O mito do “modelo sueco”

“Sweden’s Quiet Revolution” de Duncan Currie (National Review Online)

During the first half of the 20th century, Sweden benefited enormously from its non-participation in the two world wars, which devastated Europe’s major industrial powers. Blessed with abundant natural resources, it was a staunch defender of property rights and a robust advocate of free trade. Cultural homogeneity, a strong legal framework, and a lack of corruption promoted famously high levels of trust and social cohesion. Sweden had a welfare state, but it also had an open, free-market economy. “As late as 1950,” Norberg observed, “the total tax burden was no more than 21 percent of GDP, lower than in the United States and Western Europe.”

In other words, Sweden became a fantastically rich country before it started greatly boosting taxes, spending, and regulation during the 1970s. Cleveland Fed economist Emre Ergungor has noted that “the marginal income tax rate on full-time workers earning the average hourly wage increased from 35 percent in the second half of the 1960s to 65 percent in 1976.” Soaring taxes funded a dramatic expansion of government: The public sector accounted for 20 percent of total Swedish employment in 1965 and 38 percent in 1985.

At the start of the 1980s, Sweden was grappling with persistently high inflation. Over the course of that decade, its financial markets experienced a rapid burst of liberalization that led to massive credit growth, which in turn spawned a real-estate bubble. Meanwhile, the country continued to maintain a fixed exchange rate. Crunch time arrived in the early 1990s, writes Ergungor, when the reunification of East and West Germany drove up German interest rates. This fueled a sharp rise in Swedish interest rates, as did Stockholm’s efforts to defend an overvalued krona (the national currency). The government eventually adopted a floating exchange rate, but not until November 1992

By that point, Sweden’s asset bubble had imploded. The fallout was disastrous: Housing prices plunged, nonperforming loans accumulated, and the economy sank into a deep recession. This had a severe impact on the country’s relative wealth: According to a McKinsey & Co. analysis of per capita GDP and purchasing-power parity, Sweden went from being the fifth-richest OECD member in 1970 to being the 16th-richest in 1998. Since then, propelled by ambitious free-market reforms, it has regained much (though not all) of the ground it lost. Private-sector productivity growth has been vigorous, and Sweden now boasts “a near-perfect pension system,” says economist Anders Åslund of the Peterson Institute.

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