Thursday, October 22, 2015

Who said the U.S. should be like Denmark?

Senator Bernie Sanders never said so. He has been saying that we can borrow some of the better aspects of the Scandinavian/Nordic economic models in general — not just Denmark specifically or exactly — and that by doing so, America can improve on our own economic system of capitalism*.

* Capitalism, by the way, requires government — and less government might promote "free" markets, but not necessarily "fair" markets — and instead, can promote fraudulent markets that may be riff with crony capitalism.

Since the first Democratic Debate, it's being inferred that Bernie wants the U.S. to be like Denmark. But a very well-known economist thinks that, all things considered, even if using Denmark as an example, isn't really all that bad either. From Paul Krugman (October 19, 2015): Something is NOT rotten in Denmark [The short version]

No doubt surprising many of the people watching the Democratic presidential debate, Bernie Sanders cited Denmark as a role model for how to help working people. Hillary Clinton demurred slightly, declaring that “we are not Denmark,” but agreed that Denmark is an inspiring example. But is everything copacetic in Copenhagen? Actually, no, its recovery from the global financial crisis has been slow and incomplete. What explains this poor recent performance? The answer, mainly, is bad monetary and fiscal policy. Denmark hasn’t adopted the euro, but it manages its currency as if it had. And while the country has faced no market pressure to slash spending, it has adopted fiscal austerity anyway. The result is a sharp contrast with neighboring Sweden, which doesn’t shadow the euro, hasn’t done much austerity, and has seen real G.D.P. per capita rise — while Denmark’s fell. But Denmark’s monetary and fiscal errors don’t say anything about the sustainability of a strong welfare state. In fact, people who denounce things like universal health coverage and subsidized child care, also tend to be people who demand higher interest rates and spending cuts in a depressed economy — U.S. conservatives actually approve of some Danish policies — but only the ones that have proved to be badly misguided. So yes, we can learn a lot from Denmark, both its successes and its failures. And let me say that it was both a pleasure and a relief to hear people who might become president [Bernie Sanders] talk seriously about how we can learn from the experience of other countries, as opposed to just chanting “U.S.A.! U.S.A.! U.S.A.!”

Comment from Mark Thoma's blog:

"Krugman over-emphasized the growth aspect in Denmark vs Sweden. Growth has been lower in Denmark, but unemployment is 4.5% compared to Sweden's 6.7%. Youth unemployment in Denmark is around 12% and 19% in Sweden. So what would you choose? Higher Swedish growth and higher unemployment? Or lower Danish growth plus lower unemployment? Is there all that much difference?" [Editor's Note: By comparison, according to the Bureau of Labor Statistics, youth unemployment in the U.S. is a whopping 52.7 percent.]

Comment in response from Mark Thoma's blog:

"That is an interesting fact, considering their different monetary policies. Could the answer lie partly in the fact that Denmark has more skilled workers and there is higher unemployment among unskilled workers?"

Comment from Mark Thoma's blog:

I thought Krugman gave a false impression — it was a low point for Hillary during the debate. She acted as if we have nothing to learn from Denmark — and as if America is beyond reproach — when in fact she is proposing policies that Denmark has (such as child daycare). And then she red-baited Bernie as if he doesn't support small businesses [which he does] because he's anti-capitalist [which he isn't] because he said that personally, he himself is not a "capitalist" per se. (Most of us aren't, we're only employed by capitalists.)

And then there's the media (who doesn't want Bernie Sanders elected because he will raise their taxes) with misleading headlines like this: 9 Questions about Denmark, Bernie Sanders’s favorite Socialist Utopia (by Matthew Yglesias on October 16, 2015). But despite the title, if one studies the article, even the author was forced to note many good qualities about the economic and social policies of Denmark. And again, Bernie never said Denmark was his best or favorite example, only that we can borrow from some of their ideas.

And when one considers of how just using the moniker of "socialist" in any way to describe one's personal ideology can also cause some confusion among voters. Salon: Democrats’ destructive Bernie Sanders myth: Stop saying he can’t win!

Sanders is making a big mistake when he self-identifies as a “socialist” — because that’s not really what he is — at least, not in the classical sense. He’s a populist supporting a social democratic system grounded in capitalism, as a recent New York Times piece argues [noted below]. While there’s no doubt Republicans would have a field day in a general election labeling Sanders a “socialist,” [as CNN's Anderson Copper did during the first debate], the fact is that Sanders would still speak directly to the issues progressives and liberals most care about.

The New York Times: Bernie Sanders, Democratic Socialist Capitalist:

Lane Kenworthy, a professor of sociology at the University of California at San Diego said: “I think Bernie Sanders’s use of the word ‘socialism’ is causing much more confusion than it is adding value.”

