All Commentary
Thursday, November 1, 1990

Sweden: No Model for Eastern Europe

The Eastern and Central European countries that have abandoned (or at least renamed) their governments are scouting around for a new form of government. They want a system that will provide the relative freedom found in a market economy yet, at the same time, satisfy people accustomed to social welfare benefits. Delegations from East Germany, Poland, Czechoslovakia, Hungary, and the Soviet Union recently visited the Scandinavian countries to learn more about their apparently successful wedding of socialism and democracy.

Most of these delegations went to Sweden, which for decades has been touted as a model welfare state. The Social Democratic government of Prime Minister Ingvar Carlsson has shown its foreign visitors around and pointed out what a “social democracy” has brought. Would the “mixed” Swedish economy, which combines private ownership of the means of production with an elaborate welfare system, be appropriate for the formerly Communist countries? Let us take a closer look at the Swedish experiment in socialism.

Swedish socialism had its origins in the 1880s, when an egalitarian movement led by August Palm, a former tailor, gave birth to Swedish unionism and the Social Democratic Party. Socialist programs, particularly the “reformed Marxism” of Eduard Bernstein, were imported from Germany. By 1932 the Social Democrats had gained majorities in both houses of Parliament. (Sweden now has a unicameral parliament with 349 seats.)

With the Social Democrats in power, the pace of socialization accelerated. Most welfare measures were passed with the cooperation of the two centrist parties, the Liberals (Folkpartiet) and the Center (formerly Agrarians). Other measures could be passed only with the cooperation of the small Communist Party. Swedish industry was pretty much left alone so that it could pay the taxes needed to finance the welfare system. The Social Democrats have maintained political hegemony in Sweden since 1932, with the exception of a coalition government in World War I! and an interregnum of the three non-socialist opposition parties (1976-1982), during which no important plank of the welfare state was removed.

Gunnar Myrdal and his wife Alva played leading roles in the development of Sweden’s welfare state. Gunnar Myrdal won a Nobel Prize in Economics in 1974, and Alva Myrdal won a Nobel Peace Prize in 1982. Conveniently forgotten today is their admiration of the eugenics principles of Nazi Germany. The Myrdals believed that only such drastic measures would assure that the Swedish stock would be the best for the coming welfare collective.

During the next decades the Swedish welfare state expanded into more and more areas of social life in an attempt to eradicate the bourgeois nature of the traditional Swedish family. The government on all levels began to assume a paterfamilias role. Allan Carlson, writing in the May 1990 issue of Chronicles, quotes one Swedish official as saying, “I should like to abolish the family as a means of earning a livelihood, let adults be economically independent of each other and give society a large share of responsibility for its children.” Carlson explores this development at length in The Swedish Experiment in Family Politics: The Myrdals and the Interwar Population Crisis (Transaction Books, 1990).

A “Bold Experiment” that Failed the Frenzy

Socialist programs would have a grave impact on Swedish family life. Sweden now has the world’s lowest first-marriage rate and one of the lowest birthrates. Haft the children are born out of wedlock. Yet the authors of the Swedish welfare state always believed that their course was right. Alva Myrdal in her book Nation and Family (MIT Press, 1941, p. 11) said: “The Scandinavian countries, and particularly Sweden, by historical acci dent are given the most advantageous set of prerequisites for a bold experiment in social democracy. If it cannot successfully be developed in Scandinavia, given by historical chance exceptionally advantageous conditions, it would probably not work out anywhere else.”

Among those “exceptionally advantageous conditions” were some that were specifically Swedish. The Swedish population is small; it just passed 8.5 million. It is remarkably homogeneous, having only the Lapps of the north as a minority, and in the 1970s and 1980s a foreign work force of several hundred thousand. Furthermore, Sweden escaped the horrors of war for more than 175 years and was able to convert its munitions plants into factories for producing housing materials after World War II. It has thus been able to grow wealthy in a Europe that, for the most part, had been adversely affected by the war. Sweden also escaped the social displacement and ills that often follow wartime defeats, and the resultant social disintegration.

With the Social Democratic Party in firm control from 1932 to 1976, and the acquiescence of the two centrist parties, Sweden erected a panoply of welfare measures unprecedented anywhere in the world. Contributing to the system’s apparent stability was the cooperation between the central Labor Organization and the Swedish Central Employers’ Organization. The welfare state seemed to be a viable system.

But in the 1970s, things began to fall apart. Restive labor unions who saw their members’ salaries eaten up by inflation, and employers who saw their share of social costs rise to 40 percent of workers’ salaries, began to chafe at the tax burden. Unprecedented absenteeism by workers who collected 90 percent of their salaries from their first day off (without the need for medical certification) priced Swedish exports out of world markets.

