Around the world, leftist intellectuals have used Sweden as a poster child for the idea that socialism can simultaneously lead to prosperity and equality. Proponents of free enterprise usually don’t know how to respond to such statements. It can’t be denied that Swedes enjoy a high standard of living, and for sure, there are elements of redistribution and state interventionism in the country. However, the trend has clearly been in the opposite direction over the past couple of decades.
The late 1960s and 1970s were characterised by a strong turn towards socialist policies. Taxes were raised, the labour market was heavily regulated, and declining industries were given state support. This is essentially the view of Sweden that policymakers around the world still have.
However, since the early 1980s, the country has undergone a significant transformation and it would be inaccurate to refer to Sweden as a socialist country now. According to Swedish economists Magnus Henreksson and Andreas Bergh, Sweden stands with the United Kingdom as a developed country that has undergone a far reaching reform process since the 1970s. For example:
- Credit markets were deregulated in 1985.
- A voucher system for schooling was introduced in 1992.
- Sweden was the first Western country to deregulate the postal market in 1993.
- The Swedish pension system was partly privatised in 1994.
- The electricity market was deregulated in 1996.
- The radio and TV monopolies were deregulated in the early 1990s.
- As a percentage of GDP, taxes peaked at 52.3% in 1989. In 2011, this figure had declined to 44.3%.
- Since the mid-1990s, Sweden’s public debt has decreased from almost 80% of GDP to around 35% of GDP.
- Welfare is still primarily funded by taxes, but it is increasingly carried out by private corporations. Some 20% of employees in the sector work for companies.
- Marginal taxes peaked at 87% in 1979. Today they are significantly lower (around 50%), though still high compared to other countries.
It no longer makes sense to regard Sweden as a socialist economy. With the exceptions of taxes and labour market regulation, the country is arguably one of the most liberal in the Western world. Sweden has changed and it is time for the rest of the world’s view of Sweden to change accordingly.
Dr Christian Sandström is a researcher with the Ratio Institute in Stockholm, Sweden