Sweden, Fragile Economic Canary of Economic Policy

In thoughtful comments here, mping (proprietor of the excellent blog FatKnowledge), took exception to my claim that the standard of living of the average Swede is lower than the average standard of living for african americans in the US. He makes some valid points, but of course I was only referring to per capita GDP, not to the many and difficult to define variables that go into the calculation of quality of life.

I took the opportunity to look up the WEF Global Competitiveness Report, and several other indices of economic competetiveness and productivity, and place several more on my sidebar. The map above is the Heritage/WSJ map of economic freedom in the world, which is another way of looking at world economies. Below is another map of world freedom by nation from Freedom House.

Comparing a small, until recently homogeneous country like Sweden, with a very large and unhomogeneous country like the US, is an exercise in forced imagination. With small countries, like with small companies, an observor (investor) must take into account how easily trends can start and reverse themselves in the smaller entity. Sweden is a lovely country that is undergoing a devastating transition brought on by extremely poor government policies. It can feed off its past investments only for so long, but when the crash happens it can happen quickly.

It would be interesting to look at the economic indicators of Zimbabwe shortly before Mugabe seized the white farmers' land. Zimbabwe was once an economic powerhouse in Africa. In a small country, bad government policies can bring disaster quickly. Sweden is about to discover that.

When all of the top 50 companies in a country were started over 35 years ago, you are looking at a static country. That is a dangerous warning sign which investor's ignore at their own peril.

There is no way a person could make strong claims about the impending demise of Sweden, based merely upon existing indices of economic/business competitiveness or even economic freedom and employment. It is a blatant hunch on my part, based upon something about Sweden that is staring me in the face, but which most people and institutions choose to downplay or ignore, for reasons of conformist political correctness.

But I look at a country from the perspective of a potential investor, and in that sense, Sweden is a definite "sell" in my portfolio, due to reckless government policies in demographics (follow links in paragraph above) compounded by its economic stagnation and small size.

Update: Here is an excerpt from an Instapundit posting quoting from a Swedish think tank HUI study, clarifying the "standard of living" question: "Black people, who have the lowest income in the United States, now have a higher standard of living than an ordinary Swedish household," the HUI economists said.

If Sweden were a U.S. state, it would be the poorest measured by household gross income before taxes, Bergstrom and Gidehag said. . . .

The median income of African American households was about 70 percent of the median for all U.S. households while Swedish households earned 68 percent of the overall U.S. median level.

This meant that Swedes stood "below groups which in the Swedish debate are usually regarded as poor and losers in the American economy," Bergstrom and Gidehag said.

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 higher increase, HUI said.