Sunday, June 17, 2007

Swedish economic model

This blog post is about two things: commenting on the Swedish economic and social model and trying out a new Firefoc add-on i just downloaded - ScribeFire.

On Project Syndicate webpage there is a great article by Stockholm University economics professor Assar Lindbeck.

Leftist politicians and other people tend to bring Sweden as an example where economic growth has been achieved in parallel with (or even due to) generous welfare-state.

Lindbeck rebuts it by dividing the Swedish Model into three historical stages:

1. from about 1870 until the 1960’ - a period of liberal economic reforms, low taxes and limited government interventions. The result: "Sweden moved from being one of the poorest western countries to being the third richest country in terms of GDP per capita"

2. from 1960 until 1985 - a period of increased government spending, personal taxation and reduced incentives to work, save, and start business. At the same time strong labor-market regulations and labor unions. This is what is usually identified as the "Swedish model". The result: "Sweden fell from third to approximately seventeenth place in the OECD in terms of GDP per capita"

3. from late 80s to 90s: removal of capital market regulations, entry to EU, tax-cuts, deregulation of markets. The result: the growth has picked up again and for last decade Swedish economy has been growing faster than OECD on average.

According to this historical perspective "Swedish model" is a good example how prosperity is achieved through liberal, business-friendly economic climate, where people are motivated to work more and take risks in business. Generous welfare by the state can bring good living conditions to the poor, but only on the account of the general economic growth and prosperity.

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1 comment:

Jüri Saar said...

Voib-olla pakub huvi: