3037 Scandinavian Socialism: Dangers of the Welfare State
Many have long praised Scandinavian countries for their high levels of welfare provision and for their economic and social outcomes. It is, indeed, true that they are successful by most reasonable measures. However, Scandinavia’s success story predated the welfare state. Many analyses of Scandinavian countries conflate correlation with causality. It is very clear that many of the desirable features of Scandinavian societies, such as low income inequality, low levels of poverty and high levels of economic growth, predated the development of the welfare state. | Dr. Nima Sanandaji holds a PhD from the Royal Institute of Technology in Stockholm and is the author of “Scandinavian Unexceptionalism: Culture, Markets and the Failure of Third Way Socialism” which is available for free online via the Institute of Economic Affairs: http://www.iea.org.uk
Hi everybody, this is Stefan Molyneux from Freedomain Radio.
So those of you who keep writing in and tell me, tell us that the laws of economic reality somehow fade, the more blonde the women get and the higher the ski slopes are, are here to be proven wrong or incorrect or certainly open to correction.
This is Dr.
Nima Samandaji.
He holds a PhD from the Royal Institute of Technology in Stockholm and is the author of Scandinavian Unexceptionalism, Culture, Markets and the Failure Thank you
for including me.
So why pick on our Scandinavian neighbors to the north.
What did they do that has got people, including Bruce Springsteen, so confused?
Well, to begin with, the reason for me to write about this is that I'm living in Sweden.
I'm an Iranian-Kurdish immigrant who came here And I've been raised on welfare in Sweden.
So I'm very much part of the Swedish welfare state.
And for many years now I've been writing about the Swedish welfare state.
And it's very obvious for us who live here and understand Scandinavia that other people have got it completely wrong.
These ideas about a Nordic model being a miracle cure, they're flatly wrong.
So there's this general, the third way that you refer to, if I understand it correctly, so there's the disasters of predatory communism responsible for a hundred plus million deaths in the 20th century.
Not too many sane people want to head off in that direction again.
On the other hand, there's perceived to be this sort of weird Dickensian dog-eat-dog free market capitalism where people in Monocle regularly dine upon the limbs of poor people and this is considered to be something brutal.
And what is the third wave that people have this fetish for with regards to the Scandinavian model?
So there's two things, third wave socialism and the Scandinavian model.
Third wave socialism was an experiment that was introduced in Sweden in the 70s, where the state tried to control the economy in a democratic country.
The idea was that the labor unions should own all of the businesses.
And this, the third race socialist model, was a colossal failure, a complete failure.
Even the social democratic minister of enterprise who introduced it, even at the time he introduced it, he knew this was a horrible idea.
And what happened was that Sweden, which had been a very entrepreneurial economy, Entrepreneurship stopped.
Growth stopped.
Sweden went from being the fourth richest country in the world to being a pretty mediocre country.
And third-way socialism was only introduced in Sweden.
None other of the Scandinavian economies was dumb enough to follow suit.
And even the Social Democrats abandoned it.
Even the Communist Party in Sweden, the former Communist Party, even they don't want that system again.
The other thing you mentioned is the Scandinavian welfare model.
And the idea is have a big welfare state, have taxes that are currently in Sweden.
The average person pays 50% of her or his income in hidden and visible taxes.
And in Denmark, this figure is even higher.
And when the welfare state was at its peak, the average Swede would pay 60% taxes.
This was 10 years ago.
So that is the Nordic system, big government model.
Right.
Now, one of the things that you point out, as I've sort of pointed out in presentations as well, is in, you know, these are traditionally agricultural societies, so an agricultural analogy won't go far amiss, I'm sure, right?
So if you're a farmer, you have to keep your seed crop to be able to plant in the spring, right?
So you harvest, you eat some, you sell some, you trade some, and then you keep your seed crop to plant.
If you eat your seed crop, You have a lovely winter with very little hunger, but come spring you have nothing to plant and then you end up gnawing tree bark and beaver feet throughout the next year.
And one of the things that you point out is that from the 1870s when they first began to, and I'm really generalizing and I apologize for all of that, but from the 1870s when they really started to industrialize, up until the 1960s, early 1970s, there was a huge amount of entrepreneurial activity, massive growth in the economy, And then what happened was they turned all socialist and they began, I would argue, to eat their seed crop.
In other words, to rely on the momentum of previous economic freedoms in order to fund what they were doing right now.
So it's like a guy who's a jogger for a long time and then he starts smoking and he says, well, I still feel pretty healthy and I can still run well.
Well, that's because you were a jogger for a long time.
Now you're smoking and it takes a little longer for the health effects to show up.
Is that a fair characterization?
Actually, I love that analogy.
Take Sweden.
Sweden was a poor country until free market capitalism was introduced around 1870.
From this period until 1970, Sweden was a free market success story.
Sweden had the highest growth rate in the industrial world.
And until about the late 60s, Sweden had low taxes.
Sweden had a liberal free market low tax regime.
