Swedish Models

June 1, 2006 Topic: Economics Regions: Northern EuropeEurope Tags: Sociology

Swedish Models

Mini Teaser: Everyone always wants to be like Sweden.  What happens whenthe socialist paradise fails.

by Author(s): Johan Norberg

The real worry is that Sweden and other welfare states have reached a point where it is impossible to convince majorities to change the system, despite the dismal results. Obviously, if you are dependent on the government, you are hesitant to reduce its size and cost. A middle class with small economic margins is dependent on social security. This was Bismarck's plan when he introduced a system that would make those dependent on it "far more content and far easier to handle."

Sooner or later, politicians begin to identify a new, influential bloc of voters--those who live at others' expense. A former Social Democratic minister of industry recently explained what his party meetings in northern Sweden looked like: "A quarter of the participants were on sick-leave, a quarter was on disability benefits, a quarter was unemployed."

This creates a damaging cycle. With high taxes, markets and voluntary communities are crowded out, which means that every new problem has to find a government solution. If change seems too far off, a large part of the electorate becomes more interested in defending good terms for unemployment and sick-leave than in creating opportunities for growth and jobs. And that goes even if you have a job. If regulations make it difficult to find a new job, you worry more about losing the one you have and will see suggestions of labor market deregulation as a threat. OECD interviews show that well-protected workers in Sweden, France and Germany are much more afraid of losing their jobs than workers in the less regulated United States, Canada and Denmark.

In that case, sclerosis creates a public demand for policies that create even more stagnation. This might help explain the lack of reform in Europe, despite all the political ambitions. The more problems there are, the more dangerous radical reforms seem to the electorate: If things are this bad now, the logic goes, think how bad they'll be without state protection. For example, it seems like the Swedish voters are now willing to oust the Social Democratic government in September. But that is only after the center-right opposition abandoned the more radical suggestions--such as labor-market reform and reduction in social security benefits--that it used to champion.

Radical reform seems far off. On the other hand, just like the step-by-step construction of the welfare state that slowly but steadily reduced the willingness to work and the sense self-reliance, incremental reforms to expand freedom of choice and reduce the incentives to live off fellow-citizens might rejuvenate these fundamental values and increase the appetite for reform.

Johan Norberg is a Swedish writer and a senior fellow at the Centre for the New Europe, a Brussels-based think-tank. He is the author of several books, including In Defense of Global Capitalism (2003).

Essay Types: Essay