Exposing The Soft Underbelly Of Scandinavian "High-Tax Happy-Capitalism"

Tyler Durden's picture

Authored by Charles Hugh-Smith via OfTwoMinds blog,

Central planning based on central-bank inflated debt-asset bubbles works until it doesn't.

A media mini-industry touts Scandinavia's "happiness" as the result of its high-tax, generous welfare state-capitalism. This mini-industry conveniently fails to report the soft underbelly of Scandinavia's "High-Tax Happy-Capitalism": The high-tax, generous welfare model is just as dependent on unsustainable credit bubbles as every other version of state-capitalism.

The glossy surface story goes like this: state-capitalism creates a happy, secure society if taxes are high enough to fund generous social welfare benefits for everyone. People are happy to pay the higher taxes because they value the generous benefits they receive.

The story has an implicit message: every state-capitalist society could become happy if only taxes were raised high enough to fund generous social welfare for all. There are many versions of this narrative, for example, the appealing (but financially impractical) "tax the robots" funded Universal Basic Income (UBI) that I have repeatedly debunked.

Put another way: state-managed capitalism works just great if high earners and companies pay high enough taxes to fund a rebalancing of wealth and income via social welfare transfers.

The reality is quite different from this glossy PR narrative. The Scandinavian economies have pursued the same unsustainable debt-bubble "fix" for their structural insolvency as other state-managed nations.

As the charts below reveal, the "happy" Scandinavian nations are now dependent on unprecedented debt/housing bubbles inflated by extreme monetary stimulus. The script is the same as in every other monetary "experiment" intended to create the illusion of solvency in an insolvent system: lower interest rates to zero (or below-zero if you're really desperate), juice the financial system with liquidity/ easy credit, and base your measures of financial "health" on housing bubbles and other debt-based gimmicks. (Charts courtesy of the Acting Man blog)

Also left unmentioned is the Scandinavian reliance on export sectors for national income. This is of course the German model: make your money exporting to other nations that are over-borrowing to fund consumption.

So what happens when consumption in the importing nations crashes when debt bubbles pop? The economies of the export-dependent nations also implode. This is the inconvenient consequence of having an export-dependent economy.

Also left unsaid is the imperialist wealth amassed by the mini-empires of Denmark and Sweden. Denmark and Sweden had smaller but no less imperialist interests as the larger imperial powers, and ownership of foreign assets remains a hidden mainstay of their national incomes.

Put another way: if you want to be rich, start out rich.

Norway is a special case in two ways. Norway only won its full political independence from Denmark and then Sweden in 1905. Its current wealth is the direct result of a depleting resource: North Sea oil and gas. While Norway has amassed a large sovereign-wealth fund, it has already started to draw upon this fund.

The fund is of course largely invested in the usual debt-bubble-dependent "assets" that are doomed to implode along with the fiat currencies they prop up.

Does this explosion in Norway's M2 money supply look healthy or sustainable to you? If so--what are you high on?

Does Sweden's insane real estate bubble look healthy or sustainable to you? If so--what are you high on?

Does Denmark's unprecedented levels of household debt look healthy or sustainable to you? If so--what are you high on?

Take away these unsustainable bubbles, and how "happy" will these economies (or their suddenly impoverished residents) be? Central planning based on central-bank inflated debt-asset bubbles works until it doesn't. The day of reckoning draws ever nearer in every economy that's created the illusion of solvency with debt/asset bubbles and export-dependent economies.

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JustPrintMoreDuh's picture

Fall for the clickbait every fucking time

Killtruck's picture

Don't forget the rapes. I didn't read anything about the rapes. 

DieselChadron's picture

btw - all those nordic countries have at least 2times more doctors per capita than America does.

meta-trader's picture

she was a waitress in a cocktail bar now she owns a jet... http://bit.ly/2jdTzrM

Four chan's picture

only here for the 3 click bait semen demons.  

Kenny Drebson's picture

same here.  at least post a larger pic of the swedish babes, then you can bore us to death w/ your stupid graphs.

froze25's picture

Those nations are only in trouble because their welfare rolls of non-payers have exploded over the last 10 years from the invasion. Socialism could work if the fairy tail that everyone would pull their own weight was a reality.

Dale Lee Paul's picture

If men were angels.....


"Socialism could work if..."

OverTheHedge's picture

I think if you chose the printer friendly version, you get to see the ladies, but I'm running ghostery, so I don't get the button. Now, should I turn off ghostery? Perhaps I shall.

Philo Beddoe's picture

Me too. And then a bunch of fucking charts. Boo! Tyler Bad. 

Okienomics's picture

Really, we promise this time, it's going to collapse, A-N-Y D-A-Y N-O-W...

Nice Try Lao Che's picture

How about exposing the soft underBRA instead of the soft underBELLY?

Erek's picture


But who is the bald asshole bombing the photo?

Andre's picture

French villagers saw a man having sex with what appeared to be a dead woman in a field. Disgusted, they called for the gendarme to investigate.

The gendarme spoke to the man, then returned to the watching villagers.

"She is not dead."

"She is English."

A. Boaty's picture

Thinking about falling for clickbait? Read this first...

Raffie's picture

Yummy hot blonde babes tricked me.

Seasmoke's picture

Looks like Tyler doesn't want to post a thread calling the daily bottom of the hammering of Gold and Silver yet !!

ciscokid's picture

Thats no more news,Waste of time to follow prices of paper gold and silver.

