It has to be a joke. Why would anyone want to emulate Sweden? They have 9 million people and 20% unemployment.
They're a high-tax welfare state that maybe once had an enviable economy (sitting out WWII probably helped), but it's fast going into the toilet unless they do some quick and major reforming.
If anything, Sweden should only be looked at for what not to do.
The Swedish economic picture has brightened significantly since the severe recession in the early 1990s. Growth has been strong in recent years, with an annual average GDP growth rate of 2.5% for the period 2000-2004, and the inflation rate is low, with an annual average inflation rate of 1.9% for the same period. Since the mid-1990s the export sector has been booming, acting as the main engine for economic growth. Swedish exports also have proven to be surprisingly robust. A marked shift in the structure of the exports, where services, the IT industry, and telecommunications have taken over from traditional industries such as steel, paper, and pulp, has made the Swedish export sector less vulnerable to international fluctuations.
During 2004 real GDP rose by 3% and is projected to expand by 2.7% in 2005.
The government budget improved dramatically from a record deficit of more than 12% of GDP in 1993 to an expected surplus of 8% of GDP in 2001. The new, strict budget process with spending ceilings set by parliament, and a constitutional change to an independent Central Bank, have greatly improved policy credibility. This can be seen in the long-term interest rate margin versus the Euro, which is negligible. From the perspective of longer term fiscal sustainability, the long-awaited reform of old-age pensions entered into force in 1999. This entails a far more robust system vis-à-vis adverse demographic and economic trends, which should keep the ratio of total pension disbursements to the aggregate wage bill close to 20% in the decades ahead. Taken together, both fiscal consolidation and pension reform have brought public finances back on a sustainable footing. Gross public debt, which jumped from 43% of GDP in 1990 to 78% in 1994, stabilized around the middle of the 1990s and has been decreasing in recent years. In 2004 public debt was about 47.7% of GDP. These figures show excellent improvement of the Swedish economy since the crisis of the early 1990s.
[Again, what planet are you on
Sweden's Hidden Jobless
Labor Economist Asserts
Unemployment Near 20%
By TERENCE ROTH
DOW JONES NEWSWIRES
May 27, 2005
STOCKHOLM -- Jan Edling, a little-known labor-union economist, is suddenly in the policy spotlight with his assertion that Sweden's real jobless rate is really closer to 20% than the official 5.5% rate.
He resigned last week from the big LO blue-collar union where he worked after the association declined to publish his research project into Sweden's hidden joblessness. Instead, he posted it online.
"My suspicion is that we are putting people into other benefit categories that other countries would put into the unemployment column," Mr. Edling said.
That Sweden has far more people out of work than detailed in the official 5.5% unemployment rate isn't totally new. Beyond the official rate, an additional 4.4% of the working-age population are parked in the government's elaborate array of job-creation and training programs, according to a study by Skandinaviska Enskilda Banken AB with data from Statistics Sweden.
But Mr. Edling calculates that another 10% of working-age people can be identified as unemployed, using correlations between unemployment, long-term sickness and early retirement among Sweden's municipalities and regions. This makes the actual unemployment rate closer to 20% of the work force, he said.
The paper kicked up a storm in left-wing politics, making him an overnight celebrity among Sweden's lonely free-market advocates. The LO union called for a quick debate on the issue Wednesday, featured prominently on national television. Another of its economists wrote a quick refutation of Mr. Edling's theory and methodology. It denied that the report was suppressed. It said Mr. Edling's paper needed more evidence to show that large ranks of Swedes on sick leave and in early retirement are unemployed by another name.
The tempest Mr. Edling has caused will likely subside before his theory can be conclusively proven or dismissed. But it has made unemployment a big issue in time for the 2006 elections. It is the social-democratic government's hot-button policy issue, with the jobless rate steadily rising in recent years.
Finance Minister Paer Nuder said Wednesday that Sweden's unemployment data are collected according to international standards. But, without discussing the additional numbers, he acknowledged that Sweden's jobs issue goes further than the number of registered unemployed.
