Friday, January 14, 2005

Sweden an economic power?

Sweden is often looked to by the Australian left as a kind of model social-democratic country. The left like Sweden because it's a country in which there is a high level of state intervention. For instance, in Sweden mothers of young children are financially supported publicly by a long-term paid maternity scheme, rather than privately by their husbands.

For conservatives, this is a problem as it undermines, in an artificial way, the traditional family. It's not surprising to conservatives that Sweden suffers from both low rates of marriage and high rates of divorce.

Conservatives are also likely to wonder what the economic effects of having such a high-taxing interventionist state must be. Surely, the fact that tax revenues in Sweden are more than 50% of GDP must put Sweden at a competitive disadvantage?

Confirmation of this comes in a recent economic study by Swedish economist Nils Karlson. Karlson points out four remarkable facts showing how poorly the Swedish economy has performed in recent times. These facts are:

1) No new net jobs have been produced in the Swedish private sector since 1950.

2) None of the top 50 companies on the Stockholm stock exchange has been started since 1970.

3) In 2003, one quarter of the workforce lived on various kinds of public welfare programmes, such as pre-pension schemes and unemployment benefits.

4) A majority of the adult population are either employed by the state or gain a majority of their income from public subsidies.

There's a more detailed explanation of the study in this article by Richard Rahn. It's written from a right-liberal perspective (a liberal who prefers to leave things to market forces rather than state intervention), rather than a conservative one, but it does make a good case against Swedish style social democracy.

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