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The New Swedish Model
The Foundation for Economic Education ^ | March 1, 2013 | Sandy Ikeda

Posted on 03/04/2013 3:50:59 AM PST by 1rudeboy

Among policy nerds back in the day, “Swedish model” meant the brand of social democracy practiced in Sweden in the second half of the twentieth century. (Somebody would usually crack wise about Anita Ekberg whenever the phrase was uttered.) But for a very long time, whenever the problems of socialism were discussed, it was common to hear people say as a kind of shut-up argument: “Ah, but socialism works in Sweden; what about the Swedish model?”
 
Swedish social democracy created an extensive welfare state—including comprehensive health care, generous unemployment benefits, and marginal tax rates commonly in excess of 70 percent. But that followed years of relatively free-market policies in the early twentieth century, which generated impressive economic growth. Government intervention in Sweden didn’t really get going until the 1960s.
 

The Economist on “Northern Lights”

 
Interventionists in the United States could learn something from what’s going on now in Sweden (although I fear they won’t). According to a recent spread in The Economist magazine
 
Sweden has reduced public spending as a proportion of GDP from 67 percent in 1993 to 49% today. It could soon have a smaller state than Britain. It has also cut the top marginal tax rate by 27 percentage points since 1983, to 57%, and scrapped a mare’s nest of taxes on property, gifts, wealth and inheritance. This year it is cutting the corporate-tax rate from 26.3% to 22%.
 
Compare these rates with the U.S. tax rates, under the 2013 tax law, of 39.6 percent on incomes above $400,000 (filing single) and 35 percent on corporations.
 
But in some sense the current dramatic policy changes in Sweden are just a continuation, after an interruption of several years, of a dis-interventionist trend that began in the 1990s. The “new” Swedish model is not really that new. Indeed, Sweden has climbed to 30th out of 144 countries in economic freedom according to FreetheWorld.com, compared to the United States, which has fallen to 18th, just ahead of Germany (31st) and far outpacing France (47th) and China (107th).
 

So What About the United States?

 
The federal deficit numbers in the United States, however, look worse compared to Sweden’s. Again, according to The Economist,
 
Sweden has also donned the golden straitjacket of fiscal orthodoxy with its pledge to produce a fiscal surplus over the economic cycle. Its public debt fell from 70% of GDP in 1993 to 37% in 2010, and its budget moved from an 11% deficit to a surplus of 0.3% over the same period.
 
The current federal deficit—the annual excess of government spending over tax revenue—is around $1.1 trillion.
 
The accumulated debt of the United States federal government now exceeds $15 trillion, which is roughly equal to the current gross domestic product (GDP), the dollar value of all goods and services produced in the U.S. economy in 2012. That means that the federal debt as a percentage of GDP is now slightly more than 100% percent (compared to 37 percent in Sweden). 
 
The United States does compare favorably to Sweden in federal spending as a percentage of GDP. For the United States, that’s about 39 percent, versus over 50 percent for Sweden. Including state and local spending boosts this figure somewhat over 40% percent of GDP for the United States, but that’s still significantly below Sweden's figure. Sweden, though, with one-thirtieth the population of the United States, has a per capita GDP of $57,091 to the United States’s $48,112.
 

If Sweden Can Do It, Can the United States?

 
Some fear that a debt-to-GDP ratio above 100 percent places the United States past the fiscal “point of no return”—that is, past the point where in modern times governments have been able to significantly reduce the percentage of debt to GDP. How did things get so bad?
 
Milton Friedman brilliantly characterized the main alternative politico-economic systems as follows: 
 
1) spending my own money on myself (capitalist model)
 
2) spending my money on someone else (Christmas model)
 
3) spending someone else’s money on myself (rent-seeking model)
 
4) spending someone else’s money on someone else (socialism)
 
He went on to say that the problem with socialism is that eventually you run out of other people’s money.
 
But if Sweden, a country in which the welfare state has been so entrenched over so many decades, can make such dramatic, even radical, changes in its interventionist habits, why couldn’t the United States? A comparably dramatic reform here—perhaps “revolution” comes closer to describing what would be needed—is certainly possible, despite staggering institutional barriers, tenacious entrenched interests, and sheer economic ignorance. 
 
The biggest obstacle, as I see it, is not having the strength of will to sustain the relentless intellectual and political battle needed to overcome all those other obstacles. And in all honesty, I find it hard to be very optimistic about that.
 

The Greek Model

 
Well into my sixth decade of life, one of the things I think I’ve learned is that radical change and the will to see it through are indeed possible—beyond any so-called point of no return—but only when it’s clearly a matter of life and death. There has to be a sense of urgency, even desperation, to the extent that you become willing to do whatever it takes to survive. But of course desperation is tricky; desperate people can easily make matters worse. It’s perhaps during crises, moments of widespread desperation, that a well-developed philosophy of freedom can have its finest moment by guiding desperate people toward real solutions.
 
So does the United States have to follow, say, hapless Greece—with its bloated welfare state, strangling regulation and taxation, and monetary profligacy—before our crony-capitalist system develops cracks wide enough for enough of us to see that embracing liberty and rejecting statism is our last, our best, and our only hope?
 
I’m afraid our economy will have to look much more like the Greeks’ before we’ll muster the will to follow the example of the Swedes.


