Is Sweden a False Utopia?

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By Nima Sanandaji and Robert Gidehag

Sweden is often held up by American pundits and experts as a kind of Utopia, a country to be emulated. As is often the case when dealing with Utopias however, the complexities of history, culture and policy frequently are shoved aside.

Rather than being guinea pigs in a progressive experiment in social engineering, Swedes are a unique people with a long history. Therefore, we should question the lazy assumption that good Swedish outcomes (long life expectancies, social equality) are due to particular Scandinavian policies (the welfare state).

After all, even before the high-tax welfare state, Sweden was characterized by an even distribution of income, low poverty and long life spans, the same phenomena that today are said to be the result of high-tax welfare policies. In 1950, before the high-tax welfare state, Swedes lived 2.6 years longer than Americans. Today the difference is 2.7 years.

A more reasonable view of why Sweden performs well on many social metrics has its basis in history and sociology: Swedes have for hundreds of years benefited from sound low-level institutions, such as a strong work ethic and high levels of trust and cooperation.

These cultural phenomena do not disappear when Swedes cross the Atlantic to the supposedly inferior “cowboy” country. On the contrary, they appear to bloom fully. The 4.4 million Americans with Swedish origins are considerably richer than the average American. If Americans with Swedish ancestry would form their own country their per capita GDP would be $56,900, more than $10,000 above the earnings of the average American.

The old Sweden, in contrast, has not done as well in economic terms. In 1960 taxation stood at 30 percent of GDP, roughly where the US is today. As taxes rose, economic growth decreased, with Sweden dropping from being the 4th richest country in 1970 to being the 12th richest in 2008. Swedish GDP per capita is now $36,600, far below the $45,500 of the US, and even further behind the $56,900 of Swedes in America.

A Scandinavian economist once stated to Milton Friedman: "In Scandinavia we have no poverty." Milton Friedman replied, "That's interesting, because in America among Scandinavians, we have no poverty either." Indeed, the poverty rate for Americans with Swedish ancestry is only 6.7%, half the U.S average. Economists Geranda Notten and Chris de Neubourg have calculated the poverty rate in Sweden using the American poverty threshold, finding it to be an identical 6.7%.

Ironically, this points us towards the conclusion that what makes Sweden uniquely successful is not the welfare state, as is commonly assumed. Rather than being the cause of Sweden’s social strengths, the high-tax welfare state might have been enabled by the hard-won Swedish stock of social capital. It was well before the welfare state, when hard work paid off, that a culture with strong protestant working ethics developed.

As taxes in Sweden have grown rapidly towards taking up half of the economy, that social capital is being eroded. In the 1990s, supposedly hyper-healthy Sweden established itself as being sickest country in the rich world, in terms of sick-leave. In addition, half a million working-age people (compared to a total labor force of four million) were placed in health-related “early retirement”.

Labor union economist Jan Edling calculated that a fifth of working-age Swedes were supported by some form of public unemployment support, including sickness related leave in 2004, when the economy was growing strongly.

The high-tax state has also created an increasingly threatened middle class. In a recent study, the Swedish Taxpayers association noted that wealth formation among the middle classes is weak. There is little correlation between earnings and wealth amongst Swedes.

Instead of building capital, Swedes go into debt: 27 percent of Swedish households in fact have more debts than wealth, compared to between 16 and 19 percent in the US. With middle class wealth formation being held back by high taxes, Sweden has ironically developed a more unequal wealth distribution than the US. The Gini coefficient for ownership is almost 0.9 in Sweden, compared to slightly above 0.8 in the US.

In short, there is much to admire in Sweden. But when it comes to economic policy and copying Swedish institutions, Americans are probably better off being inspired by Swedes in America, rather than Swedes in Sweden.

Nima Sanandaji, is President of the Swedish think-tank Captus and Robert Gidehag is president of the Swedish Taxpayer´s association. They were assisted by Tino Sanandaji and Arvid Malm, chief economists at Captus respectively the Swedish Taxpayers Association.

