Model Socialist Economy--Sweden--A Basket Case

Many people who are ignorant of the unpleasant modern reality in Sweden, continue to tout Sweden as an example of successful socialist economic reform. From the Swedish think tank Captus, comes this incisive glimpse into the modern Swedish tragedy from Nima and Tino Samadaji. Hat tip to the New Libertarian.

.....Between the 1960s and the 1980s the government’s share of the Swedish economy increased from about 30 percent (approximately the same as the US) to about 55 percent.

From this period and onward, the Swedish model has been on the decline. Entrepreneurship has declined to an international low, none of the 50 largest Swedish corporations have been started after 1970, the working morale has declined drastically and unemployment is staggering high. But the government does it’s best to hide the figures that show the bad performance of the Swedish economy. In this paper we discuss the drop in entrepreneurship and working ethics in Sweden and examine the countries high hidden unemployment.

The image of the Swedish welfare state abroad is still that of the beginning of the 1970s, when we did not have higher taxes than other European countries, respected private property and had a strong free trade policy. By highlighting the problems that have arisen in Sweden since then, we hope to give a more balanced view of the Swedish model.

A system unfit for entrepreneurship
As the Swedish welfare state has expanded and economic incentives reduced, entrepreneurship has dropped. In a study of 37 developed countries that was conducted in 2002, Sweden was ranked in the 31:st place when it came to entrepreneurial activity and was one of the countries where entrepreneurship had fallen the most between 2000 and 2002. An important contributing factor is that the marginal tax on entrepreneurs is approximately 70 percent and that they are required to pay additional fees to the state, such as when their employees go on sick leave.

In a recent survey 56 percent of corporate leaders in Sweden responded that they regarded the corporate climate in the country as unfavorable or very unfavorable, while only 10 percent regarded it as favorable and less than one percent as very favorable. It should be emphasized that this figure looks at those who have actually managed to run a company in Sweden; the most relevant group has been excluded from this survey, those that have chosen not to do so. The percentage of entrepreneurs amongst the Swedish population in working age is below 7 percent, only a third of that in the U.S.

The expanding Swedish welfare state has monopolized many sectors of the economy and thus reduced the opportunities for private enterprise. The high taxes and the high regulatory burden are other obstacles for entrepreneurship. The disadvantageous climate for business in Sweden is demonstrated by the fact that the number of employees in the private sector is today some 100 000 less than for 30 years ago, although our population has grown by more than one million during this period. The opportunities for people who are eager to start a career in the private sector are limited in Sweden. This is demonstrated by the fact that about 30 percent of the students that graduate from the Stockholm School of Economics, Sweden’s top business school, choose to migrate to London soon after graduation.

It is perhaps not surprising that Sweden has gone from being the fourth richest country in the beginning of the 1970s to being the fourteenth richest country today.

A drop in working ethics
The many years with a large welfare system seems to have reduced the Swedish populations working ethics and made it more acceptable to live on government handouts, which have increasingly become an alternative to work. In a survey conducted in 2002, 62 percent of Swedish employees answered that they viewed it as acceptable to claim the right to sick leave even if one is not restrained by disease to work. This attitude seems to correlate closely with the large increase in Sick Leave which we have experienced in Sweden.

In any given day, more than 5 percent of the working population is on sick leave. In addition some 540 000 Swedes were early retired in December 2004, officially for health reasons. The latter figure amounts for about 10 percent of the adult population! During the past years even many young and healthy adults who have been unemployed for a long time have been given early retirement. This is fundamentally a strategy for the Swedish state to hide the true unemployment figures.

High hidden unemployment
The official Swedish unemployment stood on 5.2 percent in May 2005. But Sweden has massive government programs that contain most of the unemployed, chiefly Early Retirement, Sick Leave, Labor Market Programs and Welfare. In addition, since students get a monthly stipend and loan, many unemployed continue to study when they can’t find work.

The political right in Sweden has for some time complained about the government hiding the unemployment in the above mentioned “programs”. But the question only came to the public knowledge when LO, the immensely powerful blue-collar union, had one of its own turn against them. Hans Karlsson, a leading leftwing economist, concluded that true unemployment was more in the ballpark of 20-25 percent.

Source.

This article by my cousin Abu deals with the same topic, based on an article from The National Interest journal, is a fine supplement to the article by the Sanandajis above.

The standard of living for the average Swede is below that for the average african american living in the US. That is not a statistic that is frequently touted by modern Swedish government bureaucrats. When a government chooses to re-distribute wealth without thinking through the need to create the wealth in the first place, it creates a sinking ship of a country such as Sweden. When you add the demographic tragedy of out of control immigration of welfare dependent and violence-prone immigrants from the muslim third world, and you begin to understand why the entrepreneurial class of Sweden has been emigrating away from the country for the past 40 years.

It is an economic tragedy that was barely avoided by Great Britain, thanks to Margaret Thatcher's firmly placed stitch in time. The current French and German regimes are attempting to prevent their own countries from following in the path of Sweden's inevitable demise, but their ultimate success is in doubt, due to their inability to make the difficult decisions.