The collapse of the Swedish model

Johan Norberg wrote an excellent article that points out the dark sides of the "Swedish model" sung from the left. We have this interesting text here for you, we found it on the website Liberal Institute and we believe it is worth reading!

Social security pyramid
Social security pyramid

If Sweden left the EU and joined the US, it would become theirs the poorest state. If we use constant prices and recalculate purchasing power parity, we get the average gross household income at the end of the 90s. This revenue is $ 26 in Sweden and $ 800 in the United States. In addition, it should be borne in mind that Sweden has the highest tax burden.

The creator of the study, the Swedish Institute for Market Research, stressed that The lowest-income African-Americans in the United States now have a higher standard of living than the average Swedish household.

This report surprised many people. Mostly, however, foreigners rather than Swedes. Since the 70s, we have been accustomed to reports of Sweden lagging behind the rest of the world in wealth and income. It was a shock to Americans and Europeans, who saw Sweden as a great example, an exception capable of combining a large welfare state with a productive economy. If this social model were part of the United States, it would be considered a social problem. How could this have happened?

To understand this, we must understand that Sweden has never been an exception to the rule that wealth can only be created by free people through the free market.

Developments in Sweden

In 1850, Sweden was a poor developing country with a starving population. Starvation could not be prevented by redistribution. Even if all property were settled in the middle of the 19th century, it would still provide everyone with only a life of poverty. With absolute equality, the standard of living of the average Swede would be at the same level as the median income in today's Kazakhstan.

However, over the course of several decades during the 19th century, a group of politicians who volunteered for classical liberalism Sweden both freedom of religion, expression and movement, and economic freedom so that people could start a business and trade freely in the market. Free trade allowed Sweden to specialize in what was good, the wood and iron industries, and to buy food and machinery products for these things that the Swedes could not produce so cheaply.

The result has been economic growth and industrialization, which have made it possible to increase prosperity and investment to education and healthcare. Between 1860 and 1910, wages in industry increased by 170 percent, that is, much more than in the later period. Life expectancy in Sweden has increased by 10 years and infant mortality has fallen rapidly. At that time, Sweden was not a welfare state, but rather a minimal state. Until the First World War, public sector consumption did not exceed 6 percent of GDP.

The Social Democrats, who seized power in 1932, continued their liberal approach to business and free politics trade. Although government intervention grew slowly, in 1950 the public sector was smaller than in most countries - about 25% of GDP, about the same as in the United States and Switzerland. The economy also benefited from the fact that we stood outside the two world wars. Swedish businesses sold to both sides, the industry was not damaged and the young Swedes were not killed on the battlefields.

Between 1870 and 1970, Swedish growth was the largest in the world after Japan. In 1970, Sweden was the fourth richest member of the OECD, after the United States, Luxembourg and Switzerland.

State of prosperity, burden of prosperity

But then the welfare state began to grow, allowing politicians to redistribute the wealth created by the individual and the market. The economy continued to grow: given the initial conditions, good industry and educated and hard-working people, perhaps only the planned economy could thwart this development. However, growth was slower than in other countries. When you don't get much of yours investment, work and education, why would you invest, work hard or get a quality education? The welfare state easily consumed the wealth created by the market and made it difficult to create a new one. Since 1950 did not create a private sector (in net terms) not a single jobwhile the public sector has grown by at least one million employees.

During the 70s, the public sector became larger and unproductive and the labor market was regulated. From 1976 to 1982, public consumption increased from 50% to 65%. In the same period, the currency had to be devalued five times, by a total of 45%. The average growth rate fell by half to 2% in the 70s and continued to decline in the 80s. There was a great crisis in the XNUMXs.

After more than thirty years of high taxation and the growth of a welfare state, Sweden is no longer the fourth richest OECD country, but is 17th position. Between 1980 and 1999, the gross income of Sweden's poorest households rose by about 6%, compared with about three times as much in the United States.

Free market and trade were the basis for the Swedish miracle. Sweden was no exception, so it is not surprising that the shift from a free market to state regulation has undermined Sweden's continued success.

In 1934, two Swedish Social Democrat theorists, Gunnar and Alva Myrdal, explained that Sweden had very favorable conditions for a welfare state - wealth, a homogeneous population, a Protestant working morality and good education. They argued that if the welfare state did not work here, it could not anywhere else in the world. The rest of the world should seriously think that the Myrdals were right in this prediction.

Johan Norberg is the author of In Defense of Global Capitalism. Translated by Břetislav Klápště. Text in PDF on Libinst.cz.

0 comments

  1. haha, that's nonsense again, but it amused 🙂
    I would just be quite interested in how the author sees the link between the overall size of the public sector, personal income taxes and legal income taxes. (This was a rhetorical question;

  2. I think that every translated article should automatically refer to the original.

  3. Could the article about Sweden be found somewhere in the original, in English or in Swedish? I have witness friends I would like to send it to…
    Dekuji
    Radek Adamec

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