Okienomics's picture

It's only a waste of time if you're not buying or selling it.  For those of us actually in the market, it matters.

youngman's picture

yeah strange..Brazil closed down...special investigator in the USA...and gold and silver tanked....WTF

OverTheHedge's picture

Raising cash for margin calls?

Unlikely, now that everything is awesome, all over again.

petar's picture

I bet social Nordic countries will fail last

Philo Beddoe's picture

New Zealand, Iceland and Israel. 

silverer's picture

Better. Maybe the best you can do. In a truly non-intrusive limited government, government salaries would also go down when the economy went down, and nobody would get a pension from tax money. You'd be on your own in a free market to save or invest as you choose.

NoDebt's picture

When everything goes to shit you want to be where everything already went to shit so it doesn't feel any different.

I suggest Easter Island.  Things went to shit there quite some time ago.


NoDebt's picture

Actually, Cuba would not be a bad choice.  With any luck the mafia will reassert itself and drive the commies back up into the mountains.


August's picture

>>>When everything goes to shit you want to be where everything already went to shit

New Zealand and Iceland have the advantage of having, within recent memory, already seen their economies go to shit.

Socialism seems to be the unspoken ideal in both countries, but they also have some grasp of facts such as bills needing to be paid, and workers needing actual jobs.  As opposed to, say, the USA which is far too big to fail, or deal with reality;  if things get really serious in the States, the fedgov will just start bombing... somewhere or other.


Azannoth's picture

Israel/Palestine will be fallout-ash and nobody cares about the other 2

GestaltNine's picture

Yeah I am sure pure capitalism is the answer to their problems, massive jolt of austerity, get rid of all welfare programs and soon they will be in peak form maybe reinvest everything into their military and get some colonies back

silverer's picture

Pure capitalism by definition would have to get rid of the government completely, otherwise you have crony capitalism from a totally non-productive sector that interferes with the market. Government is a total parasite to free markets. The idea of the Founding Fathers was a Republic with limited government. You tell me if the US has a Republic with limited government, and I will show you the moon is made of cheese.

meditate_vigorously's picture

Free market bullshit is analogous to anarchy for people. It is literally insane. Corporations need to follow rules and laws just like everyone else, only they should have less freedom than an individual. Because they are not people.

Capitalism and socialism are both designed to subjugate the masses.

silverer's picture

But think about what happens. Corporations get huge. The problem is barrier to entry. What would prevent me, you, and 200 people grouped together from starting a car company? 99% of the barrier to entry would be the government. And if the abusive corporation that got there first were paying lawmakers to create more barriers, then there is the problem. Capitalism again distorted by government. Otherwise, there would be another car company. That's what went wrong with medical. You look around and say, "Hey, we can provide insurance and healthcare at more reasonable rates". Try to start the company, let me know what happens. The government will be your "first customer", and it won't be for medical care, either.

TeethVillage88s's picture

Isn't that what was tried in the Great Depression. The banks tightened money and lending, refused to lend.

And isn't that why Mariner Eccles left Utah to advise the president and then take the lead at Federal Reserve.

Austerity in this Economy of outsourced manufacturing, part time work, service jobs in retain, minimum wages, robots & automation displacing workers, $750 Billion Annual Trade Deficit as per the economist magazine... would not work... purse capitalism won't work in age of State Capitalism, Crony Capitalism, Militocracy, paramilitarocracy, Globalism. Plutocracy. Gerontocracy.

HillaryOdor's picture

No you are wrong in just about every way, and nevertheless so sure about what would work.  Just look at the list of words!  I would say reasons, but there isn't even any argument in there, just words.  

Gravity won't work in the age of computers, robots, and A.I..  You think gravity still matters with DARPA, Black Ops, and NAMBLA around?  Nonsense.  Gravity is disproven under these circumstances because I said so, so let's all jump off a roof and fly.  The govenment will force you to either way.

But just for the record, interest rates were slashed after the crash of 1929, and continued their downward trend for years, nominally of course.  Real interest rates skyrocketed due to the deflation, but now we've stopped keeping an honest account of inflation and can spin these kinds of effects as economic growth.  I'm rich!  Look at the stock market!  Look at my home equity!  Look at the GDP!  Why is my doctor so expensive?   Why is everything I can't outsource to China so expensive?

With honest accounting, I'm sure we've really been in a recession since 2008. 

meditate_vigorously's picture

That means the solution is high tariffs, closed borders, and policy that punishes foreign labor and business.

Azannoth's picture

No once you go down the road of Socialism the only way out is a total system collapse case in point NS-Germany, Soviet-Union(no there is really no difference to communism), Venezuella and soon coming to a country near you.. the only reason all those "social-democracies" are still walking is because they prop themselves mutually up(like a bunch of drunken sailors walking shoulder to shoulder to not fall over) but sooner or later they will run out of road, hit a pole or a ditch and when they fall they all fall together.

HRH Feant2's picture

Can you imagine the shitfeest when all of the new gimmigrants are told they have to get a job because of austerity measures? Or because there is no more welfare?

Do you pay for welfare or pay for security? What happens when you can't afford either?

silverer's picture

As the Fleetwood Mac song goes:

You can mow your own hay
(mow your own hay)
You can it another taxing day.
(a taxing day)

Oh yeah.

A. Boaty's picture

OK to stop thinking about tomorrow.