Writing in Bloomberg, Anders Aslund becomes the latest to point out that Sweden isn’t the total social welfare state so many Americans who wish one for the U.S. perceive it to be:
The [currently in opposition] Social Democrats [who were the architects of Sweden’s 20th century planned welfare state] haven’t only joined the free-market consensus, but seem to attack the current government from the right, pushing for a better business environment. Gone are demands for the restoration of social benefits. Opinion polls have rewarded the Social Democrats for their right turn with sharply improved ratings.
Sweden is still offering good social welfare, but more efficiently and sensibly and increasingly through the private sector. This model of falling taxes and public spending is rapidly proliferating from the north of Europe toward the south, and the northern Europeans have little tolerance for the statist conservatism and fiscal negligence of Southern Europe. Nor do the Swedes understand the fiscal irresponsibility of the U.S., while they still admire American research and innovation.
Before the “headwinds” in Europe (precipitated largely by an overextended debt-laden welfare state) that President Obama blames for a supposedly stalled recovery (even though the private sector isapparently doing fine), liberals (the real kind!) in Sweden were preaching the free-market to a wayward continental Europe:
The European Social Model is being heavily discussed in Europe. Some still laud it, but its problems are obvious, with low economic growth, an aging population coupled with “pay-as-you-go” pension systems, and widespread persisting unemployment…
For a time in the early 1990s Sweden abolished all farm subsidies and had one of the most deregulated agricultural sectors in the world, before unfortunately being forced to re-regulate when entering the European Union’s (EU) Common Agricultural Policy.
In 1996 Sweden deregulated its market for electricity, allowing private competition in distribution. Today, half the nuclear power plants are owned by a German corporation.
Telecommunications, postal services, and public transportation have largely been deregulated, opening up new markets. The state monopolies have been abolished, and the telephone company has been partially privatized.
The introduction of a voucher system has opened up a market in which parents have a high degree of choice over where to send their children to school.
Health care has largely been opened to private alternatives, thanks to the doctors’ and nurses’ labor unions. In fact, one of Stockholm’s largest emergency hospitals, St. Göran’s, is a private company listed on the stock exchange.
Sweden has a comparatively low corporate tax rate of 28 percent. The process for opening a business is relatively straightforward, ranging from one week to a couple of months. Sweden presents few barriers to foreign investment, maintaining restrictions only in some limited national-security–related sectors. Most commercial banks in Sweden are privately owned and operated. Banks are allowed to offer a full range of services, and foreign banks have access to the sector. Few working days are lost to strikes. It is easy to close down factories and move investments abroad. There is no legal minimum wage. Unlike in other European countries, retailers do not have their hours regulated. In 2005 the government abolished inheritance and gift taxes. The Swedish Competition Authority has forcefully reacted against local politicians who restrict full competition.
Sweden has high immigration per capita and was, along with the Britain and the Republic of Ireland , the only original EU member not to impose restrictions on workers from new member countries.
The pension system has been reformed from the problematic “pay-as-you-go” formula to a program funded according to the performance of the economy. In the fully funded system all Swedes choose investments for their pensions. If the economy does not grow, pensions will be low, and there are mechanisms that prevent the system from going bankrupt.
These changes, which would have been seen as radical if enacted in the “Anglo-Saxon” market model, have paid off for Sweden , permitting a 2006 GDP growth forecast of about 4 percent. Inflation was lowered to an average 1.4 percent last year.
Granted, it is an easy task to become a paragon of liberalization in today’s Europe . But it shows that what many Europeans favorably refer to as the Swedish model is not applied anymore in Sweden . The remnants of the old model—high income taxation (60.3 percent on average), the high value-added tax (25 percent), the regulated labor market, and the insufficiently reformed social-redistribution systems—are the problematic areas in the Swedish economy, not its bold vanguard.
If someone had predicted in the 1980s that Sweden would follow the social-democratic model set by France or Germany, I as a libertarian would have agreed. Today I can say that Europe should embrace the Swedish model.
You wouldn’t guess Sweden started moving away from its total social welfare model as early as the 60s given the tendency of central planners and their apologists n this country to use Sweden as an example of the wonders of central planning and Keynsian economics. Austrian economist Bob Murphy, via Tom Woods:
Bob Murphy notes that Paul Krugman, in his typical style, misleads about what’s been happening in Sweden. Bob writes: “Did you have any idea thatSweden ran a budget surplus of 2% of GDP in 2011? Me neither. Reading Krugman certainly did[n’t] give me any reason to suspect that. Krugman had produced a chart and implied that the United States was engaged in more austerity than Sweden. Go look at his post. He calls it ‘spending side austerity’ presumably to cover his bases. But it’s not like he says, ‘Oh, admittedly, Sweden is running a budget surplus, but I’m saying that’s because of their loose monetary policy which has boosted revenues and allowed them to reduce transfer payments…’ No, none of that. He just implies that conservatives are insane, puts up an irrelevant chart, and then gives a very misleading analysis of it.”