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Doesn’t Sweden Show Us the Way?

Supporters of the welfare state often reply to arguments like these by pointing to the alleged counter-example of the Scandinavian countries, Sweden in particular, where a cradle-to-grave welfare state exists alongside robust economic growth and vigorous employment figures. We really can have it all. Can we? In 2008, Swedish Prime Minister Fredrik Reinfeldt urged his countrymen to face facts: Swedish prosperity had been built up by the free market, and the much-vaunted Swedish welfare state merely drew parasitically upon that wealth until the country was forced to begin returning to the market economy once again. Wealth that “took a hundred years to build was almost dismantled in twenty-five years,” he said.48 He was telling the truth. Thanks to a largely free-market economy and its avoidance of war, Sweden could boast the world’s highest rate of per-capita income growth between 1870 and 1950. That growth rate had fallen to about average by international standards after a quarter century of expansions in the size of government. The economic interventions accelerated under the hard-left Olof Palme, whose increases in taxation and the regulatory apparatus seriously undermined the country’s international competitiveness. After years of instability and currency devaluations, Sweden began a program of deregulation and selling off state-owned companies. Cuts in spending and tax rates also contributed to improving Sweden’s relative performance compared to other European countries, after having fallen so far behind by 1990. Tax reductions have continued into the twenty-first century, with income and corporate tax rates coming down and gift and inheritance taxes being abolished altogether. Sweden is now ranked as the world’s second-most competitive economy in the world, according to the World Economic Forum. When the Wall Street Journal and the Heritage Foundation compiled the 2010 Index of Economic Freedom, they found Sweden offered “greater business freedom, trade freedom, monetary freedom, investment freedom, financial freedom, freedom from corruption, and property-rights protection than does the United States.”49 (What this really means is that the rest of the world is so unfree that even the still-bloated welfare state of Sweden could in some sense still qualify as one of the world’s freest economies.)50

Thomas E. Woods (2011-02-07). Rollback: Repealing Big Government Before the Coming Fiscal Collapse (pp. 139-140). Regnery Publishing. Kindle Edition.

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