Senator Bernie Sanders (I-Vt.) and Congresswoman Ocasio-Cortez (D-N.Y.) erroneously link Sweden’s success to socialism. Sanders said, “we should look to countries like Denmark, like Sweden and Norway” while AOC noted, “my policies most closely resemble what we see in the U.K., in Norway, in Finland, in Sweden.”
Sweden’s movement to liberalism started in the mid-nineteenth century led by Minister of Finance, Johan August Gripenstedt. The newfound freedom propelled Sweden’s economy and improved livings standards far above those under socialism.
Sweden’s GDP per capita increased yearly by 2 percent from 1870 to 1913 – 50 percent faster than Western Europe because of Gripenstedt’s policies to reduce tariffs, open free trade with France, and welcome immigration and emigration to incentivize investments and innovation.
However, after decades of improvement, a socialist experiment wreaked havoc on Sweden in the 1970s. The government monopolized education, healthcare, and social security which doubled public spending from 31 to 60 percent of GDP between 1960 and 1980. The marginal tax rate for the wealthy reached its highest at 85 percent in 1980. These policies caused a mass exodus on businesses like IKEA. Before the experiment, Sweden was 10 percent richer than the average G7 country. Now, Sweden was 10 percent poorer. The combined factors of rising unemployment, a ballooning deficit, and debt-driven inflation careened Sweden into a financial crisis with interest rates as high as 500%.
From 1991 to 1994, Prime Minister Carl Bildt returned Sweden to classical liberalism. Reforms included eliminating taxes on wealth, property, gifts, and inheritance. Sweden obtained tariff-free access to the European markets after becoming a member state of the EU in 1995. In addition, Bildt introduced a school voucher system, privatized healthcare, and replaced social security with a defined contribution and private pension plan. After socialism ended, inflation deflated, and real wages increased 65 percent. The lesson is clear: Sweden’s de-regulation, low tariffs, privatization, and free enterprise are responsible for Sweden’s journey to prosperity.
Democrats have an outdated view of Sweden. The socialist Sweden of the 1960s drowned free enterprise and living standards. The 1990 market reforms brought Sweden back from the brink. Take a look at the classical-liberal policies of Sweden today compared to those in the United States. Would Sanders and AOC endorse these?
Sources to Figure 1: Policies of Classical Liberalism present in the United States and Sweden
Top Corporate Income Tax Rate data point: Asen, Elke. “Corporate Tax Rates Around the World.” Tax Foundation, Tax Foundation, 9 Dec. 2020, https://taxfoundation.org/publications/corporate-tax-rates-around-the-world/; “Taxes on Corporate Income.” Worldwide Tax Summaries PwC, PwC, July 2021, https://taxsummaries.pwc.com/quick-charts/corporate-income-tax-cit-rates.
MFN Simple Average Tariff Rate data point: “World Trade Profiles,” WTO, 2021, https://www.wto.org/english/res_e/reser_e/tariff_profiles_e.htm