Monday, November 05, 2007

What about Sweden?

In the world today there are basically two flavors of capitalism that are battling it out for supremacy. On the one hand you have the Anglo-American model (probably more American than Anglo), rooted in free markets and minimal government interference that is practiced to varying extents in the U.S., New Zealand, Australia, the U.K. and a few other countries. Perhaps the more popular variety is the "social democratic" model that blends capitalism with a sizable welfare state, and is found throughout Western Europe.

Of the two the latter is widely regarded as the more humane model while the latter is widely despised as "cowboy capitalism" that allows the rich elite to ride roughshod over the poor. Indeed, Germans speak of "Amerikanische Verhaeltnisse" -- roughly translated as "American conditions" -- and fear that the Anglo-American model will be foisted upon them. In contrast the social democratic model is considered compassionate and a much more evolved form of capitalism in which prosperity is shared by all.

No country better symbolizes this model that Sweden. What Hong Kong is to the right, Sweden is to the left. When the right points to the economic sclerosis that plagues much of Western Europe as proof that big government and economic growth are incompatible, the left cites Sweden as proof that this is a fallacy. The Swedish model is so widely praised that even Kim Jong Il has made noise about embracing it.

In order to discredit this social democratic model you first have to discredit what the Swedes have done. The Cato Institute has just released a new study (on their redesigned website) that takes a look at this issue and finds both that the Nordic countries aren't as socialist as they are widely believed to be and they aren't as prosperous either. Indeed, if Sweden were a state it would rank in per capita GDP basis somewhere around Mississippi.

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