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.