Right On: Sweden and the U.K. are back from the socialist brink

January 23, 2019 Utah Channel 3

OPINION — Recently-elected democratic socialist Rep. Alexandria Ocasio-Cortez is the darling of the progressive left. She’s young, energetic and has appeared on every progressive television show and website as the wave of the future for the Democratic Party.

As expected, she embraces all the progressive fantasies of the day: single-payer health care, free college tuition for all and guaranteed jobs for all. Oh, and I almost forgot, a nationwide $15 per hour minimum wage.

When interviewed on “60 Minutes” she said, “My policies most closely resemble what we see in the U.K., in Norway, in Finland, in Sweden.”

I’m quick to agree that both Sweden and the U.K. have important lessons for this country, but they’re not the ones Ocasio-Cortez seems to think they are.

Economics professors Jesús Fernández-Villaverde and Lee Ohanian describe Sweden’s socialist experience in an article in the Wall Street Journal and why the country has returned to a market economy.

Sweden had a highly competitive market-based economy in mid-20th century and had the world’s fourth-highest per capita income by 1970. But electing a succession of radical Social Democratic governments led to much higher spending, higher taxes and more regulation than in any other western democracy.

By the 1990s, Sweden’s per capita income had dropped to 14th in the world. Economic growth during that 20-year period was about 1 percent lower than the rest of Europe and about 2 percent lower than the U.S.

Like our slow-growth experience during Obama’s presidency, falling behind 1 or 2 percent annually adds up, in Sweden’s case 20-40 percent over 20 years. The result: an economy performing well below its potential, leaving all segments of society poorer.

By the early 1990s, Swedish government spending and transfer payments equaled 70 percent of gross domestic product. Sweden lost over 400,000 private sector jobs in an eight-year period, equivalent to 16.7 million jobs in the U.S. today.

Disillusioned with the disparity between socialism’s idealistic promises and its results, Sweden elected a market-oriented government in 1991.

Parts of the health care system were privatized and for-profit schools were encouraged along with government vouchers to attend them. Unemployment benefits were reduced and an earned-income tax credit was introduced.

Echoing our since-lapsed Graham-Rudman-Hollings act, Swedish government ministries were required to recommend offsetting budget cuts for any new program spending. As a result, government debt has been reduced from 80 percent of GDP in the early 1990s to about 41 percent today.

Sweden’s electrical power and transportation industries were deregulated and the postal system was opened to competition. The corporate income tax rate was reduced to 22 percent and will drop to 20.4 percent in 2021.

Progressives in this country howled when Republicans lowered our corporate tax rate from 35 percent to today’s 21 percent. Instead they should applaud Republicans for adopting a Swedish precedent.

Sweden has grown 1 percent faster than other European countries since 1995 and its per capita GDP is within 15 percent of the U.S.

“Sweden allows property and profits,” notes economic historian Deirdre McCloskey. “It allocates most goods by unregulated prices.” Contrast recent government actions: The U.S. bailed out General Motors but Sweden didn’t rescue Volvo or Saab.

Turn now to another of Ocasio-Cortez’s policy models, the United Kingdom.

The U.K. elected a series of socialist-leaning Labor Party governments following World War II. These governments nationalized large segments of the economy but eventually found themselves hostage to paralyzing labor union strikes in key industries.

Prime Minister Margaret Thatcher pulled the U.K. back from socialist stagnation in the 1980s, embracing free markets, privatization and deregulation. Her Conservative Party lowered income tax rates and ended state subsidies for major manufacturing companies.

Unfortunately, the U.K. held on to government-run health care, its National Health Service. A government-sponsored report found that the NHS is characterized by neglect and “needless” deaths. Britons have been treated to a seemingly never ending series of NHS horror stories, not unlike those we experienced with our government-run Veterans Administration hospitals.

If single-payer health care is the U.K. policy Ocasio-Cortez wants to emulate, she’ll find few takers among veterans in this country.

Real world experience – something Ocasio-Cortez clearly lacks – shows that market economies far surpass socialist economies in providing for their citizens.

Free markets are characterized by economic competition, yielding more goods and services of better quality at lower prices.

The World Economic Forum’s Global Competitiveness Index lists 10 countries as having the most competitive economies: the U.S., Singapore, Germany, Switzerland, Japan, the Netherlands, Hong Kong, the United Kingdom, Sweden and Denmark.

Notice the correlation between competitive market economies and democracy. Only two of the ten above, Singapore and Hong Kong, are not fully democratic.

The nature and extent of market regulation will always be a matter of debate: government regulation is clearly needed to establish order and prevent abuse. But the more the government interferes in the market, the less competitive an economy will be.

Command and control socialist policies undermined both Swedish and British prosperity. They will do the same in this country if Democrats are given the chance to implement their socialist policy prescriptions.

Howard Sierer is an opinion columnist for St. George News. The opinions stated in this article are his own and may not be representative of St. George News.

Email: hsierer@stgeorgeutah.com

Twitter: @STGnews