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Thursday, May 28, 2015

So, Sweden

For many decades, Sweden has been the poster child for socialism and there is no doubt in my mind that it is indeed a very nice place to live (except for the climate and depressing lack of sun in the winter).

On the one hand, I tire of talking about Sweden because it has about a thousandth of the world's population and less than a hundredth of the world's output. Consider the following thought experiment: let's say we took the world's population, divided it up into exactly 1,000 completely homogenous pieces, with the same culture, government, taxation structure, resource, etc., and turned these 1,000 "countries" loose for a century; what would the standard deviation of GDP per capita be across the countries? It wouldn't be zero and I have a hunch it would be quite large, on the order of 10% to 20% of the mean GDP per capita. If so, this would mean that the success of a tiny country like Sweden could be mostly sheer luck.

On the other hand, I do find many aspects of Sweden interesting and it is very successful, so I find it's always interesting enough to contemplate.

If countries with substantial income from oil and gas are ignored, the three most successful economies in the world are Singapore, Switzerland, and Sweden. At first glance, they have nothing in common other than they all beginning with the letter 'S'. Everything from geography to culture is substantially different.  Singapore is fairly low-tax, Sweden very high-tax, and Switzerland has tax rates in the middle.

They do have a few things in common. They all have small populations, have limited resources, were on the periphery of the big wars during the last century, have been very open to international trade, and have very strong property rights.

Overall, Sweden does have very high tax rates and government spending which leads most people to assume that it's a workers' socialist paradise. And that's certainly correct to at least some extent.

Paradoxically, Sweden is also one of the most capitalistic countries in the world. The basis of this can be found in the following statements:
Sweden's wealth Gini coefficient at 0.853 was the second highest in developed countries, and above European and North American averages, suggesting high wealth inequality. [...] 
The vast majority of Sweden's industry is privately controlled, unlike many other industrialised Western countries, and, in accordance with a historical standard, publicly owned enterprises are of minor importance.
In other words, the wealth and capital in Sweden has been and continues to be concentrated in the hands of relatively few people, and those people control the capital and the companies that use that capital. In addition, in 2005, Sweden abolished inheritance taxes, enabling this concentration of capital to continue unabated into the future. Since the traditional definition of socialism is a system where the government or collective owns the capital, Sweden is pretty much the exact opposite of that.

Has Sweden become more socialist/redistributionist/big-governmentist or less over the last few decades and how have they done? I've already mentioned abolishing the inheritance tax, which in clearly in the "less" category. Also:
According to the Organisation for Economic Co-operation and Development (OECD), deregulation, globalisation, and technology sector growth have been key productivity drivers.
Note that "deregulation" is listed first in the above statement. Parts of the safety net are also private:
Sweden is a world leader in privatised pensions and pension funding problems are relatively small compared to many other Western European countries.
Minimize government involvement with pensions and the problems are reduced according to the Western European experience. Tax rates have also been coming down:
Total tax collected by Sweden as a percentage of its GDP peaked at 52.3% in 1990. The country faced a real estate and banking crisis in 1990-1991, and consequently passed tax reforms in 1991 to implement tax rate cuts and tax base broadening over time. Since 1990, taxes as a percentage of GDP collected by Sweden has been dropping, with total tax rates for the highest income earners dropping the most. In 2010 45.8% of the country's GDP was collected as taxes.
Since Sweden has deregulated, privatized and lowered taxes, how has it fared?
Overall, GDP growth has been fast since reforms—especially those in manufacturing—were enacted in the early 1990s. 
Sweden is the fourth-most competitive economy in the world, according to the World Economic Forum in its Global Competitiveness Report 2012–2013.
In other words, really good.

Sweden is an oddball. It's a pretty homogeneous and small population with a unique mix of "socialism" and "capitalism" with the control of the capital and economy in the hands of relatively few private individuals. Deregulation, privatization, and lowering taxes certainly haven't hurt and look like they might've helped boost growth (but there's certainly not enough data to be sure).

So, Sweden is not a very good poster child for either socialism or capitalism. It's an outlier for both, it works well for the Swedes, but it's far from clear to me that their successful mix of socialism and capitalism would work on the far larger scale required for a place like the United States.

40 comments:

Clovis e Adri said...

Bret,

----
but it's far from clear to me that their successful mix of socialism and capitalism would work on the far larger scale required for a place like the United States.
---
I agree.

The question is: would they be equally sucessful if they adopted any of the extremes of that mix? (i.e. "completely socialist" or "completely capitalist"?)

