We can stop using Sweden as a poster child now

The left-wing loves to use Sweden as a poster child for the “benefits” of rampant socialism.

The problem is that they are a basket case now, because of the rampant socialism.

David J. Mitchell writes about Sweden’s rollercoaster economy:

My main message was pessimism since neither Donald Trump nor Hillary Clinton supports genuine entitlement reform.

But I’ve addressed that topic many times before. Today, motivated by my trip, I want to augment my analysis about Sweden from 10 days ago.

In that column, I highlighted some research from Professor Olle Kranz showing that Sweden became a rich nation during a free-market era when government was relatively small. And as you can see from his chart (I added the parts in red), this is also when per-capita economic output in Sweden caught up with – and eventually surpassed – per-capita GDP in other advanced countries.

Then Sweden began to lose ground. Some of this was understandable and inevitable. Sweden didn’t participate in World War II, so its comparative prosperity during the war and immediately afterward was a one-time blip.

But the main focus of my column from last week was to show that Swedish prosperity began a sustained drop during the 1960s, and I argued that the nation lost ground precisely because statist policies were adopted.

Oh no, sounds like the truth is coming to bash Sweden in their pinko ass.

In other words, Sweden enjoyed above-average growth when it relied on policies I like and then suffered below-average growth when it imposed the policies (high tax rates, massive redistribution, etc) that get Bernie Sanders excited.

Today, let’s build upon Professor Kranz’s analysis by extending his calculations. He did his research in the early part of last decade, and we now have many years of additional data that can be added to the chart.

But before doing that, it’s worth noting that the years of additional data basically coincide with a period of market-oriented reforms in Sweden. A study from the Reform Institute in Stockholm explains some of what happened, starting with the stagnation caused by the era of big government.

The seventies and eighties saw Sweden’s tax burden rise from an average European level to the world’s highest. The public sector expanded vastly. All facets of the welfare system were made more generous in international comparison. Meanwhile, labour market regulation increased … Throughout these years, Swedes’ individual after-tax real income stagnated, private sector job creation ceased, and public debt spiralled higher. This culminated in a severe economic crisis in the early 1990s. By then, Sweden had fallen to 14th place in the GDP per capita rankings of OECD countries.

That’s the bad news.

The good news is that this economic misery led to market-oriented reforms.

When the onset of the financial crisis coincided with election of a market-oriented centre-right government in 1991, the reform process began in earnest. Most emphasis at the time was placed on reforms that opened significant sectors in the economy to greater competition. Moreover, an important feature of these regulatory reforms was that the crisis spurred local authorities to implement less burdensome regulation … significant changes were introduced to the tax system, macroeconomic policy framework, and social insurance system … every aspect of the Swedish economy has changed due to implementation of reforms … public sector employment has declined.

To be sure, none of the means Sweden became Hong Kong. It is currently ranked only #38 by Economic Freedom of the World, and its score only improved from 6.92 in 1990 to 7.46 today, hardly a huge jump.

But we nonetheless can now check whether this period of modest reform yielded any dividends. And, looking at an updated and extended version of Professor Kranz’s chart, there certainly seems to be a clear relationship between pro-market policy and Swedish prosperity.

Call me crazy, but it seems like there’s a lesson here about the right recipe for growth.

The lesson is socialism doesn’t work, never has worked and never will work anywhere in the world…and the poster child, Sweden, is a case in point.

I can’t wait for Jacinda Ardern to point to Sweden for some of our ideas to solve the economy. The PSA might not like her doing that though.

 

-Foundation for Economic Education


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As much at home writing editorials as being the subject of them, Cam has won awards, including the Canon Media Award for his work on the Len Brown/Bevan Chuang story. When he’s not creating the news, he tends to be in it, with protagonists using the courts, media and social media to deliver financial as well as death threats.

They say that news is something that someone, somewhere, wants kept quiet. Cam Slater doesn’t do quiet and, as a result, he is a polarising, controversial but highly effective journalist who takes no prisoners.

He is fearless in his pursuit of a story.

Love him or loathe him, you can’t ignore him.

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