And it was only around the late 60s and the beginning of the 70s when the social democratic big government policy was introduced.
And what happened was Sweden stagnated for a long period.
Until, in the 1990s, 2000s, both the right and the social democrats themselves realized this is a horrible idea.
We have to introduce free markets again, we have to reduce the generosity of welfare state, and we have to cut taxes.
And during this new free market reformist era, we again have growth.
So what is Swedish history?
Very, very last sphere of free market capitalism, the highest growth rate in the world.
Third wave socialism and big government, stagnation.
A lot of free markets return to growth.
I think what I argue in my book is that Scandinavian, Nordic countries should really be seen as free market role models.
And one reason is the Great Depression.
Because how do you remember the Great Depression?
In America you remember it as a long crisis.
When the New Deal was enacted, in effect, starting the American welfare state, you introduce the welfare state to deal with the Great Depression.
The Nordic countries did not.
The Nordic countries, when they were faced with the Great Depression, it was a huge problem for them, small trade-dependent nations, global trade collapsed, global capitalism collapsed.
But the Nordic countries did not go the same way as the US, because at the time they were very free market oriented, even more than the US. And what they did was they grew out of the Depression through free markets.
Many of the most famous Swedish companies, Dorf, Gord, Saab, etc., were actually founded during and slightly after the Great Depression and creating so many jobs that within a few years we had more jobs than when the Depression hit us.
But later, when we introduced a big welfare state, job creation died out.
Welfare dependency replaced it.
And that, I didn't know that aspect of the Scandinavian history, but I just really want to reinforce that for the listeners, that the example which I had traditionally used in free market circles is to look at the American economy right after the First World War.
There was a big, sharp crash in 1920, which took 12 to 16 to 18 months to recover from, because the president did nothing and let the free market reallocate its resources in a relatively liberal economy.
But in Sweden, of course, a huge export and import Like all people with extreme climates think they need stuff from other countries.
And then when the trade barriers came crashing down all over Europe, and I think you characterized this in a mistaken attempt to protect their own economies, people erected these huge protectionist trade barriers like Bastiat have never lived and said anything.
And in Scandinavian countries, they did not respond with punitive tariffs and an increasing control over the economy.
They just let the free market respond to the crisis as people generally do by allocating resources even more effectively.
And, you know, according to the old quote, necessity is the mother of invention.
When they were up against the wall, all these great ideas and companies began pouring out of them.
And they recovered.
In the U.S., it ground on for like 13 years, culminating in a giant global conflagration of World War II. But you still point out in Scandinavian countries, it was a year or two.
Bang!
You know, they're back up, they're growing, and they have new and stronger companies than they had even before the Depression started.
Yes, and let me give you a modern day example of exactly the same thing.
What did the Nordic countries have during the Great Depression?
They had three markets, but they had another card they played with.
Nordic countries are cold.
They're harsh countries.
And the farmers who lived here, they had to work hard, otherwise they were eating tree bark or starving.
So these countries developed extremely strong norms related to work, responsibility, Lutheran working ethics.
And these countries, which are very homogenous, they have the highest trust rate in the planet.
Combining free markets with this strongly conservative work ethic culture created a lot of growth, made it possible to grow out of the depression.
Today, we have the same condition in the Baltic states.
The Baltic states used to be run by the Soviet Union, and when the Soviet Union collapses, they are extremely impoverished.
These three countries have, however, two advantages.
The first one is that they are very free market, small government, capitalism.
They love it.
Secondly, they have the same Nordic working ethics.
What happened during the 2008 financial crisis in Europe?
People say, oh, remember Greece?
Greece had a big crisis.
Yes, but who had the biggest crisis?
Well, Greece and the Baltic states.
And do you know how much money has been spent bailing out the Baltic states?
Not much.
They grew out of the crisis.
They are thriving now.
And the crisis in Latvia, for example, is comparable to Greece.
One of the countries most hit by the depression was Latvia and the other two Baltic states, but they combined the culture, conservative working culture, with free market policies.
Fantastic.
And that is very much what Scandinavia had, what the Nordic countries had, in the first half of the 20th century.
And that is why I'll show you in my book, not only did the Nordic countries during the first half of the 20th century combine free markets and working ethics with prosperity and growth, they also had the admirable social features that they're admired for today.
Equality in Nordic countries Developed before the major expansion of the welfare state.
We had equality.
Okay, yeah, let's pause that for a sec because I think that the point that you have in the book that is...
It's hard to absorb because when you're a central planner, human beings, it's interchangeable pawns and you change the laws and suddenly the entire cultural history of the planet changes.
Or like you can have a bunch of Somalians move to Minnesota and they're exactly the same as all the Minnesotans.
They're just with this interchangeable blobs of protoplasm to be ordered around by central planners.
But I think as you point out, and correct me where I go astray, but what you point out is that these cultures have developed over centuries and have a lot to do with harsh conditions and the need, like farming communities in particular, as you point out, in some of these countries they were not serfs, but they were actually owned the land.
