Ping to the Swedish Ping List.
Posted on 02/04/2013 12:44:50 PM PST by WesternCulture
THIRTY YEARS AGO Margaret Thatcher turned Britain into the world’s leading centre of “thinking the unthinkable”. Today that distinction has passed to Sweden. The streets of Stockholm are awash with the blood of sacred cows. The think-tanks are brimful of new ideas. The erstwhile champion of the “third way” is now pursuing a far more interesting brand of politics.
Sweden has reduced public spending as a proportion of GDP from 67% 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%.
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. This allowed a country with a small, open economy to recover quickly from the financial storm of 2007-08. Sweden has also put its pension system on a sound foundation, replacing a defined-benefit system with a defined-contribution one and making automatic adjustments for longer life expectancy.
Most daringly, it has introduced a universal system of school vouchers and invited private schools to compete with public ones. Private companies also vie with each other to provide state-funded health services and care for the elderly. Anders Aslund, a Swedish economist who lives in America, hopes that Sweden is pioneering “a new conservative model”; Brian Palmer, an American anthropologist who lives in Sweden, worries that it is turning into “the United States of Swedeamerica”.
There can be no doubt that Sweden’s quiet revolution has brought about a dramatic change in its economic performance. The two decades from 1970 were a period of decline: the country was demoted from being the world’s fourth-richest in 1970 to 14th-richest in 1993, when the average Swede was poorer than the average Briton or Italian. The two decades from 1990 were a period of recovery: GDP growth between 1993 and 2010 averaged 2.7% a year and productivity 2.1% a year, compared with 1.9% and 1% respectively for the main 15 EU countries.
For most of the 20th century Sweden prided itself on offering what Marquis Childs called, in his 1936 book of that title, a “Middle Way” between capitalism and socialism. Global companies such as Volvo and Ericsson generated wealth while enlightened bureaucrats built the Folkhemmet or “People’s Home”. As the decades rolled by, the middle way veered left. The government kept growing: public spending as a share of GDP nearly doubled from 1960 to 1980 and peaked at 67% in 1993. Taxes kept rising. The Social Democrats (who ruled Sweden for 44 uninterrupted years from 1932 to 1976 and for 21 out of the 24 years from 1982 to 2006) kept squeezing business. “The era of neo-capitalism is drawing to an end,” said Olof Palme, the party’s leader, in 1974. “It is some kind of socialism that is the key to the future.”
The other Nordic countries have been moving in the same direction, if more slowly. Denmark has one of the most liberal labour markets in Europe. It also allows parents to send children to private schools at public expense and make up the difference in cost with their own money. Finland is harnessing the skills of venture capitalists and angel investors to promote innovation and entrepreneurship. Oil-rich Norway is a partial exception to this pattern, but even there the government is preparing for its post-oil future.
This is not to say that the Nordics are shredding their old model. They continue to pride themselves on the generosity of their welfare states. About 30% of their labour force works in the public sector, twice the average in the Organisation for Economic Development and Co-operation, a rich-country think-tank. They continue to believe in combining open economies with public investment in human capital. But the new Nordic model begins with the individual rather than the state. It begins with fiscal responsibility rather than pump-priming: all four Nordic countries have AAA ratings and debt loads significantly below the euro-zone average. It begins with choice and competition rather than paternalism and planning. The economic-freedom index of the Fraser Institute, a Canadian think-tank, shows Sweden and Finland catching up with the United States (see chart). The leftward lurch has been reversed: rather than extending the state into the market, the Nordics are extending the market into the state.
Why are the Nordic countries doing this? The obvious answer is that they have reached the limits of big government. “The welfare state we have is excellent in most ways,” says Gunnar Viby Mogensen, a Danish historian. “We only have this little problem. We can’t afford it.” The economic storms that shook all the Nordic countries in the early 1990s provided a foretaste of what would happen if they failed to get their affairs in order.
There are two less obvious reasons. The old Nordic model depended on the ability of a cadre of big companies to generate enough money to support the state, but these companies are being slimmed by global competition. The old model also depended on people’s willingness to accept direction from above, but Nordic populations are becoming more demanding.
