In Norway, Start-ups Say Ja to Socialism

[kpete]

In Norway, Start-ups Say Ja to Socialism
BY MAX CHAFKIN

We venture to the very heart of the hell that is Scandinavian socialism—and find out that it’s not so bad. Pricey, yes, but a good place to start and run a company.

"The tax system is good—it's fair," he tells me. "What we're doing when we are paying taxes is buying a product. So the question isn't how you pay for the product; it's the quality of the product."

Dalmo likes the government's services, and he believes that he is paying a fair price.

AN EXPANSIVE MOOD Jan Egil Flo (left), Simen Staalnacke (center), and Peder Børresen, the co-founders of Moods of Norway. In the early days of their $35 million company, they lived almost rent free, courtesy of the government


Norway, population five million, is a very small, very rich country. It is a cold country and, for half the year, a dark country. (The sun sets in late November in Mo i Rana. It doesn't rise again until the end of January.) This is a place where entire cities smell of drying fish—an odor not unlike the smell of rotting fish—and where, in the most remote parts, one must be careful to avoid polar bears. The food isn't great.

Bear strikes, darkness, and whale meat notwithstanding, Norway is also an exceedingly pleasant place to make a home. It ranked third in Gallup's latest global happiness survey. The unemployment rate, just 3.5 percent, is the lowest in Europe and one of the lowest in the world. Thanks to a generous social welfare system, poverty is almost nonexistent.

Norway is also full of entrepreneurs like Wiggo Dalmo. Rates of start-up creation here are among the highest in the developed world, and Norway has more entrepreneurs per capita than the United States, according to the latest report by the Global Entrepreneurship Monitor, a Boston-based research consortium. A 2010 study released by the U.S. Small Business Administration reported a similar result: Although America remains near the top of the world in terms of entrepreneurial aspirations -- that is, the percentage of people who want to start new things—in terms of actual start-up activity, our country has fallen behind not just Norway but also Canada, Denmark, and Switzerland.

If you care about the long-term health of the American economy, this should seem strange—maybe even troubling. After all, we have been told for decades that higher taxes are without-a-doubt, no-question-about-it Bad for Business. President Obama recently bragged that his administration had passed "16 different tax cuts for America's small businesses over the last couple years. These are tax cuts that can help America—help businesses...making new investments right now."


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read the rest:
(posting this especially for mr pete)

http://www.inc.com/magazine/20110201/in-norway-start-ups-say-ja-to-socialism.html/1

[wildeyed]

1. Good article.

I own a business. We are considering an expansion, but fear of losing my kid's college money and retirement is definitely a factor in holding back. If I knew that was taken care of, I would probably be bolder and in the process create a few jobs and value for the economy.

[Spitfire of ATJ]

2. The Right Wing is convinced people are naturally lazy and need to be forced to work...

Makes you wonder why they defend that idea....

[The Straight Story]

3. k&r(nt)

[Faryn Balyncd]

4. Norwegian "socialism" is more capitalistic than degenerate, pirate "capitalism":

Those who have finessed themselves into leadership positions in our present system of corporatism prefer to think of themselves as "capitalists". But the reality is that, since the turn of the millennium, the real, inflation adjusted return to those who have actually provided the capital (whether they be teacher pension funds, those who have invested through their IRA's, Keogh plans, qualified plans, or in non-tax-deferred accounts), has been miniscule.

Unlike today, in American capitalism in the 1950's and 60's, savers who provided capital for American industry shared in the benefits: Holders of savings accounts received interest a few percentage points over the rate of inflation. And borrowers were not charged 18-20% interest. In my own experience, when I applied for a personal loan at an Austin bank in the 1960's, I was charged 9% interest. Bankers actually made a living with an approximate 5% spread between what they paid depositors and what they charged those who took out loans (and depositors made a few points above inflation).

Today, even with CPI rigged to underestimate real inflation, depositors are paid a fraction of 1%, well less than inflation, and the banks charge credit card lenders with good credit perhaps 18-20+%. Their spread has increased (by a factor of 3 to 4) from ~5% to ~17-20%.

Yet, those that actually "own" the banks (the teacher pension funds, the IRA & 401K savers, the small businesswoman with a Keogh or qualified plan, for example), even though they provided the capital for the banking enterprise, have been making an inflation adjusted return close to zero.

Every one --- workers, consumers, and savers (the capitalist) who provide the capital for American corporatism --- has been getting the shaft except for those at the top: CEO compensation has risen from 24 times average worker compensation to roughly 262 times average worker compensation, even as many of these CEO's were running their businesses into the ground.




