The Truth about the Welfare State and Social Democracy
While researching world poverty and nutrition, I somehow ended up watching this video by the Friedrich Ebert Foundation that claims to explain what “social democracy” means. The comments on the video were mostly enthusiastic praise and wistful longing that the United States could provide such wonderful social protections and guaranteed income to it’s citizens.
Based on a hunch that this utopian story was not quite accurate, I looked up a few facts about Scandinavian countries. I found that this term refers to Norway, Denmark and Sweden, Finland, Iceland and some smaller islands. The population of all of these countries combined is only 27.5 million with nearly half of that living in Sweden and 2.4 million of those in Stockholm. The GDP of Sweden alone for 2021 was $5,381 billion. For comparison, the population of the United States is 332,403,650, according to commerce.gov. The GDP of the US for 2021 was $23 trillion.
Long story short, it did not take me long to learn that the reason Scandinavian countries have been able to provide such a high quality of life via welfare programs is because of petroleum exports. Yes, all that social welfare was funded by evil fossil fuels!
But now those same countries plan to phase out all fossil fuels by 2050. Denmark made the statement here. Norway is trying to figure out it’s way out of fossil fuel dependence for it’s wealth. As for Sweden, I found some articles about being the first country to get rid of fossil fuels and still provide a welfare state, but no actual reports of that happening yet.
It is a fact that FOSSIL FUELS have provided the energy needed for wealth accumulation, economic growth, and even the food supply in the form of fertilizer that enables mass food production for the poor in developing nations.
To continue feeding the world while also reducing fossil fuel use will require big changes. “Rob Percival, head of policy at the Soil Association, says organic farming can feed the world, if consumption patterns are adjusted to encourage those who can afford meat to eat less of it. “We need an urgent shift in both production and consumption if we’re to avert the worst consequences of climate change, including a dietary shift towards less and better meat,” he says.” https://www.theguardian.com/news/2019/jan/28/can-we-ditch-intensive-farming-and-still-feed-the-world
I wonder if the commenters on the Friedrich Ebert video have thought of where the money comes from for Scandinavia’s welfare states. Have they considered the consequences of implementing the climate agenda, especially on developing countries? I think not.
Conclusion: Everyone wants free stuff. Someone has to pay for that stuff. In rich countries, it’s much easier to give money to the lower classes. Having a strong economy takes energy and money. Without fossil fuels, everything will change. The anti-fossil fuels agenda will take the world backwards, especially poor countries.
Freedom will also suffer as total economic control will be put into place over the years. Socialists blame capitalism for climate change and inequality. Their goal is to slow down economic growth and kill capitalism. To do this, they will have to make growth very expensive. This is the actual goal of the climate agenda. Be careful what you ask for.
Blue Skies and Green Pastures 
I always tell people to compare with populations that are the same size….😆
I am from a family of Finnish immigrants. Most of what Americans describe as the “welfare state” of Scandinavian countries is a weird myth that only has currency in American political circles (a strange caricature on both the right and the left). For example, they have rich health care and education benefits, sure, but they have nothing comparable to pensions or Social Security, both of which are paying out benefits to US citizens despite being functionally insolvent programs that are used to “balance” pork spending in pretty much every budget bill. You can exaggerate the largesse of Scandinavian political systems depending on what you pick and choose as being relevant.
Frankly, I would argue that the US is closer to a welfare state than Scandinavian countries will ever be, as a substantial part of our federal budget goes to programs that effectively replace individual and corporate income (and half the country doesn’t even have an income tax liability – they mistakenly think payroll taxes are income taxes). Americans of all stripes treat their federal government like a commercial bank, where every kind of lending in the capital markets is subsidized/underwritten by Uncle Sam. The federal government subsidizes most mortgages in the US. The government does not “pay” for college, per se, but it subsidizes trillions of dollars of student debt through the bond market for US Treasuries. Any defaults or forbearances (not making payments on time, as with two solid years of forgiveness during covid) on student debt are eaten by taxpayers. It subsidizes health care for everyone making less than six figures a year, multiples of the median household income. There’s not a single aspect of the average American household’s financial life that does not have some perk from the feds priced in. Then you get into endless subsidies for corporations that artificially depress things like the cost of food or cars or home construction, the loopholes in the tax code as well. All have a cost.
The main difference is the Scandinavians actually pay for their perks out of increased taxes, but the US rolls all that up in the national debt with the grand delusion that the bill will never come due. If you divided up the national debt per person in the US, you’d find we owe about $100,000 per person on $30 trillion of outstanding public debt. If you have a family of 5, the federal government has gone into debt half a million dollars on your behalf – but you are not experiencing that cost directly, so who cares, right? That’s before you get to debt at the state and local level, random taxing authorities, and public school districts (though at least that debt amortizes). We are not only a grand welfare state already, but a colossal Ponzi scheme at that. But tsk-tsk Scandinavia, don’t they know about personal responsibility?
Scandinavian countries are a totally different culture than the US (and they are a lot older cultures). They would not have a civilization without a strong communitarian impulse up there, as it’s a hard place to scratch out a living. Americans could not even begin to relate to it.
