Sweden has reduced public spending as a proportion of GDP from 67% in 1993 to 49% today. It could soon have a smaller state than Britain. It has also cut the top marginal tax rate by 27 percentage points since 1983, to 57%, and scrapped a mare’s nest of taxes on property, gifts, wealth and inheritance. This year it is cutting the corporate-tax rate from 26.3% to 22%. [snip]The Nordic countries are not dismantling the welfare state but are asking themselves how its benefits can best be provided, then acting on their judgments. For example, if vouchers produce a quality education at lower cost, then the rationale for having government provide, as well as pay for, universal education is shattered. [Closer to home: a Stanford University study concluded that "Detroit school children are learning at a rate of an extra three months in school a year when in charter public schools compared to similar counterparts in conventional Detroit Public Schools."]
Its public debt fell from 70% of GDP in 1993 to 37% in 2010, and its budget moved from an 11% deficit to a surplus of 0.3% over the same period. This allowed a country with a small, open economy to recover quickly from the financial storm of 2007-08. Sweden has also put its pension system on a sound foundation, replacing a defined-benefit system with a defined-contribution one and making automatic adjustments for longer life expectancy.
Most daringly, it has introduced a universal system of school vouchers and invited private schools to compete with public ones. Private companies also vie with each other to provide state-funded health services and care for the elderly.
The Economist contends that the Nordic countries have succeeded because of transparency, pragmatism, tough-mindedness, and a common set of values:
in Sweden everyone has access to all official records. Politicians are vilified if they get off their bicycles and into official limousines.The combined population of Denmark, Finland, Norway, and Sweden is 26 million, less than the total population of California. Whether their example can be applied on a continent-wide basis is problematic, but at least they have shown that it can be done. © 2013 Stephen Yuen
The combination of geography and history has provided Nordic governments with two powerful resources: trust in strangers and belief in individual rights.....Economists say that high levels of trust result in lower transaction costs—there is no need to resort to American-style lawsuits or Italian-style quid-pro-quo deals in order to get things done. But its virtues go beyond that. Trust means that high-quality people join the civil service. Citizens pay their taxes and play by the rules. Government decisions are widely accepted.
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