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Your numbers are wrong

Where did you get these numbers? They're not even close. The US has twice the inequality as Sweden by the GINI coefficient.

https://www.cia.gov/library/publications/the-world-factbook/rankorder/21...

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By Nima Sanandaji and Robert

By Nima Sanandaji and Robert Gidehag
Sweden is often held up by American pundits and experts as a kind Denpa Kyoushi manga of Utopia, a country to be emulated. As is often the case when dealing with Utopias however, the complexities of history, culture and policy frequently are shoved aside.
Rather than being guinea pigs in a progressive experiment in social engineering, Aikatsu! anime online Swedes are a unique people with a long history. Therefore, we should question the lazy assumption that good Swedish outcomes (long life expectanci

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By Nima Sanandaji and Robert

By Nima Sanandaji and Robert Gidehag
Sweden is often held up by American pundits and experts as a kind watch Aikatsu! anime of Utopia, a country to be emulated. As is often the case when dealing with Utopias however, the complexities of history, culture and policy frequently are shoved aside.
Rather than being guinea pigs in a progressive Denpa Kyoushi manga read experiment in social engineering, Swedes are a unique people with a long history. Therefore, we should question the lazy assumption that good Swedish outcomes (long life expectanci

I'm not so sure of this

I'm not so sure of this Friedman exchange being more than hearsay. People passed it around in the 90s and it didn't appear in print until PJ O'Rourke used it in one of his punditry books.

great

Obviously, being a non-Swede himself, Friedmann has a broader idea of who can be held blameless for poverty, but it is defined racially and ethnically.UK was sooo last week! USA rocks the cash drop...

Pseudo scientific.

Where do i begin?

Well, for one, the swedes that migrated to america where not a statistically representative sample of the swedish population at the time. Many social and psychological factors will have affected who got there. Firstly you needed money to get there and secondly you needed to have a specific set of psychological characteristics. And they where not the same in other migrating countries either, so the comparison is just spinning. Spin spin spin.

An interesting effect of what the feeling of safety does to people is that they dare consume. People in sweden does not feel they need to save because the state will provide their safety. That´s good for business! Many fail to understand this.

Another measurement fo inequality is social mobility. A high social mobility is the american dream - that anyone can make it regardless of their parents socioeconomical status. But, social mobility is low in U.S.A (and Britain) and high in the nordic countries with big public sectors. Why is low social mobility a bad thing? Well, to be effective, a country wants that the best suited get the jobs, not the important positions to be inherited (an exaggeration to prove a point). Low social mobility, therefore, is bad for business.

Health is money. Restriction for the alcohol and tobacco market have proven to directly correlate with health.

U.S. healthcare is extremely expensive but equal to Slovenia in quality. The company that makes the most money wins, not the company providing the customer the best value. Furthermore, perfect competition does not exist and competition cost money. Perfect competition demands the customer knows what he is buying and what his alternatives are. He doesnt.

I´m not saying sweden is the model for all societies in all aspects, but we need to get our facts right, then we can discuss things.

Sweden is a false utopia for all the wrong reasons

I have lived in Sweden for a couple of years. Sweden is becoming more American than America and that is what is causing the problem.
That work ethic does not exist anymore (except in small areas). Most businesses are moving their manufacturing to China. The only part of the historic socialistic policies that caused a problem was the one of allowing people to stay home with pay for minor problems. Everything else seemed to work fine. Now the housing market is rising fast. Large international energy companies are driving up the electric prices to near unbearable levels. And unemployment is rising. There are shootings (of immigrants) and bomb threats in Malmo. There is a shortage of medical workers to help the elderly. And everything is getting more and more expensive. And the current government keeps promising eventual prosperity by cutting taxes.

You can check out http://www.thelocal.se/ or other news.

But Sweden is still way, way ahead of the U.S. in some areas

In spite of the comments above about the Swedish welfare state (which I do not have the data to dispute), I think it's important to note that the Swedish government, since the early 1990's, especially under Social Democratic governments, has carried out an extensive program of privatization and deregulation.

