Imagine a country that has weathered the global recession (5.5 percent growth last year v 2.8 in the U.S), where unemployment is dropping (7 percent v 9 percent in the U.S.) and where gross debt is manageable (45 percent of the economy v 100 percent in the U.S.).
That country is Sweden, the pinko-socialist country that many U.S. conservatives love to hate.
One reason Sweden is in a better position today: in 2007, the U.S. had a budget deficit equivalent to 3 percent of the economy. Sweden had a budget surplus equal to 3.6 percent of its economy.
Why was Sweden in a better place than the U.S. and many of its neighbors? First, Sweden was hit hard in the 1990s — a collapse of its commercial real estate and banking sectors. The political response:
The nation set a goal of averaging a 1 percent budget surplus over time and held to it — which left the government with lots of flexibility to engage in deficit spending when the economy went south.
Second, Sweden doesn’t do war. (But its compulsory military service transitioned to voluntary in July 2010.)
Third, Sweden is a small country (9 million people) with relatively homogeneous (87 percent Lutheran) values.
The first point reflects fundamental Keynsian public policy practice: develop surplus in good years to prepare yourself for the bad ones. (In my lifetime, we in the U.S. have deficit spent in both lean and fat years — with the exception of the Clinton years.)
The second point is related to the first: the Bush tax cuts, had they not been implemented, would have paid for the direct expenses of the wars in Afghanistan and Iraq (as well as other government spending – see chart of U.S. revenue and outlays).
The final point, however, may be more crucial — it is related to scale and direction. It is easier for a culture to move together with shared values and it is easier to have shared values with a population of 9 million than with a population of 300 million.
Have we — the U.S. — grown to a point of serious diseconomies of scale?
Known for gnawing at complex questions like a terrier with a bone. Digital evangelist, writer, teacher. Transplanted Southerner; teach newbies to ride motorcycles. @kegill (Twitter and Mastodon.social); wiredpen.com