If not, and we go down that road a bit further, we may say there is a good chance that no single economical recipe is guaranteed, it always should take in account local/cultural/historical aspects.

Given the above, I do ask: why is it that our good Libertarians here do look to fervently believe *they have that coveted universal repice for success*?

Annoying Old Guy said...

I do ask: why is it that our good Libertarians here do look to fervently believe *they have that coveted universal repice for success*?

We don't. If you disagree, please provide a quote.

Bret said...

Clovis wrote: "The question is: would they be equally sucessful if they adopted any of the extremes of that mix? (i.e. "completely socialist" or "completely capitalist"?)"

Given the traditional definitions and spectrum of capitalism <--> socialism, which is simply how much of the capital is owned by the private sector versus government/collective, Sweden is very close to 100% capitalist. Private individuals own pretty much all of the capital. Capital isn't even very heavily taxed. So they really can't move any more away from socialism using the traditional definition.

So the spectrum you're really considering must be more government/taxation/redistribution versus less government/taxation/redistribution. The extremes here are no government/taxation/redistribution (nope, that won't work) or 100% government/taxation/redistribution (nope, that won't work). I'd argue that they were floundering a bit over 50% government spending but that could've been random luck. My guess is that they could continue to cut per capita government spending and be at least equally successful, but I have no idea how much and not an overwhelming amount of confidence in that either.

Clovis wrote: "...we may say there is a good chance that no single economical recipe is guaranteed..."

Sure, but I believe a lot of recipes are destined to fail.

Clovis wrote: "...it always should take in account local/cultural/historical aspects..."

Yes and no. The very phrasing of your question implies an external designer coming in and somehow taking those factors into account and changing everything accordingly. That's impossibly difficult to do successfully, in my opinion. On the other hand, Sweden's system emerged over centuries and the emergent behaviors and institutions of course took into account those factors by definition.

Bret said...

Clovis wrote: "...why is it that our good Libertarians here do look to fervently believe *they have that coveted universal recipe for success*?"

Well, at least you think Libertarians are good! :-) I'll take it, even if it is sarcastic, because now I can quote you!

It's kind of a tough question to answer because it requires a rather complex definition for Libertarian and I don't think any of us actually think we have a "universal" recipe for sucess.

Let me propose a few scenarios and apply my "libertarianism" to each of them. First scenario is the United States, a country that I at least know a little bit about. Let's say there was to be a constitutional convention and Libertarian scholars came up with basically a new constitution and a completely new set of laws constructed using libertarian sensibilities. Would I support that? Absolutely not! While there might possibly be benefit, the risk of complete catastrophy would, of course, be astronomically high.

I'm an incremental libertarian. On most issues, given where we are today, I generally prefer the policies that limit government size and power and decentralize that power. Is it possible that if we were to keep shrinking government we would go too far towards a libertarian system for my taste? Sure, but very unlikely in my lifetime.

Do I think that is a universal recipe for success? Yeah, I do think that incrementally moving from here towards a more libertarian system will bring material and non-material benefits to most people over a timeframe of decades. Am I sure? No. Am I sure I would prefer it? Absolutely, even if I were wrong and it made me poorer. The liberty is worth a huge amount to me.

Second scenario: Sweden. Do I think my libertarian prescriptions could help them? Well, I'm not so confident. They're pretty successful. Once successful, it's a lot easier to destroy than improve, and I don't know enough about Sweden to have any idea where the lines are.

Third scenario: Bangladesh. I know even less about Bangladesh than Sweden. However, Bangladesh is such a disaster, that I think a federal minarchy and other libertarian prescriptions would be potentially helpful. Would it guarantee success? No, but I think traditional socialism (the current majority party is socialist) has and will continue to be a disaster. And I believe that's true regardless of the local/cultural/historical aspects. Perhaps they still wouldn't succeed under libertarianism, but they've proven beyond a doubt that non-libertarianism isn't working for them.

Peter said...

I've commented before on how the flaw in a lot of modern libertarian opinion is linear thinking---as if tax rates and government regulation were the only or even primary keys to prosperity. Sweden(actually most of Northern Europe) proves that non-economic and cultural factors play a crucial role too, especially when you compare them to Southern Europe. It' true that their notion of socialism is not based on public ownership and management of industry, which is why they were so much more successful than pre-Thatcher Britain. But culture counts too. It's not just that they are hard-working, which they are, they have quite a different way of resolving conflicts and making decisions than North Americans. Of course Sweden is free and democratic, but in public and within institutions, it is much harder to dissent openly than it us for us. They don't do lawyers or run to court at the drop of a hat to assert their "rights". The lone dissenter fighting publically in the name of the Founders for what he or she believes in is not a hero for them, he's a trouble-maker upsetting the applecart and he/she pays for it. They rely on quiet, private discussions between collectives to overcome differences between labour and management, right and left, government and industry, etc. etc. They call it consensus decision-making. We'd call it the backroom deal.

