Should Americans move to Scandinavia for the American dream?

This article was originally published on WashingtonExaminer.com

Sen. Bernie Sanders’s campaign may be floundering, but the “Bernie Bros” and millions of other Americans who supported his socialist vision for America aren’t going anywhere.

After all, Sanders is America’s most successful socialist candidate in the history of presidential politics, spending months as a front-runner and securing about 700 delegates — hundreds more than the non-Biden Democrats combined.

Most importantly, popular support for socialism is now well established. According to a recent Gallup poll, over two-thirds of Democratic voters are open to supporting a socialist candidate like Sanders in the future. The same goes for 45% of independents, many of whom see capitalism as a failed system.

The notion that the American dream is better lived elsewhere, specifically in Scandinavia, remains a major premise of the Democratic platform. And it will continue to be so beyond 2020. But the truth isn’t quite so anti-American.

The first complicating factor is that leaders in Scandinavian countries don’t think of themselves as socialists — democratic or otherwise. Ida Auken, a member of the Danish parliament, recently pointed out that Denmark is not a socialist paradise, but rather a very flourishing market economy with a strong social safety net. As Fareed Zakaria recently observed, Scandinavian countries are very open to trade, implement market-friendly policies in education and healthcare, and boast lower corporate and estate taxes than the United States. Much of their high-income tax burden is paid by the poor and middle class, who are also hit by a value-added tax.

The U.S., in contrast, has a much more progressive tax system; the rich pay a higher proportion of income taxes here than in Scandinavian countries. These countries also score high on measures of rule of law, business friendliness, and economic competitiveness — all factors associated with lower levels of inequality and higher levels of social mobility.

So, Scandinavian countries aren’t exactly the bastions of socialism that Sanders claims. As for the question about whether the American dream has moved to Scandinavia, it is important to define the American dream and how it’s measured. Speaking in strictly technical terms, the American dream is most often defined as the level of economic or social mobility experienced across generations. Absolute economic mobility is defined by how many people, usually between 32 to 40 years of age, surpass their parent’s income at the same age.

By this measurement, the American dream is said to be fading, as only 50% of people born in the 1980s surpass their parents’ income — down from 90% back in the 1940s. Despite this widely reported figure, there are a few issues with comparing data between a generation whose parents lived through the Great Depression and those who did not.

It is also important to acknowledge other studies have shown that, by addressing some technical issues with the data, the 50% figure for the current generation should be more like 68%, and when using a different data set, the number should be closer to about 73%. This is far from ideal, but contextualizing the data and measuring it properly is important to policy conversations.

A recent study by Nobel Laureate James Heckman and economist Rasmus Landerso, comparing social mobility in Denmark and the U.S., finds that rates of mobility are remarkably similar in both countries as measured by wages before counting taxes and transfers. It is only after accounting for taxes, wage compression, and large income transfers in Denmark that its technical measurements of mobility and inequality improve. The research also finds that Denmark’s generous welfare policies disincentives Danish children receiving a college education, while in the U.S. the wage premium in the labor market for going to college is very high, so it pays off to get a degree and enter the labor market.

Another important measurement of success in terms of economic mobility is how many people can reach the top quintile of the income distribution if they were born to parents who were in the bottom quintile. On this front, a study by Raj Chetty and his co-authors at Opportunity Insights found that, in the U.S. as a whole, only 7.5% of children born in the bottom quintile can reach the top quintile as adults, while in Denmark that figure is 11.7%. However, in that same study, Chetty and his co-authors find that there is a large amount of geographical variation in the result. There are many places in the U.S., particularly in California, Utah, North Dakota, South Dakota, and Minnesota, where more people from the bottom move to the top of the income ladder than in Denmark.

Finally, it seems like more Scandinavians can find the American dream in the U.S. than in their own countries. Economist Tyler Cowen explains: “Danish-Americans have a measured living standard about 55% higher than the Danes in Denmark. Swedish-Americans have a living standard 53% higher than the Swedes, and Finnish-Americans have a living standard 59% higher than those back in Finland.”

Overall, Scandinavian countries have many features that make them even more market-oriented and less hostile towards “the rich” than in the U.S. Measuring the American dream is difficult, especially with cross-country comparisons, but analyses need to be nuanced and contextualized in order to have informed policy discussions.

While there are many ways in which policymakers can improve social mobility, one thing is clear: The American dream hasn’t moved to Scandinavia.

Gonzalo Schwarz serves as president and CEO of the Archbridge Institute in Washington, D.C.

Gonzalo Schwarz, President and CEO of the Archbridge Institute, has written numerous articles and op-eds in that capacity, on topics ranging from the importance of entrepreneurship and the health of the American Dream to trends in economic mobility and inequality.