Is Sweden a Supermodel for Economic Reform and Recovery?

C. Fred Bergsten of the Peterson Institute in the Wash Post:

Sweden was the world’s third-richest country in 1968 but became a massive welfare state in the 1970s and 1980s and a prototype for how not to run an economy. It slid to No. 17 in the global income rankings and experienced a deep financial and real estate crisis in 1991, according to a 2012 study from the Research Institute of Industrial Economics. To its enormous credit, Sweden reversed course with consummate skill and political courage; it has become a paragon of sensible economic and social policy....

After its crisis, Sweden reduced public expenditures by 20 percent of its gross domestic product, slashing social transfers such as unemployment benefits and sick-leave compensation. It cut its public debt in half (its debt, as a proportion of the economy, is now about half that of the United States). It cut marginal tax rates and simplified its tax code so much thatnearly two-thirds of Swedes simply confirm by phone that the declaration automatically prepared for them by the tax authorities is correct. The banking system was thoroughly reformed and emerged unscathed from the global financial crises.

Structural reforms were also adopted. Successive governments deregulated one market after another and privatized as market conditions permitted. All children receive vouchers so their parents can choose private or public schools at public expense. Swedish social security became a true insurance system, rather than a pay-as-you-go one with huge unfunded liabilities as in the United States.

None of this is to say Sweden's famous social safety net was stripped bare.

Sweden remains a social welfare society, and government spending still accounts for half of its economy; it finances all education and health care, as is common throughout Europe. Sweden did not dismantle the social system but, in addition to drastically reducing its costs, adopted macroeconomic and structural reforms to make it sustainable and greatly enhanced its efficiency by privatizing the delivery of many educational and medical services. The country’s guiding principle is that a successful social welfare society must be fiscally conservative and administratively efficient.

More here.

Sweden is no libertarian paradise, but its bounce-back conforms to the ideas widely discussed here: Cut spending, liberalize all sorts of policies to create better austerity measures that right-size government and lay the groundwork for economic growth.

Back in 2010, Reason TV asked, Sweden: A Supermodel for the U.S.? Watch it now.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Fluffy||

    Sweden's experience is interesting, but I am more and more convinced that the "headline" economic policy items - marginal tax rates, social welfare spending, minimum wage level, etc. - of the US economy aren't the factor stifling growth in 2013.

    What's stifling growth is that state and local governments now micromanage all new economic activity using the zoning and permitting process, effectively giving us procedural socialism. No one can undertake any new economic activity if any substantial portion "of the community" doesn't want it around.

    That system is a recipe for the destruction of growth. Basically it will allow only the amount of growth needed to avoid desperation. Communities will allow growth when they're desperate for it, and not allow growth when they aren't.

  • sarcasmic||

    You want to allow people to engage in economic activity without first asking permission and then taking orders from wise public servants? That's chaos! Anarchy! You're crazy!

  • Robert||

    It's like when NY was desperate for science teachers in its schools, and lowered the ridiculously high barriers for just a brief period.

    But I think there are significant factors on the national level as the article says too. I think the problem is that socialism or fascism becomes very inefficient, hence expensive, when the regime tries to hide that it is social-democratic or fascist. If a country is allowed to admit that it is social-democratic or fascist, it can operate more cheaply & efficiently with less drag on the private sector, and less net loss of freedom.

  • Drake||

    Sweden has the population of a mid-sized U.S. state with basically one government. Think New Jersey without a federal government on top of it. The Swedish business people I've worked with are stunned at our multiple layers of bureaucracy and red-tape we go through to get anything done here.

    Unless we get a serious case of Federalism, we'll never be near as efficient as Sweden.

  • Fluffy||

    Our multiple layers also give NIMBY groups multiple chances to litigate.

    "Oh, so you passed through the Act 250 process successfully? Yeah, well, we just found a super-secret federal Agricultural Department regulation to sue you over!"

  • Chafed Walnut||

    Hanging fiber from existing utility poles? Environmental impact study.

