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Variations | A colossal failure

ON the front page of Variety’s April 1, 1983 issue was a news story about war hero Guy Gabaldon.

He had “asked…U.S. Secretary of [the] Interior James Watt for an investigation into what [Gabaldon] calls ‘the dastardly situation” in the CNMI. Gabaldon said “much of the blame for the situation in the Commonwealth lies with ‘ultra liberals’ such as Peace Corps Volunteers and the generosity of ‘Uncle Sam.’ … Why do we continue to destroy these people by pampering them?” He said people were feeding USDA cheese to pigs, or standing in the food-stamp line even though their spouses were gainfully employed.

In his 2016 book, “Debunking Utopia: Exposing the Myth of Nordic Socialism,” Iranian-Swedish policy wonk Dr. Nima Sanandaji said a “popular myth among American liberals is that the Nordic countries somehow manage to defy standard economic logic by prospering despite large welfare systems and state involvement in the economy.” In Sweden, he added, “democratic socialism” was introduced around 1970 and onward, and it was this shift in economic policy that was a major failure. “The Economist explains: ‘In the period from 1870 to 1970 the Nordic countries were among the world’s fastest-growing countries, thanks to a series of pro-business reforms such as the establishment of banks and the privatization of forests. But in the 1970s and 1980s the undisciplined growth of government caused the reforms to run into the sands.’ ”

Sanandaji said “foreign admirers of social democracy might be surprised by this fact, but the period between 1970 and 1991, when democratic socialism was put to the test, was a colossal failure for Sweden.” Since then, he said, “Nordic nations have implemented major market liberalizations to compensate for the growth-inhibiting effects of taxes, large welfare states, and labor market regulations.”

In 1935, America’s liberal icon FDR reminded the U.S. Congress that the “lessons of history, confirmed by the evidence immediately before me, show conclusively that continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit. It is inimical to the dictates of sound policy. It is in violation of the traditions of America.”

Sanandaji noted: “Hillary Clinton and Bernie Sanders would never say such things. Most Republican candidates wouldn’t either…. Roosevelt’s words today sound like something coming from a radical opponent of the American welfare state. Many would surely be surprised to find that they were uttered by the founder of the very same system.”

But going back in time, Sanandaji said, the “views of Roosevelt were anything but uncommon. In the beginning of the 20th century, even the proponents of the welfare state were greatly worried that the build-up of welfare programs might endanger the social fabric.”

Sanandaji mentioned the work of a contemporary German scholar and economist, Dr. Friedrich Heinemann, who has studied “how generous welfare systems over time can undermine the very same norms that make the welfare systems possible to uphold…. [I]f society reaches a point where overutilization of welfare programs becomes common practice, the deterioration of norms might prove difficult to stop.” Heinemann has concluded that “a self-destructive mechanism exists in a welfare state. When welfare becomes more generous, and when unemployment reaches high levels, people find it more acceptable to take advantage of welfare programs…. Basically, people react as we would expect them to react.”

Sanandaj said despite their world-famous work ethics, the Nordics themselves were not immune to the allure of “money for nothing”: They have “changed their attitudes as social democratic policies have made it less rewarding to work hard and more rewarding to live off the government.” In oil-rich Norway, “one consequence of the generous welfare policies…is deterioration in work ethic…. It is not only the adults who have stopped focusing on work. The youth — born and raised in a system with little reward for work — have gone even further.”

According to Sanandaji, “Those who doubt that generous welfare systems can affect working norms should think hard about the case of Norway. It is difficult to disregard the fact that Norwegians just one or two generations ago had among the strongest working ethics in the world. Without high trust, social cohesion, and a culture focused on individual responsibility, Norway would never have grown so successful. The country’s oil wealth has boosted the economy further, but has also proved a double-edged sword, since the massive revenues to the state made it possible to fund a very generous welfare system…. However, much as in oil-rich Saudi Arabia, handouts have fostered a class of socially poor…. Even in the oil-rich nation it has become evident that overly generous benefits are creating rather than combating poverty.”

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