This is an old article that appeared 15 years ago, but the facts of the matter are still very relevant today: Swede and Sour by Johan Norberg [ 06/10/2002 ] STOCKHOLM -- If Sweden left the European Union and joined the United States we would be the poorest state of America. Using fixed prices and purchasing power parity adjusted data, the median household income in Sweden in the late 1990s was the equivalent of $26,800 compared with a median of $39,400 for U.S. households - before taxes. And then we should remember that Sweden has the world's highest taxes. The Swedish Research Institute of Trade, who made the study, underlined that Afro-Americans, who have the lowest income in the United States, now have a higher standard of living than an ordinary Swedish household. That story came as a chock to many about a month ago. But mostly to foreigners, not to Swedes. Since the 1970s, we are used to news about Sweden lagging behind the rest of the world in wealth and income. It was more of a shock to Americans and Europeans who used to think about Sweden as the perfect example, the exception that could combine the big welfare state with a productive economy. If this social model was a part of the US, it would be considered a social problem. How did this come about? To understand this, we have to understand that Sweden was never an exception to the rule that wealth can only be created by free men and women, on a free market. Swedish Development In 1850, Sweden was a poor developing country where the people starved. This country couldn't be saved by redistribution. Even if you had levelled out all property in the middle of the 19th century, it would still have given everybody a life in misery. Total equality would have given the average Swede a living standard equal to the median income in today's Kazakhstan. But in a few decades in the mid-1800s, a group of classical liberal politicians gave Sweden religious liberty, freedom of speech, freedom of movement and economic liberty, so that people could start their own businesses and buy and sell freely on the market. Free trade made it possible for Sweden to specialize in what we did best, such as the timber and iron industries, and exchange it for that which we produced less well, such as food and machinery. The result was economic growth and industrialisation, which made it possible to increase well-being and invest in education and health care. Between 1860-1910 the manufacturing wage increased 170 per cent, much more than in the period after. Swedish life expectancy increased ten years and infant mortality declined rapidly. Sweden was not a welfare state, it was more of a minimal state. Until the first World War, the Swedish public sector did not spend more than 6 per cent of GDP! The Social Democrats, who took power in 1932, continued with liberal rules for big business, whom they appreciated, and they continued with a free trade policy. Even though government intervention slowly grew, in 1950, the public sector was smaller than in most countries -- about 25 % of GDP, roughly the same as in USA and Switzerland. The economy also benefited when we stayed out of two world wars. Swedish enterprise sold to both sides, the industry was not destroyed and young Swedes weren't killed. Between 1870-1970, Swedish growth was the biggest in the world, next to Japan's. In 1970 Sweden was the fourth richest among the OECD-members, after USA, Luxembourg and Switzerland. The Welfare State, The Welfare Weight But then, the welfare state had begun to increase -- as a way for the politicians to redistribute the wealth that individuals and markets had created. The economy continued to grow: considering the starting-point, the good industries and a well educated and hard working people, only a total planned economy could have destroyed that possibility. But thereafter, it was slower than in other countries. If you don't get much return on investments, work and education, why would you invest, work hard or get a good education? The welfare state simply consumed the wealth that the markets had created, and made it harder to create more. In 1990, the year before a deep depression in Sweden, private enterprise had not created a single net job since 1950, but the public sector had increased by more than a million employees. The Swedish public sector grew bigger, and more unproductive in the 1970s, and the labour market was regulated. From 1976 to 1982 public spending rose from 50 to 65 per cent. At the same time we had to devalue the currency five times, by a total of 45 per cent. The average growth rate was halved to 2 per cent in the 1970s, and declined further in the 1980s, and that was before the big crisis in the 1990s. After more than 30 years of high taxation and an expanding welfare state, Sweden is not the 4th richest OECD-country any longer, but the 17th. This hurts the least well off most. Between 1980 and 1999, the gross income of Sweden's poorest households increased by just over six percent while the poorest in the United States enjoyed a three times bigger increase. Free markets and free trade were the basis for the Swedish miracle. Sweden was not an exception, and therefore it is no surprise that the shift away from free markets undermined the miracle. In 1934 the two Swedish social democratic ideologues Gunnar and Alva Myrdal explained that there were extremely beneficial conditions for a welfare state in Sweden - considering our wealth, the homogenous population, the protestant work ethic and the good education. If the welfare state didn't work here, it couldn't work anywhere in the world, they thought. The rest of the world should seriously ponder the fact that the Myrdals were right in that prediction. The author is a Swedish historian of ideas, a senior fellow with the classical liberal think tank Timbro, and author of the influential pro-globalisation book In Defence of Global Capitalism, http://www.globalcapitalism.st -- winner of The Antony Fisher International Memorial Award 2002 So a quick summary. Sweden used to be poor. But then by 1970 it had one of the highest overall standards of living in the world. Many articles were written at the time about Sweden's high standard of living and how they had managed to achieve that. But then in the following decades the standard of living gradually began to decline. Maybe some socialism was a good thing but the government became overbloated. And all this was before most of the mass immigration into the country. I do want to qualify this article a little bit, I think it's mostly overblown. The standard of living in Sweden wasn't bad in the 90s, the great majority of the population could be considered middle class, though the afforded amenities were usually more sparse than what their middle class counterparts in the U.S. were used to at the time. I mean smaller houses, more families living in apartments instead of houses. Basically comfortably just within the realm of middle class but nothing extravagant. Much higher paying middle class jobs didn't exist to the extent they did in the U.S. and then high taxes ate into much of the income. Because of the absence of poor people, labor costs were also higher, so that paradoxically made middle class incomes not go as far in terms of purchasing power. (Although it also made unemployment rates very low for teens and elderly persons because of the more limited labor pool available to employers) But since the 90s things have begun to change. The country is fast headed towards "Second World" status. (Some of you know what that means, but I'll quickly explain it to those who do not. We all know that "Third World" is a colloquialism for meaning a country has a lot of poverty and living standards don't tend to be very high, whereas a "First World" country has a thriving middle class and overall high standards of living. Some countries fit between those two categories. I'd say that the country of Italy, for example, just barely fits within First World living standards. Countries like Greece and Hungary might be right on the border between First World and Second World status. When you get to actual Second World, we're talking countries like Albania or the Ukraine. Turkey and Iran would probably go in the Second World category. Some of you may still be having difficulty comprehending what this means. Second World means there's still going to be a small portion of the population dying in the streets and most people are not able to afford cars, or at least having a car is considered more of a luxury. Most people don't have lots of extra money to spend on things like going to the movies or eating out, or the latest Apple iPhone. Hospitals tend to be pretty limited in the types of medical treatment they can offer, and a major surgery is typically a huge financial hardship for the average family. You'll have a large segment of the population toiling for low wages and living in near poverty. Maybe 25% of the population will be stuck in life and not really able to do anything because there isn't enough money.) Economic security for young Nordic adults wanes by Siw Ellen Jakobsen Nordic researchers have joined forces for the first time to study and compare developments among unemployed young people in Norway, Sweden and Finland. It is commonly thought that generous welfare schemes such as unemployment benefits and public-funded job training programmes have shielded Nordic young against the harshest consequences of Europe’s economic woes. The facts show the contrary: Few jobless young people in the Nordic countries qualify for unemployment benefits. The reason is that authorities have made cuts and tightened requirements. Means-tested social welfare benefits are now the most common source of income for jobless young people. The economic and social consequences are far from rosy. “A dwindling share of the unemployed young people in Sweden, Finland and Norway qualify for unemployment benefits. In all three countries the share on regular welfare has increased sharply the last 10-15 years,” says Thomas Lorentzen. The University of Bergen sociologist has led this Nordic project. “More young people have become poor,” asserts Lorentzen. A large number of young people in Sweden struggle for years without finding any entrance to the labour market. The job market has changed since the 1980s and 1990s. Today’s young people face a much more mercurial and unstable employment situation. Since basically about half of the country's economy is socialized, it's difficult to imagine mass immigration hasn't been putting a strain on the shared pool of social services the government is able to provide to its population. (We're talking everything from healthcare to education, to pensions for the elderly) Those social services are pretty important when half your income is taxed going to pay for them.