But farming cultures tend to really focus around trust and hard work because farming is some sitting around and then crazy amounts of work during harvesting and planting And so on.
And these cultures have developed over an enormous amount of time.
And they did produce these welfare state systems temporarily, as you point out, like a decade or two of a peak in the sort of bell curve of statism.
But you can't just take the welfare state policies, put them into another culture, and have them reproduce what took centuries to develop in the Scandinavian countries from a cultural standpoint.
You point out that some of the farmers were able to get loans even without collateral because it's a very high-trust society.
Why is it a high-trust society?
Because people are trustworthy.
And they all come from similar backgrounds, similar cultures, and they understand each other.
They speak the same language.
They have the same cultural references.
They have the same religiosity and the same morals.
That kind of efficiency, you can't just reproduce by taking the products of that culture and transplanting it to another countries.
Is that a fair way of putting what you're saying?
You know, I would say if you want to understand Scandinavian early success, listen to Thomas Jefferson.
What did he say?
He said the optimal starting ground for a thriving society is independent farmers who own their own land.
Because Jefferson understood that independent farmers who own their land, they will work hard and they will be entrepreneurial.
And that is what you had in Nordics.
People owned their own land, but they lived in a land which was cold, so they had to work really hard in order to survive.
So when they got free markets, they thrived.
When Nordic countries got free markets and thrived and became rich, however, some people said, let's have a welfare state.
Now, introducing a welfare state in Scandinavia was a very good idea in terms that no other part of this planet was as well suited for welfare states as the Nordics.
You have a homogenous population.
People had very strong working ethics, very strong benefit ethics.
So, you can introduce a system.
Look at Greece.
Greece tried to introduce a generous welfare state, like the Nordics.
But what happened?
Immediately, nobody works.
Nobody pays their taxes, and everybody uses any benefit they can.
What happened when a welfare state was introduced in Scandinavia?
People continued to work.
People did not overuse the systems, because they had very strong norms.
But what I show in my book, and there's a lot of research on this topic, there's a lot of facts and figures, is that even the Nordic people have adjusted their behavior to the welfare state.
It takes generations for the adaptation to welfare state policy to occur.
But once it occurs, it changes society.
And the welfare states are in effect self-destructive because slowly they're eroding the norms that make welfare state function.
Slowly Sweden is moving towards Greece.
Slowly but surely.
Well, and this is a point that is so dangerous, and people have a very tough time understanding this.
Like in Canada, when they nationalized the healthcare system in the 1960s, they inherited a free market system, and all the doctors had a very strong work ethic.
And it was very much focused on the patients and all that.
And that doesn't immediately change, right?
It's not like the guy says, oh, now I'm being paid by the government, so my entire work ethic, my commitment to my patients and all that is going to vanish.
But what happens is over a generation or two, new people come in who are just different.
They're just different.
It's like what happens in NASA, right?
like the American space agency, they say, wow, they went to the moon and did all this cool stuff.
But that's because they got all of their engineers from the free market and they were all very hardworking, very dedicated.
And then as it continued, as the space program continued, you start to get career engineer bureaucrats coming in.
And it's like watching a movie slowly going out of focus.
You don't know exactly when it happens, but it goes from sharp to blurry and it takes As you say, it can take a generation or two or three for these standards to relax and for the configuration of society that's shaped by the free market that's then inherited by more socialist central planning, for that to sort of drift its resource allocation and to change the culture is a very slow and insidious process.
Poison that that people don't it gives you an initial high and then in the long run by the time it's it's really Comes up for like review or people are like what have we done?
There's been so much adaptation to it that undoing it becomes extremely difficult You know, I love your analog about NASA. Let me first tell you and your viewers, I am not against the welfare state.
I am pro the welfare state.
It's a good idea to give young people education.
It's a good idea to invest so that people who come from poor families, like myself, get welfare support, etc.
What I'm against is overly generous welfare systems in the Nordic countries that trap people in welfare dependency.
When welfare states become so generous, they're destroying the social fabric instead of creating opportunities for disadvantaged people.
What we can see in the Nordic countries is really that much of the social progress happens before the shift to big governments.
And this is not only in terms of wealth.
One very good metrics of welfare is how long you live.
And many, many leftist people, they look at the statistics and say, look, Nordic people are living long lives.
And they have big governments, high taxes.
If we raise the tax in the US, we will live as long as they do in the Nordics.
And these people, I hope they read my book.
And I hope they read it because I have a very, very simple analogy.
I look at the life expectancy in modern economies Before the creation of a big welfare state in Scandinavia and after the shift to the very large welfare state.
And what I can show is that the Nordic welfare state, they relatively plummet in life expectancy.
Denmark, for example, went from being the country with the fourth highest living expectancy in 1960, when Denmark had a small government welfare society, To having the 22nd highest life expectancy in 2005, which was the peak of the Nordic welfare state.
And Denmark is, of course, the country in the world with the highest tax level.
