Part Three of a Three-Part Series.
Joining Bloomberg with a man-bites-dog-like prediction about Bernie Sanders’ impact, The Independent recently quoted French economist Thomas Piketty as saying that socialism would be good for the U.S. economy, just as it is in the Scandinavian countries.
U.S. Senator Bernie Sanders
Piketty, you may recall, is the author of the best-selling Capital in the Twenty-First Century. His conclusions about capital and inequality have been debunked by many sources, but he is a best-selling author and he has a new book to sell, so what he has to say must be important. (If Piketty is donating his earnings to the underprivileged to boost equality, it’s not documented online.)
The problem with Piketty’s conclusion is that the Sweden, Norway, Denmark and Finland are not socialist countries. Like the United States, they have mixed economies, with some industries being controlled privately and others by the government.
The 2019 Index of Economic Freedom ranks all four countries, as well as the United States, as being “mostly free,” based on factors including government size, regulatory efficiency, rule of law and openness of markets. Until recently, Scandinavian countries ranked ahead of the U.S. on the index.
“To the extent that the left wants to point to an example of successful socialism, not just generous welfare states, the Nordic countries are actually a poor case to cite,” according to Forbes. “Regardless of the perception, in reality the Nordic countries practice mostly free market economics paired with high taxes exchanged for generous government entitlement programs.”
And Forbes points out that the Nordic countries can afford entitlement programs, because of the success they’ve had with capitalism.
At The Atlantic, meanwhile, staff writer Annie Lowrey wrote that, “The country’s staggering levels of income and wealth inequality are distorting the very fabric of the economy: raising saving relative to consumption and investment, dampening GDP growth, impeding mobility, and fraying the political system. There’s a good argument that reducing inequality would boost the country’s long-term growth rate, not hurt it.”
If there’s a good argument for reducing inequality, Lowery doesn’t bother making it, but she does link to a 2017 article from the Economic Policy Institute, whose core focus is income inequality.
Lowery also makes the assumption that socialist policies would reduce inequality. Typically, socialist countries shift money from the private sector to the public sector, making the country’s leaders billionaires, while everyone else becomes poor. Venezuela, for example, has the world’s largest oil reserves, yet most people living in Venezuela can’t even afford a pair of shoes.
Lowery at least concedes that a Sanders election could hurt stock prices, but she adds that, “Were Sanders’s election to hurt stock prices, Americans would largely not notice, at least not by looking at their own bank accounts, rather than cable news and the financial press. Stock ownership is now heavily, heavily concentrated in the hands of the very wealthy.”
So who cares if Bernie’s election tanks the stock market? The handful of Americans who are not very wealthy even though they own stocks can at least count on government assistance.
What the Billionaires Are Saying
It’s not that no one has sounded the alarm about a Bernie Sanders presidency. Lloyd Blankfein, a former Goldman Sachs chief executive, said on Twitter that Sanders would “ruin our economy.” Likewise, billionaires Jeff Gundlach and Stanley Druckenmiller have said that a Sanders victory would cause the stock market to tank.
Of course, they’re all billionaires – and Bernie Sanders says there should be no billionaires – so their opinion doesn’t count. Coverage of Blankfein’s tweet, as in The New York Times, inevitably includes a tweet from Faiz Shakir, manager of the Sanders campaign, saying, “This is what panic from the Wall Street elite looks and sounds like.
Other media criticize Blankfein for Goldman Sachs’ role in the financial crisis. Yahoo Finance ran a piece by Editor-at-Large Brian Sozzi with the headline, “Why former Goldman Sachs CEO Lloyd Blankfein should support Bernie Sanders.”
So would Bernie Sanders be the stock market’s best friend, as Kaissar suggested? With friends like Bernie …