This is one reason why the much-ballyhooed "Swedish model" had led to such disaster when countries with deep class or tribal/ethnic divisions and unstable, corrupt political cultures try to adopt it. OTOH, countries, especially larger ones, that pursue a libertarian model must be constantly vigilant about maintaining an effective, uncorrupted judiciary and law enforcement. Humans have a scummy side, even entrepreneurs. :-)

Harry Eagar said...

Holy crap! You mean virtually all the thousands of comments appearing on this blog referring to socialism did not refer to socialism?

Let's see if we can forget that the customers for much of Sweden's exports are gummints.

Harry Eagar said...

And before we rush to declare Bangladesh an example of socialist failure, let's recall that it is an ovewhelmingly rural country that has never had land reform -- so not socialist in any meaningful way.

Bangladesh also enjoyed an event that Sweden did not -- the murder of much of its educated population. Peace has economic benefits.

(The islands of refuge were an unqualified success, and socialist, so there is that.)

Bret said...

Peter wrote: "...countries, especially larger ones, that pursue a libertarian model must be constantly vigilant about maintaining an effective, uncorrupted judiciary and law enforcement."

Isn't that true for any model, not just libertarian ones? It seems to me that because the libertarian model has the smallest role for the judiciary and law enforcement, it's actually slightly more tolerant of corruption in those areas.

Bret said...

Harry wrote: "You mean virtually all the thousands of comments appearing on this blog referring to socialism did not refer to socialism?"

The dictionary/traditional definition of socialism is:

==========================

socialism
[soh-shuh-liz-uh m]

noun
1. a theory or system of social organization that advocates the vesting of the ownership and control of the means of production and distribution, of capital, land, etc., in the community as a whole.

==========================

By that definition, Sweden is about as non-socialist as you can get.

However, the colloquial definition, commonly used by both left and right, is related to government spending as a percentage of GDP, the size and depth of the safety net, and is somewhat synonymous with "Welfare State." By that definition Sweden is one of the more socialist countries in the world.

That's why I say Sweden is both not socialist and socialist at the same time, depending on whether you use the traditional or colloquial definition.

Harry wrote: "Let's see if we can forget that the customers for much of Sweden's exports are gummints."

Who cares? These definitions are about production, not foreign consumption.

Bret said...

Harry wrote: "...so not socialist in any meaningful way ... islands of refuge were ... socialist..."

It's not socialist but it is. Yeah okay.

Harry Eagar said...

Well, you just said welfare statism is the (or a) common definition of socialism, and what are the islands of refuge but state welfarism?

I am the one who has consistently objected to people here labeling European governments as socialist. Some have been but few lately. Welfarism is not inherently socialist; Bismarck was a welfarist.

The welfarist (and officially 'socialist') islands of refuge were a clear success in Bangladesh. Given that Skipper has been arguing strenuously that Bangladeshi capitalism cannot stomach similar successes, I think perhaps the fans of capitalism ought to be reassessing their prejudices.

As a confirmed but sometimes inconsistent antireligionist, facts do force me to recognize that some of the most important drivers of Swedish economic success were in themselves driven by Lutheran policy (universal literacy) or sentiment (guilt about not working).

Barry Meislin said...

Indeed, the Protestant work ethic can be SUCH a bummer....

Clovis e Adri said...

Bret,

---
Well, at least you think Libertarians are good! :-) I'll take it, even if it is sarcastic, because now I can quote you!
---
Well, I hardly think Libertarians will go to Heaven, but I guess they couldn't care less either :-)

---
[On Bangladesh] No, but I think traditional socialism (the current majority party is socialist) has and will continue to be a disaster.
---
Please notice you suddenly used a very different definition of socialism for Bangladesh, in comparison with Sweden, where the Social Democratic Party is the dominant one - they are as socialist as Bangladesh if that's your new metric.

---
Am I sure I would prefer it? Absolutely, even if I were wrong and it made me poorer. The liberty is worth a huge amount to me.
---
I thank you a lot for your honesty here, Bret. There we have the one thing Libertarians and Marxists have in common: they do praise ideology over final practical results. You did mention you were Marxist in your younger days, didn't you? :-)

Bret said...

