Nordic thaw: Shrinking the state in…Sweden?

posted at 12:31 pm on February 1, 2013 by Mary Katharine Ham

It is a rare report on any country that gives me hope any of us can tackle our mounting, disastrous debt problems, so I think I’ll revel in this one, from the unlikeliest of places— Sweden.

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.

The welfare state of the Nordic countries is still certainly generous, but it’s encouraging to see a society so defined by and proud of that lavishness can actually make some pretty fundamental changes. I mean, defined contribution pension plans and huge drops in tax rates and government spending as a percentage of GDP? I would have thought, if it sounds this good to me, it can’t be happening in Sweden, right? Wrong, and then there’s this:

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”.

So, what has allowed the region to make such shifts? Necessity, says the Economist, in a special report on the region, which is outperforming much of the EU in economic growth and combining that with high marks for citizen well-being. The region “got to the future first,” and had to deal with its fiscal problems:

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.

There are plenty of caveats, and reasons transferring such lessons could be tricky. These countries are small and largely homogenous, and one of the serious problems they face is integrating immigration populations and dealing with growing racial tensions. But it’s interesting and encouraging to see a region so idolized by the Left neuter (if not gore) many of liberalism’s sacred cows when fiscal necessity calls, and without the catastrophic consequences that are always so histrionically predicted at the mere mention of defined contribution or school choice. I’m happy for Sweden and others to maintain many of the generous benefits of which they’re proud as long as they can figure out how to do it without sinking themselves and making the rest of us pay for it.

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Don’t try to homeschool in Sweden.

besser tot als rot on February 1, 2013 at 12:33 PM

You can’t have successful socialism without capitalism first…

Apparently, our Democrats didn’t get the memo…

Washington Fancy on February 1, 2013 at 12:35 PM

Brian Palmer, an American anthropologist who lives in Sweden, worries that it is turning into “the United States of Swedeamerica”.

Renounce your citizenship and don’t come back if it’s so terrible.

Wassat? What? I can’t hear you, whiney toad.

Bishop on February 1, 2013 at 12:36 PM

Mind you, m00se bites can be pretty nasty.

The Rogue Tomato on February 1, 2013 at 12:36 PM

Sweden is also one of a handful of nations which places restrictions on baby names:

“First names shall not be approved if they can cause offense or can be supposed to cause discomfort for the one using it, or names which for some obvious reason are not suitable as a first name.”

So yeah, Sweden may be moving slightly in the right direction but the fact that your kid’s name has to be approved by the government isn’t exactly an indication of freedom.

Bishop on February 1, 2013 at 12:40 PM

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.

Here in the pricey Lakes Region of (Democrat) New Hampshire, I now see more Saabs and Volvos sitting either in used car lots or waiting for repairs at service stations than I actually see on the road.

And the other Swedish Big Company went out of business in 1982; that would be ABBA.

Del Dolemonte on February 1, 2013 at 12:41 PM

“We only have this little problem. We can’t afford it.”

Money line.

LetsBfrank on February 1, 2013 at 12:42 PM

Next we’ll hear that the Swedish Chef is moving back home to form the Moopets, a puppet cadre consisting of moose, reindeer and lolcat equivalents…he said the corporate tax rates there are very competitive… and that he can cook up 2/3 of the cast during long winters and share it with the other 1/3…

ajacksonian on February 1, 2013 at 12:46 PM

I mean, defined contribution pension plans and huge drops in tax rates and government spending as a percentage of GDP

Wow, government spending all the way down to 49% of GDP and a top marginal tax rate of just 57%. Impressive.

I wonder how that compares to ‘communist’ countries like, for example, China.

DarkCurrent on February 1, 2013 at 12:48 PM

Sweden is actually on a precipice. The government insists upon importing tens of thousand Muslim immigrants a year. The vast majority are on welfare and are very demanding about it. Rape has risen to astronomical levels for this country, with 6/7th committed by Muslims against the indigenous population. The Muslims have a special class of rights and are demanding more, including zones where no Swedes are permitted. At least 3 cities have been hit by religious riots accompanied by looting and of course rapes and beatings. The Swedes have reacted strongly by insisting that more Muslims will cure “the problem”.

pat on February 1, 2013 at 12:52 PM

Norway is starting to lean in that direction, too. They know the oil money won’t last forever, however wisely they husband it now. My son’s generation will be fine, but my grandkids? They won’t have the same public services as their parents have, and when I think how expensive things are there NOW (It was almost $40 to take the airport train from the city center to Gardermoen, about 20 minutes), I shudder to think how expensive things will be when the oil’s gone but people who do unskilled labor continue to be paid like professionals.

Bob's Kid on February 1, 2013 at 12:54 PM

I wonder how that compares to ‘communist’ countries like, for example, China.

