The Myth of Functional European Socialism

Economics, European Politics, Rundown, Socialism

Surely anyone who has discussed the inherent flaws and assured demise of socialism and communism with an ideological opposite has heard the argument that failed socialist and communist regimes failed due to an incorrect implementation of these systems and will point to Scandinavia and other Nordic-Model countries to prove their point.

“If socialism doesn’t work, then why are countries like Denmark, Iceland, Sweden, and Luxemburg doing so well?” And that’s a fair question, to which the best answer may be, “Those countries are successful, among other reasons, because they are not socialist countries.”

While Bernie bros and other far-left ideologues will point to the wonders of safety-net economies in Europe to praise socialism, the simple fact of the matter is that the countries they point to are capitalist countries with relatively open markets.

Means of production are owned overall by private companies, and while taxation is noticeably high in these countries, there is no real re-distribution as people with a lot of money are perfectly free to hoard copious amounts of money as long as they pay the taxes they’re obligated to pay under the law. Not only that, but countries like Sweden and Denmark depend on open-markets to provide their citizens with the products of modern capitalism, as most modern consumer goods would be far too expensive to produce domestically.

Contrary to the beliefs of democratic socialism advocates, there are no socialist European countries as the only countries currently practising socialism are Vietnam, Laos, Cuba, and, to a degree, China. When it comes to the methods that make the Nordic-model countries functional, they go in direct opposition to what makes these so appealing to socialism advocates. These countries do no put the full weight of taxation on the top 1% of the countries citizens (though their tax burden is far higher) but on all citizens except for the most vulnerable individuals.

Here is how come of these countries’ governments get the revenue needed to fund their social safety nets:

• Sweden: Only Swedish citizens that make less than a yearly $18,000 Swedish Krona (around $2,500 AUD) are free from taxes. After that base income tax is 31%, with additional taxes being added to it on higher brackets. Sweden also has a base “value-added tax” of 25%.
• Denmark: Denmark’s federal income tax rate is low, ranging between 8-15%, but citizens have a multiplicity of additional tax burdens such as Municipal tax (25%), Health contributions (4%), and Land Value tax (3.6%) in addition to a 25% VAT standard.
• Finland: The lowest federal income bracket in Finland is 25%, with additional state taxes ranging from 6-17% for the lowest earners. Finnish citizens must also contribute 2.5% of gross income to social security, as well as pension and unemployment that can go as high as 18%. Additional taxes include property value tax (4%) and VAT (24%)
• Iceland: Iceland has a simple but aggressive taxation model, taxing citizens that make less than 10,724,556 ISK yearly (around $130,000 AUD) 36% on their income, while anyone making above that amount gets taxed at almost 50%. Icelandic citizens must also pay a municipal tax of around 14%, a capital gains tax of 22%, and a VAT of 24%.

Needless to say, the dream of free goods and low taxes that democratic socialism advocates dream of is a long way away from the aspirational Nordic-model countries they so revere. It is true that these countries provide very high quality of life to their citizens, but at great expense to all citizens, not just the rich.

Another point that needs to be debunked about Bernie-label democratic socialism is the role of corporate taxation, which claims that the combination of corporate tax and taxes on the 1% will fully fund these safety nets. The reality of these Nordic-model countries is that much of the pressure is off the corporations and carried mostly by individuals. In fact, no Nordic-model country taxes corporations at above 25%.

This is to say that, irrespective of your point of view regarding Nordic-model capitalism, these European countries are exactly that; capitalist. Taxes are passed on the consumers, and as a result, they have access to social programs at the expense of a lower percentage of their wages and expensive products. This is far from the democratic-socialist model of re-distribution, state-imposed price caps, and municipalization of means of production. To this day, the only model that has provided quality of life and freedom to the citizens of the countries that abide by it is capitalism, and these democratic-socialism advocates would be wise to catch-up to the fact.

Emilio Garcia
Deputy Editor, The Unshackled
Host of the Front and Center Podcast
www.frontandcenter.net.au
@FrntAndCenter