That's a particularly naive claim: e.g. "Household net adjusted disposable income...is now 20% higher than in 2005" (OECD, 2017); life satisfaction is only higher in Iceland, Switzerland and Norway (OECD, 2013)
No it isn't. Please don't fib! But even if you were right, you'd only be highlighting how more right wing regimes are unhappy.
Sweden is compatibly doing well with its global brands such as Spotify, Ikea, H&M and Ericsson. Its GDP per capita was only $1,983 in 1960, which surpassed $60,000 in 2013. Its GDP has also outperformed that of other major European countries since the mid-1990s. I feel sorry for Finland's Nokia which was crushed by South Korea's rival company.
There is now a severe housing shortage in cities and young people are no longer able to go out and get their own apartment. Compared to the period 25 to 50 years ago, this is unprecedented in Sweden. https://www.thelocal.se/20170516/opinion-swedens-housing-policy-has-failed-an-entire-generation The shortage is not a shortage of building space, like the housing shortage issue is in U.S. major cities, but a simple issue of the population growth having outstripped construction of new buildings and driving prices up. There's also less incentive for the construction of new units because the government sets limits on the amount of rent that can be charged, but in any case even if rents were allowed to increase it's doubtful the younger generation would be able to afford it anyway. As long as there was already ample supply of older already existing housing stock, rents were not that high, but when demand increases and new units have to be constructed, that ends up increasing the prices for everybody (in a free market system). Or in a non-free market system, like Sweden's, creates shortages.
Check out London's neoliberalism for a housing shortage (then widen it to the South East and developer's use of land banking)
Tell that to the stupid Swedish women who welcomed rapists and other undesirables with their 'Refugees are welcome here banners.' and now only dare to venture out onto the streets in numbers for their own protection?
Nokia at its height accounted for 4% of Finland's GDP and more than 20% of its exports, while its decline was responsible for a whopping 8.3% drop in GDP in 2009. Because of the economic malaise, Finland cannot afford to accommodate as many refugees as Sweden does and more than 6,000 refugees were sent home in 2016. Sweden's refugee policies have changed recently to cope with the rise in anti-refugee sentiment in the public. A refugee now must prove he can financially provide for himself plus each family member, and he must show he has secured housing that the government deems large enough for all of them. He must also do this alone as a refugee learning a new language, and in the midst of the country’s perpetual housing shortage. Otherwise, he will be sent home along with his family, too.
Sweden historic unemployment rate here. Unemployment at 6.8% today! They are doing something very right compared to the rest of the EU ...
Sweden's unemployment rate remained well below 4% all throughout the 80s. It even dipped below 2% from 1988 to 1990. Probably not sustainable, and probably partially indicative of a bubble, but it does show how high the country's standard of living was, that it was even possible for unemployment to go down to 2%. U.S. unemployment rate in 1990 was 5.6%. U.S. unemployment rate in the year 2000 was 4%. That you think 6.8% is good, just shows how bad off the rest of Europe is. By Sweden's historical standards over the last 50 years, a 6.8% unemployment rate is very sluggish and a bit poor. Certainly not representative of the Nordic utopia people remember from a few decades ago.
Why should the unemployment rate in the US be the measurement for unemployment in other countries? Doesn't make any sense in my book. The rest of Europe is bad off? Unemployment rates. Denmark: 4,8% Feb '18 Germany: 3,5% Feb '18 Netherlands: 3,9% March '18 Austria: 5,2% Feb '18 Belgium: 6,4% Feb '18 Norway: 4,0% late '17 Sweden: 5,9% Feb '18 Switzerland: 4,4% late '17, according to intern. definition Seems many countries are doing quite ok. However, Italy, Spain and especially Greece have higher rates.
Unemployment rates are meaningless when comparing country to country. Even in the US there are four different unemployment rates and people can't even agree on which one of those to use at any given time. Its sort of like when the compare infant mortality rates between countries. Some countries don't even attempt high risk births at all so their numbers look better.
