Liberals Used to Say Swedish Socialism Works, Now It’s Falling Apart (Swedish Models Included)

Cyrus Massoumi

Those who would like to make America’s government and economy more European invariably hold up Sweden as a socialist’s paradise, proof that big government can deliver big results.   According to Nima Sanandaji, President of the Swedish think-tank Captus, however, Sweden’s economic success is was based upon its social and cultural capital, as well as its unique historical circumstances. Indeed, Sweden came out on top in spite of, rather than because of, the socialist policies.

Even if we wanted to try Swedish socialism, we don’t have the necessary foundational elements

Sanandaji develops this thesis at some length in a June 2011 article in New Geography entitled “Sweden:  A Role Model Capitalism?”  Briefly, Sanandaji explains that the foundations for Sweden’s later success was created between 1870-1936, before the Social Democratic Party became ascendant.  The giants of Swedish industry that are known the world over — Volvo, Ikea, and Alfa Laval — arose during this era of largely unregulated capitalism. Low taxes and pro-business attitudes reigned, with manifest results.

Sweden’s continued success under a socialist model rested upon social and demographic factors outside of government’s reach.  According to Sanandaji, “The perceived advantage of Swedes over other countries rose before the rise of the welfare state.” The factors underlying Sweden’s success are the “Lutheran work ethic” and the “cohesion of a largely homogenous population with particular social values.”

That Swedish culture matters can be seen by the fact that Swedes who have emigrated enjoy the same economic and health conditions as those who stayed behind. Thus, the poverty rate for Swedes living in Sweden is identical to the poverty rate for Swedes living in America (6.7%, using the same threshold calculations). Furthermore, even though the Swedes who stayed home get the benefit of the enormous State-run healthcare apparatus, they have much the same life expectancy as Swedes in America.  For example, says Sanandaji, “In 1950, before the rise of the high tax welfare state, Swedes lived 2.6 years longer than Americans. Today the difference is 2.7.” The Swede’s enormously expensive socialized medicine system has produced only a negligible difference in its citizens’ health.

The problem for those governments that wish to emulate Sweden’s economy and social welfare system is that they cannot force their citizens to adopt a Lutheran work ethic nor can they create a largely homogenous population (unless they want to engage in large scale social engineering or, the other extreme, genocide).  What lessons can the struggling state learn from the Swedish model? Simply that growth and wealth creation is best left to individual entrepreneurs, and the best action the government can take is to create a pro-business environment in which these individuals have the highest chance of success.

But here’s a question:  even if America could replicate Sweden’s strong economic foundation, Lutheran work ethic, and once-homogenous society, is Swedish socialism really good as the American wannabes say?  The facts say otherwise.  The data suggestions that, not only would it not be good for Americans, it’s not even good for the Swedes.

Sweden’s “highest standard of living” claim is measured only by socialist, not free market, metrics

Sweden’s biggest calling card is that it has the world’s highest standard of living.  That claim, however, is measured by a different metric than in America:  Sweden measures equality in wealth redistribution.  It ignores national economic status, the Swedish crown’s (Krona’s) buying power, the number of people working for productive aims or creating innovations, and its Gross National Product. Interestingly, it’s impossible to find any data based upon these factors that would justify “the world’s highest standard of living” claim.

You can start a business in Sweden, as long as you don’t plan on getting rich

For decades, Sweden has always been a great place to start a new business — as long as no one planned on becoming economically successful.  The more lax economic policies instituted in the 1990s increased new startups by 25%, but Sweden’s economic attitude towards business hasn’t changed much since the ’70s, when entrepreneurs were treated like pariahs. Ikea founder Ingvar Kamprad told Forbes magazine that the Swedish tax bureaucrats would frequently accuse him of using people and “only wanting profits.”

If Sweden was a state, its median income would rank it as America’s poorest

In 2002, the Swedish Institute of Trade reported in 2002 that “the median household income in Sweden at the end of the 1990s was the equivalent of $26,800, compared with a median of $39,400 for U.S. households.” If Sweden were introduced to the U.S. as a new state, it would rank as the poorest according to these standards. This is in light of the fact that these numbers are gross values — before taxes — and Sweden has some of the highest taxes in the world. Indeed, Swedes have such a low median income that they fare worse than the lowest American socio-economic class, working-class black males.

