Tuesday, June 01, 2010
Left and right-wing fallacies
Scott Sumner has a brilliant post on fallacies of the left and the right (link, via). I encourage you to read it. One addition I would make is that his second 'fallacy' of the right, 'Denmark and Sweden are socialist countries' (and yes, it really is untrue), is equally well a fallacy of the left.Lefties assume that because Sweden and Denmark have all the wondrous social harmony stuff they dig as cool 'n' groovy, it therefore follows that Sweden and Denmark have followed their favoured policy prescriptions to get there. Allow me to grace the notion with a sound effect: .Actually, the Nordics are able to afford their extremely expensive welfare state (and they do have a massive welfare state) because their economic model is very dog-eat-dog. Famously, the Swedish government recently refused to intervene in the sale of Saab, and limited its involvement to guaranteeing a loan from the European Investment Bank: this in stark contrast to the 'capitalist' United States which took over large chunks of its own automobile industry.On taxation, Swedish tax rates are very dissimilar to the UK's, but not entirely in the ways which you might think. Figures for this section come from a Eurostat publication (pdf). They do, it is true, have an overall tax burden which was in '06 48.9% of GDP, in comparison with the UK's relatively stable 37.4%: so we have lower taxes in aggregate.However, the burden falls very differently. The implicit tax rate on consumption in Sweden was 28.1%, compared with the UK's 18.5%. On labour, the difference was even more marked: Sweden's 44.5% to the UK's 25.5%. Meanwhile, the implicit tax rates on capital (in '02, when the last figures were available for Sweden) were 29.5% (SE) to 37.1% (UK).Swedish direct taxes on labour are not vastly more than the UK's: a bit, but not much. It is clear enough that in the UK, the taxes on labour fall mostly directly; in Sweden, mechanisms akin to our own employer NI take most of the strain. Swedish employees see very little of the tax that they pay, because it never even goes onto their payslip. Meanwhile, consumption is taxed more heavily, something which British lefties dislike because, apparently, VAT is mildly regressive — although I had thought most of them were against the VAT cut because it is mildly progressive, which is confusing. And capital taxes are noticeably lower, although also more regularised: dividends and capital gains are taxed at the same rate, but overall the rates are lower.There are two stories here. The first story is that the Nordic governments are dashed efficient at what they do. If you gave an Anglosphere government the same level of taxation, you would get nowhere near the output of the Nordic governments.But the second story is as I said earlier. It is that Sweden is nothing like the socialist utopia lefties make it out to be: and it's nothing like the socialist hell-hole that righties make it out to be, either.