And why is that?
Because Danes, they drink alcohol, they smoke, so they don't live as long.
And in 1960, Danes and Swedes and Finns and Norwegians They ate fish, they hiked in the mountains, they took long walks in the forest, and they lived long.
Another example is Iceland.
If I tell you Iceland, is it a country with a pleasant climate?
I think the first syllable gives you a clue.
Yes.
Iceland is the only Nordic country that actually relatively increases its life expectancy compared to other countries during this period.
And what fascinates me is Iceland is the only country in the Nordics that has never implemented a really generous welfare state.
So the country with the smallest welfare state increases its relative life expectancy, and the country with the highest tax in the world plummets.
These are the people who say, for heaven's sakes, don't open your umbrellas, otherwise it's going to start to rain.
I mean, their cause and effect is just way backwards.
Sorry, you were in the middle of the point.
Please finish up.
I mean, that is the point.
The cause and correlation.
Much of the Nordic success story is about free markets and this weird Nordic culture of trust working ethics.
But I would make this...
Now...
Okay, so go ahead, go ahead.
No, no, you finish your point.
Sorry, keep it horrific.
One of the things I really write about a lot in the book, and I am seeing that many people are interested in this.
When they're doing the translation of the book, I ask them, why do you want to translate it?
They say this point is very interesting, is I show how people's ethics slowly, over generations, adjust to welfare states.
Let me give you one example.
In the 80s, in the mid-80s, the Swedish people had still not adjusted the norms to generous welfare.
They still retained these conservative norms.
So when I asked them, is it ever right to take government money that you're not entitled to?
Less than one-fifth of the Swedes said yes, it can be good to take government money that you shouldn't take.
Today, when I ask the same question, almost half of the Swedes said yes.
It can be right for me to take government money.
I assume that bulges a little along the younger side as well.
Yes, yes.
And there's a lot of good research that shows that the younger generations have much worse norms.
Norway is interesting because Norway has oil.
And I'm from Iran.
Oil destroys countries.
Because oil is a free resource.
When government gets free money, they spend it on weird stuff and they, you know, they forget.
And they use it as collateral to borrow, of course.
Giving government the money is ensuring that your children will be in debt to untold degrees.
Exactly.
And Norway uses oil to be the only Nordic country that has yet not reduced the generosity of the welfare state.
They have kept the social democratic idea of an overly generous welfare state And in Norway, the youth, young Norwegians, the new generation of Norwegians, they have horrible working ethics.
There was a survey in Norway, let me tell you, they asked Norwegian employees, employers, do you think that young Norwegians have strong working ethics?
Could you guess how many persons said yes?
I think it was in the single digits, if I remember your book correctly.
Two.
Two digits.
Two.
Low single digits.
Yes, low single digits.
And this is really the effect of welfare state policy.
When you have overly generous welfare, first of all, you trap a lot of people in welfare dependency.
And that kind of social poverty, I grew up with that, it's horrible.
But also, you affect the entire community slowly, it becomes more acceptable to leave off government, and people stop taking responsibility for their lives, and welfare dependency actually creates poverty.
It creates social poverty.
So the welfare state, which was introduced to reduce social poverty, to reduce economic poverty, once it became too generous, slowly created the same problems it was out to fix.
Well, I think also there's a very, I mean, that's all very, very true.
There's a very softer side that I think is also very compelling about what the welfare state does, is that when your parents don't have jobs, they can't transmit the economically valuable capital of how to negotiate a workforce, how to deal with a difficult boss, how to deal with customers, how to build your career.
I mean, I think, like yourself, I grew up in a welfare home, My mom couldn't help me with my career.
She couldn't really tell me anything useful.
I mean, she could tell me how to fill out forms, I guess, if that's what I wanted to do with my life.
But the human capital is, I think, the most destroyed.
I mean, there's certainly generations in America where it's been like two or even three generations since people have actually had jobs, let alone careers.
And the children growing up in that have no exposure.
That work ethic which took centuries of brutal slog to build up, how quickly it can be drained away, and how hard it is to resuscitate among people.
You know, let me again say, I'm not against welfare states.
I write a lot in Sweden, and some of the stuff I write is actually in support of welfare policies.
I believe that the Scandinavian experience really teaches us two things about welfare states.
Firstly, they can work.
In the beginning of the 20th century, the Nordic countries spent money on basic education, they spent money on basic healthcare, etc.
And combined with strong norms, combined with the free market, this created a lot of opportunity.
Then they made the mistake of creating overly generous welfare states, of government moving into the economy, carving out private business enterprise.
And that was not successful.
And that eroded the norms that even made it possible to have welfare state.
It's self-destructive policies.
So Scandinavian countries, Nordic experience, teaches us that small welfare states plus green market capitalism, superb idea.
Moving to an overly generous welfare state, not only will it hurt growth, it will also hurt the social progress.
It will trap some of the people in welfare dependency.
