Let us start with the obvious: everyone thinks Sweden is a mess. They are the country that imposed a higher than 100% tax rate on author Astrid Lindgren. In the 1970s and 1980s, their tax and spend ways buried the country. Their spending compared to GDP reached a peak of 67% in 1993!! By comparison, our bloated federal government is spending around 25% of GDP. In the same period, they fell from being the fourth-richest country in the world in 1970 to being the 14th in 1993. Sweden became a rallying cry for French socialists and an anti-rallying cry for American conservatives.
They have nothing to teach us. . . right?
Actually, they do.
Indeed, Sweden and the gang have become a model for many countries recently. They have a solid blue print for how to reform the public sector to be efficient and responsive. Businesses are thriving. And China is studying Norway’s social spending model, which actually is self-sustaining, unlike ours. In almost every survey of economic competitiveness to population health to reported happiness, the Nordic countries are pretty much near the top of the charts.
Shocking huh?
Do you know how they did it? Conservatism.
In the 1990s, the Nordics moved right. Sweden cut their spending from 67% of GDP to 49%... still large, but lower than France’s and lower than Britain’s. Still, it’s way higher than ours, right? Actually, when you factor in federal AND state spending, our “government” spends $6.28 trillion or 41% of GDP. So Sweden doesn’t outspend us by that much, quite frankly.
The Nordic countries have balanced their books too. Sweden’s budget deficit is 0.3% of GDP, ours is 7% and rising fast.
Sweden’s “oppressive” corporate tax rate is 22%. The US rate is 35% plus state taxes.
They aren’t the socialists you think they are either. Denmark and Norway have private firms run public hospitals. Sweden has a universal voucher system for schools which allows private firms to compete equally with public schools. And the performance of all schools is measured and the results are publicly available to all citizens.
The other thing that makes Sweden work is a real opposition to corruption and cronyism. They believe in free trade, not protectionism. They don’t do bailouts or protect famous companies like Saab or Volvo.
There are problems, of course. They employ too many people in their public sector – about 30% of their workforce (compared to 14% here). Their social spending is too high as well because they don’t means test. And their taxes are still too high, as they end up chasing away their most motivated young people.
Still, there is much here to consider. These are conservative ideas: lower taxes, balanced budgets, transparency, competition, privatization, and ending corruption and cronyism. Think about what the US would be like if we could bring those principles here and marry that with the dynamic American public’s desire to achieve the American dream. If conservatism worked for Sweden, then it will work here. Let’s give it a try.
They have become more conservative which has mitigated the problems that have beset countries such as Greece or Italy. One interesting observation by William Voegeli made in his recent article in National Review is that in 2010, Sweden's revenues were 99% of government spending, Denmark's was 95%. Compare this with the U.S.A's 75%. In other words, Sweden has financed their heavy benefits through higher taxation. The United States finances it's lighter benefits through borrowing.
ReplyDeleteHis contention has always been that it has been part of the American character to disdain higher taxes. This is plainly seen in even the Democrats inability to push vastly higher taxes on any, but the highest wage earners. And yet, we clearly like our benefits. Conservatives have been equally unable to convince people to give up benefits to corral the debt.
Of course, the corporate tax rate is a joke. Out tax rate on businesses is among the very highest. making it less desirable for companies to start new business or expand here. In any event, a very interesting essay, Andrew.
Thanks Jed. I think there is a lot of really interesting information here:
ReplyDelete1. A 100% voucher system for education plus teacher accountability.
2. The spiritual home of socialism has privatized hospitals.
3. The amount of benefits Swedes get compared to us is amazing seeing as how they aren't paying that much more than we are. The reason is that our system is hopelessly wasteful.
4. Our corporate tax rates are higher than Sweden! That should shock people.
5. Good government means no corruption, transparency, spending within limits.
These are all great things we should be advocating and the fact we can point to Sweden as our example is great because if the worst of the worst of the worst socialists can do it... then surely we can too.