"We have two problems here. We have a problem with unemployed people and we have a problem on sick leave. But you shouldn't mix these problems," he said.
Mr. Nuder also defended the government's recent additions to jobs programs and new plans to help return the long-term unemployed to the work force.
"Obviously, the market is not able to find these kinds of jobs," he said. He observed that in other countries such job candidates will need to work two jobs to make ends meet. "That's not the Swedish way."
"You're not allowed to say that in the unions," said Johnny Munkhammar, an economist at the Timbro free-market think tank. "The Social Democrats and the unions are very close. Employment will be the government's biggest issue ahead of the election, but the reality is against them."
Mr. Edling, pointing out that similar numbers to his had been under discussion behind closed doors, said that the Social Democrats and unions are "afraid of having a debate that right-wing parties will take advantage of."
The LO union denied that the report was suppressed. It said Mr. Edling's paper needed more evidence.
"There are some people who are early retired that are so because they were unemployed. The question is how many," said Mats Morin, another LO economist who wrote the union's rebuttal. "It raised more questions than answers," he said.
But government critics see other signs as the drumbeat of major companies shifting jobs overseas continues. Electrolux AB, General Motors Corp.'s Saab unit and the Swedish operations of International Business Machines Corp. are only the most recent to have joined the list.
Mr. Edling, a union employee of 18 years, doesn't relish his notoriety, nor does he see himself breaking party ranks.
"I'm still loyal to the LO and the Social Democratic party. I'm still the same person I was," Mr. Edling said. "I didn't expect this to happen."
He also believes he is being misunderstood. Instead of urging the overhaul of the labor market and welfare and tax regime, his aim was to show that regions investing heavily in infrastructure, research and education for job mobility did better than regions that didn't. Typically, he said, the latter had more hidden unemployment.
"The public debate is about statistics, but they are only a symptom of something that is wrong in this country," Mr. Edling said. "What we see are people at Electrolux who lose their jobs and don't know anything else than how to make vacuum cleaners. Chances are they will soon be in early retirement."
Write to Terence Roth at [email protected]
http://online.wsj.com/article/SB111714741454244517.html?
The Outdated 'Swedish Model'
July 15, 2005
Even at a time when Europe's liberal social welfare policies are facing new doubts, the so-called "Swedish model" continues to find fans. Admirers claim that Folkhemmet -- a merging of folk (people) and hem (home) -- raised Sweden from its poor, agrarian origins to an industrialized nation that provides generously for human needs. From before World War II until the mid-1970s, Sweden maintained low unemployment, a high rate of growth, and an impressive social welfare system.
But a new study ("Sweden after the Swedish Model") by Mauricio Rojas, an associate professor of economic history at Lund University, calls into doubt the continued vitality of this social concept. Indeed, Mr. Rojas argues that it no longer exists in practical terms. The Swedish model began its decline long ago, he says. It had deep roots in the Swedish psyche, but the author claims it is falling victim not only to economic pressures but also to a changing sense of national identity.
Mr. Rojas contends that Folkhemmet is a model for a bygone era, brought low by the Swedish economic crisis of the early '90s. Only the privatization of public services and a ceiling on public spending since those days has kept the Swedish economy afloat. That is, what success Sweden has enjoyed in the past decade has come from the progressive abandonment of the old model.
The path of continued growth, therefore, lies in continued reform, not in any attempt to revive the old statist model. Although reform presents Sweden with challenges, clinging to an outmoded guide would be far worse, Mr. Rojas argues.
There is clearly a long way to go. Even now, over half of Sweden's GDP is soaked up by tax revenues. This is the highest tax burden in Europe. It is thus no surprise that robust economic growth is an objective Swedes consistently fail to achieve. Despite empirical evidence, the idea that the Swedish model is obsolete still runs counter to conventional thinking in much of Sweden today and, more broadly, many corners of Europe. But its declining validity in today's competitive world is something Europeans would be wise to heed.
