Martin Wolf on socialism:
Socialism is not a new idea, but one that has been tried and tried again. It has come in three main varieties: autocratic, populist and social democratic. Autocratic socialism was that of the Soviet Union and Mao Zedong. It was a catastrophe. The social democracy of the Nordics or the Netherlands has, in contrast, been a triumph. These are among the most successful societies on the planet: wealthy, dynamic and stable.
Finally, the populist socialism so characteristic of Latin America has never worked economically. But it has at least not had the cataclysmic human results of Soviet or Maoist communism (though the outcome of Hugo Chávez’s Venezuelan experiment, much lauded by Mr Corbyn, is clearly ghastly).
Why has European social democracy been such a success? The answer is that it understands the fundamental constraints that have to shape any successful programme, particularly for a party that believes in active government. First, it must avoid the lure of magical thinking on budget constraints, at all levels of government. Resources are always limited. Second, it must recognise the crucial role of incentives in shaping human behaviour. Third, it must fully internalise the importance of a stable institutional framework in guiding these incentives. Last, it must understand that the private sector, foreign as well as domestic, must play a leading role in the economy.
The economy can function with very high levels of tax: ratios of close to, or over, 50 per cent of gross domestic product are common in the advanced social democracies. Governments can also play a big role in supporting the economy. But private initiative is essential. And that does not come because the government commands it. It comes because the government motivates it.
Why, then, has populist socialism failed? It is because it does not respect these constraints. It is undisciplined on public finances, unconcerned about incentives, contemptuous of property rights, hostile to the private sector and antagonistic to the constraining institutions. The last point is crucial. As Princeton’s Jan-Werner Müller has written, the one thing leftwing and rightwing populists share is the belief they alone represent the people against the elites. Anything that limits their ability to act as they see fit is seen as illegitimate….
Sweden’s experiment with socialism is often lauded as an outstanding success but numbers from the Institute of Economic Affairs suggest otherwise:
Between 1950 and 2005, the Swedish population grew from seven to nine million, but net job creation in the private sector was zero. Jobs in the public sector expanded rapidly until the end of the 1970s. As it became difficult to further expand the already large public sector, job creation simply stopped (Bjuggren and Johansson, 2009)….
Will Tanner at the London School of Economics highlights more recent reforms:
In the last two decades, Sweden has reformed its welfare state to deliver efficiency as well as equity. Policymakers have opened up services to competition, using new, for-profit providers to drive down costs and improve quality within Sweden’s universal health and education systems. Around 27 per cent of healthcare is now delivered by profit-making firms, including nine major hospitals and 10 per cent of ambulance services, compared to just 3 per cent in the UK. Hospital waiting times have fallen by nearly a quarter….
Alongside market-orientated reforms, citizens have been given greater power and responsibility over the public services they use…. In the decade to 2010, Swedish hospital admissions grew just 1.6 per cent compared to the UK’s 38 per cent.
Sweden’s reforms have brought the country’s finances under control. Between 2003 and 2009, healthcare spending rose by just 0.6 per cent of GDP, compared to 2 per cent of GDP in the UK, while pension spending is actually expected to fall by 1 per cent of GDP by 2030. In contrast to the UK, meaningful reform has also allowed Sweden to meet its own fiscal targets: in the last 20 years, Sweden has consistently run a budget surplus of 1 to 3 per cent of GDP.