DarkCurrent on February 1, 2013 at 12:48 PM

In fairness though Sweden doesn’t spend nearly as much as China does on a gulag system, secret police, forced abortions, or restricting access to the internet.

Bishop on February 1, 2013 at 12:55 PM

“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.”

Words never to be uttered by any liberal Democrat.

Bitter Clinger on February 1, 2013 at 12:55 PM

A virtually free national defense provided by other people tends to help too. The bottom line is if we took our ball home these welfare states would collapse in on themselves before you could say “missile defense”. Welfare statists are living in a fantasy land funded by us.

stout77 on February 1, 2013 at 12:56 PM

Of course, propose any of those changes in the good ole USA, and Democrats would have a hissy fit.

KS Rex on February 1, 2013 at 12:57 PM

Bishop on February 1, 2013 at 12:40 PM

Funny you mention that. I just read about Blaer Bjarkardottir yesterday.

CTSherman on February 1, 2013 at 12:57 PM

There are plenty of caveats, and reasons transferring such lessons could be tricky. These countries are small and largely homogenous, and one of the serious problems they face is integrating immigration populations and dealing with growing racial tensions.

Yes, good thing we don’t have those problems here.

KS Rex on February 1, 2013 at 12:59 PM

CTSherman on February 1, 2013 at 12:57 PM

Yah that’s where I got the info too. I was flabbergastified to find out that democratic nations would do such a thing.

Bishop on February 1, 2013 at 1:00 PM

Wow, government spending all the way down to 49% of GDP and a top marginal tax rate of just 57%. Impressive.

I wonder how that compares to ‘communist’ countries like, for example, China.

DarkCurrent on February 1, 2013 at 12:48 PM

China’s government spending is about 24% of GDP, I think. Individual income is taxed progressively at 3% – 45%. Captital gains tax is 20%, but with caveats, and can be as much as 60%.

The Rogue Tomato on February 1, 2013 at 1:02 PM

Dated a nice Swedish girl once. Had its benefits, though there ended up being a downside.

Bmore on February 1, 2013 at 1:02 PM

In fairness though Sweden doesn’t spend nearly as much as China does on a gulag system, secret police, forced abortions, or restricting access to the internet.

Bishop on February 1, 2013 at 12:55 PM

Minnesota is Sweden’s gulag.

DarkCurrent on February 1, 2013 at 1:03 PM

Oh, and the food is much better in China as long as you stay away from gutter oil and fake high-end Baiju.

The Rogue Tomato on February 1, 2013 at 1:04 PM

Minnesota is Sweden’s gulag.

DarkCurrent on February 1, 2013 at 1:03 PM

Actually we’re more known for our Germans, the Swede thing is a popular stereotype of the state.

Bishop on February 1, 2013 at 1:05 PM

Sweden is lost to the jihad.

As is the rest of Europe.

Rebar on February 1, 2013 at 1:05 PM

Dated a nice Swedish girl once. Had its benefits, though there ended up being a downside.

Bmore on February 1, 2013 at 1:02 PM

It was the m00se, right? The mighty m00se is majestic, but the bites can be pretty nasty.

The Rogue Tomato on February 1, 2013 at 1:05 PM

Sweden also has a population only a little bigger than New York City and a monolithic culture (except for the growing hostile muslim subculture).

You can get away with some socialist shenanigans in this situation. But even they’ve backed off of socialism after their crash in the 90′s. They’re still a far left country by American standards but still proof that statist policies don’t work well.

Also, I can’t wait for the Democrat party to start telling people that we can be as successful as European welfare states just as soon as we start taxing the middle class at 60%. Oh, that’s right. Lefties here lie about that essential ingredient to marginally sustainable centrally planned societies.

gwelf on February 1, 2013 at 1:05 PM

It is a rare report on any country that gives me hope any of us can tackle our mounting, disastrous debt problems,

A few lucky and smart countries have been bucking the trend. Another success story no one is hearing about is Suriname, which is benefiting from the gold boom and is also rapidly paying down its debt: http://www.reuters.com/article/2012/08/14/suriname-ratings-moodys-idUSWNA344120120814 and http://www.imf.org/external/pubs/ft/survey/so/2013/CAR011013A.htm

Doomberg on February 1, 2013 at 1:06 PM

Actually we’re more known for our Germans, the Swede thing is a popular stereotype of the state.

Bishop on February 1, 2013 at 1:05 PM

No kidding?

DarkCurrent on February 1, 2013 at 1:09 PM

The Rogue Tomato on February 1, 2013 at 1:05 PM

Lol! Nice to know someone gets my humor. ; )

Bmore on February 1, 2013 at 1:10 PM

By the way, if you ever travel to Sweden, I recommend you wear English Leather cologne. It makes a great m00se repellent. I wear it all the time, and in my travels through New Jersey, Maryland, Texas, and California, I’ve never once seen a m00se.