Clovis wrote: "Please notice you suddenly used a very different definition of socialism for Bangladesh..."

You're right, I was confused on that one: "According to a recent opinion poll, Bangladesh has the second most pro-capitalist population in the developing world..." I guess it was that the name of the country is "The People's Republic of Bangladesh" and the ruling socialist party that threw me.

Not a good poster child for capitalism for sure. The only possible bright side is they've averaged 6% GDP growth per year for the last decade so they've gone from unbelievably dismal to merely incredibly dismal living conditions.

Clovis wrote: "...over final practical results..."

I guess you mean "material" or "tangible" when you wrote "practical." Nothing unpractical about liberty.

Harry Eagar said...

Barry, there's a meme that pops up on my Facebook feed with some frequency which says that if hard work were connected to wealth, African women would be the richest people in the world.

I am endlessly amused by rightwingers who simultaneously believe that the reason poor Americans won't work for $7 an hour is that they are irredeemably lazy and immoral, but that corporations must pay CEOs millions to get them to work at all.

Barry Meislin said...

I am glad to discover that you too feel sympathy for CEOs. (I thougth I was the only one.)

Really, they can only be pitied.

As for Sweden....well here's another (slightly different) angle (but, then, we crave diversity):
http://swedenreport.org/2015/06/02/goodbye-sweden/

File under: Skol!!

Clovis e Adri said...
This comment has been removed by the author.
Clovis e Adri said...

Barry,

I specially like the part on how immigration is supposed to be the undoing of Sweden, like:

"The once homogenous population has been forever altered by a rapid and massive addition of people from vastly different cultures and value-systems."

Yes, because we have no record of a country of inhomogeneous population ever succeeding to become the most rich country we ever knew... oh, wait.

Harry Eagar said...

100 years ago, a young woman walking without a male escort in Sweden would be arrested for solicitation.


It used to be a very conservative, religious society. Perhaps social liberalism accounts for all its economic advancement. (I don't think that is the case, but it isn't easy to refute, when we compare the economic condition of states that continue to treat women that way now.)

Howard said...

I suspect that Swedish women have other concerns these days.

More here.

Bret said...

So soon, in Sweden women will once again make sure they have a male escort with them when they go out. And given what's happening on American college campuses, abstinence and chaperons (or perhaps video cameras instead) will become widespread once again as well.

Amazing how everything always ends up in the same place when it comes to social interactions. Could it be that human nature just doesn't change? Could it be that that which was learned over millennia and encoded in tradition actually had some validity?

Naaaaaah, couldn't be. :-)

Harry Eagar said...

Everything always ends in the same place? Really?
You mean like how a divorced man could never be elected president until some liberal dude did it in 1980?

Hey Skipper said...

100 years ago, a young woman walking without a male escort in Sweden would be arrested for solicitation.

And why should I believe this?

Hey Skipper said...

I am endlessly amused by rightwingers who simultaneously believe that the reason poor Americans won't work for $7 an hour is that they are irredeemably lazy and immoral, but that corporations must pay CEOs millions to get them to work at all.

Show me just one that believes this.

Just one, Harry.

Howard said...

Amazing how everything always ends up in the same place when it comes to social interactions. Could it be that human nature just doesn't change? Could it be that that which was learned over millennia and encoded in tradition actually had some validity?

Maybe more so than we could imagine:

"Wolfe’s vision of the America emerging from the chaos of modernity is eerily similar to the Rome of Antiquity before Constantine. Where that antiquity was pre-Christian, this New Antiquity is post-Christian.
...
This transformation from the Great Republic to the New Antiquity has happened in large measure in order to accommodate the growing number of immigrant groups forcing their way into the metropolis. It is a colder and crueler world: Inside the cultural ghettos, the new tribes of post-America retain much of their old affections and loyalties; outside them, they treat others with wariness and distrust. And they are slow to develop a common attachment to their new “home.”"

Barry Meislin said...

"...eerily similar to the Rome of Antiquity..."

Indeed, and if so it just may be that all roads lead to---here we go again---Sweden!!:

https://www.youtube.com/watch?feature=player_embedded&v=3KSJY0c8QWw

Of course, all this is a good thing. A very good thing. If only we could persuade ourselves. Convince ourselves. Accept. Submit.

File under: Where is O'Brien when one really needs him?

Howard said...