There is one point in there I haven't been able to think through yet, and that is the corruption angle. Maybe it is a cultural thing, maybe a smaller, more homogenous populous less prone to the ethical lapses we see that come with power. In his essay on Sweden, "The Modern Welfare State" he mentions that my generation "the boomers" were the first Swedish generation to grow up in the socialist model and exhibited, according to some studies, a subtle change in character that helped lead to their financial collapse in the early 90's. The real story is that they somehow found their way to change their model in a way that separates them. We seem to be struggling with that, but it would be nice if our politicians could learn the real lessons offered here.
ReplyDeleteI know libs that love to bring up Sweden. Citing this sort of stuff will drive them out of their minds.
ReplyDeleteThanks Andrew.
Jed, I don't have an answer for that except that I think the American public would happily support someone who promises to end cronyism. In fact, both Bush and Obama spoke about that before they were elected. I think the problem is that our political class thinks they can keep right on doing what they've been doing and get away with it. Sadly, so far, they are right. But I suspect that a strong anti-cronyism campaign could sweep to power these days.
ReplyDeleteYou're welcome Max!
ReplyDeleteI thought this was very interesting because before I starting doing this research, I had the same view of Sweden as hopelessly socialist. It's pretty amazing to see the things they've done that are actually to the right of us!
Yes, Sweden has moved away from suicidal levels of government spending. They're still screwed.
ReplyDeleteGovernment spending apx 50 percent GDP isn't exactly what you would call free market. What that means is that the producers are subsidizing non workers out of profits. This in turn means greatly restricted IR&D funding which in turn is going to make your products non competitive. See Volvo. Actually you don't see them because their products haven't kept up with the world market.
OTOH, I understand Detroit is emulating Swedish immigration policies, so there's that.
So I guess Sweden is Socialist-Conservative? lol
ReplyDeleteMan, I really HATE it when leftists keep bringing up Sweden as "proof" that their policies work!
Andrew -
ReplyDelete5. Good government means no corruption, transparency, spending within limits.
Won't human nature always win out in the end? And I agree with Jed - a smaller, less diverse population might help in this case.
But I said this when the Tea Party was first starting up. Sure, they might promise this and that, especially given their "outsider" status but there's nothing to stop them from being "assimilated" by the system so to speak. But I suppose that's a topic for another time.
And maybe this generation - the ones growing up and going to school in a bad economy - will change things around, but it'll take a while.
(P.S. I responded to your nickname joke in the other thread along with some mini-reviews. Comment at your leisure.) :-)
"smaller, less diverse population"
ReplyDeleteSounds like an argument in favor of Federalism. (shhh!)
The other thing Nordic countries have is a 99.99% literacy rate and a high academic standard. Most Swedes are multi-lingual too. We should push that too.
ReplyDeleteI think the ethno-cultural homogeneity is part of what's kept Swedish socialism going for so long. It's easier to pull off if there's less diversity. And then there's the culture itself--traditional emphasis on hard work and community. Someone did a study a while back and found that the unemployment rate among Swedish-Americans is identical to that in the old country itself.
ReplyDeleteOne of the interesting things is that this has started to break down recently due to immigration from abroad, especially the Arab world and sub-Saharan Africa. The newcomers get lots of benefits and lots of unemployment, being generally segregated in the cities (Malmo is now one-fourth Muslim). So that's put an extra strain on the system. Plus, it's been noticed more and more that Sweden has a real "free rider" problem, with people taking lots of sick leave and not feeling the need to go in to work as much, given the various health and other benefits they get. So we can see that their welfare state is not only undermining economic productivity but also the old cultural values which allowed it to work in the first place.
Bottom line: Yes, Sweden is proof that "social democracy" can work, but only under very specific and not generally replicable conditions; and even then it has something of a shelf life.
K, I wouldn't call 50% acceptable either, BUT the point is that they cut their spending by 25% and we can't even seem to cut 1%. The lesson to be taken away here is that conservatism works. And we should start pointing to the things Sweden has done as examples of things we should do here: slash spending, pay our bills, privatize, grade teachers, make SSI self-sustaining, cut corporate taxes, etc.
ReplyDeleteSnape, I don't know what you'd call it at this point, but the point is that even the socialist Swedes whom the left loves to point to have adopted conservative ideas and they are doing well because of them. WE should start pointing to Sweden on issues like vouchers, cutting spending, ending deficit spending, privatization, etc.