So now we learn that start-ups by entrepreneurs are thriving in "socialist" Scandinavia, even as incompetent pirates in the boardrooms of American corporations pay themselves unprecedented compensation, while seeing to it that the average Americans whose pension funds supply the capital receive less than the rate of inflation, and their workers receive ever lower wages (if they are not cheated out of their pension by a vulture capitalist scam).



It would appear that Norwegian "socialism" is actually a more fertile ground for entrepreneurs, and for genuine capitalism, than is to be found in the fetid boardrooms of degenerate corporatism.

[scarletwoman]

5. Excellent post - so well said!

I wish it were an OP so I rec it!

[Yo_Mama]

6. Norway's corporate tax rate is 28%

http://www.kpmg.com/global/en/services/tax/tax-tools-and-resources/pages/corporate-tax-rates-table.aspx

It is true that in the US large corporations benefit from huge tax loopholes and pay little tax, but every small businessman in the US doesn't have the Congressional pull.

Small businesses in the US face a high level of taxation with a relatively low level of government services. The Norwegian way of life is very different - businesses over there benefit from both the social benefits accorded to their workers and a very business-friendly environment.
http://www.doingbusiness.org/data/exploreeconomies/norway/

[Faryn Balyncd]

7. Interesting points.

The high level of social benefits does appear to be a significant benefit to business.

The KPMG link is somewhat misleading. Specifically, KPMG presents a "corporate tax rate table" which purports to show US corporate tax rates as the highest in the world at 40%. When one clicks on their link & read the fine print, one learns that they calculate this figure by starting with the marginal tax rate on the highest bracket, that is the rate at which reported taxable income over $18,333,333 is taxed, adding in state taxes of from "less than 1% to 12%, averaging approximately 7.5%". KPMG then concludes: "...generally resulting in a net effective rate of approximately 40 percent" (in the U.S.), while KPMG reports Norway to have a 28% corporate tax rate, and the global average to be 24.05%.

KPMG conveniently omits to say is that the Norwegian 28% corporate tax rate is a flat rate applied from the first krone (not a rate applied only to hypothetical amounts of reported taxable income over $18,333,333, as in their U.S. calculations).

Of greater significance, KPMG omits to point out that their statement that KPMG's conclusion that U.S. corporate tax rates generally result in a "net effective rate of approximately 40 percent", is totally false: The truth, as the Wall Street Journal, and Wikipedia, report, is that "At 35%, the United States has the highest nominal corporate tax in any of the world's developed economies. However, the effective corporate tax rate in 2011 fell to 12.1%, its lowest level since before WorldWar I." (If we were to accept the KPMG figure of "approximately 7.5%" average state corporate income tax to this federal effective rate of 12.1%, we arrive at a combined federal & state effective corporate tax rate of 19.6% in the U.S., compared to the Norwegian 28% and the global average of 24.05%).

It would appear that KPMG has an agenda other than communicating truth.

[Yo_Mama]

10. Oh, US tax rates for small corporations are VERY HIGH.

In the US, our small business tax rate is almost uniquely high. A small corporation with taxable income of 300K would pay 39% on $200,000 of that taxable income.

Then, oddly, the tax rate drops down to 34% from $335,000 to 10 million. That is of course just the federal tax, and there will be state tax, sometimes local tax.

If we want to generate jobs, we need to cut corporate tax rates for smaller businesses. The system we have created favors very large corporations and punishes small businesses, and of course all startups tend to be small at one point in time or another. That is where a lot of the new jobs are created, so our system literally suppresses job creation.

We also have the pass-through option, but with the recent increase in personal tax rates that is about the same now, I think.

I don't see why a small business in the US should be paying that much more than a small business in Norway or Denmark or Sweden.

I agree that the large corporations aren't paying their fair share of tax, but what's often forgotten is the environment for small businesses. This is nothing that anyone would rationally design, and I think it is really proof of how skewed our tax policy is by political lobbying.

[Egalitarian Thug]

8. K&R. Thanks for posting. n/t

[Heywood J]

9. One other point to make about Norway.

http://www.norway.org/ARCHIVE/business/businessnews/oilproduction/
https://en.wikipedia.org/wiki/Energy_in_Norway#Fossil_fuels

Norway is the third largest oil exporter on Earth (8th largest producer), producing around 3 million barrels of oil/day, and the world's sixth largest producer of natural gas, having significant gas reserves in the North Sea. Norway also possesses some of the world's largest potentially exploitable coal reserves (located under the Norwegian continental shelf) on earth.

They can afford to do as they like.