Sweden: Image and Reality

Sweden is often viewed as either social democratic paradise or lefty hell, depending on one’s political and economic orientation.

Parts of the popular image are true. Sweden has a strong political left; the Social Democratic party was in power continuously for more than four decades in the middle of the 20th century and has alternated in the government since then (it’s out at the moment). Around 80% of employed Swedes are union members, and 30% are employed by the government. More than half of the country’s GDP passes through the government in taxes, and government spending on redistributive transfers and public services is among the highest in the world. Income inequality is among the lowest. Female employment is high, and the gender pay gap is low. A 2008 Newsweek index of environmental performance put Sweden at the top. It is ranked as one of the world’s most peaceful nations.

Like all countries, though, Sweden is more complex than the stereotype suggests. Here are a few things that may surprise.

Surprises for the left

1. The country has a strong work ethos. The welfare state is generous, but most able-bodied Swedes of working age are expected to be employed. During the 2000s the Swedish employment rate has averaged about 74% of the working-age population, two percentage points higher than in the United States. The share of working-age Swedish households with no employed adult is 5%, the same as in the U.S.

2. Embrace of globalization. Exports and imports total around 45% of Swedish GDP, compared to 15% in the United States. Swedish policy aims to encourage trade and to cushion the adverse impact this inevitably has on some, ensuring their incomes remain at a decent level while they’re unemployed and facilitating transition to a different firm and/or occupation.

3. School choice. Since the early 1990s government funds have been provided not only to public elementary and secondary schools but also private ones, and parents are permitted to choose which school their children attend. This comes with strings attached: private schools wishing to receive the funding cannot base admission on ability, religion, or ethnicity. But in other relevant respects the public schools are forced to compete with private ones.

4. Partially privatized pensions. In the late 1990s a social democratic government introduced a “privatized” element into the Swedish pension system. 2.5% of employee earnings are put into a defined-contribution component. The employee has a variety of choices about how the money is invested. (A key difference between this reform and the one proposed by President Bush several years ago for the U.S.: Swedish payroll taxes were increased so that this added to the existing system, rather than replacing part of it.)

Surprises for the right

1. Sweden has a competitive economy. In the World Economic Forum’s 2007-08 “competitiveness index,” Sweden placed 4th out of 131 nations. It has been in the top ten, often among the top five, throughout this decade. Like the other Nordic countries (Denmark, Finland, Iceland, and Norway), Sweden has been successful at adapting to the shift from manufacturing to services and to a more globalized and competitive economic environment. These economies have done particularly well in high-tech industries. This owes to, among other things, high-quality educational systems, excellent public infrastructure, heavy R&D investment, and commitment to adaptation.

2. High mobility. For a long time the consensus view among researchers was that egalitarian countries such as Sweden have low inequality but also little mobility, whereas the United States has more inequality but also greater opportunity for upward and downward movement. Recent findings suggest this is wrong. Mobility in Sweden, both between generations and over the life course, is at least is great as in the United States and likely greater.

3. The poor are well-off absolutely, not just relatively. Critics of high taxes and generous government benefits sometimes imagine that these destroy economic growth, so that countries like Sweden have low inequality but also low absolute living standards. In fact, the incomes of those at the bottom of the distribution in Sweden are similar to those of their American counterparts. And Swedes work far fewer days and hours to get those incomes. They also enjoy more plentiful and higher-quality public services, from schools to child care to health care to public transportation to roads and parks.

4. Sweden is heterogeneous. Those skeptical about the applicability of Swedish policies and institutions often argue that to the extent Sweden “works,” it’s because it has an extremely homogeneous population. That was likely true half a century ago, but these days Sweden’s immigrant (foreign-born) share is virtually identical to America’s, at about 13% of the population. What effects this may have over the long run are hard to anticipate, but it’s been that way for more than a decade now.

37 thoughts on “Sweden: Image and Reality

  1. Pingback: Sweden: The Executive Summary at Jacob Christensen

  2. Funny that the first two “surprises for the left” are something unequivocally positive; i.e. there seem to be more surprises for the right in this list than for the left. Perhaps Sweden isn’t such a bad example to point to after all, regardless of your politics.

  3. I’d note that most of Sweden’s “immigrants” are refugees rather than people moving for economic reasons. I think this makes Sweden’s successes even more impressive.