Mr. Kenworthy, who recently wrote a book called “Social Democratic America” offered a suggestion: “He is, if you want to put it this way, a democratic socialist capitalist.”

Mike Konczal, an economic policy expert at the Roosevelt Institute said: “It’s not socialism, it’s social democracy, which is a big difference. Social democracy implies a very active role for capitalism in the framework.”

Mr. Konczal laid out four hallmarks. You might be a "social democrat" if you support 1) a mixed economy, a combination of private enterprise and government spending; 2) social insurance programs that support the old and the poor; 3) a Keynesian economic policy of government borrowing and spending to offset economic recessions; and 4) democratic participation in government and the workplace.

Most Democrats would tell you they support all four of those things. So would quite a few Republicans.

Mr. Sanders does not want to nationalize the steel mills or the auto companies — or even the banks. Mr. Sanders himself emphasizes the “democratic” part of democratic socialism. He cited Denmark, which has very high taxes, very generous social programs and a robust economy driven by private capital investment, as an example of a place that does social democracy really well.

Note: FYI, the Scandinavian/Nordic countries of Denmark, Norway, Sweden and Finland also have a better employment-population-ratio for their prime-age workers compared to the U.S. — so they must be doing something right.

Denmark, Norway, Sweden and Finland: employment-population-ratio for their prime-age workers

IMHO, Dan Kervick at Mark Thoma's blog had the very best comment:

Just for the sake of a slightly more complete historical record, this is what Bernie Sanders actually said during the last debate:

"Those are some of the principles that I believe in, and I think we should look to countries like Denmark, like Sweden and Norway, and learn from what they have accomplished for their working people."

So he was pointing to the Nordic model in general, not just Denmark. Then Anderson Cooper singled out Denmark, and questioned Sanders about whether or not he is a capitalist. After Sanders' somewhat dodging response, in which nothing further was said about Denmark, Cooper asked "Is there anybody else on the stage who is not a capitalist?"

Hillary Clinton then said she prefers to think in terms of "saving capitalism from itself", and then said:

"I think what Senator Sanders is saying certainly makes sense in the terms of the inequality that we have, but we are not Denmark. I love Denmark. We are the United States of America. And it’s our job to rein in the excesses of capitalism so that it doesn’t run amok and doesn’t cause the kind of inequities we’re seeing in our economic system. But we would be making a grave mistake to turn our backs on what built the greatest middle-class in the history of the world."

* Editor's Note: Many of the policies in our economic system that we once had in the 50s and 60s to build "the greatest middle-class in the history of the world" were already abandoned beginning in the 1970s (just when Hillary and her husband were coming of age) — because many of the prior policies we had in place (such as bank regulation, tax legislation, labor laws, etc.) to rein in "the excesses of capitalism" were tossed out the window to better favor the very wealthy and large multinational corporations. Hillary should know that we already "turn our backs" on what built our middle-class. Bernie Sanders only wants to restore those policies that Hillary and Bill helped tear down (bankruptcy laws, welfare "reform", the capital gains tax rates, trade deals that offfshored jobs, deregulating the banks, etc.)

The whole extended exchange [during the debate] was a bit bizarre, because the Nordic countries have large and healthy capitalist private sectors (lots of private enterprise, private finance and market exchange of products). They have larger public sector social states than does the US, and do a bit more in the area of state-instigated investment with the Nordic Investment Bank.

The capitalism v. socialism framing really dumbed things down quite a bit, at least when this is confused with the idea that every country has either a capitalist "system" or a socialist "system". Capitalism and socialism are two mechanism for doing things, and every advanced modern country employs both mechanisms. All of the candidates believe in a mixed economy model with substantial roles for both capitalistic and socialistic mechanisms. What they disagree about is which mechanisms to use for which functions tasked, and in what degree to use them.

[After World War II] the process of building the greatest middle-class in history drew on both capitalist and socialist ideas from the previous century. The US partially socialized retirement and increased State support for higher education. It built up a social state over a two-decade period. It leveled incomes and redistributed wealth through aggressive taxation. The government heavily supported and drove spending on science, technology and infrastructure. It also preserved many capitalist methods of doing things economically. The Nordic economies followed the same overall pragmatic strategy, but ended up with a different socialized-privatized mix. That's what the debate should be about: getting the best mix.

I think Sanders supports the kind of policies that are frequently called either "social democratic" or "democratic socialist" in many countries, depending on the history. The labels people use around the world are highly dependent on the history of the country in question. In France, late 20th century neoliberals still called themselves "socialists". In England, college educated liberal professions still say they are "labour". In America, social democrats are required to say they are capitalists, and post 1980 were even required to expunge the term "social" from just about everything (Go figure.)

