Attention Bernie Sanders: Europe gave up on its socialist paradise years ago
Bernie Sanders is refreshing. He's brash. He's loud. He's a self-proclaimed socialist. Unlike other politicians, he doesn't pander to the idea of American exceptionalism. He says America should look to Europe, particularly the Nordic countries Sweden and Denmark, for examples of how to create public policy. America should have a cradle-to-grave welfare state, public provision of major public goods, high marginal tax rates and high redistribution, and intense regulation of many economic sectors, including financial regulation and environmental regulation.
The thing that Bernie Sanders, and many of his supporters miss, is that European socialism isn't what it used to be. It's a lot less socialist than it used to be.
Although most European countries maintain a high level of taxation and public spending, most of them have moved away from some of the key features of the post-war European welfare state.
Let's start with taxes. The top income tax rate in most Scandinavian countries is now somewhere around 50 percent, not upwards of 70 percent as it used to be. Most interestingly, Sweden, Great Britain, and other countries have cut their capital gains rate — the rate most rich people pay — drastically, typically to around 30 percent, not that far from the U.S. rate of 22 percent. Yes, 30 percent is more progressive than 22 percent, but not by much. And it's certainly less progressive than in the past.
Let's talk about regulation. Although European countries typically have high levels of regulation, the trend has been to reduce regulation. Denmark is famous for having one of the least regulated labor markets in Europe, pioneering what's known as the "flexicurity" model — there are limited job protections, but generous government unemployment insurance. The idea is that if labor markets tightly regulated, employers don't hire that much. The way to protect people is to make sure they get cash in between jobs, not to have high labor regulation. Up until very recently, Germany didn't have a minimum wage at all.
And finally, public provision. A key trend in Europe has been the outsourcing of public services to private contractors. Over the last decade countries across Europe have transferred government jobs over to private-sector management. In every country, it's been a mixed blessing. In progressive U.S. circles it's popular to praise the French system of public day cares. The reality is that in France there is a chronic shortage of day care spots, and the government threw up its hands more than 10 years ago and just gave people tax credits to get nannies, and provided companies with tax incentives to set up their own child care care systems. Business Week did a cover story last week on two Swedish entrepreneurs who are making millions housing refugees on behalf of the Swedish government. Contrast this with France's own atrocious, government-run — or not run, rather — camps.
Bernie Sanders may be a "Europe-style socialist", but the reality is that Europe is, increasingly, moving away from "Europe-style socialist" policies and instead, for better or for worse, moving in the same boring direction as the rest of the rich world: toward neoliberalism. Neoliberalism redistributes money, yes, but also encourages a thriving, loosely-regulated business sector, and outsources many government functions.
Sound familiar? Maybe America's not so exceptional after all.