  4. I would also note that the Swedish model seems to help the poor at the expense of the middle class, who are close to poverty line in US terms. A quote from the cited article shows what I’m talking about: Especially, considering that Swedish poor are not better off than those in US (looking at the same figure 9).

    “Yet as the top chart in Figure 9 makes clear, low income inequality in Sweden and Germany is in large part a function of the fact that incomes from the 20th percentile up are lower than in the United States and Canada. Is that a good thing? In other words, is low inequality better than high inequality if it entails lower incomes for most of the population?”

  5. It is a fantasy and it cries to heaven.

    Sweden has been taken over by muslims by 2050, mass-unemployment now…and I can continue, the crime rate higher than USA’s when it comes to homicides/murder and rape: http://danmark.wordpress.com/2006/07/01/last-comparison-of-crime-rates-between-nations-ever/

    An education-sector without the needed structurel adaptments to globalization like in all the European nations.

    I am a little closer

    Joern, Denmark

    http://Danmark.Wordpress.com

  6. One needs to look hard and long; but when found, ILO data of comparable employment rates show that, for the decade 1995/2005 (the latest available), the average unemployment rate in Sweden averaged 2.5% more than the US.

    This does not mean that the “Swedish Model” is somehow out of whack. The historical Gini coefficient, since WW2, compared to the US shows clearly that Swedes are better off than Americans in terms of the fairness with which the economic pie generated is being shared.

    Still, for that fairness, they pay a price with a significant unemployment premium.

    The trick them seems to be to have a high level of fairness (meaning low Gini coefficient) consonant with a low level of unemployment.

    That is no easy goal.

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  8. “In other words, is low inequality better than high inequality if it entails lower incomes for most of the population?”

    It certainly is better if those relatively lower incomes are accompanied by high quality social services.

    In the U.S., we have both high income inequality and poor social services, disparities that have only grown more worse in the past 8 years.

  9. Well, we have got our share of thatcherism here, too, with privatisation, deregulated markets, increasing income gaps and so on – although from a less unequal starting point than in other countries.

    Adam:

    “Funny that the first two ‘surprises for the left’ are something unequivocally positive”

    Economic globalisation may seem unequivocally positive to you. To me it doesn’t.

    We had a financial crisis and a bank bailout in the 1990s similar to the one in the US right now, which some have attributed to the deregulation of capital flow, just as with the Asian crisis later that decade.

    Productive and profitable industries have been shut down because their owners have found it even more profitable to move production elsewhere.

    Regarding the last two points:

    “School choice” has created segregated schools since poor parents have other things to worry about than finding good schools for their kids. “School choice” has also meant a surge in tax-funded confessional schools, including fundamentalist ones where kids can’t even get away from their parents’ religion while at school.

    Partially privatised pensions forces all of us to invest some of our pension money in the stock market, where the richest reap the highest profits. It is also an expensive system, since private funds charge higher fees than in the public pension system.

    These are poor examples to follow from an egalitarian perspective – whether they have increased or decreased Sweden’s growth or employment level remains to be shown.

  10. Pingback: EconTech » Kenworthy on Swedish Surprises

  11. I trained as an undergrad anthropologist and hold an MBA. I have always thought Sweden successful on many social and economic indicators.

    My friends always tire of me praising the place, now I am going to be a real pest with your article.

    My wife and I spent 4 months living in Skurup, the country is great and I have lived in 7.

  12. Pingback: Sweden: Image and Reality | Economist Blog

  13. I’m with Adam Stevens: no question #1 should be listed under surprises for the right, not the left; and I’m also not really sure why #2 and #4 should be considered surprises for the left either.

  14. The claim of heterogeneity is ridiculous. The percentage of the current population that is foreign-born is nowhere near an accurate measure. That’s like presuming full racial and cultural conversion in one generation. History matters.

  15. What Sweden has is the ability to sit down and update their entitlement packages when circumstances change.

  16. Thanks for your post. It makes me think of how valuable it would be to move beyond partisan politics and look at issues based on evidence from around the world.

    Jeffery Sachs (in his new book Common Wealth) points to Sweden and other countries as examples for America to look to – an argument in favor of universal health care amongst other things. Of course he’s fairly partisan in his writing himself…….

  17. The saying “not all that glitters is gold” can best be applied to Sweden. I’m in Finland, where some of the same conditions exist.