TOPICS: Business/Economy; Constitution/Conservatism; Culture/Society; Front Page News; Government; Politics/Elections
KEYWORDS: sweden
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To: tired&retired
There is absolutely no way to make it through this nightmare without a new government formulation that wipes the slate clean, takes away everyone’s golden egg laying goose, screws the debtors, and lets the taxpayers get back to their individual businesses.

You nailed it, TR. That is precisely what needs to (and is) going to happen when this ponzi scheme runs its course. Let us pray that good Americans don't die in the process.

21 posted on 03/04/2013 2:57:05 PM PST by Windflier (To anger a conservative, tell him a lie. To anger a liberal, tell him the truth.)
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To: expat_panama

The chart at Heritage as well as this ranking both give lie to the belief that “economic liberty is liberty.” Clearly there is more as I wouldn’t want to live in the top five “countries”. They’re all nice in their own way, but you don’t have general liberty in those top five.


22 posted on 03/05/2013 3:55:26 AM PST by 1010RD (First, Do No Harm)
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To: 1rudeboy

I am disappointed, I expected some gorgeous blonde swedish model. But what do I find another story about socialism. I am going to saab!


23 posted on 03/05/2013 11:05:21 AM PST by hondact200 (Candor dat viribos alas (sincerity gives wings to strength) and Nil desperandum (never despair))
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To: 1rudeboy

Can we turn around the slide into socialism?

Of course we can - we have already done it. Ronald Reagan led the way and demonstrated to the world what really works economically. The Swedes, the Russians, the Chinese and many others took the lesson as their socialist economic policies hit the wall.

Unfortunately, turning back from socialism is a bit like making peace in the Middle East - its been done dozens of times. Those bastards never quit. Turning back socialism is not something that can ever be finished.

Eternal vigilance is the price of freedom.

Swedish models just don’t stand out as anything special:

http://images.nonexiste.net/popular/wp-content/uploads/2013/02/As-a-swede-whenever-I-see-something-about-Sweden-in-the-title.jpeg


24 posted on 03/05/2013 2:28:19 PM PST by BeauBo
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To: 1rudeboy

Can we turn around the slide into socialism?

Of course we can - we have already done it. Ronald Reagan led the way and demonstrated to the world what really works economically. The Swedes, the Russians, the Chinese and many others took the lesson as their socialist economic policies hit the wall.

Unfortunately, turning back from socialism is a bit like making peace in the Middle East - its been done dozens of times. Those bastards never quit. Turning back socialism is not something that can ever be finished.

Eternal vigilance is the price of freedom.

Swedish models just don’t stand out as anything special:

http://images.nonexiste.net/popular/wp-content/uploads/2013/02/As-a-swede-whenever-I-see-something-about-Sweden-in-the-title.jpeg


25 posted on 03/05/2013 2:28:26 PM PST by BeauBo
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To: 1rudeboy

Can we turn around the slide into socialism?

Of course we can - we have already done it. Ronald Reagan led the way and demonstrated to the world what really works economically. The Swedes, the Russians, the Chinese and many others took the lesson as their socialist economic policies hit the wall.

Unfortunately, turning back from socialism is a bit like making peace in the Middle East - its been done dozens of times. Those bastards never quit. Turning back socialism is not something that can ever be finished.

Eternal vigilance is the price of freedom.

Swedish models just don’t stand out as anything special:

http://images.nonexiste.net/popular/wp-content/uploads/2013/02/As-a-swede-whenever-I-see-something-about-Sweden-in-the-title.jpeg


26 posted on 03/05/2013 2:28:40 PM PST by BeauBo
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To: alloysteel
“The balkanization of America”

In a democracy, numbers dictate the future.

About 25% of the American electorate is Black, Hispanic, or Asian.

Their numbers are growing - through immigration, birth rate, and voter participation.

As a group, they consistently vote 75% for the Democrat Party.

About 40% of whites consistently vote for the Democrat Party.

That means the Democrat Party starts each election with about 49% of the vote.

Add in a relentlessly biased MSM and uninspiring center-left Republican candidates, and there is almost no possibility of reversing our money printing and debt suicide policies.

27 posted on 03/08/2013 2:39:46 AM PST by zeestephen
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To: zeestephen

Numbers are misleading when the demographics involved reside solely in big cities.


28 posted on 03/08/2013 4:10:18 AM PST by Yekaterina Derevko (Why does no one notice whent he Russians prepare for war....)
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To: Yekaterina Derevko
Not sure I understand your point.

Yes, Democrat voters are concentrated in large urban areas.

That concentration does help the Republican Party maintain a small majority in the House of Representatives.

And, it helps a little bit with state governors, U.S. senators, and some electoral votes.

But in general the political news for Conservatives is quite threatening.

Every day older white Republicans die off.

They are being replaced by Hard Left immigrant citizens, by their very Liberal first generation children, and by higher and higher levels of non-white voter participation.

The “new” Americans are demanding European Socialism and relativist values.

If the Republican Party caves on “Amnesty” - and I think they will cave - Conservatives will be permanently outvoted, and we will lose what little political power we still have left.

29 posted on 03/08/2013 2:16:05 PM PST by zeestephen
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