A lot of people don't realize this, but back in the day Sweden was one of the most successful countries in the world. But then Sweden went to a big gov't that instituted many socialist programs and policies in the 1970s and 80s, and of course it failed miserably. Between 1960 and 1980, public spending more than doubled, from 31 to 60 percent of GDP, and taxes skyrocketed. The government started regulating businesses and the labor market in detail. The Social Democrats even began experimenting with a system to socialize major companies, “the wage earners’ fund.” And then what happened? Talent and capital stormed out of Sweden to escape taxes and red tape. Swedish businesses moved headquarters and investments to more hospitable places. IKEA left for the Netherlands and Tetra Pak for Switzerland. Björn Borg and other sports stars fled to Monaco.
The Swedish economy, which had gotten used to outpacing all the other industrialized economies, now started lagging behind them significantly. In 1970, Sweden was 10 percent richer than the G7- group of wealthy countries on a per capita basis. In 1995, it was more than 10 percent poorer. During that period, not a single net job was created in Sweden’s private sector. Massive government intervention had undermined not only productivity and innovation but also the very foundations that made Sweden look like the best place to experiment with it. The celebrated work ethic remained intact for those who had grown up under a system of free markets and personal responsibility, but it was eroded in new generations who had only experienced high taxes when they worked and generous benefits when they didn’t.
So, what did they do about it? A center‐right government under Prime Minister Carl Bildt from 1991 to 1994 implemented a radical reform agenda to get Sweden back to its classical model, and even the Social Democrats helped. They reduced the size of the government by a third and implemented a surplus target in public finances. They reduced taxes and abolished them on wealth, property, gifts, and inheritance. State‐owned companies were privatized, and markets in financial services, electricity, media, telecom, and others were liberalized. Today Sweden is again a success story that many want to emulate in Europe and also in the US.
Will that happen this time? Dunno. Maybe France and the other Euro countries have not yet sunk to the levels that Sweden did. Maybe America hasn't either. And the socialists are greater in number and determination than they were 50 years ago. So, I guess we'll see what happens.