What is a "capitalist" anyway? Is it anyone who believes there should be only private enterprise and private ownership, and no public ownership or public ownership? Clearly "no", since only the most radical libertarians would qualify. I guess it's someone who thinks there should be "lot" of private ownership, or "mostly" private ownership. But how much exactly? At what point along the scale does it become more misleading to say you are a "socialist" as opposed to a "capitalist".

I guess we can agree that in America, there is strong conformist pressure to at least use the label "capitalist", no matter what your policies are. There is a huge overlay of very emotional, cold war ideological struggle and a heavy cultural memory of purges, blacklists and red scares that smothers attempts to avoid doublethink and bullshit in this area.

Comment from Mark Thoma's blog:

Bernie Sanders isn't kidding when he says he wants to produce a political revolution. Sanders never fails to point out that other rich countries have universal health care, provide generous support to families, college-bound students and pensioners. When asked if he'd raise taxes, he quickly says he would — and then he lists the taxes, including more progressive rates on the wealthiest 1 percent. The more he talks, the stronger his support. Voters are beginning to ask "why" can't we duplicate what other rich nations do for their people. Sanders simply says, "Let's do it too." He makes those with opposing views defensive. But IMHO, at days end, simply dismissing Sanders as a "socialist' will not work.

Below is an outline from Senator Bernie Sanders' budget proposal. All revenues are over the next 10 years. The full text of Bernie Sanders' budget from his website >>> Scroll to the very bottom of the page — and ARROW RIGHT after each panel.

1. No offshoring of corporate profits - $580B
2. 0.03% tax on CDSs, derivatives, options and futures - $352B
3. End tax breaks for energy companies - $113B
4. Introduce progressive estate tax on estates - $3.5M - $300B
5. Capital gains and dividends tax (just like incomes tax rates) - $500B
6. Repeal ALL Bush tax cuts - $400B
7. Eliminate Social Security cap - makes SST solvent for at least the next 50 years
8. Establish currency manipulation fee - $500B + 1 million jobs (says the EPI)
9. Reduce military spending - $1000B
10. Have Medicare negotiate drug prices - $240B


In the U.S. interest rates have been hovering just above 0% ...

New York Times: "On an individual level, Fed rate increases are better for older people who live on savings and worse for younger people who tend to borrow more. If the Fed added up all the ways a rate increase helped people in the short term and subtracted all the ways it hurt them, they would never raise rates. While there are winners and losers, on balance a Fed rate increase means the economy will slow down, which on average is worse for everybody."

Now here is a post about Denmark ...

Zerohedge: "The central bank Denmark first adopted negative rates in the middle of 2012 to defend the krone's peg to the Euro. And Denmark cut rates not once, not twice, but three times in early 2015 in anticipation of the EUR collapse, pushing its interest rate to a record negative -0.75%. So what happens after 3 years? Well, according to Bloomberg, you get the mother of all housing bubbles."


My Related Posts:

Bernie Sanders is not Vladimir Lenin or Joseph Stalin 

Are Today's Socialists Yesterday's Progressives? 


  1. The Nation:

    How Bernie Sanders Should Talk About Democratic Socialism...

    "Instead of looking to Europe, Sanders could evoke the rich heritage of American radicalism."

  2. The Atlantic:

    Bernie Sanders's highly sensible plan to turn Post Offices into Banks

    "They're much less crazy than payday-lending services, and the rest of the world agrees."

  3. The media (in almost every case) refers to Bernie Sanders as a "democratic socialist" (or "self-proclaimed Socialist"); but you never see the media describe Hillary Clinton as a "free market capitalist" (or self-proclaimed "moderate Democrat"). Why is that?

  4. Speaking at Harvard, Danish prime minister Lars Løkke Rasmussen said: “I know that some people in the US associate the Nordic model with some sort of socialism. Therefore I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy."

    The Danish Prime Minister listed some of the virtues of Denmark’s expanded welfare state, including free health care, unemployment benefits, one year of maternity leave, and a free education system.

    Some of the confusion may stem from the definition of socialism in the first place: Technically, a socialist state as set out by Vladimir Lenin is one where the government owns all means of production, which is certainly not the case in the Nordic countries. But in general parlance it has come to be used as a shorthand for a market economy fused with a comprehensive and generous welfare state.

  5. Salon (Oct 2015)

    Bernie Sanders is more American than Ayn Rand: Democratic socialism will always trump free-market selfishness