Small is powerful
The Nordic countries have a collective population of only 26m. Finland is the only one of them that is a member of both the European Union and the euro area. Sweden is in the EU but outside the euro and has a freely floating currency. Denmark, too, is in the EU and outside the euro area but pegs its currency to the euro. Norway has remained outside the EU.
But there are compelling reasons for paying attention to these small countries on the edge of Europe. The first is that they have reached the future first. They are grappling with problems that other countries too will have to deal with in due course, such as what to do when you reach the limits of big government and how to organise society when almost all women work. And the Nordics are coming up with highly innovative solutions that reject the tired orthodoxies of left and right.
The second reason to pay attention is that the new Nordic model is proving strikingly successful. The Nordics dominate indices of competitiveness as well as of well-being. Their high scores in both types of league table mark a big change since the 1980s when welfare took precedence over competitiveness.
The Nordics do particularly well in two areas where competitiveness and welfare can reinforce each other most powerfully: innovation and social inclusion. BCG, as the Boston Consulting Group calls itself, gives all of them high scores on its e-intensity index, which measures the internet’s impact on business and society. Booz & Company, another consultancy, points out that big companies often test-market new products on Nordic consumers because of their willingness to try new things. The Nordic countries led the world in introducing the mobile network in the 1980s and the GSM standard in the 1990s. Today they are ahead in the transition to both e-government and the cashless economy. Locals boast that they pay their taxes by SMS. This correspondent gave up changing sterling into local currencies because everything from taxi rides to cups of coffee can be paid for by card.
The Nordics also have a strong record of drawing on the talents of their entire populations, with the possible exception of their immigrants. They have the world’s highest rates of social mobility: in a comparison of social mobility in eight advanced countries by Jo Blanden, Paul Gregg and Stephen Machin, of the London School of Economics, they occupied the first four places. America and Britain came last. The Nordics also have exceptionally high rates of female labour-force participation: in Denmark not far off as many women go out to work (72%) as men (79%).
This special report will examine the way the Nordic governments are updating their version of capitalism to deal with a more difficult world. It will note that in doing so they have unleashed a huge amount of creativity and become world leaders in reform. Nordic entrepreneurs are feeling their oats in a way not seen since the early 20th century. Nordic writers and artists—and indeed Nordic chefs and game designers—are enjoying a creative renaissance.
The report will also add caveats. The growing diversity of Nordic societies is generating social tensions, most horrifically in Norway, where Anders Breivik killed 77 people in a racially motivated attack in 2011, but also on a more mundane level every day. Sweden is finding it particularly hard to integrate its large population of refugees.
The Nordic model is still a work in progress. The three forces that have obliged the Nordic countries to revamp it—limited resources, rampant globalisation and growing diversity—are gathering momentum. The Nordics will have to continue to upgrade their model, but they will also have to fight to retain what makes it distinctive. Lant Pritchett and Michael Woolcock, of the World Bank, have coined the term “getting to Denmark” to describe successful modernisation. This report will suggest that the trick is not just to get to Denmark; it is to stay there.
The final caveat is about learning from the Nordic example, which other countries are rightly trying to do. Britain, for example, is introducing Swedish-style “free schools”. But transferring such lessons is fraught with problems. The Nordics’ success depends on their long tradition of good government, which emphasises not only honesty and transparency but also consensus and compromise. Learning from Denmark may be as difficult as staying there.
Neighboring Norway indeed has oil, but this is by no means the only source to Norwegian prosperity.
Today, the Nordic countries are unique among Western countries in the sense that they for decades have displayed solid economic growth, have no problems with national debt (Iceland is an exception but is, without doubt, on the right track - is Greece, Portugal, Spain, Italy, the UK, France and the US?) and have managed to avoid strikes and unstable governments for a long stretch of years.
But what is the real secret behind this Nordic success? What could other governments learn from that of a country like Sweden?
Perhaps it's as simple as this:
- Avoid any measure that will increase national debt - Do whatever you can to downsize government influence over the economy - Stimulate education, research and entrepreneurship without employing hordes of bureaucrats (contrary to what most European nations have been doing for decades) - Let the organizations of employers and the worker unions settle their own disagreements without government intervention (this is not the case in America; Sweden has no government regulated minimum wages, America does)
The intelligence and character of a country’s people is also a major factor, which seems to be ignored in this otherwise interesting article. Exporting this model to a low average IQ country would be predictably unworkable.