    For example:

    The labor participation rate is high, as mentioned above, but that’s because it’s financially difficult to have single-earner households; not because of a “strong work ethos,” as mentioned above. Germany has lower labor participation rate (in real terms) and has a much higher standard of living than Sweden; consumer prices are much lower and single-earner households are much more common there. BTW, don’t just look at PPP surveys, because they don’t tell the whole story.

    In terms of safety and crime, I don’t find Sweden’s cities all that safe. They don’t have ghetto shootings like in the US, but your chances of getting assaulted and kicked in the head by a youth gang on your way home from dinner with friends is much greater in Sweden than in the US. Generally, I’d say, for a person with no criminal ties (which I’m sure describes most of us here :-) ) your chances of falling victim to crime is greater in Sweden.

    Sweden has some competitiveness due to its established high-tech sector. However, Swedish entrepreneurs start new business in places like Estonia and Latvia. Why? Simply because taxes are way too high in Sweden and the labor market is too rigid. Also, the small-business sector in Sweden is relatively dismal for the same reason; so as a worker, you either fit into a large corporation or you are unemployed. You can forget about your individualist aspirations and starting a small business in Sweden.

    Healthcare is ok, but those Swedes who can afford it will go to the US or Switzerland for the most advanced treatment. Generally, I’d say that quality of care in the US is better than in Sweden, but only if you have insurance. Those who aren’t insured also have better care in the US, but might run into financial problems. I’d rather tweak the American system than copy the Swedish one.

    Sweden’s poor are doing ok, but it’s only partially due to services available to them. Two even more important factors include: 1). public transit so it’s not necessary to spend €5K+/year to own a car, and 2). sensible urban planning so that it’s possible to live in a small, inexpensive (but high-quality) flat with concrete walls/floors so that you can’t hear the neighbors. Both of those things barely exist in the US; if they did, then the US would be better due to the much higher purchasing power. Unfortunately, the US is poorly planned from the start.

    For mobility, there are lots of factors to consider. I’d say that, in the US, you have the widest array of choices available–but in all fairness, the system needs to be tweaked to make healthcare more affordable. Namely, get government out of it! Aside from that, I’d rather live in the US than in a small flat in Sweden–which is where most educated Swedes find themselves living throughout their lives, because that’s all they can afford with their tiny salaries.

    Sweden is mainly homogeneous. You can’t say that a person who migrates from France to Sweden is the same as someone from Mexico moving to the US. That is an equivocation insofar as heterogeneity goes. For the real immigrants (those who come from outside of the EU), Sweden is having its share of problems. That’s largely due to the corporate sector not being able to absorb these less educated 3rd Worlders. In countries with more dynamic local economies (Germany, US, Switzerland), these people work in the small business service sector–even start their own enterprises. Read above what I wrote about small businesses in Sweden.

    Again, not all that glitters is gold. Really. There are good things about Sweden (and Finland too) but there are plenty of negative sides to consider. I’m often in the Nordics due to family, but it’s really not my kind of lifestyle. You don’t get much value for your money. Geez, even going for a simple dinner with drinks costs almost twice the central European price!

    Cheers!

  18. I’m a bit tired, but hopefully you got my point. I want to mention two more things.

    If you think it’s great to have a large government to solve all your problems, then try dealing with government employees sometime. Many of them are arrogant asses, because you can’t fire them! At least with a private company, you can change to a different one. But when government runs everything, you are stuck with it. And don’t think for one moment that the “democratic process” will straighten things out. Those government workers will always vote to empower themselves–not to empower you, the consumer who is forced to use their services.

    Oh, and please don’t let me get started on the issue of racism in the Nordics… In short, realize that anyone who isn’t part of the native population is seen as an undesired ‘taker’ of public resources. And there is a natural tendency to categorize these ‘takers’ by race and ethnicity. For this reason, the Nordics are infamous for being embarrassingly racist. The neo-nazi movements are actually more widespread in Sweden than anywhere in Europe. It’s really not a good situation.

  19. I don’t mean to pick on Sweden; neo-nazis are becoming big in Finland too. I feel there is tacit support for them among the normal population. They also exist in Germany, mind you, but at least the majority population in Germany doesn’t support them like people in the Nordics seem to.

    You can’t separate socialism from nationalism. They are inherently inseparable, because the former causes the latter.

