Monday, September 18, 2006

Sweden Looks Right

The people of Sweden have apparently elected at a reformist government. A party that has promised to lower the taxes on the highest earners, to lower unemployment benefits and to trim back labor-market rigidities heads the new governing coalition. Cleverly named the Moderate Party, suggesting how radical the "Swedish model" has become over the years, the new coalition has punctured one of the world’s least competitive democracies, where Social Democrats ruled for most of the 20th century. And its program is by Swedish standards fairly remarkable. In the words of one English-language Swedish website:

Measures to get more Swedes into work will be high up on the agenda when the new government presents its first programme to the Riksdag. Reinfeldt would not say on Monday whether any specific targets for unemployment or employment. He did say, however, that voters will be given an income tax reduction by the beginning of next year.

"Our hope is to introduce the policies we won the election with as quickly as possible," he said.

The new government will need to hurry to get a budget in place by 16th October, only ten days after assuming the reins of power. Olofsson said she expected the proposal for a tax deduction for domestic services such as cleaning and gardening to be part of the proposal.

"Ordinary people will be able to live better and get more control over their lives." (Emphasis added.)

The European press is full of reports that the Swedish economy is among Europe’s most successful, having posted a growth rate in excess of 5% in the most recent quarter. And nominally its unemployment rate is very low, at approximately 5%. And yet Swedes voted for change. Part of this is perhaps the natural exhaustion that all long-term governments run into. But part of it is perhaps that the success of the Swedish model is not all it is cracked up to be. Like other Scandinavian countries, Sweden has a very minimalist definition of “unemployment.” In particular, it has moved huge numbers of people into permanent disability and hence magically conjured them out of the labor force. Since unemployment in all countries is defined as the sum of the percentage of people working plus those looking for work divided by the labor force, this maneuver lowers the unemployment rate. Eurostat, which tracks social and economic data for EU countries, calculates the rate at 7.1%, and other press reports have depicted it as as much as 20%. The disguised unemployment that goes on in some European countries is nothing short of scandalous.

Sweden has in many ways the most advanced case of the European sickness – infatuation with the welfare state at the expense of ambition, infatuation with present pleasure at the expense of future achievement, and the corrupt multiculturalism that views immigrants as generators of a quaint diversity in food, habits, clothing, etc. to be enjoyed by the locals, with scant thought given what to do with the aspirations and potentially anti-liberal culture of the immigrants and their children. (Theodore Dalrymple has outlined this problem in a brand-new interview with the Brussels Journal.) That this model is now acknowledged even by the people who live under it to be coming under perhaps fatal strain is a hopeful sign that Europe may get well. For the European left, this is a tough pill to swallow because Sweden is seen by them as the most advanced society in the world. I bolded the last paragraph in the excerpt above because this remark, by a Swedish politician of all things, is very reminiscent of something Margaret Thatcher once said – that money and the opportunity to earn more of it are important primarily as ways to give you more control over your own life.

To be sure, it is important not to overestimate what it is that the new government even wants to do, let alone what the Swedish electorate would tolerate. A substantial welfare state is clearly here to stay, for as long as the finances will allow it. But there is a refreshing notion of facing reality that gives one hope. The new government may not be any position to do anything about Sweden's problem with assimilating immigrants, and almost certainly cannot do much about its demographic decline. But in showing some will to fix the country's economic difficulties, the people of that country may (if you are a glass half-full type) have taken the first painful step toward reconciling their dreams of a welfare-state paradise with a world where people are willing to work on much better terms than those on offer from cosseted workers in postwar Europe.


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