Norway’s Class-Warfare Tax Policy is Backfiring

Class-warfare tax policy is bad news.

Last year, I warned that, “rich people are not sheep, patiently waiting to be sheared. If their fiscal torture is too extreme, they will leave.”

Norway is a powerful example. Here’s a chart showing the rate at which Norwegians are moving to Switzerland.

You may be wondering what caused the sudden change after 2022.

The above chart comes from a Bloomberg report by Ott Ummelas, and he explains what happened after Norway “increased the wealth tax burden by 55%.”

Steep increases in wealth and dividend taxes by Norway’s left-leaning government have prompted dozens of the Nordic nation’s rich to move to another prosperous, mountainous country to the south. …the small but significant migration by wealthy entrepreneurs could become permanent, bolstering Switzerland’s status as a low-tax haven. …Eighty-two rich Norwegians with a combined net wealth of about 46 billion kroner ($4.3 billion) left the country in 2022-2023, with 34 moving out last year alone, according to data from the Finance Ministry. More than 70 of those have moved to Switzerland… Swiss taxation varies by canton, but the overall effect is a significantly lower percentage of wealth and income than most other European nations. …Hollup said…”it’s a two-fold issue of losing tax revenue for Norway and the risk that a lot of brain capital has left the country.”

I started today’s column by observing that rich people are not sheep.

Instead, they are geese. Or, to be more specific, they are golden geese that have flown away.

P.S. This is primarily a column about misguided wealth taxation by Norway. But tax competition produces winners and losers, so this is also a story about the economic success of Switzerland.

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When Thieves Blame Victims

Wealth taxation is one of the most self-destructive policies that politicians can impose on a nation.

Such laws directly divert existing capital from the private sector and discourage the accumulation of new capital.

This means less long-run prosperity, with ordinary workers losing out.

I also view such laws as immoral, which means we should cheer for taxpayers who take steps to protect their (already-taxed) assets from greedy politicians.

This is why I applauded earlier this year when reading about successful Norwegians fleeing to Switzerland in response to an increase in the burden of the wealth tax.

Let’s revisit that issue today. Ott Ummelas wrote a story for Bloomberg about the ongoing damage of that nation’s wealth tax.

Some of Norway’s richest citizens…rage at a fiscal regime that drove dozens of them into exile in Switzerland. One of the world’s most prosperous diasporas has swapped the fjords for the Alps to escape a double whammy of higher wealth and dividend taxes since…Prime Minister Jonas Gahr Store stepped in less than two years ago. …Tord Kolstad, an entrepreneur listed among Norway’s 400 richest people by local media, is among expatriates fuming at the clampdown. “There are people coming down here every week from Norway, still,” he said in a phone interview from Lucerne in central Switzerland. “A lot of people do it because they feel they are forced. The main thing is the taxation system.” …Kolstad isn’t alone in voting with his feet. Some 65 rich Norwegians with combined net wealth exceeding 47 billion kroner moved to Switzerland in the space of a year… They include oil billionaire, Aker ASA Chairman Kjell Inge Rokke, the country’s seventh-wealthiest person, according to Kapital; Kristoffer Reitan, an heir to retail tycoon Odd Reitan, and more recently, Alfie Haaland, the father of soccer superstar Erling Haaland. Bjorn Daehlie, a multiple Olympic champion in cross-country skiing, and Jorgen Dahl, a home security tycoon, have also emigrated, as has Norway’s richest woman, Ninja Tollefsen.

I’m glad all of these people escaped.

But that’s not the purpose of today’s column. Instead, I want to focus on the whining and entitled mindset of Norway’s Prime Minister.

This economically illiterate buffoon (just like a former French Prime Minister) believes in victim-blaming.

The 63-year-old prime minister has called the emigration of wealthy people “a breach of a social contract.”

Maybe I’m just a cranky libertarian, but I don’t think successful people have an obligation to be passive victims of bad government policy.

Though, as explained by Wikipedia’s page about social contract, it depends on whether you believe in “negative rights” or “positive rights.”

That being said, nobody signs a contract to be a victim. As such, I don’t think there’s an obligation to surrender to expropriation.