High taxes, and the breakdown of many of the social services which these taxes were supposed to finance, have caused a tear in Sweden’s body politic. Inflation rose, and the formerly harmonious collective bargaining sessions between the Labor Organization and the Swedish Central Employers’ Organization have turned into hostile confrontations. When the self-employed author Astrid Lindgren received a tax bill of 102 percent, she wrote a stinging story, along the lines of Alice in Wonderland, that was one of the leading factors in bringing down the Social Democratic Party in 1976.

Swedish industry found itself with falling profit margins; many firms established subsidiaries outside of Sweden where workers were more productive and taxes were lower. The Meidner Funds, which had taken a portion of Swedish industries’ profits and deposited them in funds run by unions, were the last straw. They will, in all likelihood, be terminated, but they have placed a huge burden on Swedish companies.

One of Sweden’s most astute economists, Pro-lessor Assar Lindbeck, writing in Sweden’s leading daily Dagens Nyheter (December 22, 1988), perceptively noted, “The high marginal taxes and the production of public services cause the family to more and more focus on the ‘care’ of objects, while public institutions, to an increasing extent, take over the care of people, an occupation earlier regarded as the specific duty of the family. In a welfare state of the Swedish type it is not the corporations that are socialized, but the family, or more correctly, many of the traditional functions of the family. One could probably say that while classic socialism meant socialization of industry, a welfare state of the Swedish type means socializing the households’ traditional care and support for fellow citizens.”

The Swedish welfare state has reached a crisis state outlined by the East German Marxist theoretician Jurgen Habermas in his Legitimations-problem in Spatkapitalismus:

“The division of labor between the state and the private sector that forms the basis of the Swedish model requires that a continually increasing share of the national product be transferred to the public sector. Technical and economic changes must be accompanied by an enormous public investment to assure the stability of society. There is a point where the dislocation in the social structure becomes so great that people are no longer willing to pay the price of the necessary remedies. The demand for security remains, but the desire of each person to contribute to the cost of this security diminishes. The welfare society then faces a crisis of confidence.”

A System that Doesn’t Work

As the standard of living has fallen over the past ten years, it has become evident to almost all observers that the Swedish system no longer works. Hakan Gergils, a member of the Swedish Civil Rights Movement and an adviser to Swedish industry, noted in Economic Affairs (October/ November 1989) that “This development has created a new class of poor people. The number of Swedes in this category increased to 600,000 last year, which means that around 10 percent of the adult population in Sweden cannot earn their living by working. They have to rely on public support for housing, food, clothing, etc. The most astonishing thing is that the new class includes a large number of well-educated people. A great number of full-time working men and women with, under normal circumstances, an acceptable income, have been trapped into dependency by the progressive tax system.”

Another eyewitness account came from Jacob Arfwedsson, who left Sweden to pursue a doctorate in political science at the Catholic University of Parris. While doing specialized studies under Professor Claes Ryn (another Swedish-born intellectual of rare ability) at the Catholic University of America, Arfwedsson pointed out to this writer in April 1990 that the whole complex of social services in Sweden is falling apart. The Social Democratic government had to renege on its promise to provide care for all children by 1991; desperately ill people have to go abroad because the waiting lists for hospital care in Sweden are years long.

To this crisis-ridden welfare state many in Eastern and Central Europe now look for solutions to their own crises. Yet these nations have no real chance to replicate even the more successful aspects of Sweden’s cradle- to-grave welfare provisions. A welfare state must be wealthy in order to provide for the creature comforts and exigencies of a population. And after decades of command economies, these nations are close to economic collapse.

The Wall Street Journal (February 22,1990) editorializes: “The reality of today’s Sweden is the lingering myth of a cradle-to-the-grave Welfare Paradise. The myth is based on an enormous system of subsidies—from food consumption to having children and even reaching old age. Savings are non-existent and investments are flowing abroad. That the gravy train is sputtering can be seen in the degradation of services, particularly medical care, and increasing poverty. Conditions in Sweden, of course, are still a far cry from those in Eastern Europe. But since the economic problems of both arise from the same socialist theory, countries trying to escape the grips of a statist nightmare have little reason to emulate Sweden’s welfare system.”

As one whose life has been rather evenly divided between his native Sweden and his new homeland, the United States, it is sad to see the glitter flaking and the glamour fading from the nation that gave him birth. But socialism, whether of the Marxist, democratic, or nationalist kind, is bound to fail. It is, in its various forms, a system of institutionalized envy. If the failure of the Swedish experiment in cradle-to-grave welfarism serves as an eye-opener to those who would imitate it, then it will have served an important purpose.