ReplyDeleteScott, Human nature does win out, but you can contain human nature with procedure. For example, if we had (1) transparent government records, (2) a very active justice department that investigated all instances of corruption and brought criminal charges and disgorged profits, and (3) a better system that didn't allow tinkering on behalf of donors, that would dramatically slash the corruption angle.
ReplyDeleteAs for the small homogenous population, I don't buy that because that assumes human nature is different in different places -- it's not. Humans are all the same. What is culturally acceptable is different, but culture can be changed. They changed their culture to eliminate cronyism after their banking failure in the 1990s. We now see the same thing and both left and right are opposed to cronyism. The only question is whether or not our population can overpower our political class.
tryanmax, The problem with federalism is that so long as the federal government has more power than the states, the federal government will always be where the key laws are made and that will attract the interest groups who seek to control everyone. It's like a magnet for the power-mad.
ReplyDeleteBev, Agreed. And again, let me say how totally shocking it is that we can't do the same. I think it's a real indictment on our education establishment that they can't produce a near 100% literacy rate. I can understand why Americans weren't big on foreign languages, but the fact that teachers have kids for 6 hours a day for 180 a year for 12 years (12,960 hours) and that that isn't enough time to teach kids to read is shocking.
ReplyDeleteT-Rav, I think the article above is proof that social democracy cannot work for very long. I think this is proof that their model broke and they needed to come back to reality, i.e. conservatism.
ReplyDeleteLook at the things above and they are things the left advocates -- not the right: tax cuts, spending cuts, balanced budgets, competition in education, competition in health care, less cronyism, free trade.
Those aren't things that make leftists happy.
Andrew, I cede the point on the grounds that "federalism" doesn't mean what it used to. I think you know what I'm trying to describe. What do we call that now?
ReplyDeletetryanmax, Sadly, that's a really good question. And honestly, I see no way to get back to that short of a new constitution, and that's not happening.
ReplyDeleteTrue that. At base, though many claim it, hardly anyone truly believes in a right to be left to their own. Test the theory; try playing solitaire in front of other people.
ReplyDeletetryanmax, LOL! Nice test.
ReplyDeleteI think you're right that people don't really believe it. They believe to the extent that they don't want to be told they can't do something and they don't want to be force to pay to help other people. But when it comes to things they want, then they are all in favor of government.
Personally, I think conservatives need to recognize this and stop pretending there is this yearning need in the public for a hard-core libertarian world. Our best opportunity is to slowly reduce the dependence on government to a minimum through reform, rather than screaming about slashing and eliminating.
That's one of the things about the Nordic nations. They use logic, which makes them very good engineers and craftsman.
ReplyDeleteThey saw a problem and tried to solve it. Andrew did your research take you as far as to why they did all the social spending in the first place.
Or was it that human nature thing, do what everybody else is doing. No matter how dumb it is. You know, like people getting tattoos.
Max, No, I didn't get into why they did all the social spending in the first place. I've always heard it's because the Vikings were basically communal so they have a strong communist/collectivist culture, but I've never really looked into it. What interested me is that they've change course away from disaster toward conservative ideas.
ReplyDeleteSpeaking of tattoos, I've been looking into the issue actually and I found out something interesting. Tattoos seem to be everywhere, right? Well, actually the estimate is that 40 million people have them -- which sounds like a lot, but is only 12.9% of the population. Moreover, 17% of those people are currently having them removed and they estimate up to 66% of those people will have them removed before they have kids (this results in a $10 billion a year industry to remove tattoos).
At the same time, more and more employers are now firing people for visible tattoos. I think the idiocy has passed.
Norway is another interesting country. There was a WSJ article about them. Their taxes are also lower with balanced budgets and high literacy rates. Granted, oil revenues help a lot but not spending the money like a drunk California governor is also key.
ReplyDeleteKoshcat, It's fascinating isn't it? 10-20 years ago, those countries were a mess, but they seem to have moved to our right in many ways and they are doing well and we are struggling. There is a real lesson here and we should start teaching it to people -- especially people who still worship these countries as bastions of leftist ideology.
ReplyDeleteI worry that a teaching opportunity has been lost over the last 5 years. By bailing out everybody and blaming greedy bankers, what did the housing issue teach us? If you default it's ok, the government will be there to help you rather than a little debt is an ok investment but too much is disasterous. The next one will be really horrible.