In marked contrast to the United States, there are no public-sector mass transit workers left in Sweden - all transit services are procured on a competitive basis from the private sector.

I think your numbers are wrong

I am not familiar with many of the numbers you used, but I am familiar with the Gini coefficient. Sweden is about .25, and the U.S. is about .41. There just is not any way that you could manipulate the numbers to get them completely upside down like you did. Zimbabwe has about the worst income inequality in the world, and it is only about .65.

I wonder: are the other numbers in your article similarly flawed? If so, then what of the conclusion?

I happen to agree that Sweden's high taxes are as much of a detriment to economic development as a benefit. But there is more to life than economic development.

Are there children who go to bed hungry each night in Sweden? Are their children without proper dental care? Are there autistic children who are denied therapy because they can't afford it? I have never been to Sweden, so I can't speak to those issues.

But if you have actually seen children homeless and hungry, then it becomes much harder to argue the fine points about poverty rates and the disincentive effect of 50% marginal taxes.

If Sweden pays these high taxes and gets nothing in return, then surely it is an economic crime. If they pay these taxes and use the money to take care of those who are poor, hungry, and sick, then it is unfair to say they get nothing for their money.

Gini

Dave:
Their number is not wrong. They are referring to the Gini coefficient of *wealth*, while you are referring to the Gini coefficient of *income*.

Read the text more carefully.

"if you have actually seen children homeless and hungry"

There are very few children homeless and hungry among Swedish-Americans. Of course there are some. But what you do not seem to realize is that there are some homeless people in Sweden as well. Homelessness in modern society is not due to poverty, it is due to substance abuse and mental illness. Both exist (in a small way) in Sweden.

Also, as the text points out even with all the redistribution from the high taxes, "take care of those who are poor, hungry, and sick," Swedes have the same poverty rate as Swedes in America. Clearly a welfare state is not a very efficient way of reducing poverty, because poverty is subsidized and wealth taxes.

Mistaken about poverty

"Homelessness in modern society is not due to poverty"

I normally do not comment, but your statement shocked me. It is a common misunderstanding that homeless people are all either mentally ill, drug abusers, or both. Admittedly there are a significant number of homeless persons that identify with these problems in modern society (), but those are not the main causes for being on the streets. Please don't forget the high rates of foreclosure in the United States during this particular housing crisis, and also the rates of unaffordable housing in general (http://www.personal.psu.edu/ljt5052/homeless.html). Barbara Ehrenreich's Nickel and Dimed illustrates well just how difficult it is to find an affordable place to live on a low-income budget, even if you have a PhD worth of knowledge to help you do your research.

I also ask that you please read the short article, "The Myth of the Culture of Poverty," by Paul Gorski (http://gmu.academia.edu/PaulGorski/Papers/362831/The_Myth_of_theCulture_...). Gorski reminds us that drug abuse rates are roughly the same in all classes of society; drugs are abused by both rich and poor. With poverty, however, the abuse is simply more visible.

You also might find it interesting that mental illness was not a factor in determining homelessness for low income mothers with dependent children in one study (http://www.hawaii.edu/hivandaids/Prevalence_of_Mental_Health_and_Substan...).

Great Post

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Welfare State

So the welfare state has actually held the development of places even "wealthy" nations like Sweden back? Not a surprise, even in a country where "socialism" is supposedly "working". It just taking a very long time to bankrupt it due to those good work ethics etc. But the evidence is there that it is happening.

Had Sweden gone a different way back then, would the incomes be similar to Swedish in America? My guess would be yes.

The situation must be similar to the Dutch as well. American Dutch have higher then average American incomes as well.

These countries will have big problems if the U.S. goes further into this "economic" model. It just fails at different rates. In the U.S. it won't take half a century to show cracks.

I don't see how liberals have done so well selling this, there isn't a success story anywhere in the world. So they hold up examples like Sweden as successes when they really aren't successes when you look closer.

Some theories just don't work, its a shame so much of the world is held back by it.