Let the people who believe in redistribution and entitlements all live with each other. We’ll see how well that works out.

P.S. By the way, I’ve been wondering why so many rich Norwegians decided to escape when the wealth tax was increased.

Such a tax is economically foolish and a terrible example of double taxation, to be sure, but boosting the rate from 0.85 percent to 1.1 percent did not seem that dramatic. At least not dramatic enough to produce a sudden and massive exodus.

But the story notes that effective rate almost doubled because of other changes. And politicians also increased the double taxation of dividends and capital gains.

Norway’s maximum wealth tax rate, applicable to fortunes in excess of 20 million kroner, was increased to 1.1% by Store’s cabinet from 0.85%.., Conservative-led government. A reduction in rebates means the effective rate almost doubled. On top of that, the effective tax rate on dividends and capital gains on shares rose to 37.8% last October, up six percentage points from two years ago.

P.P.S. The article states that the leftist prime minister is wealthy. But it also notes that he “inherited money from his grandfather.” By contrast, the vocal opponent of the Norway’s class-warfare, Tord Kolstad, “has a self-made fortune.”

All of which supports the stereotype that self-made people (i.e., ones who create wealth) are much more sensible than those who inherit wealth (and thus tend to be leftists who try to assuage their guilt by supporting higher taxes on other people).

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Scandinavian Governments Pillage Middle-Class Taxpayers

Scandinavian countries have very unusual economic policy. They are very free market-oriented with regards to most types of economic policy.

The glaring exception is fiscal policy, where these nations get very low scores. The burden of government spending is very high, and that unsurprisingly also means very onerous tax policies.

The rich pay high taxes, of course, but the overall burden on upper-income taxpayers in Scandinavian nations is very similar to the tax burden on rich Americans.

The big difference between the U.S. and Scandinavia is the treatment of middle-class taxpayers.

Here’s some data from the OECD showing the marginal tax rate on two types of ordinary households. I’ve highlighted the U.S. and Scandinavian countries and you can see that every Scandinavian nation other than Iceland grabs a much bigger chunk of people’s income.

I decided to share this chart because I just came across a must-read article by Brian Riedl and John Gustavsson in the Manhattan Institute’s City Journal.

Here’s some of what they wrote about Scandinavian taxation.

The Nordic reality doesn’t reflect the progressive caricature. Finland, Norway, and Sweden collect an average of 42.6 percent of GDP in taxes, versus the 26.6 percent collected by America’s federal, state, and local governments. However, 14 percentage points of this 16-percentage point overage come from higher payroll and value-added tax (VAT) revenues that broadly hit the middle class. …Scandinavia’s additional tax revenues come mainly from slamming their middle classes with steep social security, consumption, and income taxes. How steep? Total social security taxes (including those employers pay) are twice as high in Sweden (31.42 percent) and nearly one-third higher in Norway than in the United States. Nordic VAT rates of approximately 25 percent raise roughly 9 percent of GDP in revenues, while America has no national VAT.

And when you compare the aggregate burden of Scandinavian consumption taxes with state sales taxes in the United States, you can understand how the middle class in America is comparatively lucky.

Here’s a chart based on OECD data.

The Riedl/Gustavsson article explains why Nordic-style taxation would be undesirable in the United States, all of which is true.

Heck, Nordic-style taxation is also undesirable in Nordic nations!

That being said, there are some policies in Scandinavian nations that I would like to copy. Like private social security in Denmark and Sweden. Like school choice in Sweden. Like spending restraint in Denmark. And privatized fisheries in Iceland.

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Economic Freedom: United States vs. Nordic Nations

There is a recipe for achieving growth and prosperity and I used a grade-point-average analogy earlier this year to explain why it is important to get all the ingredients correct.

Let’s look at some empirical data. I wrote back in March about the Heritage Foundation’s 2023 Index of Economic Freedom, mostly to express pessimism about a worldwide decline in economic liberty.

But I also groused that the United States had fallen to #25 in the rankings.

And I noted that score put America “lower than many European welfare states” because those nations “have higher fiscal burdens, but are more market-oriented in areas like trade and regulation.”

Here’s the proof.

