Identifying Socialist Institutions and Socialist Countries

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We have been having a good dialogue of late about socialism (Neal Meyer; me; Mathieu Desan and Michael A. McCarthy; me). The short summary of the dialogue is that Meyer said the Nordic countries have not challenged the ownership of major corporations, but then I showed that they had, especially in Norway. Desan and McCarthy said that state ownership was not adequate because state ownership by unaccountable officials is not socialism, but then I pointed out government officials in Nordic countries are democratically accountable.

Now McCarthy has another effort to draw the line up at Jacobin. McCarthy acknowledges that yes state ownership is significant in these countries and yes the state owners themselves are democratically accountable through parliamentary elections, but concludes that “democratic socialism would nonetheless mean a further democratization and public ownership of the economy than currently exists” in those countries.

I’ll address some issues with the piece below, but let me say in general that this is exactly the conclusion I am trying to push people to reach. My argument is that the Nordic countries, Norway in particular, have put together very effective socialist institutions. I use that phrase to refer to institutions that facilitate the collective, democratic ownership of capital. In Nordic countries, those institutions are (1) a general government sector that provides public services like education and child care, (2) a portfolio of state-owned enterprises, and (3) social wealth funds that own other capital assets.

The definitional problem arises when you go from identifying an institution as socialist to identifying a country as socialist.

If you define countries in a binary way as socialist or non-socialist, then a socialist country is one where the size of the socialist institutions passes some kind of threshold. Drawing that line is going to be pretty tricky and McCarthy does not attempt to do so. (As an aside, Brad Delong tells me his definition is that the socialist institutions have to be accountable for 75 percent of GDP or more and so Norway falls short at 60 percent of GDP.)

If you define countries along a spectrum, then you can describe countries as being more or less socialist based on the size of their socialist institutions. My position has always been that (1) using this spectrum approach, Norway is clearly the most socialist country in the developed world, and (2) Norway and Nordic institutions generally provide a blueprint that can be copied and dialed up further. So for instance, you could have an even bigger state-owned enterprise portfolio, even bigger social wealth funds, and an even bigger general government sector. The institutions are proven and there is no obvious reason why their share of the economy cannot be even bigger than they are there.

So with McCarthy’s latest piece, I believe we have converged to a place of agreement. The Nordic countries have effective socialist institutions, but in an ideal world they would be pushed even further. In McCarthy’s words, the countries do not “represent the limit of what we think a democratically run economy and society can look like.”


I hesitate to raise issues with the piece given that I fundamentally agree with the overall thrust of it. But I cannot help myself in these matters. It is a sickness. So here goes.

McCarthy says that, contra Norway:

Democratic socialism, on the other hand, should involve public ownership over the vast majority of the productive assets of society, the elimination of the fact that workers are forced into the labor market to work for those who privately own those productive assets, and stronger democratic institutions not just within the state but within workplaces and communities as well.

“Vast majority” is not a clearly defined term, but the Norwegian state does own 76 percent of the country’s non-home wealth, which to me is the “vast majority of the productive assets of society.” What’s more, that 76 figure is from 2016, the last year of the data series it comes from. Based on what happened in 2017 especially, I would bet that number is north of 80 percent right now.

As far as “stronger democratic institutions … within workplaces” go, Norway has sectoral labor unions and codetermination laws that permit workers to elect upwards of 1/3rd of a firm’s board members. Perhaps it could go even further there, but it is worth noting that, on top of the large state ownership, they do have additional institutions for workers to exercise control on the sector and firm level.

McCarthy says:

This is precisely why the Meidner wage-earner fund in Sweden, a project that would have transferred ownership of firms from capital to the public — something that Bruenig and I are both very fond of and would like to see realized in some form — ultimately failed to be fully installed. Although democratically supported, it threatened capitalists’ very existence and so was undermined by capitalist power. Even in the best of social democracies, the rapprochement between capitalism and democracy is an unstable one.

There are a couple of mistakes here. Firstly, much to my chagrin, the Meidner plan did not ever appear to have majority support among voters in issue polling. The Swedish SDP did win an election with that in their platform, which counts in my book as a democratic endorsement, but it’s a little more complicated than that.

Secondly, the Meidner plan was installed in the form of regional funds that were set to gradually snap up ownership of all Swedish company stock. Those regional funds managed to snap up 7 percent of Swedish company stock over the course of 8 years or so. The reason it failed is not really some grandiose contradiction, but rather because SDP lost the 1991 election.

Additionally, I think it is worth emphasizing here that the Norwegian wealth funds are basically the same thing as what the Meidner plan was trying to achieve. Again we can say the funds need to buy up even more assets than they currently have, but they are the same institutional form of the much beloved “funds socialism” of Meidner.

McCarthy continues:

Does Norway contain institutions that might counter capital strikes? If guided by socialist principles of investment, it appears that Norway’s sovereign wealth fund could offer a line of defense against this kind of business power. Founded in 1990 as a vehicle to invest surplus profits from the state’s oil company, by 2017 it had grown massively to 8,488 billion kroner. In a capital strike, assets could be reallocated to counter domestic job loss or disinvested from companies that are using their private power to counter socialist public policy.

But the fund has never been used this way, and deep changes would need to be made for it to weaken domestic business power. Unlike Norway’s much smaller folketrygdfondet fund, their sovereign wealth fund is not primarily domestically invested. It is internationally invested to offset risk from more localized economic crises, owning on average 1.4 percent of every publicly listed company in the world.

Slight nitpick here is that the fund was passed into law in 1990 but was not actually established in the sense of it being operational until 1996. This is important when analyzing the time series of state ownership in Norway, which was quite high even before 1996. Another issue here, which is more substantive, is that the global fund is not really “internationally invested to offset risk from more localized economic crises.” Rather, it is internationally invested basically to avoid Dutch disease, i.e. the Norwegian government is trying to make sure its massive oil exports do not result in a run up of the value of Norwegian currency, which would then make all of its other export industries non-competitive.


Anyways, like I said already above, I think we have basically reached a dialectical convergence point, where we can all more or less agree that these countries have put together effective socialist institutions and have extended those institutions over a great deal of their economic system, but that they should extend them further still.