Global inequality is surging at an unprecedented pace.
According to Oxfam, the world’s 26 richest people currently have the same amount of wealth as the poorest 3.8 billion—down from 61 people in 2016. As the rich get richer, sea levels rise, tribalism flourishes, and liberal democracies regress. In the clutches of corporate giants and populist strongmen, even some of the wealthiest nations now find themselves plagued by job insecurity, debt, and stagnant wages. Ordinary people across the political spectrum are increasingly concerned that the system is rigged against them. Trust in public institutions is near an all-time low.
In response to these conditions, democratic socialism is in the midst of a revival in the United States. In the run-up to the 2020 presidential election, self-described socialist Sen. Bernie Sanders of Vermont is polling ahead of and raising more money than the other contenders, and his town hall appearance on Fox News this week was the most watched such event of the campaign season so far. With this surge of interest has come a renewed debate, often centered on historical and international comparisons, about what socialism actually means and whether it can succeed.
In U.S. politics, “socialist” has long been a smear used to discredit progressives—a rhetorical battle-ax honed for decades by Cold War tribalism, wielded by Republicans against Democrats, however centrist their politics. Conservatives have applied the label to presidents from Franklin D. Roosevelt to Bill Clinton and Barack Obama.
Progressives, forced to adapt to this framework, tend in their timidity to distance themselves from the term, even when advocating for policies that clearly lean toward it. Fear of being labeled socialist has long narrowed their repertoire of policy options. The right, of course, wants to preserve this leverage. That’s why Republicans feel so threatened by the newfound popularity of politicians who describe themselves as socialists, including Sanders, Rep. Alexandria Ocasio-Cortez of New York, and Rep. Rashida Tlaib of Michigan. At the highest levels of U.S. politics, they are openly attempting to reappropriate the word.
Democratic socialists in the United States often point to Scandinavian countries for prime examples of their ideas in action. Scandinavia, broadly speaking, combines big governments that readily interfere in markets with stable growth and prosperity. This prosperity is often on display in rankings, such as the Legatum Prosperity Index and the United Nations’ World Happiness Report.
Scandinavia’s success is inconvenient for the right. For the public to remain distrustful of socialism, the right wants the label reserved for the likes of North Korea and Venezuela. Scandinavia’s record leaves conservatives with only two options, both of which rely on sophistry and cherry-picked facts: They can dispute either the region’s economic success or its socialist leanings. Members of the right-wing commentariat and think-tank sphere, for whom socialism implies coercive wealth redistribution, have pursued both approaches.
Like many of my fellow Scandinavians, I have followed this odd spectacle with bemusement.
In an essay representative of the broader conversation, published in Forbes last year, economist Jeffrey Dorfman argued that leftists who point to Scandinavia tend to conflate socialism with the generous welfare state. “Socialism can take the form of government controlling or interfering with free markets, nationalizing industries, and subsidizing favored ones,” he wrote. “The Nordic countries don’t actually do much of those things.”
Behold, the economy of Norway : “Controlling or interfering with free markets, nationalizing industries, and subsidizing favored ones” is precisely how the Norwegian government ended up owning 60 percent of its net national wealth—twice the share the Chinese government owns in China.
The share of total U.S. income owned by the richest 1 percent of the population has been surging since the 1980s. It now exceeds 20 percent. Scandinavia’s 1 percent bags less than half this share, ranging from 6 percent in Denmark to about 9 percent in Sweden. The Organization for Economic Cooperation and Development ranks each Scandinavian nation among the Top 10 with regards to both economic equality and absence of poverty. The United States is on the opposite end of both spectrums.
Like any viable economic system, Scandinavia’s is a mixed one. A fully socialized economy would be just as unfeasible as a fully privatized one. Socialism, as the term has evolved in mainstream usage, does not mean a total absence of markets, just as capitalism does not imply a total absence of public ownership and regulations. Democratic socialism simply means a democracy leaning towards the leftward bound of the private-public ownership spectrum—an economy in which the government controls major corporations, while the people in turn control the government, securing de facto popular control of the economy. The government functions as an intermediary, managing state corporations on behalf of the people. The greater control the government exerts over the economy, and the greater control the people exert over the government, the better the democratic-socialist label fits.
