Sunday, April 14, 2013

Sweden, Socialism and Culture

From The Swedish Model Reassessed: Affluence Despite the Welfare State by Nima Sanandaji.
The Swedish model is often dramatized in the public policy debate, described as either a social democratic utopia or a failed socialist experiment. These views are far from the truth. Sweden is a successful country in terms of low poverty rate and long life expectancy. However, these factors have much to do with Swedish culture that existed already when taxes were still relatively low.

As Milton Friedman has previously noted, the millions of US residents of Swedish descent also have a low poverty rate. As is shown in this report, they combine this with a living standard that is over 50 percent better compared to Swedes living in Sweden. The transformation of Sweden from an impoverished agrarian society to a modern industrialized nation is a rarely mentioned, but quite significant, example of the role of free markets.

One should remember that the golden age of Swedish entrepreneurship, where one successful firm after another was founded in the small country and gained international renown, occurred during a time where taxes and the scope of government were quite limited. Sweden shifted to radicalized social democratic policies in the 1960s, 1970s, and the 1980s.

However, this transformation was not successful, as it led to long-term diminished entrepreneurial growth, lagging behind in terms of wealth compared to other industrialized nations, and an erosion of previously strong work and benefit norms.
The move towards high taxes, relatively generous government benefits, and a regulated labor market, is related to the situation in which Swedish society has had difficulty integrating even highly-educated immigrants, and where a fifth of the population of working age are supported by various forms of government handouts.

It is, however, important to remember that Sweden, like other Nordic nations, has compensated for these policies by improving economic liberty in other fields. Some reforms, such as the partial privatization of the mandatory pensions system and voucher systems in schools and health care surpass what has been possible to implement in most developed nations.

Swedish society is not necessarily moving away from the idea of a welfare state, but continuous reforms are implemented towards economic liberty within the scope of welfare. The rise of government has been stopped and even reversed in recent
years. The nation is again returning to the free market policies which served it so well in the past.
Living in Sweden 1970-75, I attended an international school with children from the four corners of the world, with children from developed economies as well as what was then still termed third world economies. I recall a 9th grade debate on Socialism and the Swedish experience and the consensus being that Sweden had made a success of the theories of socialism but in a fashion that could only be achieved in a culture such as Sweden's. Which is much the conclusion that Sanandaji comes to via a much more rigorous and data based route than our junior high school discussion.

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