Why Sweden Can Handle Its Spending Better Than America

Thomas Grennes

With Bernie Sanders and Elizabeth Warren among the front-runners for the Democratic presidential nomination, Americans have heard more about socialism lately. It’s a vague term that could refer to anything from the rigid central planning of the former Soviet Union to the social democracy of Sweden. American progressives tend to associate their bold ideas, such as Medicare for All and the Green New Deal, with the latter. 

It’s true that Americans could learn a lot from Sweden—including how to implement some fiscal discipline.

Sweden is a prosperous country with a large government sector, but is it prosperous because of its brand of socialism? Many Swedish economists, including Johan Norberg and Lars Jonung, would answer with an emphatic “no.” Their interpretation of economic history is that Sweden became prosperous as a result of one hundred years of growth between 1870 and 1970.

That century—characterized by a market economy, not rigid government direction—transformed the Swedish economy from one of the poorest in Europe to one of the richest. After socialist policies became prominent between 1970 and 1990, the economic growth rate decreased. For instance, no large and prominent Swedish firms were started after 1970. Additionally, an economic crisis in 1992-93 forced major fiscal reform away from Sweden’s more extreme Socialist policies.

Sweden has comprehensive health insurance, for example, but Swedes can choose to be treated by private doctors. Since 1992, vouchers have allowed people to choose their children’s schools. Studies showed that Swedish students were taking too long to complete college, so the higher education stipends they receive now come with time limits.

Sweden had a tax on wealth, but along with Germany, the Netherlands, and Austria, it abandoned it. When an extremely high percentage of Swedes—one of the world’s healthiest populations—were claiming sick leave, Sweden retreated from its once-generous policy of paying them 80 percent of their normal earnings. Sweden also has an efficient regulatory process with less red tape than the United States, according to the Heritage Economic Freedom Index.

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