Sweden a socialist or a market state? John Hassler
The Bumblebee •
“...Think of a bumblebee. With its overly heavy body and little wings,
supposedly it should not be able to fly— but it does. Every summer it comes back and makes the seemingly impossible possible en route from a forget-me-not to a daisy. This is how so-called analysts view the Swedish economy. We “defy gravity.” We have high taxes and a large public sector, and yet, Sweden reaches new heights. We are still flying, so well that many envy us for it today.” Göran Persson, prime-minister, quoted in the IMF report The Swedish Welfare State, Can the Bumblebee Keep Flying?, IMF 2004
The Swedish welfare state • The Swedish government collects more tax revenue than almost any other country in the world. • The large expansion came in the 50s, 60s, and 70s.
• Came a bit later in other countries. • Has been clear convergence -- in EU.
Is it flying? • Sweden had the world’s highest growth rate between 1870 and 1970. • After, not an outstanding growth performance but remains a rich country. • Has among the world highest degree of equality of disposable income and yet a high degree of social mobility. • After all, is GDP everything?
Why is it flying? • Perhaps not spectacular performance, but Sweden is not crashing. Why? – – – – – – –
High taxes, but efficient system with fairly little progressivity. Efficient bureaucracy. Good educational system. Low taxes on property and corporations. Market alternatives financed with vouchers. Fairly little government involvement in business and industry. Unions that are large enough to care of the size of the pie, understanding the value of a competetive industry. – Well functioning political system that can deal with difficult tradeoffs.
How socialistic is Sweden? • •
•
”Sweden has socialized the family but not the firm”. Assar Lindbeck But– a lot of private production of services provided by government. The extensive welfare state systems do create problems, but perhaps not so strange that the bumblebee continues to fly!
0 Mexico
Chile
Turkey
Korea
United States
Japan
Switzerland
Slovak Republic
Ireland
Greece
Canada
Poland
New Zealand
Portugal
OECD-Total 2
Luxembourg
Germany
United Kingdom
Israel 1
Spain
Czech Republic
Slovenia
Netherlands
Hungary
Iceland
Austria
Finland
Italy
France
Norway
Belgium
Sweden
Denmark
Tax revenues share of GDP 2009
60
50
40
30
20
10
Tax revenues share of GDP 60 50 40 30 20 10 0 190019101920193019401950196019701980199020002010
US Swe
Government expenditure share of GDP 65 60 55 50
EU Ger UK Swe Spa
45
40 35 30 25 20 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Swedish GDP per capita relative to OECD average 135 130 125 120 115 110 105
Current prices
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
100
Constant prices
Income inequality and social mobility
Immobility
Inequality
Source: Daniel Waldenström, chapter in SNS Konjunkturrådets årsrapport 2010.
Average taxes 1970 Sweden UK USA France
Income percentiles
Source: Daniel Waldenström, chapter in SNS Konjunkturrådets årsrapport 2010.
Average taxes 2004 (2008) Sweden Sweden (2004) UK Sweden USA (2008) UK France USA France
Income percentiles
Source: Daniel Waldenström, chapter in SNS Konjunkturrådets årsrapport 2010.
0 Korea Canada Japan Ireland Norway New Zeeland U.K. Australia Denmark Luxembourg France Israel Belgium Sweden USA Netherlands Schweiz Finland Spanien OECD average Estonia Island Polen Chile EU-21 average Slovenia Greece Germany Hungary Portugal Austria Slovakia Tjeck republic Mexico Italy Turky Brasil
Share of 25-34 with university degree
70
60
50
40
30
20
10
Senior High Compulsory
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
Share of students in private schools 25
20
15
10
5
0
Quality of life relative to the U.S.
Source: "Beyond GDP? Welfare Across Countries and Time“, C. Jones and P. Klenow, WP. Stanford University