As you can see, the five Nordic nations all rank above the United States. But notice that the United States gets much better scores on “Tax Burden” and “Government Spending.”

The reason these other nation rank above the United States is that they generally get better scores in other areas. So they offset the damage of bad fiscal policy by being better than the United States for things like property rights and trade.

By the way, the United States does better if we instead look at the Fraser Institute’s Economic Freedom of the World. America is only behind Denmark when comparing overall grades for America and the Nordic nations.

But if you remove the fiscal policy variables, the U.S. looks worse and the Nordic nations look better. Which is also what we saw a few days ago when reviewing the Historical Index of Economic Liberty.

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Norway’s Self-Destructive Wealth Tax

The economic argument against wealth taxation is very straightforward.

Such a levy is akin to a very high marginal tax rate on saving and investment.

Indeed, it’s quite possible that the effective tax rate would exceed 100 percent.

That definitely penalizes capital formation, which ultimately means workers will earn less money.

There’s also a practical argument against wealth taxation, which is based on the daunting challenge of revaluing assets every year.

There’s a competitiveness argument as well, and that’s our topic today.

Simply stated, rich people are not sheep, patiently waiting to be sheared. If their fiscal torture is too extreme, they will leave.

And this is not just theorizing.

In an article for the U.K.-based Telegraph, Charlotte Gifford reports on how Norway’s higher wealth tax is backfiring.

Mr Røkke, an industrial tycoon with an estimated net worth of Nkr 19.6bn (£1.5bn), is among 50 billionaires and millionaires to have left Norway over the past year as they were hit with higher rates of wealth tax. Record numbers of the country’s richest residents have fled since the Labour-centre coalition increased wealth tax rates by 0.1 percentage points, costing the government tens of millions in lost tax revenue. …It is expected that even more wealthy Norwegians will leave because of the tax raid which kicked in last November. …In 1990, 12 OECD countries, all in Europe, levied wealth taxes. However, most of them repealed these in the 1990s and 2000s due to growing fears that in a globalised world the wealthy would simply take their riches elsewhere. France was the last to scrap its wealth tax in 2017, after losing an estimated 60,000 millionaires between 2000 and 2016… Other wealthy individuals who have recently abandoned Norway include Tore Ivar Slettemoen, co-founder of battery company Feyr, and Ninja Tollefsen, daughter of property investor Ivar Tollefsen. Fredrik Haga, 31-year-old co-founder of cryptocurrency data business Dune, has also gone to Switzerland. Mr Haga, who has most of his wealth tied up in the rapidly growing company, told the Financial Times that he was worried his next tax bill would be several times his disposable income. …The OECD has warned that wealth taxes have a negative impact on long-term growth, damaging entrepreneurship and risk-taking.

I applaud these people for protecting their family assets from greedy politicians.

But let’s focus on some practical issues. There are three important takeaways from the above excerpts.

1. The higher wealth tax almost surely is losing revenue because the geese with the golden eggs are flying away.
2. It is possible to have effective tax rates of more than 100 percent on annual disposable income.
3. Even some leftists – such as French politicians and OECD bureaucrats – realize wealth taxes are foolish.

Unfortunately, it does not seems that Norwegian politicians will undo their mistake. Indeed, they are even contemplating an awful U.S.-style exit tax.

In a desperate attempt to stop high taxpayers leaving the country, Norway has said it is investigating the possibility of an “exit tax” where individuals are taxed on saved capital income the moment they move out of the country.

Norway is not a member of the European Union, but it does have agreements to mirror many E.U. policies. Hopefully the rules of freedom of movement would preclude any sort of exit tax.

P.S. Surprisingly, Switzerland has a wealth tax, though at least that bad levy is a replacement for alternate bad policies such as capital gains taxation.

P.P.S. On the other end of the spectrum, Spain is compounding the damage of wealth taxation by imposing a second wealth tax!

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Norway, Sweden, Socialism, and the Welfare State

The Nordic nations punch above their weight in global discussions of economic policy.

Advocates of bigger government in the United States, such as Bernie Sanders, claim that those countries are proof that socialism can work.

