From: Anders Sandberg (asa@nada.kth.se)
Date: Mon Jul 08 2002 - 06:34:20 MDT
Here is a comment from Waldemar Ingdahl related to my correlations post.
He pointed out that reciting numbers is not as convincing as studying an
example of *why* these correlations happen.
---- Forwarded message ----
If Sweden left the European Union and joined the United States we would =
be the poorest state of America. Using fixed prices and purchasing power =
parity adjusted data, the median household income in Sweden in the late =
1990s was the equivalent of $26,800 compared with a median of $39,400 =
for U.S. households - before taxes. And then we should remember that =
Sweden has the world's highest taxes.=20
The Swedish Research Institute of Trade, who made the study, underlined =
that Afro-Americans, who have the lowest income in the United States, =
now have a higher standard of living than an ordinary Swedish household. =
That story came as a chock to many about a month ago. But mostly to =
foreigners, not to Swedes. Since the 1970s, we are used to news about =
Sweden lagging behind the rest of the world in wealth and income. It was =
more of a shock to Americans and Europeans who used to think about =
Sweden as the perfect example, the exception that could combine the big =
welfare state with a productive economy. If this social model was a part =
of the US, it would be considered a social problem. How did this come =
about?=20
To understand this, we have to understand that Sweden was never an =
exception to the rule that wealth can only be created by free men and =
women, on a free market.=20
In 1850, Sweden was a poor developing country where the people starved. =
This country couldn't be saved by redistribution. Even if you had =
levelled out all property in the middle of the 19th century, it would =
still have given everybody a life in misery. Total equality would have =
given the average Swede a living standard equal to the median income in =
today's Kazakhstan.=20
But in a few decades in the mid-1800s, a group of classical liberal =
politicians gave Sweden religious liberty, freedom of speech, freedom of =
movement and economic liberty, so that people could start their own =
businesses and buy and sell freely on the market. Free trade made it =
possible for Sweden to specialize in what we did best, such as the =
timber and iron industries, and exchange it for that which we produced =
less well, such as food and machinery.=20
The result was economic growth and industrialisation, which made it =
possible to increase well-being and invest in education and health care. =
Between 1860-1910 the manufacturing wage increased 170%, much more than =
in the period after. Swedish life expectancy increased ten years and =
infant mortality declined rapidly. Sweden was not a welfare state, it =
was more of a minimal state. Until the first World War, the Swedish =
public sector did not spend more than 6 per cent of GDP!=20
The Social Democrats, who took power in 1932, continued with liberal =
rules for big business, whom they appreciated, and they continued with a =
free trade policy. Even though government intervention slowly grew, in =
1950, the public sector was smaller than in most countries -- about 25 % =
of GDP, roughly the same as in USA and Switzerland. The economy also =
benefited when we stayed out of two world wars. Swedish enterprise sold =
to both sides, the industry was not destroyed and young Swedes weren't =
killed.=20
Between 1870-1970, Swedish growth was the biggest in the world, next to =
Japan's. In 1970 Sweden was the fourth richest among the OECD-members, =
after the US, Luxembourg and Switzerland.=20
But then, the welfare state had begun to increase - as a way for the =
politicians to redistribute the wealth that individuals and markets had =
created. The economy continued to grow: considering the starting-point, =
the good industries and a well educated and hard working people, only a =
total planned economy could have destroyed that possibility. But =
thereafter, it was slower than in other countries. If you don't get much =
return on investments, work and education, why would you invest, work =
hard or get a good education? The welfare state simply consumed the =
wealth that the markets had created, and made it harder to create more. =
In 1990, the year before a deep depression in Sweden, private enterprise =
had not created a single net job since 1950, but the public sector had =
increased by more than a million employees.=20
The Swedish public sector grew bigger, and more unproductive in the =
1970s, and the labour market was regulated. From 1976 to 1982 public =
spending rose from 50 to 65 per cent. At the same time we had to devalue =
the currency five times, by a total of 45 per cent. The average growth =
rate was halved to 2 per cent in the 1970s, and declined further in the =
1980s, and that was before the big crisis in the 1990s.=20
After more than 30 years of high taxation and an expanding welfare =
state, Sweden is not the 4th richest OECD-country any longer, but the =
17th. This hurts the least well off most. Between 1980 and 1999, the =
gross income of Sweden's poorest households increased by just over six =
percent while the poorest in the United States enjoyed a three times =
bigger increase.=20
Free markets and free trade were the basis for the Swedish miracle. =
Sweden was not an exception, and therefore it is no surprise that the =
shift away from free markets undermined the miracle. Even worse, the =
fall of wealth in Sweden has also produced an increasingly statical =
mentality in people, which further undermines the possibilities for =
advancement. The greatest damage of the welfare state is the loss of =
moral values, and increasing alienation and suspiciousness between =
people.
In 1934 the two Swedish social democratic ideologues Gunnar and Alva =
Myrdal explained that there were extremely beneficial conditions for a =
welfare state in Sweden - considering our wealth, the homogenous =
population, the protestant work ethic and the good education. If the =
welfare state didn't work here, it couldn't work anywhere in the world, =
they thought. The rest of the world should seriously ponder the fact =
that the Myrdals were right in that prediction.=20
Waldemar
----- End forwarded message -----
-- ----------------------------------------------------------------------- Anders Sandberg Towards Ascension! asa@nada.kth.se http://www.nada.kth.se/~asa/ GCS/M/S/O d++ -p+ c++++ !l u+ e++ m++ s+/+ n--- h+/* f+ g+ w++ t+ r+ !y
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