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.