NCPA - National Center for Policy Analysis

Sweden's Reputation As a Welfare State Is In Trouble

May 18, 2012

Sweden has a reputation as the prototypical cradle-to-grave socialist European nation, and the political left has long yearned for America to be more like the Scandinavian nation.  But it now seems that this depiction of the European nation is unfair and misleading, as the country has implemented a series of reforms that have moved it significantly toward the right, says Investor's Business Daily.

The turnaround has been driven in no small part by the election of Fredrik Reinfeldt as prime minister in 2006.

  • Reinfeldt took office in October 2006, and by January of 2007 his government had begun tax-cutting.
  • It also began cuts in welfare spending as part of a general move toward austerity, attempting to make cuts in its extensive government debt.
  • Finally, it has made a concerted effort to deregulate the economy in order to encourage entrepreneurialism and business investment.

This move to the right has yielded significant benefits for a country that was once the quintessentially Left nation of Europe.

  • Sweden fell into recession in 2008 and 2009, but it's pulled strongly out of the decline, posting gross domestic product (GDP) gains of 6.1 percent in 2010 and 3.9 percent last year, when it ranked at the top in Europe's list of fastest-growing economies.
  • This compares to America's anemic growth over that same period -- 3 percent in 2010 and 1.7 percent in 2011.
  • Additionally, while the United States continues to struggle with its jobs problem (unemployment currently sits at 8.1 percent), Sweden's jobless rate has fallen to 7.5 percent.
  • Though still higher than the government would like, 7.5 percent is far below the euro zone average of 10.2 percent and significantly lower than the rates in Spain (21.7 percent), Portugal (12.9 percent) and the United Kingdom (8 percent).
  • Furthermore, Sweden's government debt as a share of GDP has dipped below 45 percent for the first time in decades and now is situated at a much-preferable 38.4 percent.

Sweden's Finance Minister Anders Borg has emphasized that all of this was accomplished without the massive stimulus spending that was instituted in other countries.  Rather, it was through measures of austerity that Sweden weathered much of the recessionary storm.

Source: "Sweden's Reputation as A Welfare State Is In Trouble," Investor's Business Daily, May 11, 2012.

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