Sweden’s equality fades away

23 May, 2013 at 16:40 | Posted in Economics | 1 Comment

SwedenGini1980to2011           Source

Sweden, which has long been the shining example for liberal economists of what we should be aiming for, seems to be losing its luster.

That’s because the growth in Swedish inequality between 1985 and the late 2000s was the largest among all OECD countries, increasing by one third:

Sweden has seen the steepest increase in inequality over 15 years amongst the 34 OECD nations, with disparities rising at four times the pace of the United States, the think tank said.

Once the darling of the political left, heavy state control and wealth distribution through high taxes and generous benefits gave the country’s have-nots an enviable standard of living at the expense of the wealthiest members of society.

Although still one of the most equal countries in the world, the last two decades have seen a marked change. Market reforms have helped the economy become one of Europe’s best performers but this has Swedes wondering if their love affair with state welfare was coming to an end.

The real tipping point came in 2006 when the centre-right government swept to power, bringing an end to a Social Democratic era which stretched for most of the 20th century.

Swedes had grown increasingly weary of their high taxes and with more jobs going overseas, the new government laid out a plan to fine-tune the old welfare system. It slashed income taxes, sold state assets and tried to make it pay to work.

Spending on welfare benefits such as pensions, unemployment and incapacity assistance has fallen by almost a third to 13 percent of GDP from the early nineties, putting Sweden only just above the 11 percent OECD average.

At the other end of the spectrum, tax changes and housing market reforms have made the rich richer.

Since the mid-80s, income from savings, private pensions or rentals, jumped 10 percent for the richest fifth of the population while falling one percent for the poorest 20 percent.

David Ruccio

1 Comment

  1. Hi Prof. Syll! I wonder if you could give us some more information on the above. Am I correct to understand that another referendum on the EURO is (thankfully) out of the question? As far as I can gather from the above, inequality is in part a result of another housing bubble, and partly the result of government “rationalization” — but if the Krona floats against the EURO surely there is no barrier to a reconstruction of the Swedish welfare state (or perhaps, even better, an increase in the wage share of the working population)? I know people like Victor Pestoff have written about the development of the third sector in Sweden as a democratization of the welfare state. He wrote in one paper: “So, it is not a question of frivolous parents turning their backs on high quality public services and the egalitarian ideals of universality for the latest whims of ideological politics or the market. Rather, it is a natural reaction to major cut-backs in public services and a clear drop in service quality in the 1990s. But, perhaps most important, it is a question of developing new channels for citizens’ influence through collective action by providing personal social services, i.e., of developing collective voice.” Setting aside wrong-minded worries about the putative costliness of the traditional welfare state, is there any possibility for its revival in a new form?

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