NCPA - National Center for Policy Analysis

The Swedish Model Reassessed

November 3, 2011

Amongst those who advocate for a larger government presence in the free market, the example presented by Sweden has long provided a reliable talking point.  Its economic success, combined with positive social indicators such as low crime rates, high life expectancy and a high degree of social cohesion, suggest to many foreign onlookers that the big government route might not be as negative and inefficient as detractors have suggested.  However, in analyzing the Swedish success story, it becomes apparent that the welfare state does not deserve the credit that it receives for advancing Sweden beyond others, says Nima Sanandaji, president of the Swedish think tank Captus.

The lack of a correlation between a welfare state structure and positive socioeconomic outcomes is apparent for two crucial reasons.

First, the timelines within Sweden provide little evidence that one causes the other.

  • The era of Social Democrat rule began in 1936, yet Sweden's growth as a country was relatively substantial well before that time.
  • Furthermore, since the 1990s, the modern, center-right administrations in the country have gradually scaled back the welfare state, and these policies have been accompanied by growth that the country had not seen in decades.
  • In fact, the period in which welfare economics were most strongly implemented (the 1970s and 1980s) saw low rates of growth.

The second reason that compels the conclusion that the welfare state cannot be credited with the growth of Sweden's economy is provided by the performance of Swedish immigrants to the United States.

  • Despite having left Sweden and moving to a new country, this population has historically outperformed expectations and obtained socioeconomic standards far above par, characterized by a low poverty rate and high employment.
  • This fact substantiates the original claim because it suggests that there is something idiosyncratic about the Swedish people as a whole that brings about their success, such that they are able to thrive despite the absence of a welfare state structure.
  • While some suggest that a traditional Lutheran work ethic is the confounding variable in this case, the point stands that any number of cultural and ethnic factors could be collaborating to bring about Sweden's exceptional standards of living.

Source: Nima Sanandaji, "The Swedish Model Reassessed: Affluence Despite the Welfare State," Libera Foundation, October 2011.

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