And that form of poverty, as you say, is more difficult to escape from than having a working parent who just has a low income.
So welfare states shouldn't be seen as good or bad.
It's in moderation.
It's like eating candy.
Small amount of candy, good.
Too much candy, less good.
Alright, I'm gonna put on my challenge hat for this because I think we have a divergence of opinion and I want to make sure that...
I can hear the questions my audience is yelling in my ear.
So, the first, which is more of a praxeological issue, which is, you know, giving governments the power to take money through force from one section of the population and distribute it to the others, has violation of property rights considerations That are problematic from a moral standpoint, and of course our interferences with the free flow of capital and the right of self-ownership.
That's not really debatable because welfare state is the initiation of force to move money.
And I know that you're not saying that.
But let me ask you, since you are very much on the empirical, pragmatic side, can you give me an example of a welfare state That has remained sustainable over a couple of centuries.
Because, I mean, the ones that come to my mind, of course, the Roman Empire collapsed with bread and circuses.
Germany was, of course, the first country to come up with the modern welfare state under Bismarck in the 1870s with old age pensions and unemployment insurance.
And that grew to a highly militarized state.
America is eating its $100 trillion plus of unfunded liabilities.
I'm trying to think of a welfare state...
That grows like puberty and doesn't grow like cancer and overwhelm the body politic.
In the long run, again, I know it's a jagged upper path.
And here in Canada, of course, the same thing has happened as well.
So give me an example, if you can, of where it's sustained itself.
You know, I can't do that because of two reasons.
First, as you say, there's this tendency to overdo it and to borrow money, etc.
And secondly, because history hasn't gone too long.
It's a pretty new institution.
And I do agree with what you said, the moral issue.
But my point is the following.
One thing we know is successful is early interventions.
If you early on look at kids who are six years old and you say, look, this kid, he's going to fade.
He's cognitively, socially behind.
He comes from a poor family.
He's not getting support, et cetera.
We invest in early childhood support program.
There's a lot of empirical research that shows that is a good investment.
You can say we want to do this privately, we should have a charity, we shouldn't have a government, but that's a good investment.
And just empirically, a small welfare state in Nordics was a good idea, but you're right.
They didn't stop at the current level.
They just kept expanding, expanding the system until, like your NASA analogy, It not only was bigger, but much less well-functioning, and was trapping people in dependency instead of helping them out of dependency.
So sure, all of this criticism against the welfare state is fair.
I just want to make the point, even if you're an American liberal, even if you're an American socialist, I hope you can read my book and see that there's a point about the limits of policy, the limits of welfare policy.
More welfare state isn't always better, even if you don't care about libertarianism, even if you don't care about private ownership, even if you don't care about money, you just care about good social outcomes, low levels of inequality, even then you should limit how much Welfare state you have, because after a while the welfare state actually destroys social capital.
It creates social poverty.
Yeah, and it creates a voting block of people who have a conflict of interest with a small government, right?
Because they're reliant upon social benefits handed out by the government, which means that they're going to vote with their need, and they're going to create a voting block that politicians have to pander to.
It changes the media as well, because you end up with this endless Marxist economic determinism of all the poor are victims and sad and tragic, and nobody ever made mistakes, and nobody ever did something dumb, and nobody was ever mean or stupid or anything like that.
Nobody ever got drunk and went to work and got fired and, you know, they should be examples to others of what not to do.
It all becomes like, you know, sad-eyed, heroic single moms who never did anything wrong.
And it changes the entire culture when you get a dependence block of people.
Yeah, it creates a culture of victim mentality.
And it creates a lot of issues with race and...
It creates a culture when you're an immigrant and you're living off a benefit street.
You grew up in a benefit street.
You don't have any social capital.
You don't meet any adults who have jobs.
The left tells you, no, no, no.
The problem is not welfare dependency.
It is that all people who are not a minority are racists.
And you should be a cultural Marxist.
You're a victim.
You're proving our cultural Marxism true.
And then, on the other hand, you get racism going on because people say, why aren't these immigrants in Sweden working?
Well, I mean, they would work.
In the U.S., the same people would probably go to a job, but here we've trapped in welfare dependency.
You can't blame the individual only.
The system actually traps them in dependency, and then other people get upset, and you get these very nasty conflicts in Nordic countries.
The anti-immigration parties have become major political forces, and much of the reason we have them is actually That people are frustrated over the development of welfare states, where a large share of the population who could work are just dependent on government.
And the people who are in this segment, they're frustrated because they don't want to be there.
They're poor.
They're not doing well.
So, of course, there are many issues with welfare states.
I do agree with that.
Yeah, and I mean, immigration to me is undeniably tied up with the question of a welfare state.
As you point out in the book, immigrants have significantly higher rates of welfare dependence than domestic citizens, and that is a big problem.
Of course it's going to foment In a society with a pure free market, I mean, to me, come and go as you please.
It's like, I don't care.
But when my taxes are going to rise with the number of immigrants, particularly from other cultures that are going to come in, You know, I'm sorry.
