Introduction

Margaret Thatcher once said, “The problem with socialism is that you eventually run out of other people’s money.” As the former Prime Minister, Thatcher despised socialism because she understood the implications of different economic systems. Social and Economic theories are one of the most important factors that contribute to the quality of living in a nation, so choosing the right system is crucial for a nation’s success. Understanding this concept is crucial to ensure that one’s own country will not follow down the same path of poverty, famine, war, and inequity that so many states have fallen victim to. Understanding socialism helps supporters and opponents alike understand the historical implications and helps them come to a consensus if this economic system is beneficial for their own country. 

Understanding Socialism

There are two different aspects to take into consideration when exploring socialism: socialism in theory and in practice. Socialism is defined as “a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done.”⁹ This means that workers in a socialist society are paid by the value they bring to the country and overall economy. Socialism can only be successful under the premise that the workers control the means of production. In theory, this means that no single person owns corporations and companies. Rather, there is communal ownership. This premise is achieved by accepting two main factors. First, when the workers own the means of production, exploitation of labor is mitigated because nobody is non proportionality profiting off a worker. Secondly, as everybody effectively contributes to the wealth of the nation, each individual is entitled to a share of the wealth depending on the amount of productivity they produce. 

However, socialism looks slightly different in practice. Interestingly, all socialist nations have shared the common trends of economic depression, reliance on capitalist economic principles, nationalization of crucial industries, violation of human rights, and violent revolution. In practice, a socialist nation will face economic depressions once it inevitably runs out of money to redistribute. Socialism ultimately drives out business and innovation because it is less profitable to operate due to the lack of financial incentive. This perpetual cycle of driving out business and economic decline means that socialist states cannot produce enough to meet the needs of its citizens. For this very reason, every socialist nation needs to operate in a capitalist economy to some degree. A purely socialist nation cannot sustain itself, thus it utilizes capitalist market principles.³’⁶’⁷ One caveat is that industries that are deemed crucial such as agriculture will be nationalized and controlled by the government.³ The nationalization of some industries is supported by many socialists parties, such as the Democratic Socialists of America. Nationalizing industries effectively gives the state enough power to turn into an authoritarian regime. When a state has the power to control basic necessities, they have the power to control society.³ This power most commonly leads to a violation of human rights.³ Finally, the transition to socialism usually requires violence and social disruption. In Britain, socialist strikes led by educators, dock workers, hospital workers, truck drivers, gravediggers, and toolmakers caused car bombings and threats on the press. The strikes created food shortages and left sick patients helpless until the Army Medical Corps came to provide medical aid.¹¹

Real World Comparisons

Economic System
Country
1
Capitalism
United States of America
2
Socialism
Maoist China
3
Communism
Venezuela

Capitalism (1)

Capitalism is an economic philosophy that utilizes the free market to encourage competition, innovation, and productivity. Capitalism naturally creates a productive economy so government intervention is not usually necessary. The one way capitalism can go sideways is through the creation of monopolies. Competition amongst businesses increases quality, and innovation while decreasing prices. However, with no competition there is no financial incentive to improve quality and innovation. Monopolies exploit the lack of competition by increasing prices. Consumers don’t have much variety so they are either forced to purchase from the monopoly or go without the goods or service. The United States of America is usually seen as the hallmark of capitalism. The free market in the United States has very minimal intervention in the economy. Of course, it does provide subsidies, regulate corporations, etc; however, this is all basic economic policies that are needed to produce a productive economy and mitigate the creation of monopolies. The United States capitalist economy itself creates competition and encourages innovation which contributes to stable markets and a strong general economy. Capitalism in the US holistically is sustainable and productive, which means that government regulation is unnecessary.  

Socialism (2)

Socialism as defined in the previous section of the paper follows many trends and ideologies that can be seen in history. Mao Zedong implemented many socialist policies that transformed China into the socialist state. Some of the most notorious policies include The Great Leap Forward. The Great Leap Forward was a policy that was supposed to push China into a more economically and socially advantageous position. The policy intended to achieve the former by coercing people to work and live in giant communes. This form of nationalization of industry led to a enormous famine as farm workers could not produce enough food because of the constant abuse, malnutrition, and poor planned agricultural projects.⁵’¹² This policy is certainly a socialist policy for several reasons. First, the nationalization of industries came in the form of forcing people to work in communes that were controlled by the government. Second, the Great Leap Forward rewarded citizens by merit and productivity. This follows the Marxist-Leninist Socialist ideology that says, “From each according to his ability, to each according to his contribution.”¹⁰

Communism (3)

