Among those countries afflicted with the more advanced stages of welfare statism are Norway, the Netherlands, Denmark, and Sweden -- especially Sweden. In the past, Sweden has been held up by some as the model mixed economy -- how to combine a vigorous capitalist industrial base with a lavish social welfare system. It was even touted as "market socialism" -- a future that seemed to work. Not any more. The negative consequences of decades of the heavy welfare state burden can no longer be postponed. The May 24, 1993 issue of FORBES reported on Sweden's welfare state ("The Swedish Disease") -- and the condition it has left that country.
"The Clinton Administration's liberals who are pushing for more taxes, a bigger welfare state, bigger labor unions, currency devaluation and an industrial policy should take note: The Swedish model is doing abysmally.
"Sweden's industrial production has plunged 15 percent since 1989. The jobless rate is 12% and rising. The budget deficit accounts for a third of the central government's spending and 13% of the country's GDP (compared with 5% in the U.S.). The currency is sinking even faster than the dollar."
What is Sweden's problem? "The Swedish model is Sweden's problem," observes Ian Wachtmeister, a former aluminum company executive who heads the recently formed, market-oriented New Democracy Party, and who was elected to the Swedish parliament in 1991.
"People are sick of the Big Brother-type of state. It's all connected with what's happening in Eastern Europe, because they had 100% socialism and we had 70%," reports Wachtmeister.
"Sweden's welfare state has all but destroyed the country's work ethic. The absentee rate in Swedish industry reached an astounding 25% several years ago before recent welfare cutbacks encouraged people to work more. Many companies used to overstaff themselves by 25% just to make sure that they had enough workers on the production line."
When the Swedish welfare system was at its peak a few years ago, the national health care system tended to encourage people to become sick. According to the statistics, Sweden was the sickest society on earth at that time. LIke anything else, when medical care is "free", an increasing number of people find ways to take advantage of it. Sweden's national health care system became a national scandal.
As Forbes points out, by becoming every Swede's rich grandfather, the state has destroyed most peoples' incentive to save. According to Sweden's current Finance Minister, Anne Wibble, "Most households in our country do not have any private savings, and that means they are not independent of either employers or or politicians."
Meanwhile, another hangover from Sweden's socialistic welfare binge is that some of the world's highest taxes on capital and income have driven Swedish entrepreneurs to less hostile environments in continental Europe and America. The productive private sector began to shrink at an accelerated rate. Three years ago Swedish banks collapsed, real estate prices plunged fifty percent, and the government's budget deficit exploded. The semi-capitalistic goose that had been laying the golden eggs had finally keeled over. Sweden was in a hell of a mess. A Soviet-style economic collapse was eminent.
"In 1991 Carl Bildt's conservative coalition was elected to clean up the socialists' mess. Like some ancient hero of Norse legend, Carl Bildt has been swinging a mighty ax to clear away the tangles of the welfare state. Government expenditure has been cut by $11 billion (80 billion kronor, equal to 6% of GDP). Welfare payments have been cut. Inflation has been tamed to an underlying rate of 2%. A voucher system had been introduced in the public school system. Capital gains taxes are 30%. The top marginal tax rates on income are still 50% -- high, but that's a big improvement over the 85% of the recent past."
But, will it be too little too late to turn Sweden around? Many of Bildt's more ambitious reforms and privatization attempts have been stalled partly by political opposition from the old-line reactionary Social Democrats who held power for so long and brought Sweden to its crisis situation.
The Forbe's article concludes with the following: "Sweden may or may not recover fully from its socialistic experimentation. But this isn't just a story about Sweden. It's about any country where politicians believe in the infinite ability of the private sector to fund an ambitious social agenda, be it through high taxes, mandates, regulations or other forms of state interventions.
"The New Democracy Party's Wachtmeister worries that Sweden's experience with market socialism has been lost on many of the liberals in the Clinton Administration. The key lesson, as Sweden is now finding, is that once in place this kind of socialism is very hard to dislodge."
"Right now I'd rather be in Sweden than in the U.S., because we have seen the problems and are moving away from the welfare state," says Wachtmeister. "On your side, you are moving right into it, and you risk destroying your country."