But there’s a big problem with that claim. The Nordic nations don’t have any of the policies – government ownership, central planning, or price controls – that are characteristics of a socialist economy.

But they do have high taxes and big welfare states. And since some politicians seem to think America should copy those policies, let’s see what we can learn by examining the Nordic nations.

NIma Sanandaji, writing for Foreign Policy, highlights what is good – and not so good – about government policy in the region. He starts by looking specifically at Norway.

Erlend Kvitrud, a member of the Norwegian Green Party, links democratic socialist economic policies and Nordic countries’ prosperity. …the left has for decades showcased the Nordic nations as proof that socialism can work not only in theory but also in practice. …Inconveniently for fans of the Nordic welfare model, though, Norway’s actual economic success rests on its wealth of natural resources. …Norway’s oil fund is the world’s largest sovereign wealth fund, worth around $200,000 per citizen. It wasn’t Norway’s social democratic economic policies that created the country’s wealth. It was nature. …The other Nordic countries, which lack Norway’s oil and natural gas riches, have lower living standards than the United States.

He’s certainly correct in highlighting the role of oil wealth in Norway.

And he also points out that Norway became a successful and prosperous nation before the welfare state was imposed.

What’s more, the Nordic countries’ social successes predate their high-tax, high-social spending policies. …economists Anthony Barnes Atkinson and Jakob Egholt Sogaard shows that most of the progress toward income inequality in Norway and Sweden happened before 1970, at a time when the two countries had low tax regimes and less redistributive policies. Similarly, the Nordic countries’ social successes were more pronounced in those years. Relative to the rest of the world, for example, they had a greater advantage in life span and child mortality in 1970 than they do today. In other words, the Nordic model arose after those countries were already prosperous and egalitarian.

These are all good points, but I think Nima actually overlooks one very powerful argument.

Yes, per-capita GDP in Norway is very similar to the United States, but gross domestic product is an imperfect measure of living standards. The data in relatively small economies can be misleading if there is a particular sector that distorts national statistics – such as financial services in Luxembourg or corporations in Ireland.

That’s why, if you want to measure the prosperity of households, it’s best to review the OECD’s data on “actual individual consumption.”

I’ve shared that data for all developed nations in the past, and the Council of Economic Advisers recently did a specific comparison of the United States and Nordic nations.

Norway is still impressive, ranked higher than its neighbors, but not in the same league as the United States.

By the way, in another article, this time for National Review, Nima explains that America actually has more women in management than any of the Nordic nations.

Science Daily once bluntly stated that “the Nordic countries are the most gender equal nations in the world.” There is some truth to this. …A common assumption is that the gender-equality progress of the Nordics is due to their social-democratic welfare policies. …The truth is that Nordic countries have a long history of gender equality, stretching back to the time of the Vikings. …One might expect this to translate into many women reaching the top of the business world. But this clearly is not the case. …the share of women among managers, as recorded by the International Labour Organization, is 43 percent in the United States, compared with 36 percent in Sweden and 28 percent in Denmark. …a pattern emerges: Those with more extensive welfare-state policies have fewer women on top. Iceland, which has a moderately sized welfare state, has the most women managers. Second is Sweden, which has opened up welfare services such as education, health care, and elder care for private-sector competition. Denmark, which has the highest taxes and the biggest welfare state in the modern world, has the lowest share of women in managerial positions. …The true lesson, that a large welfare state actually can impede women’s progress.

Let’s return to the big-picture economic comparisons.

Professor Hannes Gissurason of the University of Iceland authored a report on the Nordic model for the Foundation for European Reform.

It’s a very detailed study covering lots of issues.

The five Nordic countries, Sweden, Denmark, Finland, Norway, and Iceland, are rightly regarded as successful societies. They are affluent, but without a wide gap between rich and poor. They provide social security, but without a significant erosion, it seems, of their freedoms. They are small, but they all enjoy a good reputation around the world as peaceful, civilised democracies. The Nordic nations are healthy and well-educated and the crime rate is low. But what is it that other nations can learn from the Nordic success story?

For today, let’s focus on the third chapter, which look at three distinct eras of Swedish economic history.

