TCS Daily


Hot Swedish Models!

By Johnny Munkhammar - March 1, 2006 12:00 AM

Sweden is a country of many economic and political contradictions: the highest tax pressure in the Western world and low corporate taxes, school vouchers and state-run universities, a regulated economy but a free private sphere. In short, part socialism, part market economy -- part big state and part freedom.

The Nordic countries, and perhaps Sweden in particular, are now often cited as countries to learn from for the rest of the EU. A word like "flexicurity" has been invented, the Sapir report (a panel tasked by the European Commission with assessing the prospects for EU growth) was very favorable to the Nordic countries and they rank high in Lisbon Agenda scorecards. And now, in March, EU leaders will devote their summit in part to learning from the Nordic countries.

As a Swede, in a way that makes me proud and happy. But on the other hand, looking at the contradictions, I feel obliged to point out that some if things are worth copying from Sweden others should be entirely avoided.

There are two good Swedens to learn from: One is the hugely successful country that literally went from rags to riches between 1890 and 1950, with one of the highest growth rates in the world. This was not least thanks to a tax pressure between 10 and 20 percent of GDP, a truly limited state, with open borders and very good conditions for entrepreneurs.

Or there is the Sweden that started reforming in the 1990s. Marginal tax rates were cut, markets were deregulated, the Central Bank was made independent, public pensions were cut substantially and some free competition was allowed in health care. School vouchers were introduced -- still even controversial in the US -- and markets were deregulated, the prime example being telecom, opening up for the development of Ericsson and a something like 75 percent decrease in the price for phone calls. This led to a higher growth and increased prosperity for several years around the Millennium shift.

But there is also another Sweden, a country that one can learn much from, but should definitely not imitate. It is the country that introduced an extreme version of the European Social Model of a big state. The tax pressure was raised from 20 percent in 1950 to some 50 percent in 1980. The state monopolized welfare services and social security. The labor market was highly regulated.

The Swedish experience from walking this path is that it is a dead-end. It is even counter-productive. And when it comes to this model, the big state, Sweden has not reformed. The tax pressure is still the highest in Europe. Ever since the taxes reached this level, growth has been declining. If Sweden were a state in the US, it would be the fifth poorest. During the past 15 years, average annual growth has been 1.4 percent -- lower than the average for the US, the OECD and the EU.

Employment has been developing very poorly. There are nine million people in Sweden, and some 1.5 million people of working age don't go to a job. The unofficial total unemployment is some 20 percent. In the EU-15 between 1995 and 2003, employment grew more in 11 EU countries than in Sweden. In 2004, according to UNCTAD, only 12 countries out of 183 in the survey had a net outflow of investments -- the basis for any job creation -- and one of them was Sweden.

Thus, many people are dependent on the state. Early retirement, sick leave, unemployment, temporary labor-market programs -- there are many categories. Employment is decreasing and dependency on the state is rising. About 60 percent of the adult population is to some extent dependent on the state.

And indeed, those welfare services that were said to benefit from public monopolies and a big state are deteriorating. Despite an increase of almost 70 percent in spending since 1979, Sweden's public health-care system is coming apart at the seams. The Swedish Association of Local Authorities and Regions reports that doctors see an average of four patients a day, down from nine in 1975. The number of hospital beds is down by 80 percent since 1975. More than 50 percent of patients have to wait over 12 weeks for an examination and then at least 12 more weeks for treatment. Public schools and public elderly care also experience great problems.

These are all natural results from this so-called social model. The big state stands in the way of prosperity and better living standards. In this regard, other countries -- in the EU or anywhere in the world -- should not copy Sweden.

Sadly, the market-oriented reforms that largely were introduced in the beginning of the 1990s have come to an end. Practically nobody wants to roll them back, the freer markets that were introduced seem to remain. But no new reforms in that same spirit have been introduced for almost the last ten years, with the exception of the so-called death tax, which was abolished in 2005. There may be several reasons for this: a shift in government in 1994 to traditional Social Democrats and the fact that the reforms coincided with an economic recession following the failed big state of the 1970s and 80s.

But the facts remain: no new reforms are introduced in Sweden and the positive effects of the old ones are fading. During the last year, according to the Index of Economic Freedom by the Heritage Foundation and Wall Street Journal, 18 EU countries increased their economic freedom, but Sweden had the lowest score in five years. Now, the greatest need is for Sweden to regain reform momentum and can learn from other European countries, not the other way around.

The author is the Director of Timbro, a free-market institute in Sweden.

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2 Comments

Security costs a bundle
You gotta admit, Johnny, that Sweden is one of the safest places on the planet to live. With the state (and the taxpayers) assuming the burden of financing most social risks, meaning any risk that two people may have in common, the "people's home" might as well be located inside Fort Knox's Federal Reserve Compound.

