The Swedish Model

Socialism has failed everywhere it has been tried. There has never been a successful socialist economy. This inconvenient truth, to borrow a turn of phrase, is willfully ignored by the American left. In past years the left dismissed right-wing criticisms by pointing to the European social welfare model, holding it up as a system that blends the "compassion" of a big government social safety net with the dynamism of a market economy. In light of the economic stagnation that has plagued Europe over the past decade, highlighted by persistent high unemployment levels, this defense of socialism has been exposed as fiction.

Still, there is one country that has seemingly defied the odds that is the left's last source of hope: Sweden. The Swedish model has been hailed time and time again as proof that we can a move towards ever greater levels of statism is compatible with economic growth. Even Kim Jong Il declared that he was "intrigued" by Sweden's economic system. Well, now it's finally emerging that even this notion of Sweden's alleged success with high taxes, big government and economic vitality is a myth. As The Economist notes:

In truth, the Swedish economy's best years are long gone. Between 1870 and 1950, average growth in Swedish GDP and productivity was, by some measures, the fastest in the world. In 1970 Sweden was the fourth-richest member of the OECD club of industrial countries. But for most of the past 50 years the story has been one of relative decline, including a deep recession in the early 1990s (see chart 1). By 1998 Sweden had fallen to 16th in the OECD rankings. It has since climbed back a bit, but the relatively strong growth of the past decade should be seen mainly as a rebound from the 1990s trough.

...The worst is employment. Par Nuder, the finance minister, makes much of Sweden's having the highest employment rate in the European Union after Denmark, at just over 70%. The official unemployment rate is 6%. But Sweden is a world champion at massaging its jobless figures, which exclude those in government make-work programmes, those forced into early retirement and students who would prefer to be working. Sweden's suspiciously large number of workers on long-term sick leave are counted as working, and included in the employment rate (sickness benefits account for 16% of public spending). Absenteeism is common.

Earlier this year the McKinsey Global Institute, a think-tank, studied Sweden's labour market. It found that the rate of employment among working-age people had declined in the past decade. Indeed, Magnus Henrekson of the Research Institute of Industrial Economics says that Sweden has created almost no net private-sector jobs since 1950* (see chart 2). Youth unemployment is among the highest in Europe. The McKinsey boffins conclude that the “true” unemployment rate is around 15-17%, which puts Sweden among the worst job-fillers in the EU. It translates into more than 1m people without work.

The shortage of jobs is felt most acutely by Sweden's fast-growing immigrant population. Thirty years ago Sweden was a largely homogeneous country, but today 10% of its people (and one-seventh of those of working age) are foreign-born. Sweden's new immigrants—especially the country's fast-increasing Muslim population—have integrated poorly compared with the arrivals of the 1970s and 1980s. But the biggest problem for immigrants, as for young Swedes, is work. A study of comparable Somali groups in Sweden and Minnesota found that less than a third of working-age Somalis in Sweden had jobs, half the share in Minnesota.

It would appear then that the oh-so wonderful Swedish model has been bested by the dog-eat-dog cowboy capitalism of the U.S. But this begs the obvious question of why then, if the Swedish model is broken that the voters don't demand change. Fortunately, The Economist answers:

One answer, says Mr Lindbeck, is that so many are dependent on the state: some 30% work for it, and a bit over 30% receive transfer payments. Another answer is offered by Mr Rojas. Asked why the opposition's programme is a lot more centrist than it was in 2002, Mr Rojas suggests that a big lesson from the past has been that it is a mistake to attack the government too fiercely, since “all Swedes are to some extent Social Democrats.” An attack on social democracy risks, in other words, being seen as an attack on Sweden itself.

So Swedes then appears to have a system that has left the country poorer, has hurt the most vulnerable members of society most profoundly, and left its people dependent on the government. This is not compassion.

Read the entire article, I could have quoted the whole thing.