…a distinction can be made between three Swedish models. The liberal model was developed in the mid-19th century, when liberal principles of free trade and unfettered competition were generally accepted and implemented in Sweden. The years between 1970 and 1990 were the heyday of the social democratic welfare model, although it had of course started its development much earlier and was to last for a few more years. The third model emerged in the 1990s after the experience of the social democratic model: this was the liberal welfare model.

The first era, which was based on classical liberal principles of free markets and limited government, is when Sweden became rich.

It was the liberal model which made Sweden wealthy, as Swedish economist Nima Sanandaji has well documented. Between 1870 and 1936, Sweden enjoyed the highest growth rate in the industrialised world… What produced the astonishing growth after 1870 was the introduction of economic freedom into a relatively poor society, but with strong traditions of self-reliance, hard work, thriftiness, and respect for the law and a high level of education. Money was sound, with the Swedish krona being on the gold standard… The environment was friendly to business and taxes were relatively low, even after the Social Democrats took over. In 1955, for example, tax revenues in Sweden, as a proportion of GDP, were the same as in the US, 24%.

The second era is when Sweden shifted to what some people call democratic socialism, but more accurately should be called the era of big government.

There were high taxes and lots of redistribution programs. And, not surprisingly, this led to economic stagnation.

…In 1975, tax revenues, as a proportion of GDP, had risen to 39% in Sweden, but was still only 25% in the US… In 2004, 38 of the largest companies in Sweden were entrepreneurial which means that they had been started as privately owned enterprises within the country. …Only two had been formed after 1970. While the public sector grew, the private sector stagnated. Between 1950 and 2000, the Swedish population grew from seven to almost nine million. Incredibly, the net job creation in the private sector during this period was close to zero. All the new jobs were in the public sector. …Many entrepreneurs left the country, including the founders of IKEA, Tetra Pak, and H&M.

Big government undermines initiative and weakens economic performance.

The study includes this data on how Swedes get richer in America than they do back home.

All this bad news created the conditions for the third era, which featured market-based reforms – regardless of which party or parties were in control of government.

Reluctantly, the Social Democrats started some reforms, deregulating credit and foreign exchange markets and changing the tax system, lowering marginal income tax from 73% to 51% and the capital gains tax to 30%. In 1991 a non-socialist government was voted in again. Now it was also anti-socialist, and it immediately abolished the wage earner funds… energy, postal, telephone, railway, and airline markets were all deregulated. …The government introduced school vouchers, sold stateowned companies, and carried out reforms in the labour market, especially designed for small businesses and private job agencies. The government also allowed for some choice in health care and assistance to the elderly. …when the Social Democrats returned to power in 1994…welfare benefits were cut; a new pension system was established, partly with self-funded pensions; collective bargaining was reformed; the inheritance tax was abolished. The centre-right government which was in power 2006–2014 continued liberalising the Swedish economy: the wealth tax was abolished, …property rights were strengthened, and the corporate tax was cut to 22%.

In other words, for the past twenty or so years, Sweden has been a leader in pro-market reforms.

Yes, there’s still a big government. But not as big as it used to be.

Yes, there are still high taxes. But not as high as they used to be.

And what’s the lesson we can learn?

This chart is very persuasive. It shows how Swedish prosperity, measured relative to the United States, declined during the era of big government.

But there’s been some convergence ever since policy makers started liberalizing the Swedish economy.

And we see a similar pattern if we compare Sweden to all other industrialized nations.

P.S. A very interesting study suggests that widespread migration to America made Sweden more statist.

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Socialism in the Modern World, Part II: The Nordic Model

In Part I of our series on Socialism in the Modern World, we looked at the tragic story of Venezuela.

Today, we’re going to look at what we can learn from the Nordic nations. And the first thing to understand, as I explain in this interview, is that these nations are only socialist if the definition is watered down.

As I noted in the interview, real socialism is based on government ownership and control of the “means of production.” But Nordic countries don’t have government-owned factories, government-controlled allocation of resources, or government regulation of prices.

In other words, those nations are not socialist (government ownership), they’re not fascist (government control), and they’re not even corporatist (cronyism).

So what are they?

