[Good Government, Bad Government] Sweden, Once the Most Admired Country

Sweden was once one of the most admired countries in the world. Paul Samuelson, a Nobel laureate in economics, even said that Sweden was the most ideal country humanity should aspire to. That was because it had both a strong economy and an extensive welfare system.

Swedes did not need to worry about unemployment or about old age. The government supported them so that they could make a living. Thanks to its abundant welfare benefits, the lives of Swedish people were prosperous, and society was able to remain well integrated.

The problem with a welfare system is that it can make people dependent on the government and reduce productivity. Yet Sweden was regarded as a country that seemed to defy that concern. After all, it was home to world-class companies such as Volvo, Ericsson, and Electrolux. But this was only an impressive outward appearance; even Sweden could not escape the problems caused by an excessive welfare system.

Sweden began industrializing in 1870. Free trade was allowed, and unlike in other European countries, the guild system—a kind of monopolistic cartel arrangement—was abolished, allowing free business formation. In this laissez-faire atmosphere, numerous inventors and entrepreneurs emerged. Major companies such as ASEA/ABB, Ericsson, SKF, and Sandvik were founded during this period. Alfred Nobel, founder of the Nobel Prize, was also an entrepreneur of this era who succeeded in the explosives business. It was the free economy that enabled Swedes to accumulate wealth.

Another factor that further accelerated Sweden’s economic development was its ability to maintain neutrality during the two world wars. As a result, it was able to export vast amounts of war materiel to other countries involved in the wars.

It was precisely this economic strength that sustained Sweden’s vast welfare system. But even Sweden could not avoid the cost problem of the welfare state. As unemployment reached as high as 20% of the population, the incentive to work weakened and productivity declined. That is why a country that had ranked second in Europe in terms of national income immediately after World War II had fallen to 17th place in Europe by 1970.

People want a government that takes good care of them right away. But what is even more important is to encourage people to work. In other words, the key is to foster their motivation to seek jobs for themselves.

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Original title: [좋은 정부, 나쁜 정부] 가장 존경받던 나라, 스웨덴

Author: Center for Free Enterprise (CFE)

Date: 2008-12-22

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=17&idx=10726