It's not a matter of racism.
It's just I have to protect my wallet.
And people get tense about that kind of stuff.
And the state, of course, is supposed to be that which mediates and diminishes social conflicts.
But so often it creates a win-lose situation where people have no choice but to get involved in often a hostile way in each other's business because the state means that my neighbor's business is not just his business, but it becomes my business and my children's future's business as well.
And that creates a lot of social conflict that I think is driving some of those parties' Let me give you a good example.
Sweden.
Sweden has three periods of modern immigration.
First, when we had a small government, free market, free labor market system.
Immigrants came, worked.
And they got jobs and, you know, it was all well.
Then we had another period in the 80s, 90s.
During this period, a lot of immigrant refugees came to Sweden from countries like Iran.
I'm an Iranian Kurd, like me.
A lot of people fled Saddam Hussein.
These people were often highly educated people who came as refugees, but they had a good education.
Many of them were the executives of the big companies in Iran, etc.
This highly educated group With a lot of working experience, in the U.S., they would have jobs, they would have grown prosperous, they would pretty fast become an elite group, as has happened amongst many small immigrant groups.
In Sweden, the same groups during this period became welfare dependent because they couldn't enter the labor market, because Overly high effective minimum wages, welfare traps, etc.
Now we have a system where the refugees who come to Sweden are not highly educated.
The highly educated people do not come to Sweden.
They come to Canada, they come to Australia, they come to the US. We have a welfare magnet effect.
Where they can have more opportunities, right?
Where they can put their education to better economic use.
We have a welfare magnet effect combined with the fact that it's very difficult to integrate here because of the welfare state and the high taxes.
And of course, this is not a pretty picture, what is happening now.
Because what we're seeing now is that many people who come to Sweden, they don't have a chance to enter the labor market, their children most likely will end up in social poverty, and the welfare state actually can't handle that.
The welfare state could handle Sweden when everybody had high degree levels of social capital, Then it seemed to function very well.
Now we're seeing the limits of welfare policy, and it's not a pretty picture.
Yeah, I think there is.
I mean, America, of course, took a big pause in immigration from the 20s until the mid-60s, and the argument for it was to say that if a bunch of immigrants come to a country, it takes a while to assimilate to the existing culture.
If too many immigrants, combined with the welfare state in particular, but when too many immigrants come into a culture, They tend to create these sort of bubbles where they only, and this you can see in France with Muslims, you can see this of course with Chinese people earlier in the century in Chinatowns along the West Coast in the United States.
But they create these subcultures.
And because there are enough of them and because the welfare shields them from the need to participate in the larger economic life of the society, They become very inward-looking groups, and the assimilation just doesn't seem to happen very well.
And that lack of assimilation means that the existing culture becomes very fragmented, and that has, you know, regardless of what you think of multiculturalism, that has significant social costs, because it's very difficult to have a very productive economy with people who don't speak the same language, who have different cultures, different expectations, and so on.
Yeah, you know, Sweden's third largest city is Malmö.
Malmö is right next to Denmark's capital, Copenhagen.
It's situated in a perfect spot.
It's been ranked as one of the most innovative places in the world because there are a lot of universes there.
Malmö should be very, very prosperous.
Maybe it should be the most prosperous place in Sweden, perhaps.
It's horrible.
Malmö is the failure of integration multicultural Sweden.
The current debate we have in Sweden now is how many hand grenades are being thrown in Malmö.
And the police doesn't know.
I think the last few days they've been throwing hand grenades most of this week.
Last week, there were four days of hand-worn in Malmo.
In this small country of Sweden, and this is not Chicago we're talking about, this is a fairly small city, the police are helpless.
And what happens is that the many immigrants who live in Malmo, they are living in a culture that is not the modern, Western, democratic, free market system.
It's a very violent, school-collapsing, Welfare dependency culture, which really isn't what promotes people to, you know, grow as individuals, get a job, etc.
So it is pretty nasty what is happening.
And what we're seeing is that modern welfare states are not coped to handle these issues.
For a long time, Sweden looked at America and they said, look, these Americans have violence in the streets.
Look at these bastards, these capitalists, these cowboys.
But once the same thing comes to Sweden, we have no idea what to do about it.
And it's very difficult to make a case economically to the average native-born white Western Swede.
It's very difficult, I think, to make the case to say your economy is going to be better served by having someone from Mogadishu come and live in your country than having a Swedish person native-born to a Swedish family in your country.
Because as you say, high levels of trust and culture and so on, I think, again, there's exceptions to every rule.
You could have some brilliant guy from Mogadishu and some dumb guy from Sweden being born, but in general, I can't for the life of me, and you know more about this than I do, I'm certainly happy to hear the case, but I can't for the life of me Understand how you could make the case to say, bring in immigrants with incompatible cultures.
That's going to give you greater economic growth and stability than having your own kids.