Problem is, there is an inverse relationship between security and freedom and a direct relationship between freedom and economic opportunity. Therefore, the more security a society opts for, the less economic opportunity it enjoys. Worse, social costs are steadily rising because the "mountain of meat" is shipping itself south to Spain.

The net result for Sweden is rising social costs together with rising economic opportunity costs due to forgone economic opportunity. This means less economic growth, less wealth, and less income from that wealth to pay the rising social costs.

You're darn right, Johnny. This mess is not worth repeating!

The liberated biz reforms came in time for...
..the larger realization that we been "securejunkies" and more peep talked of the state,not about the society we all are part of,yes the people are the commun and the stateway big state behaviour not wanted or expected. Here also a big mind reforming thing took place.Television-cable-came "free"(add-drivven and free as the soviet old party system when transparencywants is on) TV with the first comercial doin'its debut and started also redefine what we needed in relation to what we want.
here the new liberal freedom fighters started badmouth us-to our self.skimming every miscontent possible to direct as a vessel for own agendas like 30% cuts in statepensions cause the aspect "everybody"know true is that the pensionists are lazy frauds to have fallen ill and now the "truth", hungry wolfs hunts best, turning humanistic smalltown,reasonable nice Sweden to a place i soon dont share many values with.As the new dispice of fellow humans??are they morons??no,fighting for "freedom"(for the wealthy).
"the socialist teach all men are born equal,big state command your thoughts and it IS OK to blame "knarkarna"drugusers-for all! We dont have any want or ability for real solutions.Blame the Big state,The reason healthcare turning sadbad is because not enough of the toptax krona goes to private stockholders.AHAA take 12%from funding and invent a stockholders benefit.45 tratment weeks on psyciatric climnic in balticum to keep if...
-Sweden are pretty much barron on psychaitry-and the despice boils some more,Many many many short thinknig see it fit to belive weaknes is by choice and such idiots are not to spend any of our precious volvos on. And the sense of fright instills as we speak,The dangerous state of affairs with scared people in high No. are not in wiev! It all started in the 80s(palmes death WASinstrumental in the change-may not intentionally but many more than admited or seen were happy to se him in the puddle-the leading neocon partys-Moderata Samlingspartiet-
youth mov. sold a t-shirt with palme and the puddle with the words"tack å hej!" the long smelly palmehate had fielddays.

When the righwing-long time taunted as fools-finaly took the"problem formulation priviledge" from social awareness of effect and consequenses´,to mostly alarmistic crime-"jouralistsm" "the man shot the 4yo daughter 5 times in the pelvis area." is draining energy so one SITS DOWN IN THE BOAT. But new tunes online worldwise gives an opening to change-the web have no nationality and no possible fixed time.these are top qualitys for freedom!not owned such.
DONT BE AFRAID!

So.
"this is a one person talkback at timbro pro formulaters with high pekuniair strengt to sit around p***g sweden and the not suposed to gain on fortcoming cut of social security money down 30%.IF this beeing policy many hungry,young and old are taking whats needed no pay.food may not be a right but it nesecary.to OWN is a right.total improductive for the robbed-and a soul damaging comes with the choise to have over friction loaded-to be.but theres no way to pay,buy,simulate friction and without it life turns as in a shellter build on righteous demand on 3 or4 car garages.so the energy must be harvest lowclass sniffing.
and now we have a lower class with small or no selfesteem.in the old poor days the pride to at least study to ´technicans or physicians or just do go by the truth"theres no shame in poverty."All gone exchanged by "are you a loser"etics were money is only measurment valid.
and so in every walk of swedish life.
To own security is fredom!
To distibruate security widely is opression by taxation.
the newspeak at Orwell comes to mind
But both is out fishing,the element of secure state of things drain the freedom until freedom is to buy a potatoe with two wheelbarrows cash!
Both security models are false.
but this the real powerrwigs know and tell,no one listen- ha ha ha al the ol' way to banking.
So its poor times and lets drain thr poor even more.'

truism: det är de rika som har alla pengarna"
"its the rich who have all the moneY" dooh!

If anyone are to help the poor it is going to be the poor helping the poor.
Timbro peeps talk for salary
we who know we are richer than industry as long as we know there are some things we do not need, talks of passion or pathos or just agression.caled envious!by the greedy!
Both statements carry gnosis but to envy those moneysick
powerjunkies i wont ever.

No paid army ever took on any deeply convinced army fused by high held truhts and won cause if you are prepared to die since life sucks soo bad you are very scary to the sold buyed one.he wants to live to spend the sold and he don give **** for the local drivvel.
Like a CEO with psycopatic personal makeup dump short and take winnings selling anything to hell if he wants.

So.

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