by David L. Goetsch
Sweden has become the first of the Western European nations to take a major step away from socialism. According to the National Center for Policy Analysis (NCPA), “Sweden spent years as a statist economy, with marginal tax rates above 90 percent. With nationalized healthcare 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.” These deficit and debt levels should sound familiar to anyone paying attention to what has happened to America’s economy over the last several decades and particularly during the first six years of the Obama administration.
In the 1990s Swedes began to realize what socialism and statism were doing to the quality of life in their country. As a result, they elected Sweden’s first conservative government since the end of World War II. Knowing precisely what needed to be done to pull their nation back from the abyss of economic ruin, Sweden’s new conservative government quickly went to work cutting taxes on businesses and individuals. Things began to change for the better almost immediately. Consider the following improvements Sweden has enjoyed since beginning the long, hard road back from socialism and statism (data provided by the NCPA):
- Between 1993 and 2010, Sweden’s GDP growth exceeded that of the rest of Europe by one full percentage point. Further, by 2010 public debt had dropped to 37 percent of GDP and taxes on businesses had been decreased to 22 percent (compare this with the 36 percent rate in the United States).
- Sweden’s political leaders transformed the nation’s retirement pension system from a defined-benefit system into a defined contribution system, thereby saving it from inevitable insolvency.
- The Swedish Fiscal Policy Council was established and empowered to independently monitor and evaluate government fiscal policy. The Council’s most current recommendation is that Sweden raise its retirement age to protect the long-term solvency of the nation’s retirement system.
Do you think Cubans are fighting for healthcare or freedom from Communism?
These and other free-market initiatives have resulted in an upturn in entrepreneurship in Sweden. For example, Skype (the VolP service) and Spotify (the music streaming program) both got their starts in Sweden. Saab, best known as an automaker, is also excelling in the aerospace and aviation industries. In fact, according to the NCPA Saab has beaten out Boeing for aviation contracts in the past several years. In a move that should be watched closely by America’s airlines, automakers, and other unionized industries, SAS—the Scandinavian airline—finally posted a profit after six straight years of losses by negotiating with its union to cut pay and retirement benefits. The rationale of SAS executives in asking for the cuts and the rationale of union leaders in accepting them was simple: It is better to get a little less than you want than to get nothing when the airline goes bankrupt.
Sweden has not yet weaned itself completely from socialism, but it has made excellent progress. Socio-economic change is difficult in a democracy. It typically happens in fits and starts, but as Sweden has shown, it can happen. What Sweden began in the 1990s is what America will need to begin in 2016. But, as it did in Sweden, this will require electing a conservative government. Let us hope and pray that the American electorate will show the good sense shown by its counterpart in Sweden.