If Sweden can learn to see itself through a new lens, it can be competitive well into the future. There might be reason for optimism. Even in Stockholm, voices demanding less regulation and more free enterprise are making themselves heard. The heavy tax burden and the welfare measures it supports is now well-acknowledged as having sapped incentives to work.
Some politicians are urging tax simplification, which is good, but over time, Europe's competitiveness will depend on taxes and spending coming down in both absolute and relative terms. The most innovation is occurring at the edges of Europe, by those countries embracing globalization, such as Ireland and the Central European states. Those economies following the French-German social model are stagnating.
For Europe to learn from Sweden's mistakes, it will have to acknowledge that the much praised "model" is now an anachronism. Mr. Rojas has made a contribution to that understanding by pointing out that even the Swedes have their doubts.
Source
Swedes less well off than African Americans
by Reuters Monday, May. 06, 2002 at 11:00 PM
STOCKHOLM, May 4 (Reuters) - Swedes, usually perceived in Europe as a comfortable, middle class lot, are poorer than African Americans, the most economically deprived group in the United States, a Swedish study showed on Saturday.
The study by a retail trade lobby, published in the liberal Dagens Nyheter newspaper 19 weeks before the next general election, echoed the centre-right opposition's criticism of the weak state of Sweden's economy after decades of almost uninterrupted Social Democratic rule.
The Swedish Research Institute of Trade (HUI) said it had compared official U.S. and Swedish statistics on household income as well as gross domestic product, private consumption and retail spending per capita between 1980 and 1999.
Using fixed prices and purchasing power parity adjusted data, the median household income in Sweden at the end of the 1990s was the equivalent of $26,800 compared with a median of $39,400 for U.S. households, HUI's study showed.
"Weak growth means that Sweden has lost greatly in prosperity compared with the United States," HUI's President Fredrik Bergstrom and chief economist Robert Gidehag said.
International Monetary Fund data from 2001 show that U.S. GDP per capita in dollar terms was 56 percent higher than in Sweden while in 1980, Swedish GDP per capita was 20 percent higher.
"Black people, who have the lowest income in the United States, now have a higher standard of living than an ordinary Swedish household," the HUI economists said.
If Sweden were a U.S. state, it would be the poorest measured by household gross income before taxes, Bergstrom and Gidehag said.
They said they had chosen that measure for their comparison to get around the differences in taxation and welfare structures. Capital gains such as income from securities were not included.
AMERICANS CAN BUY MORE
The median income of African American households was about 70 percent of the median for all U.S. households while Swedish households earned 68 percent of the overall U.S. median level.
This meant that Swedes stood "below groups which in the Swedish debate are usually regarded as poor and losers in the American economy," Bergstrom and Gidehag said.
Between 1980 and 1999, the gross income of Sweden's poorest households increased by just over six percent while the poorest in the United States enjoyed a three times higher increase, HUI said.
If the trend persists, "things that are commonplace in the United States will be regarded as the utmost luxury in Sweden," the authors said. "We are not quite there yet but the trend is clear."
According to HUI figures, in 1998-99 U.S. GDP per capita was 40 percent higher than in Sweden while U.S. private consumption and retail sales per capita exceeded Swedish levels by more than 80 percent.
The HUI economists attributed the much bigger difference in consumption and sales mainly to the fact that U.S. households pay themselves for education and health care, services which are tax-financed and come for free or at low user charges in Sweden.
According to recent opinion polls Sweden's Social Democrats are comfortably ahead of the centre-right opposition in the run-up to the September 15 elections.
Source
Beguiling curves of the Swedish model
By Richard W. Rahn
When considering the Swedish model, one can be forgiven for thinking of a comely statuesque blond with blue eyes. However, to economists and policy junkies, the Swedish model refers to the "third way" between socialism and capitalism many on the American left laud as the ideal.
