Sweden turning to capitalism as money for government spending runs out

I hear a lot of people in my office predicting doom and gloom for the United States. Rubbish. The worst that’s going to happen is that we have the kind of slow economy that France has, and that will only last until we run out of money to borrow.

Yahoo News explains what happens when socialists run out of money.

Excerpt:

The Nordic model, known for high taxes and its cradle-to-grave welfare system, is getting a radical makeover as nations find themselves cash-strapped.

[…]In the wake of a banking crisis in the early nineties, Stockholm scrapped housing subsidies, reformed the pension system and slashed the healthcare budget.

A voucher-based system that allows for-profit schools to compete with state schools was introduced, and has drawn attention from right-wing politicians elsewhere, including Britain’s Conservative Party.

In 2006, conservative Prime Minister Fredrik Reinfeldt’s government accelerated the pace of reform, tightening the criteria for unemployment benefits and sick pay while lowering taxes.

Income tax in Sweden is now lower than in France, Belgium and Denmark, and public spending as a share of GDP has declined from a record 71.0 percent in 1993 to 53.3 percent last year.

Just so you know, his numbers might be out of date.

The latest Heritage Foundation Index of Economic Freedom says this:

The top individual income tax rate is 57 percent, and the top corporate tax rate has been cut to 22 percent. Other taxes include a value-added tax (VAT) and a capital gains tax. The overall tax burden is 44.5 percent of GDP. Public expenditures make up about half of GDP, and public debt is below 40 percent of GDP. The government is attempting to expand investment in infrastructure and research while reining in welfare spending.

The United States had this:

The top individual income tax rate has risen to 39.6 percent, and the top corporate tax rate remains at 35 percent. Other taxes include a capital gains tax and excise taxes. The payroll tax holiday expired at the beginning of 2013. The overall tax burden amounts to 25.1 percent of gross domestic income. General government expenditures are slightly over 40 percent of GDP. Total public debt equals over 100 percent of the size of the economy.

So we are actually worse than Sweden now, in terms of government spending as a percent of GDP.

Denmark, too

More from the Yahoo News article:

If Sweden is the Nordic country to have gone the furthest in shrinking its welfare state, Denmark has moved the fastest.

When her Social Democratic government took power in 2011, there was little to suggest Prime Minister Helle Thorning-Schmidt would make any dramatic changes to the country’s cherished welfare state — funded by the world’s highest tax burden.

After a centre-right government had raised the retirement age and reduced the unemployment benefits period from four to two years, “Gucci Helle” — as she is known among her detractors — went on to cut corporate taxes to 22 percent from 25 percent.

Other reforms have included requiring young people on benefits to undertake training, and withdrawing student aid to those taking too long to finish their studies.

Denmark has been spurred into action by a persistently sluggish economy since a housing bubble imploded in 2007, leading to anaemic household spending.

But among Danes there is also a sense that the welfare state was ballooning out of control.

In 2011, a TV report aiming to show what life was like for the poor in Denmark visited the home of a single mother on benefits, whose disposable income turned out to be 15,728 kroner (2,107 euros, $2,860) per month.

“Poor Carina”, as she was later nicknamed, sparked a national debate on the level of unemployment benefits, with one pollster crediting her with fuelling a rise in the number of people who felt benefits were too high.

It would be nice if we had journalists who could do a story like that.

A different article from a Swedish newspaper called The Local has more on the new Sweden.

Excerpt:

One in ten Swedes now has private health insurance, often through their employers, with some recipients stating it makes business sense to be seen quickly rather than languish in national health care queues.

More than half a million Swedes now have private health insurance, showed a new review from industry organization Swedish Insurance (Svensk Försäkring). In eight out of ten cases, the person’s employer had offered them the private insurance deal.

“It’s quicker to get a colleague back to work if you have an operation in two weeks’ time rather than having to wait for a year,” privately insured Anna Norlander told Sveriges Radio on Friday. “It’s terrible that I, as a young person, don’t feel I can trust the health care system to take care of me.”

The insurance plan guarantees that she can see a specialist within four working days, and get a time for surgery, if needed, within 15.

I used to make fun of Sweden for being so socialist, but then I started to read more about them on Reason.com and from the Cato Institute (two libertarian sites) and my mind changed. These new articles confirm for me  that Sweden is improving their economy by embracing the free market system and rejecting socialism. Obviously, there is more to do, but the trend is good, and the results cannot be questioned. What could the United States do if we acted more like Sweden? It seems like just as they are moving away from government control of health care, we are moving towards it! We are embracing old ideas, and we need something new.

I am still worried about the European countries because of the breakdown of the family, the disrespect of marraige and the low fertility rates. But still, this is a good sign for those of us who are worrying that we need to cheer up. This is how socialism ends. We’ll get there.

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