Barry,

That dude is good!

Harry Eagar said...

'And why should I believe this?'

For one, it fits in with what we know generally about Sweden. For two, it's in Philipp Blow's 'The Vertigo Years: Europe 1900-1914'

Hey Skipper said...

Harry -- that fits in with what you insist we know, but so far as I have been able to find, no one else does. And if it is in 'The Vertigo Years', then by all means give us the specifics.

Also, there is this assertion of yours still unsubstantiated: I am endlessly amused by rightwingers who simultaneously believe that the reason poor Americans won't work for $7 an hour is that they are irredeemably lazy and immoral, but that corporations must pay CEOs millions to get them to work at all.

Is there even one example you can give, or are you just stinking the place up?

Hey Skipper said...

From the OP: the three most successful economies in the world are Singapore, Switzerland, and Sweden.

On what basis do you make that judgment? On PPP, Sweden's per capita GDP is almost 20% less than the US: $44k v. $51k. And then there is the little issue of how bloody expensive everything is there. Over the last ten years or so, the exchange rate has been about 7 krona per dollar. However, it takes over 9 krona to buy in Sweden what $1 dollar gets in the US. So, looked at in PPP terms, the krona is about 38% under valued compared to the dollar.

If you go to Sweden, be prepared to spend $10-12 for a beer.

[Peter:] I've commented before on how the flaw in a lot of modern libertarian opinion is linear thinking---as if tax rates and government regulation were the only or even primary keys to prosperity …

+11

[Harrry:] Let's see if we can forget that the customers for much of Sweden's exports are gummints.

How hard can it be to forget something we shouldn't have remembered in the first place?

Barry, there's a meme that pops up on my Facebook feed with some frequency which says that if hard work were connected to wealth, African women would be the richest people in the world.

I think that meme is at heart Marx's labor theory of value.

Which was complete rubbish.

The welfarist (and officially 'socialist') islands of refuge were a clear success in Bangladesh. Given that Skipper has been arguing strenuously that Bangladeshi capitalism cannot stomach similar successes …

I have? Perhaps you should try directly quoting what I said.

Bret said...

Hey Skipper wrote: "On PPP..."

PPP has its place and should be considered. However, like any measure, it also has its problems and when two economic systems are substantially different (as in the US and Sweden), I think it's less valid. For example, yes, beer and Big Macs are very expensive in Stockholm, but healthcare and daycare are very cheap. So what does that mean? Who knows?

Your last link in that paragraph is to a website that hasn't been updated for a loooong time. Note the 1.34 euro exchange rate.

Harry Eagar said...

Was the labor theory of value complete rubbish? Oversimple, for sure.

But erp, among others, is wedded to it.

erp said...

Harry, I've been called a nazi many times, but this is first time I've been accused of being wedded to a marxist theory.

Harry Eagar said...

I am endlessly amused by rightwingers who simultaneously believe that the reason poor Americans won't work for $7 an hour is that they are irredeemably lazy and immoral, but that corporations must pay CEOs millions to get them to work at all.

Show me just one that believes this.

How's John Hagee for the first part? I think even erp will grant he's a rightwinger. You don't think anybody put both halves in the same paragraph, do you?

http://www.greenvillegazette.com/fb/pastor-john-hagee-nasty-welfare-recipients-dont-deserve-to-live-12/

Hey Skipper said...

[Harry:] How's John Hagee for the first part?

Horrible, if the intent was to substantiate what you were blowing out your hat. Do you even read your links?

And since you have no second part, and your this exercise in blown hats rather strikingly includes the word "simultaneously", then you continue to astonish.

But not in a good way.

Bret said...

Hey Skipper wrote: "...continue to astonish..."

Dude, if you're really still astonished by that sort of thing, you're a really slow learner! :-)

erp said...

Harry, How can I agree or disagree about who is or isn't a rightwinger when I still have no idea what you mean by same.

From what I can glean out of your comments, rightwingers in your opinion are fascists, so Hagee must be a fascist, but I have no interest in who he/she is or what he/she says.

Harry Eagar said...

You should be interested in who Hagee is. Bush II's Billy Graham. An evil influence if ever there was one.

erp said...

Bush was the most decent man ever to be president and wasn't overly religious. Whoever Hagee is and whatever are his religious convictions, it's doubtful they could be even in the same ballpark as our boy president's religious mentor, the vile racist Jeremiah Wright.

Harry Eagar said...

Decent? He and Torquemada used the strappado. No other president is in that company, not even Jackson