tax burden, at 19 percent of gross domestic product (GDP), was lower than that of the United States and other European countries.

It's only relatively recently that Sweden's tax burden and size of government have ballooned. Government spending exploded from 31 to 60 percent of GDP in the twenty years between 1960 and 1980. High taxes and big government spending alone don't constitute socialism, but they do have consequences. As Sweden's government grew, its economy stagnated. It was the fourth-richest country in the OECD (a group of rich countries) in 1970, but by 2000 it had fallen to fourteenth place. Sweden grew most when it was freer than it is today. But even today, it remains relatively economically free and prosperous, and its policies are far from socialist.

If Sweden isn't socialist, then what is? This is where Americans seem to be confused. Propagandists like Michael Moore don't help when they tweet out things like "Most polls now show young adults (18-35) across America prefer socialism (fairness) to capitalism (selfishness)." Socialism doesn't simply equal "fairness." What it really equals is the abolition of private property; in a socialist economy, the government decides what will be produced, how, and for whom.

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