Although they are sometimes cited as more relevant socialist success stories, the experiences of the Nordic countries also support the conclusion that socialism reduces living standards. In many respects, the Nordic countries’ policies now differ significantly from what economists have in mind when they think of socialism. For instance, they do not provide healthcare for“free”; Nordic healthcare financing includes substantial cost sharing. Marginal labor income tax rates in the Nordic countries today are only somewhat higher than in the United States, and Nordic taxation overall is surprisingly less progressive than U.S. taxes. The Nordic countries also tax capital income less and regulate product markets less than the United States does. However, the Nordic countries do regulate and tax labor markets somewhat more; thus, American families earning the average wage would be taxed $2,000 to $5,000 more per year net of transfers if the United States had current Nordic policies. Living standards in the Nordic countries are at least 15 percent lower than in the United States.

It may well be that American socialists are envisioning moving our policies to align with those of the Nordic countries in the 1970s, when their policies were more in line with economists’traditional definition of socialism. We estimate that if the United States were to adopt these policies, its real GDP would decline by at least 19 percent in the long run, or about $11,000 per year for the average person.