Wednesday, May 25, 2005

Sweden: Freezing Employment

UPDATE: The follow-on is here.

Jacob Arfwedson, research fellow at the Stockholm Network and Johnny Munkhammar, a director at Swedish free market institute Timbro, supply more evidence that the "Third Way" is a dead-end in today's Wall Street Journal:
[T]he cradle-to-grave welfare model is causing increasing problems and is questioned and revised. Growth is low, dependency on government is high and the expected welfare services are deteriorating. Over the past decade a series of comprehensive reforms have taken place; taxes have been lowered, private competition in welfare services allowed, and pensions systems have been changed. But the steps are too small and too slow.

The problems are mounting. The government insists that Sweden can maintain high taxes with high growth. In fact, Swedish growth has been declining for 50 years. Currently, Swedish growth is well below that of the countries of Eastern and Central Europe, but also lower than that of, for example, Britain, France, Spain and Denmark. In terms of per capita private consumption, Sweden is 19th among the 30 OECD countries.

If economic growth were a consequence of high taxes and centralized power, Central and Eastern Europe would have been content to cement and applaud the Iron Curtain; North Korea, Cuba and Burma would be world champions of economic development. They are not. Still, the Swedish government argues that such a model is a condition for prosperity and welfare. . .

The true picture is totally different, however. The largest trade union, LO, a strong supporter of the Social Democrats for more than 100 years, recently admitted that real Swedish unemployment is closer to 20%-25%.

Of the Swedish population of working age (5.8 million), 2.2 million belong to the category "not at work," of which 1.4 million live off government handouts. In 2004, this amounted to 39% of the population of "working age" -- that is, almost four out of 10 people of working age don't go to work. . .

The Swedish welfare state is a model for growth -- but only growth of government. With an annual growth of 3.5%, GDP doubles in 20 years; no amount of government redistribution can match this in terms of prosperity. We need market-based reform, drastic tax cuts and deregulation of state monopolies. And if the new EU Constitution offers a possibility of escaping the so-called European Social Model, Swedes and other EU citizens alike should make use of it.
I thought the EU Constitution locked-in the "European Social Model." Maybe it reads different in Swedish.

4 comments:

Anonymous said...

Although I in no way condone the welfare system established in Scandinavia, this post is not completely fair. Having spent a great deal of my life in Sweden I am well versed in its affairs. There is no question that the healthcare system will have to be privartized. Taxes on employees will have to be abolished to encourage growth. Obviously, state monopolies should be lifted.

But there is a shifting trend currently in the country. The Moderates (right wing) have been gaining steady ground in opinion polls and as the old entrenched socialist party voters are passing away, younger blood is beginning to run the country. For the first time in decades, the Social Democrats are no longer the majority party and are even at risk of slipping to 3rd place.

The Right Wing is looking to acheive many of these milestones.

The unemployment numbers cited as stated by LO are not exactly accurate. As with any statistic, numbers can be twisted from selected segments to reflect your opinion. The dispute revolves around counting or not counting sickleave and long term disability into unemployment numbers since there seems to be a higher incidence of disability claims in areas with low employment.

I support low taxes 100%. I am against state pressures on the natural growth of the economy as a result of ingenuity.

The analysis in this post is a bit disingeneuos so I had to make that known... If you want a Socialist Horse to kick while its down, try France!

OJ

www.RightViews.com

Carl said...

OJ:

Good thoughts. I hope you're correct about Sweden. I've replied here, seeking data you might have.

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