Columns

The Swedish model

JOHN REINIERS, More Than Words
Published: November 18, 2012

This election proves what Americans knew all along. We are a hopelessly divided nation – split down the middle. Nevertheless I have always argued we will continue to drift further left because of – among other things – self-imposed demographics. (We bring it on ourselves.) Since the Immigration and Nationality Act of 1965, Congress has enacted seven costly amnesties (including Central American and Haitian amnesties) in exchange for reliable Democratic votes. I see no reason for this to stop. History is a great teacher.

We can and should learn a lot from European styled socialism. The mainstream media could perform a valuable service by examining these Nordic countries on TV specials or public radio (NPR) special programming; or even in the liberal press; e.g., the New York Times could run a series on each country. If a majority of Americans want to go further left, at least learn something from established socialist countries.

The favorite socialist economic models are the Nordic countries, which have generous and universal welfare programs that redistribute income, yet at the same time try not to scare away job creating, tax paying capitalists – a difficult balancing act. Inexplicably, since the financial crisis, they have been electing center-right governments (The exception being Denmark where the ten year rule of the right-wing "socialists" came to end by a razor-thin margin).

Of these countries Sweden has been the Holy Grail; the most admired socialist welfare state. The term "Swedish Model" was coined in 1935 in the best-selling book The Middle Way by Marquis Child, who defined Sweden as an "ambitiously egalitarian welfare state," or as President Franklin Roosevelt noted, "A royal family, a socialist government and a capitalist system, all working happily side by side." The book was criticized as being a bit long on sweeping generalities, and it is now a bit dated, but that impression of Sweden still exists today. (A disclaimer: I am a first generation American – half Dutch and half Swedish.)

An important feature of the model which still exists today is the 1938 Saltsjoban Accord, which proved to be a durable system of labor relations, with centralized bargaining between well organized labor and equally well organized employer associations. This makes for a prompt global resolution of labor disputes with no strikes; nothing like the rioting Wisconsin experienced when the teachers union and their friends occupied the state capitol building to shut down the legislature.

Speaking of education, Sweden has a costly but acclaimed preschool model (8 out of 10 women work). In 1992 they introduced "Free School" reform when downsizing the national government by transforming teachers from federal to municipal employees, which must also fund independently owned "free schools" supported by vouchers – hardly something U.S. teacher unions would endorse.

The labor/management consensus system is made possible, in part, because the economy is dominated by a small number of industrialist families; so consensus on management's part is more easily attainable than in a large economy such as the U.S. Furthermore, management's control over industry has never been challenged by labor or the government, and owners have been allowed to retain their wealth. (I couldn't imagine the Obama union government warming up to this idea.) Incongruently, Sweden is nevertheless a nanny state with a highly competitive capitalist economy with 247 major corporations, rated by The World Economic Forum as the second most competitive country in the world. Go figure.

Consensus is also made possible because Sweden is relatively small, with a population of 9 million; not ethnically diverse, being mostly white, with 87 percent nominally belonging to the Lutheran church.

It is bordered by friendly, culturally similar Norway and Finland; both having been part of the Swedish kingdom in the past; a striking difference between the U.S., Mexico and Canada. Not to be insensitive, but imagine if generous Sweden bordered Mexico with its population of 114 million. (One out of ten Mexicans lives in the U.S.) Sweden is a pacifist country that remained neutral during World War I and II.

In the 1930s Sweden had the world's highest standard of living, and was the first country to recover from Great Depression. But all good things come to an end – even in a socialist nirvana.

A real estate and financial bubble caused by a surge in lending burst in the early 1990s. Prior to the crash Sweden's government spending as a fraction of its GDP outpaced all other First World economies at 68 percent. During the financial crisis the government took over about a quarter of the banks. Unemployment was stuck at around 12 percent.

The Swedish economic model had failed. Its swollen public sector, just like in the U.S., contributed to its economic decline. It had to reinvent itself as a model of austerity, and did by socialist standards.

The Swedish left-wing leadership accused the center-right party of transforming Sweden into another America. The wealth tax was eliminated in 2007, the "death tax" in 2007 and residential property taxes in 2008. (This surely is not another America. Here's where the Obama union government and socialist Sweden could part company.) The Swedish Model is financed by taxes on income.

The country still has extensive welfare benefits with government spending at 51 percent of GDP – right up there with France – but greatly reduced from 68% before the crisis, which clearly was not sustainable in a free market global economy. It still has the second highest tax rates as a share of the country's income – right behind Denmark. An important point to be made is that everyone has a big tax bill – not just the rich. The top 10% in Sweden make 26 percent of all income, yet amazingly pay the same percent in taxes – perfectly flat. In the America the top 10 percent pay 70 percent. In Sweden, everyone has skin in the game.

They have revamped their welfare state and cut government spending, yet taxes are still high. But the Swedes, being committed to cultural and social cohesion, seem satisfied with what they are getting, so they are willing to pay for their big government.

One the other hand we have become a left-leaning disunited, dissatisfied society, where anti-capitalist liberal progressives want even more from government, so long as their "47 percent" do not pay anything for it.

These are the folks who have their feet firmly planted in outer space making it impossible to walk forward.

John Reiniers, a regular columnist for Hernando Today, lives in Spring Hill.