And the problem is, of course, as the welfare state begins to have this effect of tilting money away from native-born Swedes to immigrants, what happens is the immigrants who are a net negative to the economy as a whole end up having a lot more kids.
And because the taxes then become even higher, native-born Swedish people have fewer kids.
I mean, the demographic decline of the current or the ancient inhabitants of Europe is, I think, significantly tilted.
And again, that creates all this conflict within a free society would barely exist.
You know, you talk about tilting.
Let me get back to this empirical analysis of the welfare state from a perspective that is not against the welfare state.
Maybe you have a more libertarian view on that.
Initially when the welfare state is introduced, The idea is not to give money to people so they become dependent on it.
When Franklin D. Roosevelt created American welfare state through the New Deal, two years later he said this to Congress.
He said that welfare dependency was a subtle narcotic, a destroyer of the human spirit.
Even the architect of the American welfare state understood the idea is not for people to continue living off government, right?
And initially, the Nordic welfare states, the reason I think they were efficient was they were investing money in the future.
Investing money in giving every child an education, etc.
Investing money in healthcare that was prevented.
Prevented healthcare so people don't become sick.
Now, you could invest this money privately to the welfare state, but this is smart investments.
Gradually, the entire welfare state shifts.
Towards giving money to you when you are sick.
Giving money to you when you don't want to work and you say, oh, I'm sick, I don't want to work.
Giving money to you once you've become dependent on welfare.
And this is the problem we have.
And this problem, of course, reinforces the issues of immigration because the people who become dependent on welfare, the people who live in the benefit streets of Europe, are mainly people like me, not myself, Well, me as a child, but people like me who become dependent on the welfare state.
And what we should have It's exactly what Canada had in the 1990s, where even the Canadian left slowly began to understand, part of the Canadian left, that we have to reform the welfare state.
And that is exactly what we're seeing in Denmark.
The Danish social democrats, which recently lost the election, they actually started a national debate about the need to go from the welfare state towards a competition state.
A state where the model is not about supporting citizens With very generous benefits, but about giving them public services and relying on individual responsibility.
Yeah, and I mean all of that sounds great on paper, but until I can be shown an empirical evidence of this becoming a sustainable thing, I'm going to view it with extreme skepticism.
Like in America under the Republicans, and again I'm not a Republican by any stretch of the imagination, but in America under the Republicans they did put, well you have to Get trained or get a job in order to get temporary welfare, and that reduced the role to some degree.
You know, then Obama came in and just reversed all of that.
And, you know, like, it's, you know, I think it's a jagged line, but I think it continues the same way.
And there's, you know, say history is short, but the, you know, Spenum landed in the UK in, I think, the 18th century.
They tried all this government-run welfare state.
It destroyed industries and created massive amounts of vagabonds.
The ancient Roman Empire.
I mean, to me, there's so many examples of how this forced redistribution of income, aside from being a huge moral issue, fundamentally shifts human nature.
And the great thing about private charity is it competes for best outcome.
The government welfare state, of course, does not compete to best outcome.
And I, you know, I came from a poor background, I think, as you did as well.
So I really want the poor to get help.
But unfortunately, with a government welfare state, 70-80% of the money doesn't get to the poor.
I want a higher percentage of my money getting to the poor than giving it to a bunch of bureaucrats in the government to then drift it down.
You know, the money should be about helping people in the right stages of time when you can help them, not just giving money to the poor.
Right, but of course the government doesn't know the difference between what the Victorians used to call the deserving poor and the undeserving poor.
The government simply, well first of all is just going to be out there buying votes in general.
Politicians follow their own particular path to power just as everyone has their own self-interest.
So they're going to be out there Buying votes.
And there's going to be a huge number of people who end up with careers based upon the existence and size of poverty, right?
I mean, all the social workers and the psychologists and the aid workers and the welfare bureaucrats, they all require the continued existence of poverty to have their paychecks.
So there are very few people, as you know, ever work themselves feverishly out of a job.
Very few people get up at 6 o'clock in the morning and say, I want to put in 18 hours a day this week to make sure I get no job next week.
I mean, that's just not how people work.
And so when something profits off poverty rather than the reduction of poverty, it's hard to see how the poor don't become just a kind of crop that they want to maintain rather than a weed that they want to eliminate, if that makes sense.
Well, you know, the book I wrote, it's being translated, it's getting a lot of international media, mostly from people, I guess, with your political opinion, being a libertarian.
I'm a pragmatical guy.
Many of my friends are libertarians.
I'm pragmatical.
I will tell you one thing though.
One of the things I write in the book is about the limits of policy.
Many years ago Milton Friedman came to Sweden, this free market economist.
Somebody told him, in Scandinavia we have no poverty.
And he said, as a very smart individual, you know what?
In America, amongst the Scandinavians, we have no poverty either.
And I show this in the book.
This is absolutely true.
Scandinavian Americans have the same or lower poverty levels than the Scandinavians themselves and much, much higher living standards.
Finnish Scandinavians Finnish Americans, sorry, they have 47% higher living standard than their cousins living in Finland.
