The Swedish Model
It's the free-market reforms, stupid.
By JOHNNY MUNKHAMMAR
In a Europe plagued by debt crises, one country has no budget deficit at all and is currently returning to surplus. This same country is consistently among Europe's fastest growing economies, with GDP growth set to hit 4% this year.
That country is Sweden. For many years, foreign policy-makers have pointed to Sweden as a positive model to follow, making Swedes like me proud. Too often, though, foreigners have drawn the wrong lessons from Sweden's success. For instance, whenever I give a lecture, anywhere in Europe, about economic reform, I always get the following response: "But you come from Sweden, which is socialist and successful—why should we launch free-market policies ?"
The simple truth is that Sweden is not socialist. According to the World Values Survey and other similar studies, Sweden combines one of the highest degrees of individualism in the world, solid trust in well-functioning institutions, and a high degree of social cohesion. Among the 160 countries studied in the Index of Economic Freedom, Sweden ranks 21st, and is one of the few countries that increased its economic freedoms during the financial crisis. Sweden gets higher scores for liberal markets than Germany and Belgium, or reformers such as Cyprus and Georgia.
It's true that Sweden wasn't always so free. But Sweden's socialism lasted only for a couple of decades, roughly during the 1970s and 1980s. And as it happens, these decades mark the only break in the modern Swedish success story.
In the mid-1800s, Sweden was one of the poorest and underdeveloped countries in Europe. Then, Finance Minister Johan August Gripenstedt, a proponent of de Tocqueville and Bastiat, launched far-reaching economic reforms that forged Sweden's transition to capitalism. Sweden was opened up to the world, to free trade, and to migration. Free enterprise and free competition were introduced. In particular, the financial sector was deregulated.