In a column for the Washington Post, Max Boot accurately describes them as free-market welfare states.

…rigging elections and locking up or killing political opponents. This is one model of socialism — the same approach that has been applied in Cuba and the Soviet Union. But there are many other varieties that are far more benign. …the Scandinavian model. …Denmark, Norway and Sweden…show that a “free-market welfare state” isn’t an oxymoron. …By some measures, moreover, they are freer, economically…than the United States.

That last sentence isn’t a typo. The United States has more overall economic freedom than the Nordic nations, but both Denmark and Finland actually rank above America when looking at factors other than fiscal policy.

And Sweden and Norway only trail the United States by 0.03 and 0.06 points, respectively.

That being said, a big lesson to learn is that fiscal policy is a mess in the Scandinavian countries.

…there is nothing sinister about wanting to emulate the Scandinavian example. But that doesn’t necessarily mean it’s practical. The Scandinavians have lower corporate tax rates than the United States but much higher individual taxes. …The Scandinavian countries also charge hefty value-added taxes of 25 percent on consumption. The United States doesn’t have a national sales tax, and the average rate for state sales taxes is only 7 percent. In all, Scandinavians pay $25,488 a head in taxes compared with $14,793 a head in the United States — 72 percent more. This is what it takes to finance a Scandinavian-style social welfare state. It can’t be done simply by raising marginal tax rates on the wealthiest taxpayers to 70 percent, as Ocasio-Cortez suggests, because few taxpayers pay the top rate. It requires a massive tax hike on the middle class.

Amen. This is a point I have frequently made, most recently when writing about Alexandria Ocasio-Cortez’s statist agenda. Ordinary taxpayers will pick up most of the tab if the left’s agenda is adopted.

But I’m digressing. Let’s return to today’s main issue, which is the Nordic nations and socialism.

Technically, there’s no connection. As I said in the interview, those countries have never been socialist. Heck, if those nations are socialist, then so is the United States.

There is a lesson to be learned, however, and that lesson is relevant whether one uses the technical or common definition of socialism.

Simply stated, the relative success of those nations is due to free markets and a history of small government, but the imposition of big welfare states starting in the 1960s has weakened the region’s economic vitality.

This chart tells you everything you need to know.

P.S.  Actually, there is more your should know. Nima Sanandaji’s data on how Americans of Nordic descent are richer than residents of Nordic nations is very illuminating.

P.P.S. And we have specific data from Sweden showing how that nation lost ground after it adopted the big welfare state (and has subsequently gained ground thanks to pro-market reforms such as nationwide school choice and partial pension privatization).

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Did Migration to America Make Scandinavia More Collectivist?

The most persuasive data, when comparing the United States and Scandinavia, are the numbers showing that Americans of Swedish, Danish, Finnish, and Norwegian descent produce much more prosperity than those who remained in Sweden, Denmark, Finland, and Norway.

This certainly suggests that America’s medium-sized welfare state does less damage than the large-sized welfare state in Scandinavian nations.

But maybe the United States also was fortunate in that it attracted the right kind of migrant from Scandinavia.

Let’s look at some fascinating research from Professor Anne Sofie Beck Knudsen of Lund University in Sweden.

If you’re in a rush and simply want the headline results, here are some excerpts from the abstract.

This paper examines the joint evolution of emigration and individualism in Scandinavia during the Age of Mass Migration (1850-1920). A long-standing hypothesis holds that people of a stronger individualistic mindset are more likely to migrate as they suffer lower costs of abandoning existing social networks. …I propose a theory of cultural change where migrant self-selection generates a relative push away from individualism, and towards collectivism, in migrant-sending locations through a combination of initial distributional effects and channels of intergenerational cultural transmission. …the empirical results suggest that individualists were more likely to migrate than collectivists, and that the Scandinavian countries would have been considerably more individualistic and culturally diverse, had emigration not taken place.

If you’re interested in more detail, here are passages from the study.

We’ll start with the author’s description of why she studied the topic and what she wanted to determine.

