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Sweden: The Sensible (and Slowly Shrinking) Welfare State
Townhall.com ^ | June 11, 2012 | Daniel Mitchell

Posted on 06/11/2012 6:30:59 AM PDT by Kaslin

Sweden must be a schizophrenic country. Something strange is happening, after all, if a statist like Jeffrey Sachs and a rabid libertarian like yours truly both cited it as a role model in our remarks last month at the United Nations.

So who’s right? Well, it depends what you care about.

In a column for Bloomberg, Anders Aslund elaborates on Sweden’s efforts to reduce the size of the state.

Not so long ago, Sweden could claim world leadership in unmitigated Keynesian economics, with a 90 percent marginal tax rate and a welfare state second to none. …but in the last two decades the country has been reformed. Public spending has fallen by no less than one-fifth of gross domestic product, taxes have dropped and markets have opened up. …no turnabout has been as dramatic as Sweden’s. From 1970 until 1989, taxes rose exorbitantly, killing private initiative, while entitlements became excessive. Laws were often altered and became unpredictable. As a consequence, Sweden endured two decades of low growth. In 1991-93, the country suffered a severe crash in real estate and banking that reduced GDP by 6 percent. Public spending had surged to 71.7 percent of GDP in 1993, and the budget deficit reached 11 percent of GDP. …Sweden’s traditional scourge is taxes, which used to be the highest in the world. The current government has cut them every year and abolished wealth taxes. Inheritance and gift taxes are also gone. Until 1990, the maximum marginal income tax rate was 90 percent. Today, it is 56.5 percent. That is still one of the world’s highest, after Belgium’s 59.4 and there is strong public support for a cut to 50 percent. The 26 percent tax on corporate profits may seem reasonable from an American perspective, but Swedish business leaders want to reduce it to 20 percent.

Interestingly, the Swedish people and the Swedish elite (just like the Estonians, as I discussed in my takedown of Paul Krugman) seem to understand that there’s no going back to the statist era of the 1970s and 1980s.

Where are the left-wing intellectuals to challenge this new order? They have disappeared. The old socialist research organizations have closed down. The Center for Labor Market Studies was a state institution that generated propaganda, not research, and the government closed it. The Trade Union Confederation had a sophisticated research institute, which it eliminated for not being sufficiently political. The union economists, who dominated Swedish economic debate in the 1970s and ’80s, have been replaced by bank economists. The free-market right has influential research centers in Stockholm. After many years of absence from the debate, I attended a conference on the Swedish economy in the southern city of Malmo last month. …the 180 speakers represented the full range of Swedish views. I was amazed to hear how far the consensus had moved to the free- market right, even among Social Democrats and trade-union leaders. …The Social Democrats haven’t only joined the free-market consensus, but seem to attack the current government from the right, pushing for a better business environment. Gone are demands for the restoration of social benefits. Opinion polls have rewarded the Social Democrats for their right turn with sharply improved ratings.

In other words, Sweden is a lot like Canada – a nation that took a misguided turn to the left but since then has moved significantly in the right direction.

I’m not willing to trade places with either nation, but that may change at some point. The Bush-Obama policies of bigger government and more intervention have made America less attractive, while other nations have learned from their mistakes.

If Sweden adopts a flat tax and figures out how to cancel winter, I may have to move there.

P.S. Sweden’s government-run healthcare system can be quite emasculating.


TOPICS: Business/Economy; Editorial; Foreign Affairs; Government
KEYWORDS: sweden; welfarestate

1 posted on 06/11/2012 6:31:06 AM PDT by Kaslin
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To: WesternCulture

Ping.


2 posted on 06/11/2012 6:32:07 AM PDT by Army Air Corps (Four Fried Chickens and a Coke)
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To: Kaslin

In other words, Sweden is a lot like Canada – a nation that took a misguided turn to the left but since then has moved significantly in the right direction.


Here is the problem we face. Think of them as a powerful and maneuverable ski boat, while the US is an oil tanker.


3 posted on 06/11/2012 6:46:40 AM PDT by cuban leaf (Were doomed! Details at eleven.)
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To: Kaslin

Thank you...

I have been meaning to do my own, more in depth study, of the economics and politics of Sweden. It seems, they come up in every discussion these days as THE EXAMPLE of how to do things.

I hope, Rush takes this up as a topic. Could be highly illuminating!


4 posted on 06/11/2012 6:48:57 AM PDT by SomeCallMeTim ( The best minds are not in government. If any were, business would hire them)
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To: Kaslin

Heartening to see some on the other side of the pond (and our friends up North) coming to grips with reality.

I suspect it is starting to happen here, and since those on the Left are constantly trying to use Europe as a guide, it will be interesting to watch their tune change.

One thing that conservatives should point out, with regard to the U.S., is that this failure of big government was predictable, and ratcheting it back will be extremely painful, and that’s not counting the massive debt we built up in order to defer the eventual results of these disasterous policies. We could have avoided much of the problems if we had left social policies to the States and not federalized everything including the kitchen sink. We would have found what solutions worked (and didn’t) sooner, and the pain of correcting our course would have been far, far less.


5 posted on 06/11/2012 7:03:34 AM PDT by chrisser (Starve the Monkeys!)
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To: Kaslin

Export the denizens of our “inner cities “ to Sweden and see how much faster they sink


6 posted on 06/11/2012 7:09:18 AM PDT by uncbob
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To: uncbob

If these keeps up,all the socialists who aren’t already here in Minnesota will be coming here.


7 posted on 06/11/2012 8:02:16 AM PDT by TurboZamboni (Looting the future to bribe the present)
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To: uncbob

Export the denizens of our “inner cities “ to Sweden and see how much faster they sink


They have their own “inner city” problem — Malmo is a muslim enclave and breeding ground ... no non-muslims allowed... not even firemen (without police protection) to put out a fire.


8 posted on 06/11/2012 8:49:36 AM PDT by Mack the knife
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To: SomeCallMeTim

In your in-depth study, do not overlook Sweden’s muslim problem and let us know your findings.


9 posted on 06/11/2012 9:40:35 AM PDT by 353FMG
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