Sure you would. You’d be born into a land that has the second highest reported rape rate in the world, after South Africa. It’s not Vikings that are doing the raping.
You’d be born into a land where 16% of the babies are born to “non-Western” parents.
You’d be born into a land so flourishing that there’s a welcome mat out for immigrants who have over 50% unemployment and welfare dependency.
You’d be born into a land where there are no-go areas for blue-eyed people like you, unless perhaps you really were a-Viking, sword and battle-ax in hand.
As has been pointed out by others, Swedes in America are pretty darn prosperous. I would not be surprised if they are on average better off than those who stayed in the Old Country.
- Guess you're right.
However, the average level of intelligence concerning China, Gabon and India is comparatively low, yet these nations sure enjoy high GDP growth rates.
But what about character?
Maybe economic growth, on a wider scale like that of a whole nation, has more to do with certain traits involving economic sense and the “room” provided for individuality in that very society?
Take Ingvar Kamprad, founder and sole owner of IKEA. Early in his life, he got rather convinced that an academic career was out of the question in his case. Later on, in an interview, he claimed he probably would fail to impress if performing an IQ-test.
To me, this tells the story of a very original person, a gifted businessman who doesn't mind cutting his losses, is stubborn enough to follow his own mind and wholeheartedly devotes himself to one mission in life; doing what he is good at.
Still, entrepreneurs like Ingvar Kamprad, Bill Gates, Lars Magnus Ericsson (founder of Swedish telecom giant Ericsson) and Henry Ford are in need of a surrounding environment that welcomes business initiatives in order to launch fruitful business initiatives.
In this area most national governments have a lot to learn.
My Grandma always said I was so dark because I was “a black Norwegian”. She claimed that the Vikings captured many dark, gypsy Princesses on their raids and brought them home to Norway for wives. My Dad said he thought that maybe those Vikings had captured some African Princesses. That would explain my coloring and my desire to hunt lions.
- Neither would I. Swedes and Scandinavians in general are, evidently, good at doing business.
Especially during the early phase of mass-emmigration from Sweden around the mid 19th century, there was little opportunity for gifted businessmen back in the old country. Sweden's economy might have exploded with growth from around 1870, but since America remained a far richer country at least until the outbreak of WWII, people continued to emigrate to USA from Sweden.
Ping to the Swedish Ping List.
“She claimed that the Vikings captured many dark, gypsy Princesses on their raids and brought them home to Norway for wives.”
- An amusing story, but I really wonder if it has much to do with actual history.
My impression is that black hair is more common among Norwegians than among Swedes, Finns and Danes. But why?
Swedish Vikings did a lot of journeys eastwards and southwards (mainly to countries today known as Russia, the Ukraine and Turkey), in other words to places were we find a lot of people with black hair. The Norwegian Vikings mostly went westwards.
Yes, the Norwegians went West. My great, great, great Grandfather roamed the prairies of New York with two, forty five caliber Herring strapped to his sides. He was known as THE LONE LUTEFISKER.
“HI HO HERRING AWAY!”
These days, there are a lot of dark-haired Norwegians, Swedes and Danes with names like Muhammad and Ahmad.
“My great, great, great Grandfather roamed the prairies of New York with two, forty five caliber Herring strapped to his sides”
- No offence, but was he, by any chance, the inventor of LSD?
Oh, you’ve heard of him.
Lutefisk......Now, there is a traditional dish that I do not understand. Having been in its presence, just once, my nostrils still burn and a gag reflex is induced by the mere recollection. I guess you acquire the taste during childhood......
Lutefisk......Now, there is a traditional dish that I do not understand. Having been in its presence, just once, my nostrils still burn and a gag reflex is induced by the mere recollection. I guess you acquire the taste during childhood......
Skin and hair color isn’t important from an intellectual standpoint. But it still plays a role in politics, although in a negative manner, namely in the way that people belonging to the Caucasian race - the whites - today are encouraged to express their apologies for having discovered and developed the World.
What’s the problem with people who can’t deal with sill, lutefisk, sushi, sashimi, gravlax etc?
Visit some other corner of the World besides your local KFC once in your lifetime.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.