You’re right , you can’t compare the two , but many anti-Americans do. And I agree that the US economy is a Ponzi scheme. I’m very curious how long until a sudden “recession” comes along to right the ship again. Gotta stop that outta control inflation! Or have we gone too far with the spending and let China become the dominant power ? Are you sure about the pensions , though? I saw that mentioned as a benefit in one article . How do you think they will continue to finance their programs without oil?
Yes, I am quite sure about the pension issue. The Nordic states had serious financial crises in the 1990s that led to them famously imposing strict reforms across social programs, but particularly pensions. All the things your sources are saying right now about the sustainability of the welfare state these countries have already dealt with effectively on a large scale decades ago. They are used as case studies in economics courses for it.
They used to have pension systems akin to what we currently have in the US (all of which date back to the Great Depression), where the current retiring generation essentially has its benefits paid by income into the program from younger generations. An actuarial mismatch is created whenever you have a large generation followed by falling birth rates or a generation that lives for a long time and requires far more benefits to be paid out than previous generations (this is why the Baby Boomer generation is going to leave insolvent Social Security and Medicare programs to younger generations, such that we will have spent our working lives paying for programs and won’t see a dime in benefits). The Nordic countries fixed that model by demanding that people pay in far more than they would under the old system. The US has undertaken no such reforms.
It’s also worth noting in this context that our country is managed by people in their 70s and 80s who are quite fine watching these programs burn because they’ll be dead when it happens. They aren’t going to reform squat at this point. In fact, they can get millions of elderly voters out on election nights with even the suggestion that these programs might be reformed to help future generations. The Nordic countries are managed by younger generations who are currently in the middle of their professional careers and building families. They don’t have our generation gap malaise.
It is also not fair that say that these countries rely entirely on fossil fuels for their economy. They don’t. These countries are heavy on exports, yes, but most of what they export is related to engineering and manufacturing. Sweden, for example, has one of the biggest defense contracting businesses around the globe – that’s why they were able to be so generous to Ukraine during this war. Again, compare that to the US with its trade deficit, which relies on external players with labor forces made of literal slaves to supply many basic things (so much capitalism). These countries did not experience the economic rout that the US experienced during the coronavirus either, both as a policy response and thanks to the structures of their economies.
The folks who see these problems purely through an ideological lens of capitalism versus socialism – whether you are a nationalist cheerleader or want free stuff without practical limit – kind of miss the point. These countries are better at capitalism in many ways than we are, and that’s why they can afford to have rich programs. They also do not suffer the basic level of paralysis in governance than we do. Folks can rah-rah-rah our GDP versus theirs all they want, but we have a national debt that exceeds our GDP by nearly $10 trillion. Most of that debt comes from financing a deficit that is created by entitlement programs that are never “paid for” across decades of budget cycles. And we have no plans to fix that – we are on the trajectory of a third-world country right now and are seeing third-world problems swell domestically.
It’s not any different than comparing education and infrastructure in AAA-rated Florida to junk-rated Illinois. The Nordic states are far less fragile than we are economically, whether you hate their political vocabulary or not (or wrongly believe countries that had communitarian models long before Marx existed are somehow aligned with the communist experiment in dictatorships across the globe). They made reforms decades ago that achieved a balance in their society while we are having Depression-level panics every decade and have a permanent, inter-generational underclass. It’s a real plank-in-your-own-eye situation.
As a practical matter, I really do not grok this political boogeyman of fossil fuels versus renewables. It’s like the GOP thinks it speaks for US energy companies, but most US energy companies have fully diversified into renewables globally and are unlikely to reverse their corporate position… ever. They don’t share this either-or dilemma that people on the right think exists. They may like it if you make it easier/cheaper for them to drill because it is a component of their business, but they aren’t getting in a time machine anytime soon. That’s not so much a political position than a business decision. By definition, fossil fuels are a limited resource that have high barriers to entry to obtain. It’s a hard way, financially speaking, to eke out a profit. If they can make renewables work, then they have a permanent, easy source of income. This is sort of why the Nordic countries are such ideological whipping boys. If they can make an energy-intensive manufacturing economy work on hydropower and geothermal energy alone – run an export economy with literally zero pollution, which is the primary negative externality of the business from an economic perspective – then this whole debate is really dead.
Sounds like a great place to live .
It’s really sad, because those who hate capitalism don’t seem to realize that in just the last 60 years or so, the economic well being of the entire planet has increased tremendously. We’ve reduced famines, reduced global poverty, stopped a lot of diseases, and (brought health care to millions. When I was a child, we were supposed to clean our plates because kids in Africa (and Cambodia) were literally starving to death. Most kids didn’t even make it to five! The feeding programs paid for by capitalism in the past half century have reduced those numbers dramatically. It was only in 1979 that we finally began to reduce the number of people in the world trying to live off of less than a dollar a day! These are all well documented facts.
So “socialism” is actually kind of selfish and self absorbed because it never looks at the overall impact globally. Also, it never really works very well. And of course, what goes on in Scandinavian countries is not quite the socialist fantasy many people seem to believe it is.
Very true. What I find really interesting is that even Russia and China have mostly Capitalistic economies! Here’s a video from a channel that I like. They are a Russian couple. In this one they go shopping at a store that is the equivalent of a Walmart. https://www.youtube.com/watch?v=Xb8wmcavFPs