Sweden a socialist or a market state?

John Hassler

The Bumblebee

• “...Think of a bumblebee. With its overly heavy body and little wings,

supposedly it should not be able to fly— but it does. Every summer it

comes back and makes the seemingly impossible possible en route

from a forget-me-not to a daisy.

This is how so-called analysts view the Swedish economy. We “defy

gravity.” We have high taxes and a large public sector, and yet,

Sweden reaches new heights. We are still flying, so well that many

envy us for it today.”

Göran Persson, prime-minister, quoted in the IMF report The

Swedish Welfare State, Can the Bumblebee Keep Flying?, IMF

2004

The Swedish welfare state

• The Swedish government collects more tax revenue than

almost any other country in the world.

• The large expansion came in the 50s, 60s, and 70s.

• Came a bit later in other countries.

• Has been clear convergence -- in EU.

Is it flying? • Sweden had the world’s highest growth rate between

1870 and 1970.

• After, not an outstanding growth performance but

remains a rich country.

• Has among the world highest degree of equality of

disposable income and yet a high degree of social

mobility.

• After all, is GDP everything?

Why is it flying? • Perhaps not spectacular performance, but Sweden is

not crashing. Why?

– High taxes, but efficient system with fairly little progressivity.

– Efficient bureaucracy.

– Good educational system.

– Low taxes on property and corporations.

– Market alternatives financed with vouchers.

– Fairly little government involvement in business and industry.

– Unions that are large enough to care of the size of the pie,

understanding the value of a competetive industry.

– Well functioning political system that can deal with difficult

tradeoffs.

How socialistic is Sweden?

• ”Sweden has socialized the family but not the firm”.

Assar Lindbeck

• But– a lot of private production of services provided

by government.

• The extensive welfare state systems do create

problems, but perhaps not so strange that the

bumblebee continues to fly!

Tax revenues share of GDP 2009

0

10

20

30

40

50

60

Denm

ark

Sw

ede

n

Belg

ium

Norw

ay

Fra

nce

Italy

Fin

land

Austr

ia

Icela

nd

Hung

ary

Ne

the

rla

nds

Slo

ven

ia

Czech R

ep

ub

lic

Spa

in

Isra

el 1

United

Kin

gd

om

Germ

any

Luxe

mb

ou

rg

OE

CD

-To

tal 2

Port

ug

al

New

Ze

ala

nd

Pola

nd

Cana

da

Gre

ece

Irela

nd

Slo

vak R

epu

blic

Sw

itze

rla

nd

Ja

pa

n

United

Sta

tes

Kore

a

Turk

ey

Ch

ile

Me

xic

o

Tax revenues share of GDP

0

10

20

30

40

50

60

190019101920193019401950196019701980199020002010

US

Swe

Government expenditure share of GDP

20

25

30

35

40

45

50

55

60

65

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

EU

Ger

UK

Swe

Spa

Swedish GDP per capita relative to OECD average

100

105

110

115

120

125

130

135

197

0

197

2

197

4

197

6

197

8

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

Current prices Constant prices

Income inequality and social mobility

Inequality

Immobility

Source: Daniel Waldenström, chapter in

SNS Konjunkturrådets årsrapport 2010.

Average taxes 1970

Income percentiles

Sweden

UK

USA

France

Source: Daniel Waldenström,

chapter in SNS Konjunkturrådets

årsrapport 2010.

Average taxes 2004 (2008)

Sweden

UK

USA

France

Sweden (2004) Sweden (2008) UK USA France

Income percentiles

Source: Daniel Waldenström,

chapter in SNS Konjunkturrådets

årsrapport 2010.

Share of 25-34 with university degree

0

10

20

30

40

50

60

70

Kore

a

Cana

da

Ja

pa

n

Irela

nd

Norw

ay

Ne

w Z

eela

nd

U.K

.

Austr

alia

Denm

ark

Luxe

mb

ou

rg

Fra

nce

Isra

el

Belg

ium

Sw

ede

n

US

A

Neth

erla

nds

Schw

eiz

Fin

land

Spa

nie

n

OE

CD

ave

rag

e

Esto

nia

Isla

nd

Pole

n

Chile

EU

-21 a

ve

rag

e

Slo

ven

ia

Gre

ece

Germ

any

Hung

ary

Port

ug

al

Austr

ia

Slo

vakia

Tje

ck r

epu

blic

Me

xic

o

Italy

Turk

y

Bra

sil

Share of students in private schools

0

5

10

15

20

25

199

3

199

4

199

5

199

6

19

97

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

20

11

Senior High Compulsory

Quality of life relative to the U.S.

Source: "Beyond GDP? Welfare Across Countries

and Time“, C. Jones and P. Klenow, WP. Stanford

University