Swedish Capitalism Today
In the 1970s and 1980s the Swedish economy resembled socialism — big government, state-owned firms, high taxes and heavy spending. [1] Ultimately, however, crisis conditions arrived with inflation reaching 10% and at one point interest rates reached about 500 percent. That was enough for the Swedish population. Public spending was cut, the national rail network was privatized and other government monopolies were broken up and state-owned businesses were sold off. Inheritance taxes were eliminated, and a school voucher system was adopted. The large welfare state remained, so the necessity of high taxation did not go away, but thereafter the Swedes emphasized their free markets and the prevalence of strong competition and free trade. “Sweden is actually more free market.”
Why Does the System Work as Well as It Does?
Sweden, like other Scandinavia countries has enjoyed a high degree of social cohesion. Although things may be changing gradually under fairly heavy immigration, especially in Sweden, these countries are inhabited by hard-working, responsible people with high levels of “social trust.”[2] Scandinavia enjoyed high life expectancy and other positive health indicators and rather egalitarian societies even before it expanded its welfare states.
These countries compensate for their high taxes and the rigidities in their labor markets by following market-oriented policies in other areas. They value a high degree of business freedom and openness to trade. Denmark ranks 11th in the Heritage Foundation’s index of economic freedom, which is one place higher than that occupied by the United States. The American economy is still thought of as a strong, market-oriented economy, although we, too, sustain high expenditures for welfare state programs. And, of course, one major political party in the United States advocates open borders and hopes all the citizens of countries to the south will come to join American citizens, enjoy voting rights and receive welfare benefits. At the same time, there are quite a few Americans who still believe in the existence of budget constraints.
Economic and Social Implications of Recent Immigration Trends
The Swedish population of only 10 million has been asked by political leadership under pressure from forces in the EU to absorb a large number of immigrants from the Middle East in the last couple years. Currently, 1.6 million residents of the country were born elsewhere. Even many favoring the admission of generous numbers of immigrants now believe that increased pressure on the schools and on Swedish society in general suggest a pause in the acceptance of additional immigrants. Many still believe that if the latest influx can be taught Swedish, they can benefit the labor market and the economy. But politics have been affected by the growing numbers of non-Swedes. The Democrat Party, Swedish Democrats (Sverigedemokraterna, SD) is a social conservative and right-wing populist political party which is likely to have an impact in elections in the near future.
There is some fear currently of losing social welfare benefits, but no evidence to this point of such losses. Housing has become a serious problem with the strong increase of demand for the current housing stock. Some young people are forced to continue living with parents at home, but unlike millennials in the United States, their problem is not so much a financial one as a housing supply problem.
There have been some serious difficulties in integrating immigrants into the work force and the society. Gang-related crime is on the rise and fast-growing groups of outsiders threaten to break down societal cohesion and well-being.
[1] See https://reason.com/reasontv/2018/10/23/stossel-sweden-not-a-socialist-success
[2] See https://nypost.com/2015/10/19/sorry-bernie-scandinavia-is-no-socialist-paradise-after-all/