Sweden: Keynesian Heaven?
This article was originally sent as an e-mail to a number of people in the USA.
Sweden is by many considered to be a miracle when it comes to living standards, since the state since the last 70-80 years has embarked on the social democrat path. “The third way” is told to be a success.
This is, however, only what the Swedish government wants everybody to believe--everybody including both Swedes and non-Swedes. Swedes are often told in school, at work, in the media and so on that Sweden is the greater nation. The prime minister in the 1980’s, the social democrat Olof Palme (who was shot to death in 1986), was extremely successful in declaring the “third way” a success.
When looking back, there are a number of reasons why Sweden as a country rose to be industrialized rather quickly.
1) In 1809 a new constitution was enacted which passed power from the king to the parliament. This meant the conservative and classical liberal politicians were free to enforce there policy. Consequently, during the mid 19th century Sweden enjoyed free trade both internationally and domestically, which boosted economic growth well into the 20th century.
2) As a result of the major economic growth produced by minimal state intervention in the latter half of the 19th century venture capital was available to be invested Swedish inventions. Thus, many major Swedish corporations were founded around the turn of the century. Most big corporations today are still from the that age; Volvo, L M Ericsson, ASEA (now ABB) and so on.
3) The Swedish economic uprising would have started to decline in the first decades of the 20th century. However, most western countries fought two world wars, which gave Sweden the advantage. At the end of WWII Swedish industry was still intact, which resulted in another economic boom in the 1950’s and 1960’s. Which became a depression in the 1970’s when the world economy finally, in the 1960’s, had caught up.
Thus, the Swedish economic industrialization originates from the minimalistic state system in the 19th century--and a great deal of luck since.
The Corporate Welfare State
The social democrat party seized power in general elections in the 1920’s, and it still has around 40% of the vote (there are seven parties in the parliament) and thus is in power.
Since the beginning, the social democrats have depended on big business to increase national income. The Swedish state is since about 80 years a corporate democracy, where the social democrats (together with the workers' unions) are building the welfare state upon promises from big business. As a “thank you” big business is not really taxed or regulated. Instead, small or medium-sized enterprise is heavily taxed, as are individuals.
The welfare state has thus been built upon the promises of big business to reduce (or abolish) unemployment and increase growth. Since the 1970’s the Swedish economy has been declining (in relation to the rest of the world), which means big business has not been able to deliver.
But the social democrat welfare state project has continued to grow bigger and thus the public sector has continuously increased in size. Reforms during the 1980’s were financed by high inflation, repeated depreciations of the Swedish krona, and borrowing. As a result, the krona was heavily attacked in 1992 during a financial crises. Central bank interest rates rose to 500% but the krona was not to be saved, it was depreciated with another 25-30%.
What Swedish Welfare Is and Isn’t
Swedes still believe that Sweden is the greatest country on earth. However, taxes are about 65% of earnings on small wages, the percentage increasing rapidly for larger salaries. Big business is in practice not taxed, but small companies are heavily taxed and will have to cover their earnings with deductible costs to survive.
To the ordinary Swede the welfare state is no longer delivering what it promises. Hospitals have been shut down to cut costs, even though most wages in the public sector are very low compared to their private counterparts. In plain language: people employed in the public sector will have to work long hours for lousy pay.
The social democrat party has been trying for the last few years to prohibit private health care, but have not yet been able to pass the bill through the Swedish parliament the Riksdag.
With “free” health care lines increased and eventually it had to be abolished. A fee was introduced in the 1990's to keep people away from the public health care. Still, people are sometimes kept waiting for surgery for years. Actually, people are dying while awaiting public health care.
During the last decade quality in the public schools have been diminishing at high rate and it is now one of the main issues in Swedish politics, since a large percentage of students graduate the nine-year compulsory school without grades in core courses. Some go through nine years of schooling without learning how to read and count. Still, schools have to reduce costs.
To take control of operating costs the government is forming corporations of government agencies to take advantage of the cost control incentives in the marketplace. Some of the corporations are then introduced in the stock markets and sold at excessive price to foreign investors and the Swedish population as a way of covering operating costs.
As few months back the Swedish Research Institute of Trade published a report indicating the problems in the Swedish welfare state. It suggests Swedes earn less (in buying power) than American blacks. As a matter of fact, the report proves Sweden would be the poorest state if in the United States.
Frustration; Tightening the Grip
There is a rising frustration with the welfare state not delivering among the youth. People have been taught to demand public services without having to do something in return, as part of the Swedish model of the welfare state. This makes everyday life hard, since the welfare state does not deliver. Still, the politicians try to uphold the image of the Swedish welfare state as a rule model for the rest of the world. Isn't this what the East German government did?
The government seems to be in a state of panic, but it refuses to admit to that. A couple of years ago the prime minister promised to condemn anyone who spoke disadvantageous of Sweden abroad. And currently the Swedish Internal Revenue Service is buying commercials on MTV to emphasize the importance of paying taxes. (It has shown that 25% of youth would choose working without paying taxes if they had the opportunity.)
In the prime minister’s keynote speech after the general elections of September 15th  he promises to invest even more on controlling the borders. As a Swede I expect more thorough taxation of imported items. Even today, the Swedish government opens and registers the content of all packages crossing the borders. If it is taxable, it is taxed. Then the Swedish Postal Service is hired to deliver the package at the cost of recipient.
It is not obvious to the bystander or even the masses “within” the system yet, but the Swedish welfare state is quivering in its very foundation and will soon crumble.
What the Swedish government preaches is however correct: Sweden is (still) an example for the rest of the world to take notice of. But an example of what not to do.
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