Does the Swedish model work as advertised? According to a new paper by the highly regarded Swedish economist, Nils Karlson, the "model has become quite different from what was intended and to what many people still believe to be the case."
(none)
The extent of the failure of the Swedish model are both shocking and little known. For example, no new net jobs have been produced in the Swedish private sector since 1950. (By contrast, the U.S. created more than 60 million new private-sector jobs during the same period, from 52 million in 1950 to about 115 million in 2002.) "None of top 50 companies on the Stockholm stock exchange has been started since 1970."
Again, contrast this with the U.S. where many of our biggest companies had not been born or known of in 1970, such as Microsoft, Intel, Wal-Mart, Home Depot, Cisco, etc., Mr. Karlson's litany of failures of the Swedish model include: "Sweden has dropped from fourth to 14th place in 2002 among the OECD countries (i.e., affluent industrialized countries) in terms of GDP per capita since 1970."
In addition, "well over 1 million people out of a work force of around four million did not work in 2003 but lived on various kinds of public welfare programs, such as, pre-pension schemes, unemployment benefits, sick-leave programs, etc." Finally, "a majority of the adult population are either employed by the state or clients of the state in a sense that they have a majority of the income coming from public subsidies."
A half-century ago, Sweden was a great success story. One hundred fifty years ago, Sweden began a transformation from a poor agricultural society to a rich industrial society. The economy was deregulated, taxes were lowered and tariffs abolished. Modern limited liability company laws and a patent system were adopted. The result was from 1890 to 1950, Sweden was the world's fastest-growing economy, and developed a number of globally known and respected companies. During this time, Sweden was a low-tax country where the total tax burden reached only 21 percent of gross domestic product by 1950 (currently total taxes are approximately 30 percent of GDP in the U.S.).
The outlines of the Swedish "third way" welfare state began appearing in the 1950s. As late as 1960, taxing and government spending in Sweden, as a percent of GDP, was only slightly larger than in the U.S. But then the welfare statists went into full bloom. Taxing and spending surged in Sweden during the 1960s, 1970s and 1980s until the mid-1990s, when tax revenues were more than 50 percent of GDP and government spending had reached a whopping 66 percent by 1995 (a peak from which it has slightly declined).
The rise in taxing and spending was coupled with increased market regulation, "social engineering" and state planning. All the taxing, spending and regulation had a number of unintended consequences, such as undermining volunteer organizations as people increasingly turned to the state for help. Job security legislation made employers more reluctant to hire. Fewer new firms were created, new inventions and innovations declined, and real costs of providing goods and services rose. Increasing taxes on labor undermined work incentives and increased the "black" or underground economy.
In addition to cataloging the economic decline resulting from the rise in the Swedish welfare state, Mr. Karlson argues that perhaps the most damaging consequence of the "third way" is the loss of "dignity" among the Swedish people. Mr. Karlson takes a classical approach and argues every individual has a "unique value" and a "good society" requires individual liberty, personal responsibility and respect for the liberty of others.
As the welfare state undermines the ability to engage in productive activity to support oneself, and individual liberty and responsibility, there will be a corresponding loss in dignity. This loss of dignity debilitates both the individual and society.
The Swedish model teaches us good intentions are not enough when trying to create a humane, compassionate and prosperous society. Failure to fully understand the economic and social consequences of policies that increasingly regulate and tax productive activity was the Swedish model's fatal flaw.
Unfortunately, this same ignorance of the consequences of taxing, spending and regulation is rampant among far too many of the American political and media class. The good news is the Swedish model is not totally useless; it is a fine model of what not to do if only we can get the American people and their opinion leaders to understand it.
Source
As for the overall economic picture, I think I prefer to trust the take of the US State Department over that of the Wall Street Journal and the Washington Times commentariat, whose ideological proclivities render them far from neutral observers.
Stumble It!
Tweet This
Bookmark on Delicious
Share on Facebook
Share on MySpace