First, these countries are not technically socialist. By the YDSA’s definition, socialism entails a centrally planned economy with nationalized means of production. Although these countries have high income taxes and provide generous social programs, they remain prosperous because of their free-market economies.
Denmark ranks as the 10th most economically free country in The Heritage Foundation’s Index of Economic Freedom, which cites free-market policies and regulatory efficiency as reasons for the high standard of living. Sweden is ranked 15th and Norway 23rd, both with similar descriptions of thriving private sectors and open markets.
These three countries are clearly not operating under centrally planned economies, or their economic freedom scores would be significantly lower.
Second, the success of these countries is clearly based on a capitalist foundation, and it predates the expansion of social programs. Sweden, for example, became a wealthy country in the mid-20th century under a capitalist system with low tax rates.
Social programs and high tax rates were not implemented until the 1970s, which caused the economy to significantly underperform and unemployment to rise.
In recent years, Sweden has been privatizing socialized sectors, such as education and health care, cutting tax rates, and making welfare less generous. Even though tax rates and government spending remains comparatively high, open-market policies generate the revenue to support the spending.