The Myth of American Unexceptionalism Part 1: Economics

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Amidst mobs of entitled college students and economically naive young adults, Bernie Sanders is making a very serious run for the Democratic nomination. In doing so, his message has been simple: the United States needs to look more like the Scandinavian and Nordic socialist utopias. Sanders is particularly infatuated with Denmark.

The typical line among the enlightened Left is that the United States, in its old fashioned capitalistic ways, has fallen behind the rest of the developing world, especially Scandinavia and a few other European countries, economically, socially, and educationally. But the reality is that things in northern Europe aren’t as great as the Left wants you to think they are. In fact, if the United States looked like these countries which liberals so desperately want to emulate, we could very well be worse off.

So, the intent of this article (and the following two which will focus on social and educational issues) is to look at some of these alleged utopias and show some cold hard economic facts to dispel the warm fuzzy feelings that Bernie wants us to have about Denmark and other countries.

Before You Continue: I’d like to preface the rest of this article by pointing out that according to Trading Economics, unemployment in Sweden as of January of this year was at 7.5% and Finland is at 9.3%. For comparison, the United States is at 5.5%. Yay socialism!

– Highest Personal Debt In the World: Despite the fact that many northern Europeans looked down their noses at the reckless Mediterranean countries who nearly destroyed the euro, the Danes haven’t been too thrifty themselves. As is noted by The Economist, “Danish households have the highest debt as a share of disposable income among the 34 members of the OECD, a club of mostly rich countries.” This is largely due to soaring housing prices (more on that in #2) and poor productivity in the economy (we will discuss that in section #3). To adjust for this, Danes take on a whole lot of debt (4x more than Italians) and more than 50% of Danes admit to using the black market to illegally obtain goods at a cheaper price according to The Guardian.

– A Housing Bubble That Is About to Burst:  The Economist also writes:
“In 2004 only 10% of Danish mortgages had long interest-only periods, during which borrowers repaid none of the principal. By 2013 that number had climbed to 57%. Over the intervening decade, property prices soared as Danes rushed into the market. Banks financed themselves through mortgage-backed securities, promising investors fat yet seemingly riskless returns: mortgage bonds have a 200-year history in Denmark, and none has ever defaulted.

Gregory Perdon of Arbuthnot Latham, a British private bank, believes that Danish households are living on borrowed time. Thanks to the prevalence of interest-only loans, Danes are paying down their mortgages at a rate of only 2% a year on average. When the interest-only periods end (typically ten years into the loan), their monthly payments will rise sharply. Some will not be able to afford them: the recovery has been weak, and employment has fallen in recent years. Refinancing is an option for many, but not for the most precarious borrowers, due to legal restrictions on loans of more than 80% of a property’s value.

– A Notoriously Unproductive Economy: There isn’t much to say here. Danes work very little compared to everyone else according to BBC. When supply goes down and demand doesn’t do the same, demand is bound to rise. This, in addition to record-setting taxes, is why an iPhone 6s costs the equivalent of $1,000 in Denmark – hence Denmark’s debt problem.

– Really… REALLY High Taxes: While this does bring about some benefits like a low child poverty rate, it comes at quite a price. Vox writes that combined local, state, and federal taxes in the U.S. currently amount to about 25% of GDP, in Germany that number is 37%, but in Denmark that number is 49%. But that’s still not enough. Denmark also has

– Falling economic equity: The proportion of people below the poverty line has doubled in the past decade.

– Lack of economic diversification: Norway really likes its oil. It is oil that keeps Norway’s welfare state alive, but Norway’s oil boom is ending nearly a decade before expected. Prices are already rising, and jobs are declining. The government set aside a rainy day fund of about $170,00 per man, woman, and child to help prepare for the worst. But Forbes notes that this could be more of a curse than a blessing. This is going to cause issues with the value of Denmark’s currency, and it will likely create the kind of false demand that can lead to a sizable economic crash.
– Environmental Harm: This is common to both Denmark and Norway. Denmark may be flashy with its windmills, and Norway may fancy itself above the rest of the world environmentally, but the reality is that Denmark consumes inordinate amounts of coal and Norway sends out a whole lot of oil for the rest of the world to burn.

– Economic Contraction:  I don’t see reason to spend much time on Finland. In the third quarter of 2015, Finland’s economy contracted by 0.6%. The economy is 5% smaller than before the financial crisis. Business Insider notes that Finland has seen prices rise much more quickly than the rest of the eurozone, unemployment is predicted to grow, and the state is bloated. The answer being given by the rest of Europe? Austerity. It’s funny how Bernie rarely mentions this model of a socialist utopia.

– Critically Low Interest Rates: The interest rates in Sweden are literally in the negatives. This is in response to deflation of Sweden’s currency. Despite its negative connotations, a certain amount of inflation is economically healthy. However, Sweden’s inflation is well below a healthy level. The Economist provides great analysis of the complex issue.

Debt… So Much Debt: despite the fact that it is the poster child for economic recovery in Europe its current external debt sits at over 700% of its national annual GDP, and over $280,000 per person. For comparison, the current external debt of the United States is at 103%, and distributes to about $58,000 per person. Life tends to be pretty good when you can rack up debt which is worth more than 7 times what your economic productivity is worth. But hey, as long as the people of Iceland don’t mind that number looming over their heads, it can’t possibly hurt anybody, right? *nervous laughter*

So what’s the point?
So yeah, all these other countries have their issues, but doesn’t the United States have problems too? The answer is yes, but comparatively the United States is, at best, better off on an economically comprehensive level than these countries. At worst, the United States is not the antiquated economic dinosaur that it is often made out to be. The best of these socialist Nordic countries are leaching off of booming oil industries and sky high tax rates. However, experience is showing that even then, an economy under a benevolent, socialist government is susceptible to high prices, high unemployment, issues with the value of currency, housing bubbles, and economic environmental neglect to which the Left gives so much lip service. But hey, if you don’t mind paying 180% taxes on your next car, racking up massive personal debt,  and still having your economy struggle then maybe we ought to be more like Denmark after all!

Kyle Huitt
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Kyle Huitt

Part of the multitude that has lost their faith, but part of the few that has returned to it. This blog is my attempt to describe why I returned to the faith, and to maybe prevent somebody else from leaving it in the first place. Studying philosophy and history at Hillsdale College. Member of Delta Tau Delta fraternity.
Kyle Huitt
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