And who are the Scandinavian Americans?
They are the descendants of the poor people in Scandinavia who couldn't feed themselves, so they mass immigrated to America.
And they had a culture of trust, working ethics, and all of that.
They became very successful.
So really, we should also think about the limits of policy.
What can you solve through policy?
What can't you solve?
And many people, since they don't understand correlation to causation, they don't understand, I have an umbrella.
Is the umbrella causing the rain or not?
They think that you can just copy a country's culture by copying its And in the case of the Nordics, the welfare state has a self-destructive nature in the sense that a strong working ethics are being eroded by overly generous welfare state.
So if you want to have strong working ethics, if you want to have individual responsibility, you should copy more the system that Scandinavian Americans are living in, which kind of does encourage People to retain their working ethics than the Nordic one.
And I will promise you, if you could measure this, you would see that the working ethics is stronger in Scandinavian Americas than Scandinavians in Scandinavia.
Trust is higher in Scandinavian Americans than in Scandinavians in Scandinavia.
So you can really see this.
I would, and I think that's a very, it's an excellent point, and it goes to show that it is the culture that is transferable and the policies themselves are not.
But, you know, just the last annoying point I want to make in is that, you know, you say, oh, well, I'm a pragmatist and so on.
But as a pragmatist, of course, you should be focusing on that which has been proven to work historically.
So your challenge as somebody who's for the welfare state is to find a time in history where this has sustainably worked in a population.
That would be the pure pragmatic approach.
If you want to let me know, come back and tell me.
I'd love to see you.
The first half of the 20th century in Scandinavia, we had low taxes, 25% GDP because of taxes, equality, growth, all of that.
And the size of the Scandinavian welfare state then was the same size, the size of government, as the most free market countries today, Australia, Canada, the US. Wait, hang on.
Are you saying from sort of 1900 to 1950, that is a sustained, like 50 years, a generation and a half, that's your sustainability, which then loaded into this monstrosity?
We don't know that.
But not very pragmatic, I would say.
The British pound has been around for 400 years.
I'd say for 50 years, which then bloats into a monstrosity that causes massive economic dislocation, huge amounts of interracial and intercultural conflicts, and debt, and loss of productivity, and massive youth disenchantment, lazy work ethic, unemployment.
I've got to think, as a pragmatist, wouldn't you want something a little more sustainable?
You know, what I think is the most best examples of welfare states is actually Canada, Australia, and Netherlands, because they had the major problems with overly generous big governments and somewhat reformed out of that situation.
But you're a Canadian.
I don't know if you agree.
I am a Canadian, and I can tell you this, that the debt in my province of Ontario is five times the debt per capita of California, which is considered the left-wing basket case of America.
So we are not at all in Canada on a sustainable path.
And of course, you know, the argument as well for both Canada and for the Scandinavian countries is that because they rely on the military shield of the United States, this is not my argument, this is a traditional argument, that they don't have to invest.
They can afford a welfare state because they don't have to spend money on weaponry, which is sort of off-source to other countries and so on.
But, you know, since I don't believe that American military spending is doing anything to bring peace to the world, far from it, that's not really my case, but it's a case for some people.
Do you know what Sweden's current military strategy is?
I don't know.
Gender feminism.
You what now?
Feminism.
Oh, getting more women into the military?
A few years ago, Georgia, the country of Georgia, was partially invaded by Putin, Vladimir Putin.
You remember that.
At the time, Sweden had advisors in Georgia training them in gender feminism.
I don't even know what to say about that.
If you were not protected by the American military shield, Putin would have taken parts of Sweden or done something with Sweden.
So I do agree with that.
But on the plus side, I mean, I think that the Scandinavian countries would have been very well protected by social justice warriors making mean comments about patriarchy on social media, and that would have kept most of the Russian troops out of the country, creating a shield of outrage and indignation that could be penetrated by no mortal weapon.
Yeah.
Well, listen, thanks.
Thanks very much.
I really appreciate the conversation.
I'm going to mull over what you've said, and maybe we can chat again about the sustainability of the welfare state, should that be of interest to you.
But I really want to remind people to pick up this book.
Look, first of all, well-written.
I mean, an elegant pen is enormously helpful.
When it comes to getting good ideas out into the world.
So I just really wanted to point out to people, it's well written, easily digestible.
I hope that you're going to get an audiobook version out there for the twitchy types who like to be out and doing things when they're consuming their wisdom.
But I really hope that people will pick this up.
And make sure they get a hold of it.
The title again, Scandinavian Unexceptionalism, Culture, Markets, and the Failure of Third-Way Socialism.
Again, free online.
You can get it at the Institute of Economic Affairs website at, oh, a little too small for my eyes.
There we go, iea.org.
Thank you so much, Nima.
It was a really enjoyable chat and thanks, of course, for the work that you're doing to help push back this socialism fetish that people have for these countries through generally wild amounts of misunderstanding.