People of Western societies are unique in their strong view of themselves… This culture of individualism has roots in the distant past and is believed to have played an important role in the economic and political development of the region… differences in individualism and its counterpart, collectivism, impact processes of innovation, entrepreneurship, cooperation, and public goods provision. Yet, little is known about what has influenced the evolution of individualism over time and across space within the Western world. …I explore the relationship between individualism and a common example of human behavior: migration. I propose a theory, where migration flows generate cultural change towards collectivism and convergence across migrant-sending locations.

Keep in mind, by the way, that societies with a greater preference for individualism generate much more prosperity.

Anyhow, Professor Knudsen had a huge dataset for her research since there was an immense amount of out-migration from Scandinavia.

During the period, millions of people left Europe to settle in New World countries such as the United States. Sweden, Norway, and Denmark experienced some of the highest emigration rates in Europe during this period, involving the departure of approximately 25% of their populations. …Total emigration amounted to around 38% and 26% in Norway and Sweden respectively.

Here are some of her findings.

I find that Scandinavians who grew up in individualistic households were more likely to emigrate… people of individualistic mindsets suffer lower costs of leaving existing social networks behind… the cultural change that took place during the Age of Mass Migration was sufficiently profound to leave a long-run impact on contemporary Scandinavian culture. …If people migrate based, in part, on individualistic cultural values, migration will have implications on the overall evolution of cultures. Emigration must be associated with an immediate reduction in the prevalence of individualists in the migrant-sending population.

Here is her data on the individualism of emigrants compared to those who stayed in Scandinavia.

As an aside, I find it very interesting that Scandinavian emigrants were attracted by the “American dream.”

…historians agree that migrants were motivated by more than hopes of escaping poverty. Stories on the ‘American Dream‘ and the view of the United States as the ‘Land of Opportunities‘ were core to the migration discourse. Private letters, diaries, and newspaper articles of the time reveal that ideas of personal freedom and social equality embodied in the American society were of great value to the migrants. In the United States, people were free to pursue own goals.

And this is why I am quite sympathetic to continued migration to America, with the big caveat that I want severe restrictions on access to government handouts.

Simply stated, I want more people who want that “American dream.”

But I’m digressing. Let’s now look at the key result from Professor Knudsen’s paper.

When the more individualistic Scandinavians with “get up and go” left their home countries, that meant the average level of collectivism increased among those remained behind.

Several observations are worth mentioning in light of the revealed actual and counterfactual patterns of individualism. First, one observes a general trend of rising individualism over the period, which is consistent with accounts for other countries… Second, the level of individualism would have been considerably higher by the end of the Age of Mass Migration in 1920, had emigration not taken place. Taking the numbers at face value, individualism would have been between 19.0% and 20.3% higher on average in Sweden, 17.8% and 27.9% in Norway, and 7.6% and 12.5% in Denmark, depending on the measure considered.

These charts capture the difference.

To wrap this up, here’s a restatement of the key findings from the study’s conclusion.

I find that people of an individualistic mindset were more prone to migrate than their collectivistic neighbors. …Due to self-selection on individualistic traits, mass emigration caused a direct compositional change in the home population. Over the period this amounted to a loss of individualists of approximate 3.7%-points in Denmark, 9.4%-points in Sweden, and 13.6%-points in Norway. …The cultural change that took place during the Age of Mass Migration was sufficiently profound to impact cross-district cultural differences in present day Scandinavia. Contemporary levels of individualism would thus have been significantly higher had emigration not occurred. …The potential societal implications of the emigration-driven cultural change are of great importance. The period of the Age of Mass Migration was characterized by industrialization, urbanization, and democratization in Scandinavia. Individualism was generally on the rise, in part due to these developments, but it seems conceivable that the collectivistic turn caused by emigration played a role in subsequent institutional developments. While economic freedom is high in contemporary Scandinavia, the region is known for its priority of social cohesion and collective insurance. This is particularly clear when contrasting the Scandinavian welfare model with American liberal capitalism.

This is first-rate research.

Professor Knudsen even understands that Scandinavian nations still have lots of economic freedom by world standards.

Imagine, though, how much economic freedom those countries might enjoy if the more individualism-minded people hadn’t left for America? Maybe those nations wouldn’t have dramatically expanded their welfare states starting in the 1960s, thus dampening economic growth.