Communism follows many of the same trends and has many similarities with socialism. Some resemblances include empirical failures, violent revolutions, and restriction of human rights. There are multiple differences in communism and socialism, however. First, is the distribution of resources. Communism follows “ From each according to his ability, to each according to his needs”. This phrase ensures that citizens are given enough resources to sustain good health and a livable quality of life as long as they contribute to the economy to the best of their ability. Socialism follows “From each according to his ability, to each according to his contribution”. This phrase means that an individual can be as productive as they want and based on what the government believes he/she contributed, the individual will receive accordingly.¹⁰ An example of a communist state is Venezuela. Venezuela has two major policies that fulfills the two characteristics of communism, which are nationalization of industry and “From each according to his ability, to each according to his needs”. The nationalization of the agricultural sector and the price caps reflect a communist state model. Venezuela effectively stole millions of acres of land and tried to use this lands to operate a colossal, state run agricultural sector. However, no government has the capacity to run such an industry, so the agricultural sector was bound to fall from the beginning. The failure of the agricultural industry caused widespread famine and food shortages. A second policy was price caps on goods. Price caps can be seen as a method of fulfilling everyone's needs by increasing accessibility and affordability to goods. This method of fulfilling everyone’s needs is a modern spin that utilizes free market principles of supply and demand. While its intended purpose was to provide Venezuelians with goods, the price caps had quite the opposite effect. It made whatever goods on the market cheap, so everyone rapidly bought out the supply. Private companies stopped manufacturing goods because they could not make a profit with the price caps in place. These factors contributed to the rapid decline of supply.¹

How Socialist is Sweden?

Jeffrey H. Dorfman, a professor of Agricultural and Applied Economics, puts it best when he describes Sweden’s economic state as “compassionate capitalism”.⁶ While it may focus on the social welfare of its citizens, Sweden falls into the same category as the United States: capitalist. To reinforce this claim, I will examine how Sweden’s economic structure and policies fit into the ideologies and practices of communism, socialism, and capitalism. 

Sweden is certainly not communist for three key reason: 

First, Sweden’s government has very small shares in its industries. The Government Offices of Sweden released a 2018 report with details about state sponsored and owned enterprises. The study shows that Sweden is far from nationalizing all its industries. The highest share of the market they have in any industry is 44 percent in Basic Industry and Energy, while the smallest market share they have is 2 percent in transportation.⁴
Second, Sweden shows none of the characteristics of a communist regime. They respect human rights, no violent revolutions took place, and they have a strong sustainable economy. They don’t show any traits of a communist state and seem to project the exact opposite results and principles. 
Finally, the wealth disparity in Sweden has grown significantly according to the Gini Coefficient. If Communism was prevalent in Sweden wealth disparities would not exist, nevertheless grow.²

Neither can Sweden be classified as Socialist for one main reason: 

Sweden tried socialism and abandoned it after it almost destroyed their economy. Starting from the 1960s Sweden experimented with redistributing taxes and implementing many social safety programs. The reason why many Swedish economists like Gunnar Myrdal thought socialism would work, is because the country had robust economies, a strong work ethic, non-corrupt civil services, and a high degree of trust. However, the reason why Sweden had such a vibrant economy was because the Minister for Finance, Johan August Gripenstedt, introduced reform in immigration, trade, and domestic industry. However, as mentioned the socialist model is not sustainable and in the 1990s, Sweden started to face some of the unsuitable repercussions. At a certain point, the government had to pay more to support the people and programs than the country was making. Because Sweden was spending money it didn’t have, it led to economic decline which disincentivized companies from operating on Swedish soil. As more and more companies fled the country, the economic situation got worse and the cycle of economic decline leading to companies leaving had an enormous impact. The vast amounts of spending on socialist programs contributed to the 1990 recession. Since then, Sweden made changes to revitalize their economy, which included reduced government and reforms to the tax system.⁷’⁸

These changes led to Sweden's relapse into capitalism. Sweden is a capitalist state with huge social safety programs. Swedish policy makers did not want to completely compromise all their social safety nets because these programs are vital to the wellbeing of a country’s citizens. 

When viewed through the following factors, it is evident that Sweden must be considered capitalist: 

First, they have minimal government intervention in the economy. The less government intervention there is, the purer capitalism becomes. Capitalism was supposed to be a self sustaining economic model so government intervention would taint that. A prime example of a lack of intervention is the absence of minimum wage. In Sweden, worker unions are tasked with negotiating wages. The amount one gets paid is purely based on the consensus of the worker and employer.⁶
Most importantly is the lack of social wealth distribution. Rather than distributing wealth equally among its citizens, the Swedish government focuses on increasing the quality of life by investing vast resources into social safety nets. If Sweden truly were a socialist state, the employer and employee would not negotiate because the government redistributes wealth, making their interaction irrelevant. 
  

Conclusion

The notion that a nation has to be measured on a spectrum of how socialist it is can be unclear and quite abstract especially in an essay. Categorizing Sweden under three main socio-economic theories gives more clarity as opposed to a scale, as the word “how” implies. Thus, I took a unique approach and answered the prompt by categorizing Sweden instead of putting on a confusing scale. In conclusion, Sweden is not socialist but can be categorized as capitalist.