Sweden: A myth past its expiration date

Focusing on macroeconomic data and dubious international social rankings ("best places to live") based on the so-called "human development index" and similar "quality of life" metrics does not even begin to tell the true story of Sweden, the United States, or any other country. New institutional economists like me are aware that we cannot explain differences in economic outcomes without a bit of historical and cultural research.

Last year I read at Newgeography.com an article by two Scandinavian economists, Nima Sanandaji (president of the Swedish think tank Captus) and Robert Gidehag (president of the Swedish Taxpayer's Association). They recalled how one of their colleagues tried to tease Milton Friedman: "In Scandinavia we have no poverty." With his typical sense of humor, Friedman replied, "That's interesting, because in America among Scandinavians, we have no poverty either."

To those who are quick to attribute income equality and the long life spans of Sweden to the dominant tax-and-spend social democratic policies of the 20th century, Sanandaji and Gidehag point out that the country performed well in those two areas before the rise of the welfare state. A possible sociological explanation is "strong work ethic and high levels of trust and cooperation." Such cultural characteristics not only do not get stifled when Scandinavians immigrate to the supposedly inferior individualistic capitalism of the United States, they provide tremendous advantages. While poverty rates among Swedish Americans are the same as the poverty rates in Sweden itself, the vast majority of the descendents of those who moved from Scandinavia to our Midwest are doing spectacularly well. According to Sanandaji and Gidehag, "If Americans with Swedish ancestry would form their own country their per capita GDP would be $56,900, more than $10,000 above the earnings of the average American."

The lessons are not too difficult to get-welfare is not the source of social strengths, it is the people's stock of physical, human, entrepreneurial, and social capital that can support a wasteful social democracy. Sanandaji and Gidehag's conclusion: "When it comes to economic policy and copying Swedish institutions, Americans are probably better off being inspired by Swedes in America, rather than Swedes in Sweden."