  20. And then questions develop, like what is a ‘true Swede?’ or ‘true Finn?’ or ‘a real American?’ These questions arise from natural tendencies that manifest themselves in socialistic societies, lest anyone thinks it’s a big rainbow of multicultural acceptance. It’s really not. Instead, there are jealousies and hatreds of anyone who appears different and is thereby seen as a foil to the system.

    Just think about Hilter’s Germany, and realize that Bismarck started the welfare state only a few decades prior. Coincidence?

  21. Hadas Mandel and her co-authors have drawn some attention to what could be considered further surprises for the left – in particular, surprises that revolve around occupational gender inequalities. As we all know, female labour force participation is comparatively high in Sweden. However…

    Occupational sex segregation is also comparatively high in Sweden. For example, women are more likely to be in “female-typed” occupations in Sweden than in the USA. Related to this, women are also less likely to be in managerial occupations in Sweden than in the USA. (See the LIS working papers and associated journal articles by Hadas Mandel and her co-authors.)

  22. Nice to see Finlander/Suomilainen and a few others questioning the Sweden-dream-land view.

    Out of the top 200 Swedish firms, only 2 are headed by oh-so-liberated women. This despite decades of state intervention!

  23. Finlander:

    I fully agree with you that racism is widespread here – good that you point that out.

    But you are poorly informed about the neo-nazi situation. They are violent and murderous, but, fortunally, few.

    “The neo-nazi movements are actually more widespread in Sweden than anywhere in Europe”.

    More widespread than in other Nordic countries – yes.

    But how about Russia as a counterexample:

    http://www.russiatoday.ru/news/news/21302

    67*150/9=4

    Please provide us with a recent year when Amnesty International documented that 4 people or more were murdered for the colour of their skin in Sweden.

    The largest rightwing extremist gathering is the yearly march in Salem, south of Stockholm, attracting 1000-2000 people (the violent clique consists of a couple of hundreds at the most) – and about as many people usually try to stop the march, which they are prevented from by riot police.

    Right now, the neo-nazi movement is probably more split than ever, fighting each other more than they fight minorities and political opponents.

    This is not to say that they should be ignored, but the rampant racism that you rightly mention is much more of a problem, providing non-European immigrants with higher levels of poverty and unemployment than the figures for Swedes or Nordic immigrants.

  24. should of course be 67 (murders in Russia) times 9 (million Swedes) divided by 150 (million Russians) roughly equals 4.

    So, the majority of the population in the Nordic countries support the shattered neo-nazi groups? Where did you get that figure from? Even the immigrant despising party Sverigedemokraterna hates the nazis for giving a bad name to nationalism.

    Your rantings about parallells between nazism and socialism I will leave for somebody else to comment on.

  25. Finlander got it broadly right, and if anybody doubts that socialism (broadly defined) causes nationalism, I advise studying the history of the Swedish Social Democratic Party more carefully. (Or the history of Fabian socialism, for that matter.)

    I’d like to add a few insights that I got from working in Denmark.
    Surprise for the left #1: high employment is not the same as a strong work ethic: high employment can originate from an efficient welfare police (cutting benefit fraud), from make-work schemes, from a preference for short working hours (i.e. a low work ethic, possibly due to high marginal tax rates), etc.

    Surprises for the right:
    1. “Competitiveness” indexes are not to be taken seriously.
    2. It’s easy to move from underclass to middle class when the difference is a few percent of income: that does not mean that people become significantly better off.
    3. If the incomes at the bottom are no higher in Scandinavia than in the USA, that would rightly be seen as a failure by Scandinavians.

