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Article posted Jan 27 2014, 3:41 PM Category: Economy Source: Per Bylund Print

Turning Their Backs on Sweden's Welfare State

By Per Bylund

As noted by e.g. Reason.com, Yahoo! News recently reported that Swedes are increasingly turning their backs on their globally lauded utopian welfare state. While very little known, Sweden’s welfare state “worked” through the early 1970s thanks to deliberately preserving capitalist institutions and expanding its scope at a slower rate than the country’s overall economic growth. This changed in the 1970s, which necessitated several devaluations of the currency in only a few years intended to “boost” exports, and then a somewhat lost decade in the 1980s.

The welfare state finally imploded under financial problems in what can best be categorized as an economic depression in the early 1990s. The social democratic government resigned, government lost control (to the extent it ever had any), and politicians from all parties got together to enforce strict budget discipline (no deficits) and consistently cut back on the state’s generous welfare benefits. At the same time, pseudo-market forces were reintroduced through Friedmanite voucher systems, private health care was no longer prohibited, and the national pharmacy monopoly was privatized. Even Sweden’s railway traffic is now carried out largely by private companies.

Also, since 2006, Sweden has also seen relatively extensive (for being Sweden, at least) tax cuts.

Of course, these measures were necessitated by the great crisis in and around 1992 – the state does not limit its own power unless it absolutely has to. And the welfare system is still quite generous with almost-”free” health care and fully taxpayer-funded education from kindergarten through university degrees and doctorates. This is, as us Austrians have known for quite some time, unsustainable, and it has in Sweden impacted the economy as well as the morals in the country.

While Sweden has lately ”fallen” from the #1 position on the global tax rate list to #4, public spending still amounts to well over half of the country’s GDP. The national debt as a fraction of GDP, not including pensions and other liabilities, has halved over the course of the last two decades. Twenty years of reform, away from the extensive welfare state and socialist experiment, explains Sweden’s relatively strong finances in the present financial crisis. But much remains to be done.

As the Yahoo! News report shows, Swedes are fed up with their “great” public health care (which is very costly, highly qualitative, but mostly inaccessible) and gladly (and in great numbers) take advantage of the market solutions made available through recent reform (in this case, private health care insurance). This fact is yet another empirical case indicating both that socialism, even “limited” such in the form of a welfare state, is disastrous – and that if common folks get to choose (rather than vote or elect), they choose the market.





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