Paraphrasing a philosopher of his era, Winston Churchill once said, “Those that fail to learn from history are doomed to repeat it.”
Churchill was himself a devoted student of history.
His research for his multi-volume biography of his ancestor, John Churchill, 1st Duke of Marlborough, likely informed his strategic military thinking as Prime Minister during WWII.
Churchill was also a fierce critic of socialism in his time.
Socialism as we know it today is based on a different view of history, one that says history is headed in a particular direction and you just need to see where it is heading to “be on the right side of history”.
Socialism was thought to be the wave of the future in Churchill’s time, just as it was the wave of the future when Karl Marx was writing about it in the mid to late 1800’s.
In fact, a wave is an apt analogy for socialism.
Enthusiasm for socialism has crested and then crashed down many, many times in the last couple of centuries.
Today, some enthusiasts are again riding high on the socialism wave.
Some of them are too young to know better, while others simply refuse to learn the lesson from previous crashes they have witnessed.
Given previous spectacular failures of full-fledged socialism in Eastern Europe, Latin America, Asia and Africa—usually resulting in violence, poverty, and suppression of individual rights— advocates of socialism find themselves on the defensive.
When asked why we should try a system that has repeatedly and spectacularly failed, a common fallback is to cite Sweden and other Nordic countries as examples we should learn from.
It may surprise some of my colleagues that this is one point where I agree with the socialists.
We should examine and learn from Sweden’s experience.
In fact, an excellent summary of Sweden’s experience from the 1950’s to today has been complied by the Swedish economist Johan Norberg.
His video, “Sweden: Lessons for America” is available on YouTube as part of the Free to Choose network.
A short paper similarly titled “Sweden’s Lesson’s for America” has been published by the CATO Institute.
I recommend these to all my colleagues on both sides of the aisle.
We can learn a lot from Sweden.
As Norberg points out, by about 1950, Sweden was the fourth richest country in the world, and had the fifth freest economy.
In other words, Sweden became wealthy through economic freedom.
Then, it started to adopt socialist policies.
At first, it was just a few welfare programs, but between 1960 and 1980, government spending doubled from 31 percent of GDP to 60 percent of GDP, and of course that meant sky high taxes.
This is the time period that older socialists remember fondly.
Sweden was surfing on top of the socialist wave and seemed to have it all: prosperity, massive government spending, and a highly regulated economy.
However, even the best surfers cannot ride a wave forever.
All waves eventually come crashing down.
Sweden’s socialist policies started to kill off the wealth creation that was needed to fund all that government spending.
Norberg points out that Sweden was 10 percent richer than the G7 countries on a per capita basis in 1970, but by 1995, it was more than 10 percent poorer than the G7.
During that time, not a single net job was created in Sweden’s private sector and inflation took away almost all the value of any wage increases.
As Margaret Thatcher famously said, “The problem with socialism is that you eventually run out of other people’s money.”
One of the most iconic Swedish companies is IKEA. Its stores all around the world are painted the color of the Swedish flag.
During Sweden’s experiment with socialism, IKEA moved to the Netherlands, where it is headquartered to this day.
But, by the 1990’s Sweden realized its mistake and reversed course.
Yes, it did elect a center-right government in the 1990s. But, importantly, the left-wing Swedish Social Democrats also recognized their mistake.
Norberg quotes a Social Democrat Minister of Finance, “That whole thing with democratic socialism was absolutely impossible. It just didn’t work. There was no other way to go than market reform.”
So, yes, let’s learn from Sweden.
We don’t have to go down the socialism road.
It’s a dead end.
Yes, Sweden still has much higher government spending and a more extensive welfare state than the United States.
But, in order generate the wealth to pay for it, Sweden has pro-growth policies.
They don’t pretend that they can finance all that spending by just taxing the rich.
In fact, Sweden’s tax code is much less progressive than ours.
Most Swedish tax revenue comes from an income tax system flatter than ours and consumption taxes.
Norberg points out that the top 10 percent in Sweden pay less than 27 percent of the taxes whereas in the United States the top 10 percent pays 45 percent.
Moreover, taxes on employers and capital are modest to attract investment and remain competitive on the global stage.
The Trump tax cuts finally made our corporate income tax competitive with Sweden’s.
That’s right, the Trump tax cuts made our corporate tax more like Sweden, but now Democrats want to make it much less competitive once again.
They are making the mistake Sweden made decades ago and has now corrected by restoring pro-growth policies.
As Norberg says, “You can have a big government, or you can make the rich pay for it all. You can’t have both.”
Everybody in Sweden, rich, middle class, and even lower-income, pays high taxes.
That’s the deal the Swedes have made.
If that’s the deal Democrats are offering Americans, they should be honest instead of pretending it’s possible to fund Swedish-style government spending by just soaking the rich.
They should explain that hard-working Americans will have to fork over close to half their income to the government in return for cradle to grave welfare state benefits.
But, I think they know that would be unpopular here.
The United States is not Sweden.
Americans, who declared independence and fought a Revolutionary War over taxes, are on the whole much less tolerant of giving over their hard-earned dollars to the government to spend.
I would urge my colleagues across the aisle to learn the lessons from Sweden, including their counterparts on the center-left in Sweden.
Do not kill job creation and wealth creation.
Do not let soaring inflation steal the wages of American workers.
If you want to look to Sweden, look to the Sweden of today, not 1980.
Better yet, if you want a model in the region, look to Sweden’s dynamic neighbor across the Baltic Sea, Estonia.
Its history has led it to be even more resistant to the failed, outdated ideology of socialism.
Estonia has the most competitive tax code in the OECD and a fast-growing economy.
No wonder it’s pushing back on the Biden administration’s proposed global minimum tax.
Our actions now will determine what kind of life our kids and grandkids will have in the future.
We ought to learn from history so we can shape a brighter future.
History is clear: economic freedom is the ticket to broad prosperity, not socialism.
