This summer will bring more to Greece than just fiscal chaos. The Mediterranean summer will also bring tourists, many of whom will come from Europe’s colder north. While this year’s tourists will provide some of the usual economic benefits, there is one country whose citizens will also be able to bring lessons on economic growth and recovery. Sweden, often dismissed by free marketers and embraced by the left, provides some of the best examples of how privatization and sensible banking policy can lift a country out of an economic slump. The Greeks would do well to learn from the Swedish experience.
Up until the 1970s Sweden had strong market-oriented policies in place that increased wealth and standards of living thanks to reforms introduced at the end of the 19th century. These Swedish market reforms were wide ranging, impacting both business and law. Property rights were enforced, the government was limited, regulation was light, and a private banking sector flourished. Sweden managed to avoid direct involvement in the Second World War and so was able to avoid the economic hardship endured by the rest of Europe that helped introduce centralized governments and public service institutions.
In the 1970s the Swedish government implemented policies that were anti-market and pro-government. Taxes went up and many industries were subsidized. The currency was devalued and burdensome additions to employment law were introduced. The result was the economic crisis of the early 1990s.
In response the Swedish government reverted to free-market polices. In the years following the 1990s crisis, Sweden has deregulated whole industries and encouraged the privatization of public services. One Swedish hospital is listed on the stock exchange while the country's education system is the most market-friendly in the word, with a popular voucher program and for-profit schools. Sweden has also managed something almost unheard of in Europe: budget surpluses.
Greece did not avoid the Second World War, and since that war’s end Greece has endured civil war, military coups, dictatorship, and a sluggish economy. While struggling to reform their own domestic politics, the Greeks also worked to convince their European neighbors that they were European, not west Asian, cousins. Greek admission to the eurozone was in part a confirmation of Greece’s europeanism. Economists from across the political spectrum warned against expanding the euro too quickly. Nonetheless, the eurozone expanded and when the most recent crisis struck Greece was hit hard.
The eurozone is on the verge of collapse and the members of Greece’s dysfunctional political classes are trying to propose solutions that will put the country on a course of fiscal sanity. Although ancient Greek thinkers such as Aristotle thought of barbarians as natural slaves, policies adopted by the descendants of such barbarians offer some of the best chances for the restoration of Greek pride and dignity.
For all of the expertise and motivations behind the proposals to solve the eurozone crisis no one has yet suggested polices that have a proven track record of success. If the Greeks want to keep their generous welfare system and still be prosperous, Sweden offers the best example of how this can be achieved: Deregulate industries, cut red tape, introduce the profit motive into education and healthcare, and reform the banking sector. All of these would not only promote economic growth but would allow Greece to stay well within the spending restrictions imposed by international bodies.
If Greeks find the political will to back austerity and market solutions they might yet restore some of the dignity foreign bureaucrats have dismantled. Unfortunately, it looks like hard-left parties will dominate in coming elections, with neo-fascist parties being well placed to act as coalition builders and key negotiators. Such results would further impede serious fiscal and institutional reforms.
Matthew Feeney is Assistant Editor of 24/7 News