Sweden's Swing toward a Free Market
February 5, 2014
Sweden's move toward a free market has brought economic growth, says attorney Michael Rosen in The American.
Sweden spent years as a statist economy, with marginal tax rates above 90 percent. With nationalized health care and welfare programs, Sweden had a budget deficit worth 13 percent of its gross domestic product (GDP) in 1993 and a government debt at 71 percent of its national output.
But in the 1990s, Sweden elected its first conservative government since World War II, which began cutting taxes on businesses and individuals.
- Between 1993 and 2010, GDP growth in Sweden exceeded that of Europe by 1 percentage point. By 2010, public debt had fallen to 37 percent of GDP, and taxes on corporations were dropped to 22 percent (much lower than the United States' 35 percent rate).
- Sweden also moved its pension system to a defined-contribution system rather than a defined-benefit one.
- And the Swedish Fiscal Policy Council was established to independently evaluate government policy. Its latest report urged raising the retirement age to make the country's finances more sustainable in the long term.
As the country has instituted more free market reforms, entrepreneurs have emerged.
- Spotify, the $4 billion music streaming program, and Skype, the VoIP service, both began in Sweden.
- In fact, Sweden has seen one of the highest levels of venture capital per capita anywhere in Europe in the last decade.
- Saab, another Swedish business, has twice beaten out larger aerospace companies, including Boeing, for aviation contracts.
- And SAS, the Scandinavian airline, reached its first profit in six years following negotiations with its workers for cuts in pay and retirement benefits, after nearly reaching bankruptcy last year.
Rosen says that while the country may not have left all of its socialist past behind, it is making solid progress.
Source: Michael M. Rosen, "Sweden's Swing toward a Free Market," The American, January 29, 2014.
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