The Rogue Tomato on February 1, 2013 at 1:13 PM

No kidding?

DarkCurrent on February 1, 2013 at 1:09 PM

I shiite you not in the least. Many of the original small town churches as well as their cemeteries are “Germanic”, i.e. the names on the stones are mostly German, the church doors are inscribed in German, and the early Bibles and texts were written in German.

The Scandies came in later waves and consisted more of Norwegians and Danes than Swedes.

Bishop on February 1, 2013 at 1:15 PM

Bishop on February 1, 2013 at 1:15 PM

How’s that hook taste? ;)

DarkCurrent on February 1, 2013 at 1:16 PM

Actually we’re more known for our Germans, the Swede thing is a popular stereotype of the state.

Bishop on February 1, 2013 at 1:05 PM

And then there is my family (on my mother’s side) who reinforces the sterotype. :D My mother’s father is 100% Swedish (his parents came over as immigrants), and my mother’s mother is a big chunk of Norwegian.

Othniel on February 1, 2013 at 1:17 PM

They could have an economic boom if they cranked out more 6.5x55mm ammo.

mad saint jack on February 1, 2013 at 1:21 PM

How’s that hook taste? ;)

DarkCurrent on February 1, 2013 at 1:16 PM

You’re doing it wrong. You have to be outrageous in the comment and then land someone who goes at least partially ballistic.

This might help: http://www.musky-lures.com/pictures.html

Bishop on February 1, 2013 at 1:23 PM

What the hell is a mare’s nest? Do Swedish horses build nests?

Tc0061 on February 1, 2013 at 1:24 PM

You’re doing it wrong. You have to be outrageous in the comment and then land someone who goes at least partially ballistic.

This might help: http://www.musky-lures.com/pictures.html

Bishop on February 1, 2013 at 1:23 PM

A different technique, but I got ya. Now back into the pond you go…

DarkCurrent on February 1, 2013 at 1:26 PM

Bishop on February 1, 2013 at 1:23 PM

Had no idea what you looked like until now. Great catch!

Bmore on February 1, 2013 at 1:30 PM

“Whenever I give a lecture, anywhere in Europe, about economic reform, I always get the following response: ‘But you come from Sweden, which is socialist and successful—why should we launch free-market policies ?’ The simple truth is that Sweden is not Socialist.”

- Johnny Munkhammar, a Moderate Party member of the Swedish Parliament and the author of “The Guide to Reform”

“There is a general change in Swedish society. Social-democratic ideas are losing their grip on Sweden, and we are getting more and more individualistic.”

- Jenny Madestam, a political scientist at Stockholm University, New York Times, 9 September 2010

“By the late 1980s, though, Sweden had started de-regulating its markets once again, decreased its marginal tax rates, and opted for a sound-money, low-inflation policy. In the early 1990s, the pace quickened, and most markets except for labor and housing were liberalized. The state sold its shares in a number of companies, granted independence to its central bank, and introduced school vouchers that improved choice and competition in education. Stockholm slashed public pensions and introduced private retirement schemes, keeping the system demographically sustainable.

These decisive economic liberalizations, and not socialism, are what laid the foundations for Sweden’s success over the last 15 years. After the reforms of the early 1990s, Swedes’ real wages increased by roughly 35% in a decade. And, as businesses have become more productive and people’s incomes have risen, living standards improved. More people eat at restaurants now, more people travel abroad, more people buy DVDs and new cars. More people get more.”

The Non-Existent Stairway To Socialist Heaven In Sweden

Resist We Much on February 1, 2013 at 1:32 PM

Sweden is also one of a handful of nations which places restrictions on baby names:

They are probably to PC and dumb to ban names like Muhammed, Ahmed, Ali, Abdu,…

Tc0061 on February 1, 2013 at 1:32 PM

Swedes are like Germans, but without the sense of humor.

bofh on February 1, 2013 at 1:38 PM

“Had no idea what you looked like until now. Great catch!

Bmore on February 1, 2013 at 1:30 PM”

I don’t think that’s Bishop. He’s much more handsome than that!

AsianGirlInTights on February 1, 2013 at 1:39 PM

Shrinking the state in…Sweden?

…WHAT DIFFERENCE DOES IT MAKE!…JugEars wants to be Greece!

KOOLAID2 on February 1, 2013 at 1:40 PM

Oh, its Bishop alright.

Bmore on February 1, 2013 at 1:42 PM

Sweden is also one of a handful of nations which places restrictions on baby names

…we are just waiting for the coming Executive Order…. here!