    What's the environmental impact of stringing a piece of fiber optic cable on the same poles that cable TV, power, and phone are delivered? Better do the study and make sure it's okay.

  • ||

    Dude, just moving from Connecticut to New York blew my mind in terms of the layers of bureaucracy and red tape. I went from a place where there was the town, and the state. And I never saw or dealt with anyone from the state, except for the occasional state police cruiser driving through. Then I moved to a place where there was the village...and the town...and the county...and the state. With police at every level. And politicians at every level. And regulations at every level. And bullshit at every level.

  • Drake||

    Moved from CT to NY? You have to be a Sadomasochist. Enjoy the pain.

  • ||

    You clearly have a learning disability, as you didn't pay attention to a word I said. Enjoy the pain.

  • Irish||

    Moved from CT to NY? You have to be a Sadomasochist. Enjoy the pain.

    Correction. Moved from Connecticut to New York to Seattle.

    He must fucking hate himself and want to suffer.

  • ||

    So you're saying he's looked in a mirror.

  • Rhywun||

    A lot of that shit is loved by the residents, mainly as a tool to keep out their inferiors - that's how you wind up with dozens of villages in LI that each cover a few square blocks of mansions.

    Isn't CT the only state (I think besides Alaska) that has no functioning county government?

  • Robert||

    No, that was a trend that swept a lot of New England a few decades back. There was a phase-out. At least Mass. did the same, I'm not sure which other states. What had to happen 1st was for towns to expand to occupy all the space, with no more unincorporated areas.

  • Robert||

    Plus, no blacks. Meanwhile in the USA there's tension between those who want redistribution and those who are afraid their race will be plundered in favor of another, so there's a lot of very roundabout and obscure statism instead of open socialization.

  • sarcasmic||

    I remember an interview with ABBA about their songwriting. Apparently they never wrote anything down the day they came up with it. Only the day after. They figured that if it wasn't catchy enough for them to remember it the next day, then it wasn't catchy enough to get radio listeners to buy the record.

  • Brandon||

    That's ABBA? I thought it was Ace of Base.

  • ||

    People fail to realize that the homogeneity of Sweden is a huge factor in its ability to do, well, anything. It is a massively homogeneous society, and the US can never approach that, as it is too mixed. Our heterogeneous nature has definite advantages, but it will never allow for anything like Sweden.

  • ||

    Advantages? Like what? That I have to share the same air as a disgusting guinea like you?

  • ||

    Aren't you a Polock? Do you make your submarines with screen doors?

  • ||

    That's a half truth at best!

  • Pro Libertate||

    Japan has the same situation, only with Japanese people instead of becalmed Vikings.

  • KPres||

    Yeah, it's interesting how they got a small amount of muslim immigration and the next thing you know they're burning cars in the streets. So much for their tolerant paradise.

  • Pro Libertate||

    V-I-K-I-N-G-S. It's important to remember this.

  • KPres||

    Seriously, though, the only reason they went socialist is because they were afraid the Soviet Union was going to invade, so the pushed out a bunch of commie propaganda through the academy and the media, and the next thing you know they had themselves a popular movement.

    Soon as the USSR collapsed they started backtracking, and they're going to continue to (and being successful doing so) much to the squeals and dismay of American leftards.

  • Robert||

    I don't get it. You saying they thought the USSR wouldn't invade a socialist country?

  • Pro Libertate||

    Curiously, also Vikings. The Vikings run the UK, all of Scandinavia, Iceland, Greenland, much of North America, and Russia. Vikings, Vikings, Vikings.

  • Medical Physics Guy||

    Hopefully you didn't have to read the Guardian crowd op-eds after those riots. They claimed the riots were all because Sweden cut their welfare state by a few percent? And not because Sweden decided to import a few hundred thousand Somalis and make no effort to assimilate them? Twas insane.

  • Killazontherun||

    The other thing they fail to realize is Sweden was an advanced capitalist power house for four hundred years before turning towards socialism. Schumpeter was right about the unfortunate tendency of later day generations taking the wealth of their nation for granted and falling for decadent political ideologies.