The Norwegian government in particular controls the levers of the economy through ownership of major industries and financial institutions. It did not achieve this through forced nationalization, but by stock acquisitions on the open market. While the U.S. government was ceding authority to the market, Norway’s government used the market to bolster its authority.
The Norwegian public currently holds about 40 percent of the stocks traded on the Oslo Stock Exchange.
Companies for which public ownership exceeds 34 percent (giving the government power to veto any board decisions requiring a two-thirds majority) constitute 56 percent of the country’s total market capitalization.
The public benefits of this are hard to miss: A corporate culture like Enron’s, sustained on fraud and corruption, would be hard to imagine with publicly accountable government representatives present at every single board meeting, controlling a third of the votes.
The same can be said of financial institutions, whose gambling addiction resulted in the Great Recession. When boards of directors hire their CEOs, they instruct them to maximize shareholder value. For private shareholders, value mostly boils down to short-term return on their investments. Privately owned banks are thus encouraged to take on major long-term risk for the sake of maximizing short-term profits. This is how the U.S. housing-market correction from 2006 to 2008 was able to bring the global financial system to its knees.
For public shareholders, value is a multivariate function that includes long-term, macroeconomic concerns. Norwegian banks went against the crowd by shunning both subprime-based bonds and Icelandic bank bonds. Despite outstanding rates of return, such assets were deemed too risky by the Norwegian government. As a result, Norway cruised through the Great Recession mostly unscathed. There were no domestic bailouts. Gross domestic product recovered within two years. Unemployment barely budged.
Had the boards of Goldman Sacks and Lehman Brothers been chaired by government representatives, similar cultures of aversion to systemic risk could have been enforced. The Great Recession, along with its political ripple effects, might then very well have been averted.
This business-government relationship is the opposite of the U.S. system. In the United States, powerful corporations buy and control the government. In Norway, the government buys and controls powerful corporations.
The right continues to cite Venezuela an example of a failed socialist economy, while refusing to call Norway a successful one. Never mind the fact that state ownership is more extensive in Norway than in Venezuela. Never mind that an authoritarian government’s irrational policies caused Venezuela’s collapse—not socialist principles.
“For conservatives, the word ‘socialism’ does not really refer to state or collective ownership of capital, but rather poorly-managed state or collective ownership of capital,” Matthew Bruenig, the president of the People Policy Project, wrote last year in an article for Current Affairs. “From there, the claim that ‘socialism’ leads to poor management becomes tautological, as every example of well-managed collective ownership is either ignored entirely or conveniently excluded from the socialist label.”
According to the World Bank, Norway and the United States have nearly identical GDP per capita. Yet Norway, unlike the United States, enjoys universal health care, child care, and elder care, as well as tuition-free universities, 12 months of paid parental leave, and a robust social safety net.
Scandinavian students graduate without the horrifying debt burdens of their U.S. counterparts. Those of us who sustain injuries in traffic accidents never have to beg bystanders not to call for an ambulance, for fear of drowning in medical debt. Scandinavian diabetics don’t need to crowdsource their insulin. As seniors, we don’t spend our golden years working at Walmart or living in our vehicles. Our homes were not confiscated during the Great Recession. Due to extensive public ownership, we are shielded from the harshest aspects of unfettered capitalism.
Whatever Norway can afford, the equally wealthy United States could afford as well—if it stopped allowing a minute fraction of the population to hoard almost all of the wealth. For conservatives, the evilness of socialism remains an article of faith. Yet the success of Norway, along with its Scandinavian neighbors, affirms that public ownership can be a road to prosperity, rather than serfdom. Democratic socialists in the United States are right to point that out.