ReplyDeleteKoshcat, I don't think the public took that lesson. The public is more anti-bank than ever and I think that's a direct result of the bailouts and how we got screwed.
ReplyDeleteThe problem is that Wall Street has learned the lesson that they can get bailed out and politicians will cover their butts.
When it starts to crash again and President Paul refuses to bail them out, it will be really ugly.
ReplyDeleteLOL! Yeah. That will be an interesting moment, won't it?
ReplyDeleteI saw today that some leftist economist (Rubin) actually said that breaking up the banks won't fix "too big to fail." That's nonsense. The reeks to me of an insider trying to protect his powerful friends by simply lying about reality.
I have a truly scary tattoo story. One that should be told to anyone who wants one.
ReplyDeleteOne night(back in the 80's) at a party a friend says, "show him your tattoo!" So the girl shows her tattoo, it was a Chinese dragon very big and bright. It was located just below her belly button. This girl was about 18-19 she was very petite. About a decade later I ran into her, she had a growth spurt, she was much taller and a bit rounder. The last thing I was going to do was ask about the tattoo. Kinda scary.
If I ever grow my company, that's policy number one. No visible tattoos, Only girls in the office staff can have earrings, no other piercings visible(I don't want to know). Shop personal have to follow osha standards, machine shops are a mandatory short sleeve environment. No rings, watches, earrings, or other piercings. I do not want to pay some moron for his nipple ring(or anything else) getting ripped out, by a machine tool.
Sadly I can't tell a kid, we can't hire you because you are stupid.
There are many areas of history I know a lot about; Scandinavian history is not one of them. So I can't help you with explaining how this came to be, except to say that I've heard the thing about them having a collectivist society before. It goes along with what I mentioned earlier: if some form of socialism can work at all, it does so mainly in those societies which are fairly homogenous and have strong communal bonds. And even then, as Sweden demonstrates, it doesn't last forever.
ReplyDeleteOne of the truly bizarre situations to me is that countries which led the way in European technocratic socialism--Germany, the Low Countries, Scandinavia--appear to finally be getting their act together, but Britain, from which we got our ideas of liberty, is still circling the drain and doesn't show much evidence of that changing soon. Funny how things work out.
Max, Tattoos demonstrate a great deal of short sightedness. They are an excellent way that stupid people mark themselves so everyone else can avoid them.
ReplyDeleteT-Rav, I have no idea what the heck is wrong with Britain. I check out their papers every day and the country both seems to be falling part and seems to be suffering the delusion that everything is running fine.
ReplyDeleteThe Germans, by the way, recently made the point that the Eurozone population is only 7% of the world, but accounts for more than 50% of social spending. They think that's unsustainable, so look for Germany to begin pushing even harder to change the way Europe runs.
Germans have this funny thing about wanting to run Europe. Go figure.
ReplyDeleteThe funny thing is that the Germans don't really seem to want anything to do with the rest. They want the union, but they are very tribal -- they don't like foreigners in their country, they don't buy foreign products, they don't have a lot of interest in non-German things. It's like they see the EU as just a neighborhood association meant to keep the neighbors from letting their lawns go bad.
ReplyDeleteP.S. I don't mean the Germans don't want to run things -- they absolutely do -- they just don't really want anything to do with them besides telling them what to do.
ReplyDeleteThat wouldn't be the first time Germany did that.
ReplyDeleteOnly this time they don't have to roll over France, much less firing a shot.
I do find it fascinating these countries embraced a system, that they fought so hard against for so long. But the mistake was ours, we rebuilt Europe, but we didn't teach them our form of decentralized government. When you consider who was in charge in those days, it's not a surprise.
That's it in a nutshell, Andrew.
OImnotaroundtomakedesisionsMa needs to set up a government program for free piercings and tattoos, that will keep people unemployed.
Max, I think the Europeans have given up and are just riding out their living waiting for death, hoping they don't run out of the money their ancestors left them. That's my impression of the continent actually.
ReplyDeleteI suspect immigration is actually to blame. I suspect that the one with motivation are all over here and the ones who are left "are happy with less."