The Swedish Welfare State
An interesting article at The New Libertarian:
“The Swedish self image is special. That we are a moral superpower, a higher civilization, richest of them all, have the best welfare and are neutral since we are so good – it lives on”
– Johnny Munkhammar in the liberal magazine Liberal Debatt, number 4, 2003Sweden is in a sense an ideal natural experiment in economic policies. Sweden was an impoverished nation until capitalism was introduced in the country during the 1870s. Although the socialdemocrats had a strong influence during the first half of the 20th century, they were pragmatic and slow to expand the size of government. Sweden was one of the freest economies in the world during this period and experienced the second fastest growth in the world between 1870 and 1970, second only to Japan. During the 60s the socialdemocrats radicalized and a rapid expansion of taxation, the regulatory burden and government occurred. Sweden became the country with the most extensive welfare state in the world, the highest taxes, the strongest unions and the longest period of one party rule (the socialdemocrats have been in power 60 of the past 69 years). Between the 1960s and the 1980s the government’s share of the Swedish economy increased from about 30 percent (approximately the same as the US) to about 55 percent.
From this period and onward, the Swedish model has been on the decline. Entrepreneurship has declined to an international low, none of the 50 largest Swedish corporations have been started after 1970, the working morale has declined drastically and unemployment is staggering high. But the government does its best to hide the figures that show the bad performance of the Swedish economy. In this paper we discuss the drop in entrepreneurship and working ethics in Sweden and examine the countries high hidden unemployment.
The image of the Swedish welfare state abroad is still that of the beginning of the 1970s, when we did not have higher taxes than other European countries, respected private property and had a strong free trade policy. By highlighting the problems that have arisen in Sweden since then, we hope to give a more balanced view of the Swedish model.
As the Swedish welfare state has expanded and economic incentives reduced, entrepreneurship has dropped. In a study of 37 developed countries that was conducted in 2002, Sweden was ranked in the 31:st place when it came to entrepreneurial activity and was one of the countries where entrepreneurship had fallen the most between 2000 and 2002. An important contributing factor is that the marginal tax on entrepreneurs is approximately 70 percent and that they are required to pay additional fees to the state, such as when their employees go on sick leave.
Read the whole thing at The New Libertarian.
Dutch social democrats often refer to the Swedish model as the prime example of a good functioning welfare state: a system we have to copy in the Netherlands.
Perhaps some of our ‘progressive’ leaders should read the article at TNL.
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8 Responses to “The Swedish Welfare State”
I’m curious as to how those economic figures from Sweden compare to other countries in the region. And if non-economic factors like demographics is considered. Does the article address this? If not, then you can’t be certain if it’s specific to Sweden or to all of Europe.
And I don’t think I need to point out why you would need to be cautious regarding figures from a libertarian article about the Swedish welfare state.
Are businesses and entrepreneurs migrating to more friendly countries?
Alan: in the Netherland unemployment is… 5% or 4%.
Our economy is gaining strength. More entrepreneurs, more business activities, more investments, etc.
It would have no effect if progressives looked at Sweden. After all, they are able to ignore the broad sweep of history during the past half century, which demonstrates that prosperity comes to nations with limited constitutional government, secure property rights, and a free economy. These facts haven’t stopped them from cheering for those governments which practice precisely the opposite, from Sweden to Venezuela.
Nick Kasoff
The Thug Report
Sweden is one of the most ethnically homogeneous countries in the world. It might be instructive to look at the poverty, infant mortality, etc. rates among the Saami minority there before we generalize the Swedish experience too much.
Um, unless I’m mistaken the more heavily regulated countries of Scandanavia and parts of Europe are usually rated better on standards of living than the supposedly more free-market US. And, countries with government single-payer systems for health care like Britain have lower per-person costs and overall better health than the more private system we have in the US.
And more economically-regulated countries like France and Belgium have higher per-hour productivity than the US (though the US leads in per-worker productivity).
And as for the “broad sweep of history during the past half century“, the record seems to be more mixed than you admit.
Communism has failed, and socialism isn’t doing much better. But we’ve seen a leftist/socialist revival in Central and South America. In this country, to the dismay of economic conservatives like Andrew Sullivan, the government keeps growing and increasing spending.
Indeed, if you go back farther than a half-century, to the 1920′s or 1930′s and compared the government then and now, it has in fact grown enormously. Programs like Social Security and Medicare, which are popular now, were considered “socialism” back then. And as for defense spending…well, in 1938 the US Army was 19th in size. Now it’s part of the world’s only superpower.
” the broad sweep of history during the past half century, which demonstrates that prosperity comes to nations with limited constitutional government, secure property rights, and a free economy”
You mean like the US, whose government (to the despair of economic conservatives like Andrew Sullivan) continues to grow despite various promises to reduce government?
And how about efficiency? I thought free markets were supposed to increase efficiency–but if this is so, why does Britain pay less per-person for health care (and have overall better health) and why do France and Belgium have better per-hour productivity?
Could it be that sometimes (not always) government intervention promotes greater efficiency?
And this discussion hasn’t even touched on quality of life, which various surveys rate better in countries with more regulated economies (Sweden, Holland, Denmark) than in the more free US.
Arguments like this drive me nuts, because it’s always either/or and bad/good.
The social welfare state probably does discourage personal initiative and business entreneurship.
Capitalism probably does the reverse, but it is also conducive to a disregard for, and even expoitation of, those on the lowest rungs.
Every country has to cope with what is happening at this moment. It should be a question of adjustment, not see-dawing between two opposite poles.
Those making a fetish of the free market paradigm point to China as as their banner bearer, but they don’t talk about sweatshops and the forced relocation of farmers.
No one economic system can accomplish everything. It’s a question of balancing the scale in a rational matter by weighing the gains ans losses of going in either direction.
Sweden and France will have to make adjustments sooner or later. I hope they do it cautiously.