Martin Sandbu: What The Nordic Mixed Economy Can Teach Today’s New Left: "Ten years ago, the global crisis laid bare the failures of financial capitalism. This gave the political left an opportunity to win support for its agenda. Yet almost every established centre-left party in the developed world bungled this shot at political dominance...
...The only leftwing politicians to prosper have been those who reject the “third way” centre-leftism of the 1990s. In the UK, Jeremy Corbyn has taken over the Labour party with the support of a hugely expanded membership. In the US, Bernie Sanders’ socialist primary campaign gave Hillary Clinton a run for her donor class money in 2016. In recent local results, like-minded politicians Alexandria Ocasio-Cortez and Rashida Tlaib have won safe-seat Democratic party nominations to Congress. Polls show that about half of young Americans now favour “socialism” over “capitalism”. This has triggered a debate about what the new socialists mean by “socialism”. On one reading, it is just an aspirational label for Scandinavian social democracy, with policies such as universal healthcare or better conditions for workers.
But some... argue in favour of socialism because it is opposed to capitalism... see socialism and capitalism as rival and incompatible systems. This semantic difference matters politically. The either/or view may have made sense during the cold war. But even when the dichotomy was real, the Nordic countries were clearly arrayed on the capitalist side of the dividing line. To oppose “socialism” against “capitalism” is to refuse to learn from the experience of the societies that have probably come closest to the new socialists’ own ideals. The Nordic countries have been called “mixed economies” precisely because they combine elements of socialism and capitalism: state and private ownership of the means of production; public regulation and market competition; redistributive taxes and wages determined by employers and employees. If the socialists of today ignore capitalism’s role in that mix, they fail to follow their own leading lights. Here are three lessons they should heed from the Nordic model, whether or not they call it “socialist”:
First, it embraces globalisation. It was no coincidence that the Nordic mixed model emerged in countries with high exposure to international trade....
Second, while the Nordics’ economic egalitarianism is well known in broad terms, the detail is not. But the detail matters. The achievement... is... a highly compressed distribution of market wages.... The distribution of wealth and capital income, and the degree of income equalisation through policy, is unexceptional... an economy that did not need to overburden the state’s redistributive power.
This leads to the third lesson. Much of the Nordic model’s success is rooted... in the finely balanced interplay between social organisations... unions... coherent employers’ associations.... Coherent organisation encourages employers to recognise how what may seem like a burden on an individual company benefits business as a whole. In Scandinavia, a compressed wage structure has been good for productivity. If it is expensive to use labour unproductively, and if high-skilled labour is relatively cheap, companies accelerate investment and quickly adopt new technology. Similarly, an organised employer sector helps workers, businesses and the government to adjust in the face of technological disruptions. If this is socialism, it is one that makes for a more flexible capitalism. The Nordics, then, give vindication to the insight of great liberal centrists of the interwar years: that wise government intervention is good for capitalism, and makes capitalism good for workers. Progressive centrism may have earned itself a bad name in the run-up to the crisis and its aftermath. But if socialists reject it out of purism, they will find their own goals frustrated as well...