The obvious takeaway is that migration from Denmark, Sweden, and Norway to the United States was a net plus for America and a net minus for Scandinavia.

P.S. When she referred in her conclusion to “American liberal capitalism,” she was obviously referring to classical liberalism.

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Is Norway a Role Model for “Democratic Socialism”?

Earlier this year, I explained why Nordic nations are not socialist. Or, to be more precise, I wrote that if they are socialist, then so is the United States.

And my slam-dunk evidence was this chart from the Fraser Institute’s Economic Freedom of the World., which shows that there is almost no difference in overall economic liberty when comparing the United States with Finland, Norway, Sweden, and Denmark.

This doesn’t mean, incidentally, that we have identical policies. I pointed out that the United States gets a better (less worse) score on fiscal policy, but also reiterated that Nordic nations are more market oriented than America when looking at other variables (especially rule of law).

The net effect, though, is that we wind up with near-identical scores.

I’m rehashing this old data because there’s a column in The Week that celebrates Norway as an example of “democratic socialism.”

The spectacular upset victory of Alexandria Ocasio-Cortez in her recent New York congressional primary election has catapulted the topic of democratic socialism to the top of America’s political discussion. …we have a country that very closely approximates the democratic socialist ideal. It’s a place that is…considerably more successful than the United States on virtually every social metric one can name. I’m talking about Norway. …Norwegian workers are heavily protected, with 70 percent of workers covered by union contracts, and over a third directly employed by the government. The Norwegian state operates a gigantic sovereign wealth fund, and its financial assets total 331 percent of its GDP… Meanwhile, its state-owned enterprises are worth 87 percent of GDP. Of all the domestic wealth in Norway, the government owns 59 percent, and fully three-quarters of the non-home wealth.

I don’t know if those specific statistics are true, but I certainly don’t disagree with the assertion that Norway has a large public sector.

But here are a couple of passages that don’t pass the laugh test.

Norway is unquestionably more socialist than Venezuela… Indeed, it is considerably more socialist than supposedly-communist China.

This is absurdly inaccurate. If there was a thermonuclear version of wrong, you would be seeing a giant mushroom cloud.

Here’s the data on overall economic freedom for Norway, Venezuela, and China. As you can see, Norway is far more market oriented.

So how does the author, Ryan Cooper, rationalize his fantastical assertion of Norwegian super-socialism?

If you read the article, he has a tortured definition of democratic socialism. One of his variables is government ownership, which normally would be a reasonable piece of data to include.

But it’s an artificial number when looking at Norway since the government controls the nation’s oil and also has a big sovereign wealth fund that was financed by oil revenue.

In other words, Norway is geographically lucky because all that oil boosts Norwegian GDP. It makes Norwegians relatively prosperous. And it definitely helps partially offset the economic damage of big government.

But it’s nonsensical to argue that oil-rich Norway somehow provides evidence for overall notion of democratic socialism. It’s sort of like looking at data for Kuwait and asserting that the best economic system is a hereditary sheikdom.

Yet he wants people to support socialism simply because of Norway, as illustrated by this final excerpt.

…when it comes to building a decent place to live, Norway is completely blowing America out of the water. So while conservatives have been pointedly ignoring the most obvious and relevant piece of evidence in their spittle-flecked tirades against socialism, Norwegians can and do point to the United States as an example of what happens when you let capitalism run wild.

But there’s one itsy-bitsy, teeny-weeny problem. As you can see from the chart, Norway and the United States have almost identical levels of economic liberty.

So if America is “capitalism run wild,” then so is Norway. Or if Norway is “socialism,” then so is the United States.

The bottom line is that both the United States and Norway are admirable nations by global standards. We both rank in the top-20 percent for overall economic freedom.

But we’re not Hong Kong or Singapore, so we both obviously should do a better job of following the recipe for greater prosperity.

For additional information about what’s good and bad about Norway and other countries in the region, I recommend these columns from January 2015 and June 2015.

For additional information about why socialism is bad (both democratic and totalitarian versions), just open your eyes and look at world evidence. Or you can also peruse these columns from June 2017 and August 2017.

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