Wednesday, May 25, 2005

Welfare State Stagnation - Sweden

Sweden is cited to show that you can have cradle-to-grave welfare for all and high taxes, but still have a dynamic economy. Not so, say JACOB ARFWEDSON and JOHNNY MUNKHAMMAR, researchers in Sweden. Sweden is a model for growth of government. The Wall Street Journal (paid subscription required) shows the true situation. Growth is 3.5%, respectable, but not a leader.
In fact, Swedish growth has been declining for 50 years. Currently, Swedish growth is well below that of the countries of Eastern and Central Europe, but also lower than that of, for example, Britain, France, Spain and Denmark. In terms of per capita private consumption, Sweden is 19th among the 30 OECD countries.
And they claim employment is high.
The true picture is totally different, however. The largest trade union, LO, a strong supporter of the Social Democrats for more than 100 years, recently admitted that real Swedish unemployment is closer to 20%-25%. Of the Swedish population of working age (5.8 million), 2.2 million belong to the category "not at work," of which 1.4 million live off government handouts. In 2004, this amounted to 39% of the population of "working age" -- that is, almost four out of 10 people of working age don't go to work.
The conclusion of these Swedes:
The Swedish welfare state is a model for growth -- but only growth of government. With an annual growth of 3.5%, GDP doubles in 20 years; no amount of government redistribution can match this in terms of prosperity. We need market-based reform, drastic tax cuts and deregulation of state monopolies. And if the new EU Constitution offers a possibility of escaping the so-called European Social Model, Swedes and other EU citizens alike should make use of it.

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