The jobless and homeless are treated working citizens sometimes voluntarily join their ranks

It’s true that those without jobs or homes, or those who are mentally ill, are not found parked on Sweden’s streets.  That’s because state subsidies allow them to live in optimal conditions and to provide little work — and if they are made to work for their benefits, their jobs are in a public enterprise that the government runs, which helps keep unemployment statistics low.  Workers can earn up to 570 paid days off a year.  That’s not a typo, by the way.  We know there are only 365 days a year, but the Swedes can in fact earn more paid days off than days they actually work.  The number of people on this cushy government welfare is growing because there’s nothing in Sweden’s cradle-to-grave system that discourages their lackadaisical habits. Indeed, productive Swedes often join the ranks of the unemployed as a form of early retirement.  All of these people, who could be working but who are, instead, living on government benefits or doing make-work government jobs not officially considered “unemployed” in most Swedish statistics.  After making the observation that loons don’t wander the streets of Sweden, P.J. O’Rourke had one more thing to say in his book Eat the Rich:  “The last time I walked through Gamla Stan, I didn’t wonder where the crazy people were. In Sweden the craziness is redistributed fairly. They’re all a little crazy.”

The 55% Swedish income tax is the base tax, not the total tax, Swede’s pay

Sweden’s income tax — 55% of the Gross National Product — is the highest income tax in the world.  That’s just the beginning of the accounting.  The tax is also coupled with sales taxes, property taxes, and other excise taxes and tariffs. Nor is the Swedish sales tax the 8% or 10% tax that makes American’s wince.  Instead, this “value added tax” ranges all the way to 22.5% on a huge number of goods, including most foods.  Under this tax structure, the Swedish government’s total ownership of public goods is roughly 64% — and closing in on 70% once you include all these other forms of taxation. And keep in mind that these numbers do not include government-owned means of production, which control about a full quarter of Swedish productivity.

The strong family values that the Swedes boast about hide some ugly secrets

Sweden’s history of domestic relations is chock full of civil rights abuses. Starting in the 1930s, and going right up to 1974, the government forcibly sterilized 62,000 Swedes that government researchers had determined came from “racially inferior” families.  Not just parents, but also children, came under the government knife.  During this same period, a Swedish Television documentary revealed that Sweden lobotomized at least 500, and possibly as many as 4,500, “undesirables,” in some cases without their families’ consent. These practices both predated and extended beyond the Nazi’s twelve year reign of terror over Germany.

Swedish education only looks good in the New York Times

What America shares with Sweden is a universal free education system — and what Sweden shares with America is a system that is decayed and on the verge of financial collapse.  Sweden pays an average of $7,000 a year per student.  Swedish children must attend nine years of elementary school, but high school and college are optional. To encourage high school attendance, the government pays students about $100 a month.  By college, many of the young people have been programmed to join the unemployed and collect benefits.  Some high school students actually teach at the elementary schools, while the colleges offer a curriculum similar to that offered in Swedish high schools fifteen years ago.  As a further way to disguise unemployment figures, many welfare recipients are required to take Mickey Mouse courses at college, so that they can be recorded as “students,” rather than “unemployed,” thereby perfectly illustrating the general sense of misuse of the Swedish education system.

Sweden’s alleged “third way” is just another name for socialism

Swedes often argue that their system is not socialism, since the government only owns about one fourth of the Swedish main lines of production.  This has to be understood, however, in the context of government’s ownership of 70% of the Swedish Gross National Product, not to mention the fact that it controls industries through heavy regulation. By mandating who can provide what products and services, and controlling media, education and public utilities, Sweden’s “Third Way” between capitalism and socialism is nothing more than fake capitalism, which achieves the socialist goals of redistribution of wealth and products without actually calling most industry “publicly owned.” Socialist economics around the world use this “Mixed Economy” trick to give governments progressive control over trade.

The lesson of the Third Way? Free trade is not free just because someone calls it “free.”

Sweden has superior unionization — if you like it when unions control the government

Unions in Sweden have become hyper-organized, leaving government involvement obscure and questionable. Super-union organizations, such as the LO, have official affiliations with the Social Democratic Party, and work closely with the authorities to push domestic reform provisions they feel are “in the interest of the workers.”

It depends how you define “strong economy”

People who want us to be more like Sweden like to boast about its “strong economy.”  They seem to define that a bit differently than the rest of us do.  For example, even as the government spent 70% of the Swedish Gross National Product in the ’90s, for 4 years the national debt doubled and for 3 years the nation experienced negative financial growth.

Socialist success story?

Whether Sweden’s massive welfare state, with its cradle-to-grave public aid, ultra-high taxation, and dishonest economic policies, is a success is something we’ll leave entirely up to you, the reader.

 

in a June 2011 article in New Geography  “Sweden:  A Role Model Capitalism?),

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