  • Killazontherun||

    takeing falling

    change one phrase and noun/verb agreement goes to shit.

  • KPres||

    The problem is the incentives for the intelligentsia (as Schumpeter noted). In a centrally planned economy, they're the ruling class, whereas in capitalism the best they can hope for is a job teaching a class full of obnoxious ingrates. So, quite naturally, they teach central planning.

  • ||

    Do we want to listen to some Swedes singing as cheesily as possible about Gustavus Adolphus? Of course we do.

  • JW||

    I was flipping through the channels last night and came across a concert on Palladia, in Bulgaria, that featured Megadeath, Anthrax and 2 other metal bands I can't recall.

    Check that, hier is the lineup.

    You'd still be in an staccato, orgasmic coma today.

  • ||

    They've been doing that Big Four tour for a while. Looks like fun. I saw Megadeth and Slayer a while back, and I never saw so many old drunks with dirty, greasy, male-pattern balding long hair.

  • JW||

    That sounds about right, although there was a healthy youth contingent there.

    I lasted about 5 minutes before I had to change the channel.

  • ||

    You're telling me that peace sells, but you're not buying?

  • JW||

    I only buy on sale.

  • Killazontherun||

    Sounds like the Paul McCartney concert I went to twenty years ago.

  • ||

    Do you ever listen to music that has a rhythm to it?

  • ||

    The gallop counts as a rhythm, so yes.

  • JW||

    Not in those pants, it's not.

  • JW||

    Structural reforms were also adopted. Successive governments deregulated one market after another and privatized as market conditions permitted. All children receive vouchers so their parents can choose private or public schools at public expense. Swedish social security became a true insurance system, rather than a pay-as-you-go one with huge unfunded liabilities as in the United States.

    Mein gott! Those obstructionist Rethuglicans got their mitts on Sweden!

  • KPres||

    Also, they have no minimum wage, no death tax, their tax system is more regressive than ours, and their corporate income tax is only a little more than half the size of ours.

    It's a Rethuglican hell!!!

  • Killazontherun||

    A Rethuglican hell? Is everyone who gives you a quest mission a white middle aged redneck, and are guns so prevalent, you can't even stomp a bunny sized critter with your 4wheeler without it shitting pistols and munitions?

  • KPres||

    No, put part of their taxes go to the state-sanctioned Church of Sweden, so there's that.

  • RightNut||

    A Swedish team did win The International 3, so maybe their they are doing something right.

  • Pro Libertate||

    So, in related news, I went to Ikea for the first time this past weekend. I was charmed by their efficient socialistic capitalism.

  • Pro Libertate||

    Sorry, IKEA. Must fear their trademark cops.

  • JW||

    Trigger warning!

    IKEA: Everything we do is off by one fucking millimeter™

  • Pro Libertate||

    We bought some shelving units for the kids. I had a couple "FUCKING FUCK YOU FUCKING SWEDE FUCKS" moments, but nothing too bad.

  • Brandon||

    The Poang chair and footstool is the most comfortable thing I've ever sat in for under a hundred bucks. Other than that, IKEA is fairly mediocre.

  • Pro Libertate||

    You know what the world needs? A Trader Joe's for furniture.

  • Killazontherun||

    You got me something from IKEA for my birthday? What did I ever do to you?

  • The Late P Brooks||

    "If it works in Finland, it will obviously work here."

  • Pro Libertate||

    It's an upgrade from hearing, when I was a kid, about Soviet efficiency.

  • Jordan||

    simplified its tax code so much thatnearly two-thirds of Swedes simply confirm by phone

    That says nothing about how complex the tax system is.

  • Jon Lester||

    For what it's worth, they also limit their arms exports to the other Scandinavian countries.

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Video Game Nation: How gaming is making America freer – and more fun.
  • Matt Welch: How the left turned against free speech.
  • Nothing Left to Cut? Congress can’t live within their means.
  • And much more.

SUBSCRIBE

advertisement