KOOLAID2 on February 1, 2013 at 1:42 PM

Sweden is also one of a handful of nations which places restrictions on baby names:

“First names shall not be approved if they can cause offense or can be supposed to cause discomfort for the one using it, or names which for some obvious reason are not suitable as a first name.”

So yeah, Sweden may be moving slightly in the right direction but the fact that your kid’s name has to be approved by the government isn’t exactly an indication of freedom.

Bishop on February 1, 2013 at 12:40 PM

Unless of course you’re muslim, then it’s completely out the window. Besides, rest assured, regardless of what laws the PC swedish politicians put on the books, Mohammed and Fatima will never name their newborn son Sven.

NapaConservative on February 1, 2013 at 1:49 PM

Was it the Muslims that turned Sweden around? The current chances of a female in Sweden being raped by Muslims is 25%. The price for the benefits derived from Islam for their economy I guess.

BL@KBIRD on February 1, 2013 at 1:58 PM

Sweden is also one of a handful of nations which places restrictions on baby names

…we are just waiting for the coming Executive Order…. here!

KOOLAID2 on February 1, 2013 at 1:42 PM

I was surprised that Germany and New Zealand restrict names too. Some of this started out because countries like Sweden still had royal aristocracy who didn’t want the confusion of errant names when it came to inheritances. Others were considered copyrighted names..businesses, performers, etc. I can kind of understand those issues in a legal sense. But now it’s all about PC.

Deanna on February 1, 2013 at 2:02 PM

Countries like Sweden, Norway, Finland, Denmark, Estonia, etc. have depended upon a small handfull of companies for their tax bases and employment. In Finland for example, Nokia’s problems have been a major blow to their economy.

Deanna on February 1, 2013 at 2:06 PM

A virtually free national defense provided by other people tends to help too. The bottom line is if we took our ball home these welfare states would collapse in on themselves before you could say “missile defense”. Welfare statists are living in a fantasy land funded by us.

stout77 on February 1, 2013 at 12:56 PM

Exqueeze me? Baking powder? During the Cold War, (in which period Sweden enjoyed great economic prosperity), Sweden adopted the heavily-armed porcupine model of neutrality. They had universal conscription, and an extremely well-equipped military, with state of the art jets, tanks, and navy. Now, I’m very happy to read of their increasing economic freedoms, and their reduction of the welfare state, but Sweden never “free-loaded” on others for their defense. Sure, they’ve slashed their military spending since the fall of the USSR, but so has every other country in Europe.

quikstrike98 on February 1, 2013 at 2:36 PM

Pat Buchanan once said that welfare states become less attractive to a nation’s population as it gets more diverse. People trust those who resemble themselves, but I don’t think the Swedes are too keen on supporting a Muslim population with an increasingly radicalized element.

Daemonocracy on February 1, 2013 at 2:52 PM

They can count in Sweden, big difference.

Theworldisnotenough on February 1, 2013 at 3:01 PM

As a resident in Sweden, I estimate that nearly 70% of the money that I earn or is paid out by my employer (I’m a full-time employee plus I run my own business on the side) finds its way to the government in one type of tax or another. My small business is crippled with up-front taxes and bureaucratic red tape. I certainly could never afford to hire a Swedish employee, so I outsource at a fraction of the cost.

Most people I know are gaming the system to one degree or another, with little to no shame, and I could rattle off a hundred examples of complete and utter wastage of taxpayers’ money – but it would fall on deaf ears over here. Like everywhere else in the Western world, the ‘me, me, me’ generation have an incredible, insatiable sense of entitlement and I fear it isn’t going to end well.

The anti-immigrant political party (always prefixed in media reports as ‘far right’) now commands almost 10% of the vote and is the third largest party in the country. I believe the number of refugees allowed into the country last year was around 50,000 (Sweden pop. about 9 million). I don’t see that political party’s market share dropping any time soon.

Far from being all meatballs and spaghetti, there are a lot of cracks under the surface here that are just waiting to rupture. I think the horse is looking back at that closed barn door with great amusement.

Nordic on February 1, 2013 at 3:45 PM

Sweden is also one of a handful of nations which places restrictions on baby names:

Next thing you know, they will be telling you what kind of light bulb you can put in your house. But that’s just crazy. Even the worst Socialist country wouldn’t do that……….Wait a minute!

Alabama Infidel on February 1, 2013 at 6:07 PM

I’ve seen the future. And it doesn’t work.

AshleyTKing on February 2, 2013 at 12:44 AM

quikstrike98 on February 1, 2013 at 2:36 PM

That is cool about armed Swedes. But the other are loafers, man, the others!

AshleyTKing on February 2, 2013 at 12:46 AM