RSS

Confronted with the grim necessity of European economic reform, many economists trot out Sweden as proof that counter to conventional wisdom, big government and economic growth can peacefully coexist. The Swedish economy has often been compared to a bumblebee, whose ability to fly can only be explained by its ignorance of aerodynamics and physics.

Proponents of the Swedish model cheer the flight of the bumblebee, whooping: It can fly! It can fly!

Yet Sweden and other European countries, with their rigid labor markets and bloated public sectors, have created social and economic exclusion. Failure to expand economic freedom in these countries will impede their ability to grow and develop on par with global peers. More than half of Sweden’s 50 largest companies were founded before World War I; only two were founded after 1970.

In true bumblebee fashion, Sweden is rich despite the welfare state. In the late 19th century, successive liberal governments introduced free establishment in different trades, abolished guilds and stripped the upper classes of economic privileges that had bled the economy dry. It was during this time that free trade was a badge of honor, and immigration and emigration was free for all. This era saw the birth of our most prosperous companies: SKF, Electrolux and Assa (later Assa Abloy). Sweden has a proud tradition of free market institutions, and it is market reforms, both in the late 19th century and in the mid-1990s, that explain our economic development.

When the Swedish social democrats were ousted last year after twelve years in power, observers who had touted Sweden as a welfare paradise on earth were inconsolable. Guardian columnist Polly Toynbee, who once lauded Sweden the best country in the world, wrote two days after the election:

“How can a good government lose power when the country is flourishing? With a rising growth rate of 5.6%, low interest rates, thriving manufacturing and exports…Sweden’s welfare system is the envy of the world.”

Perhaps, but that doesn’t mean it works properly. The Swedish system’s welfare weaknesses have become even more apparent in the wake of globalization and more intense international competition. Of five million working-age adults, one million remain outside the workforce, even though few are officially unemployed. In 1970 Sweden was the world’s 4th richest country; today we are number 14.

Europe is a both wealthy and a civilized part of the world. We have contributed historically with great inventions and institutions. Europe was also the first part of the world to become prosperous. But that doesn’t mean the future is footloose and fancy-free. Now competition, the number one wealth creator, is under attack. The fact that the EU is spending $110 billion per annum on farming subsidies and only $9.3 billion on development aid, when abolished subsidies would be better for starving nations, is beyond stupidity.

If Europe is to remain the focal point of western prosperity, it must accept what most Swedish governments for more than a century have held for true: that free trade is the source of wealth for consumers and business, and that it is the vent of fresh air that the oxygen-starved countries in the developing world require.

There are certainly lessons that Europe can learn from Sweden. But expanding government and limiting competition should not be among them.


Maria Rankka is President of Timbro, a Swedish free market think tank. She has written books concerning the emerging European tigers Estonia and Ireland, and the social dimensions and impacts of high taxation on individuals. Prior to Timbro Maria was a partner in a fast-growing public relations firm and before that she worked for the Moderate party, which is now in government.


Related Materials from the Atlantic Community

• Christine Otsver says Get Moving, Europe!
• Heino Fassbender writes Don’t Blame the Welfare State for US-EU Productivity Gap
• William L. Silber asks Will the Euro Dethrone the Dollar?