The Economist brings some news from Scandinavia:
Sweden has reduced public spending as a proportion of GDP from 67% in 1993 to 49% today. It could soon have a smaller state than Britain. It has also cut the top marginal tax rate by 27 percentage points since 1983, to 57%, and scrapped a mare’s nest of taxes on property, gifts, wealth and inheritance. This year it is cutting the corporate-tax rate from 26.3% to 22%.
Sweden has also donned the golden straitjacket of fiscal orthodoxy with its pledge to produce a fiscal surplus over the economic cycle. Its public debt fell from 70% of GDP in 1993 to 37% in 2010, and its budget moved from an 11% deficit to a surplus of 0.3% over the same period. This allowed a country with a small, open economy to recover quickly from the financial storm of 2007-08. Sweden has also put its pension system on a sound foundation, replacing a defined-benefit system with a defined-contribution one and making automatic adjustments for longer life expectancy.
Most daringly, it has introduced a universal system of school vouchers and invited private schools to compete with public ones…
Well, this is all very interesting. The stereotype is that Europe = Socialism, and that’s why most of the continent is slowly collapsing – but not all of it. You see it in comment threads all the time: “Dude, Obama wants us to become more like Europe, but look at Greece! Look at Spain!” “Naw, dude, look at Sweden. They’re rocking. If socialism is so terrible how come Sweden is so rocking?”
The dichotomy between the collapsing socialist Greeks and the chill socialist Swedes is so widely accepted that progressive Tim Worstall tried to raise money to write a book about it called “How to Create a Liberal America.” Worstall wanted to investigate what the collapsing socialists were doing wrong and what the chill socialists were doing right.
After all, that’s always the progressive conceit, right? If big government doesn’t work, you’re just not doing it right. If we can just implement it correctly, or with the right people in charge, we can make it work.
Well, if The Economist is any indication, maybe the way to make a liberal country successful is actually to…. make it less liberal. Lower tax rates? Scrapping defined-benefit pensions? A UNIVERSAL SYSTEM OF SCHOOL VOUCHERS? (I thought Democrats had assured us that the v-word was conservative code for throwing poor people to the streets…)
In my feeble attempts to recognize bias without being dogmatic, I had always figured that the Scandinavian success was simply evidence that the world was complex and big government doesn’t always lead to impending doom as much as some of us would expect. It never crossed my mind that the Scandinavian success could actually be because those countries were making their big government smaller.
To be sure, Sweden and friends are nowhere near Libertarian Utopialand. If anything, they’re pursuing the sort of clever hybrid that elites find so appealing, and they may not be so far from illustrating that progressive conceit of the well-managed welfare state.
There are plenty of caveats and complications, as well. Sweden, Norway, Finland – all are much smaller than the US, and much more homogenous, though they are also beginning to face some of the political damages of immigration (a topic I wrote about earlier):
For the Nordic countries to be able to afford their welfare states they need to have 80% of their adults in the workforce, but labour-force participation among non-European immigrants is much lower than that… mass immigration is creating a class of people who are permanently dependent on the state.
There is much more to be explored on this issue, including the possibility that The Economist is oversimplifying and cherry-picking. Still, assuming the above facts are not wholly erroneous, I can’t help but feel a pleasant irony at discovering that the most successful socialist European countries may actually be the ones that are most successfully scaling back their socialism.