  26. Report from the publich Swedish BRÅ shows that the number of rape-crimes rose by 257 p.c. from 1996 to 2006. This implies an yearly increase of 9.9 p.c. Drug-rape has been included in rape-crimes from 2005, but that does alter the development.
    Now we need the distribution of criminals on Swedes on the on side and the group foreign citizens, citizens with naturalization and the offspring of the latest (but Sweden does not publish that).
    The distribution when we look at Danish (next to Sweden) relations:
    Extracts from: http://danmark.wordpress.com/2007/01/27/unge-med-anden-etnisk-baggrund-end-dansk-truer-med-vold-og-terroriserer-med-sms-er/ (in Danish):
    “That 40 p.c. of all convicted for rape-crimes are immigrants or their descendants, that 50 p.c. of all criminals in our capital Copenhagen have another etnic background than Danish, that 80 p.c. of all convictions concerning violence made by youngster less than 18 years is given to young second- and third-generation of immigrants (in 2004 82 p.c. (in Danish:http://www.lilliput-information.comdomc.html )), that the same group occupy 70 p.c. of all the country’s special secured institutions for young criminals, that the jails, the prisons (including the new-built ones) and the centres of crises are filled to the limit with persons from the mentioned group, and the violence has increace by 57 p.c. in just the last two year in the schools could perhaps indicate that something is totally wrong or some does not match up in the information we are given…”
    The foreigner share is larger in Sweden than in Denmark, so the share of rape-crimes, assumed the patern of actions are pretty much the same in two countries, definitely is larger that 40 p.c. in Sweden.

    Joern

    http://Danmark.Wordpress.com

    http://lilliput-information.com

  27. Seems like this thread has become a playing ground for Nordic xenophobics.

    We should let them taste their own medicine and deport them to places like Iraq and Somalia where they argue that our immigrants should go.

    Very peculiar that these criminological data are not reported or commented as in the examples above by Nordic criminologists. Thus, it may either be the case that this thread’s commentators are spreading racist myths, or that Nordic criminologists have been brainwashed or partake in some kind of multiculturalist conspiracy.

  28. Actually, the poor in Sweden live considerably better than the poor in the US. The LIS study simply points out income *ignoring* government services are approximately the same in Sweden and the US. Once non-monetary government services such as health, childcare, university, etc are taken into account, Sweden’s poor do considerably better. Since Americans rely far more on their after-tax income for their basic needs, Americans need higher incomes to keep up with European living standards. Unfortunately, the poor do not earn more than Sweden, despite working twice as long.

    Sweden is also at a disadvantage in this study, as the proportion of the elderly population is much higher in Sweden. The LIS’s author published another report looking just at disadvantaged groups together (elderly and poor children) and found a much lower living standard in the US.

    This is likely the case for most Americans now. Nominal per capita GDP is now higher in Sweden than the US, by IMF calculations. Given the difference in US/Sweden inequality, the median worker must earn considerably more in Sweden, even ignoring the additional government services.

    According to the US Census, US median income is $24K. In Sweden, it is $34K.

    http://www.scb.se/templates/tableOrChart____225793.asp

  29. What a difference a year can make ……
    To visit a neurologist in the state health system it costs
    about £30. To visit you local doctor £15.
    Medicines are not free.

    EVERYONE including pensioners all have to pay the same amount when in need of health care.

    Taxes are high and pensioners pay MORE than workers !
    I know I am one , and live I in Sweden.

  30. Two generations of so-called welfare financed by taxes and consumed almost privately resulted in a very interesting information from the official Welfare-commission with so-called welfare-experts taught to tell what the politician don’t dare to say themselves and to defend any doings (within the power of their expertice) of any government – a so-called buffer:
    Non-Western immigrants in Denmark consume 3.47 times the amount of welfare in average compared with the average of the Danes (self-knowledge usually is a good thing even though we knew and also told it right from the beginning):
    So, if we allow a little mathematics:
    x/(1-x) * Danes’ share in p.c. of the population/Non-Westeners’ share in p.c. of the population = 3.47
    where x is the percentage of Non-Westerners’ consumption of the entire welfare-budget.
    (we can ignore the Western immigrants, they are very few, and they mostly come here to work)
    x= 30%, even though we calculate with just 11% Non-Westeners – perhaps 15% is even more realistic. We are not allowed to know the correct number, but we must pay anyway, so we get the politically correct number instead partly to make us pay.

    This means that the Danish welfare-system that was bound to collapse when the hippy-generation of rulers had become pensioners and was expected to have eaten up all national resources by the time of their own death will collapse instead 2-4 years from now.

    We have calculated several possible outcome depending of the most foreign immigrants share on:

    http://danmark.wordpress.com/2010/04/14/non-westeners-cost-30-37-of-the/

    Sincerely
    Therese
    Denmark

  31. Pingback: Sweden: Image and Reality | Mortgage Review Site - Latest Daily Mortgage News

  32. Pingback: The Surestart Generation: Labour List Article Reproduced | Working for Walthamstow

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