Headlines 2014

Sweden is still a capitalist welfare state


Costs started to soar in the 70s, explained Andreas Bergh and Assar Lindbeck at a seminar organized by IFN, when discussing about the Swedish welfare state. They agreed that the Swedish welfare system in some parts, needs to be reformed. "Though, it is difficult for politicians to reform without a crisis," said Lindbeck. At the seminar a new book authored by Andreas Bergh was presented and discussed – Sweden and the Revival of the Capitalist Welfare State. Irene Wennemo, editorial writer for Dagens Arena also participated in the debate.

In the picture from left Assar Lindbeck, Andreas Bergh and Irene Wennemo at the seminar held on August 28. Photo: Cecilia Larsson Lantz.


In Sweden and the Revival of the Capitalist Welfare State (Edward Elgar Publishing, 2014), Andreas Bergh, IFN and Lund University, explains how a country can successfully combine prosperity with a relatively fair distribution. Unlike the French economist Thomas Piketty Bergh shows that "Sweden's success formula does not include high taxation of capital, but rather to provide efficient, capitalist institutions that allow a re-distribution within the framework of the welfare state."

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Andreas Bergh presented his book Sweden and the Revival of the Capitalist Welfare State at a seminar in Stockholm. Photo: Cecilia Larsson Lantz.


Andreas Bergh explained in his presentation that the Swedish economy is robust, compared with most countries in Europe. He asked, however, if the Swedes themselves know why the country is doing so well. He answered the question that gave name to the seminar – is Sweden still a capitalist welfare state?

"Yes the goose [read capitalism] still lays her golden eggs", said Bergh, and continued: "Sweden is a more open, free-trade-friendly and more liberal country than, say, the US. However we have high taxes."

He noted that the Swedish reform process has slowed down, starting in the mid-1990s and has subsided even more during the last four years. "There is a great need for reforms. The problems of isolation and the structure of the labor market have only increased since 2006 We currently have a respite as the number of people in the workforce outnumber the older population. But, around 2020-30, the 40's generation will constitute an impediment for municipal finances. To make matters worse we know that at that point in time less people will be of working age."

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The crowd was eloquent and engaged in the seminar where the book Sweden and the Revival of the Capitalist Welfare State was presented. Photo: Cecilia Larsson Lantz.


Andreas Bergh went into polemics with the French economist Thomas Piketty – who advocates high capital taxes. "The Swedish formula for success engages capitalism and capitalists as wealth generating powers to create jobs and tax revenues. And we have experimented with high capital- and income taxes. The result was that Sweden didn’t do so well."

Bergh noted that today's debate about the profits in the welfare sector raises the question of wether the Swedes really understand what creates wealth. "To me it seems strange that we are focused on profit rather than control, quality assurance and to providing proper incentives. Capitalism creates wealth since all the players have an incentive to ask what people want to buy, what to do and how to do it, rather than turning to the state in hopes of subsidies. Profit is one of many motives that needs to be maintained; otherwise the risk is imminent that the goose will quit laying golden eggs!"

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Irene Wennemo talked about the role of municipalities in the world recording state. Photo: Cecilia Larsson Lantz.


Both Irene Wennemo and Assar Lindbeck highlighted the role of municipalities in the discussion on the future of the welfare state. Wennemo explained that local authorities early on built rudimentary welfare systems. Today, she said, the public debate about the input that municipalities have in regards to educating the youth, arranging for the elderly, etc., has lost proportionality. "How local authorities act must be up to each individual community. It is certainly a huge problem when government regulation becomes part of the picture."

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Assar Lindbeck explained that politicians find it difficult to reform, when society is not in crisis. Photo: Cecilia Larsson Lantz.


Assar Lindbeck recapitulated how the economy and welfare state have developed in Sweden during the last 100 years. He pointed out that the idea of local autonomy entails the municipalities themselves making decisions. "Today we are told that municipalities have autonomy but if municipalities do not want the same things as other local governments the state should intervene and raise the level for all so that no one lags behind. It's a strange form of self-government we have: One should not do differently! This approach must indeed be costly."

View the seminariet on YouTube

Read an Op-Ed  by Andreas Bergh in the British financial newspaper CityAM

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