
How Laissez-Faire Made Sweden Rich (2013) - cnnx
https://www.libertarianism.org/publications/essays/how-laissez-faire-made-sweden-rich
======
data_required
Here is a better article on Sweden's economic history, with far more data
backing it up: [https://eh.net/encyclopedia/sweden-economic-growth-and-
struc...](https://eh.net/encyclopedia/sweden-economic-growth-and-structural-
change-1800-2000/)

1\. Sweden's economic growth relative to the rest of the world continued quite
strongly for _40 years_ after the Social Democrats took power in 1932 and
built a large welfare state.

2\. In fact, the period with the strongest economic growth rate in absolute
terms was 1950-1975, the period when laissez-faire was most clearly abandoned.

3\. The libertarianism article doesn't _once_ mention the _absolutely crucial_
fact that Sweden did not participate in the two world wars. In fact, Sweden
has been pacifist since the early 1800s. It really helps a lot when your
country is not twice ravaged by major wars, and Sweden also makes a habit of
investing more in its people.

4\. The fact that Sweden and several other countries can sustain a rich
economy with healthy and happy people, at the same time as it has high taxes,
is itself a death knell for the claim that libertarianism is always and
forever the best ideology. If something drastically different from
libertarianism is most strongly associated with wealth & health, then
libertarianism clearly isn't necessary.

The libertarianism article is not without merit (some kinds of trade
liberalizaton and other liberal reforms were obviously a great idea in
retrospect), but like most articles written by proponents of an ideology, it
fails to acknowledge other important pieces of the puzzle.

~~~
mediascreen
While I agree that the question is more complicated, it took until 1974 before
tax rates were anywhere near where they are today [0].

Also, while not involved in any wars, I'm not sure i would call Sweden
pacifist during the last century. For example Sweden had the 4th largest
airforce in the world in the 1950s [1]

And, except for tax rates, Sweden has a pretty liberal economy [2].

[0][http://www.scb.se/en/finding-statistics/statistics-by-
subjec...](http://www.scb.se/en/finding-statistics/statistics-by-subject-
area/public-finances/local-government-finances/local-taxes/pong/tables-and-
graphs/mean-tax-rates-whole-of-sweden/)

[1][https://en.wikipedia.org/wiki/Swedish_Air_Force#Expansion_du...](https://en.wikipedia.org/wiki/Swedish_Air_Force#Expansion_during_the_Cold_War)

[2][https://www.heritage.org/index/country/sweden](https://www.heritage.org/index/country/sweden)

~~~
data_required
Good additional context!

I think the fact that steadily increasing tax rates over the decades before
1974 also coincided with high economic growth is a good point against
libertarianism.

And the fact that tax rates have been quite high since the early 70s, and yet
Sweden's share of the global economy has been basically constant, is also
interesting. Libertarianism would suggest that should not happen, and yet it
works just fine.

I think avoiding being clobbered by World Wars 1 & 2 was the most important
thing :). Probably "neutrality" or "non-aggression" is a better word than
"pacifist".

Good points about Sweden having a liberal economy other than high tax rates. I
agree that has worked well for Sweden.

~~~
CryptoPunk
>>I think the fact that steadily increasing tax rates over the decades before
1974 also coincided with high economic growth is a good point against
libertarianism.

I think one could reasonably attribute the growth for the first decade or two
after tax rates began increasing to the momentum built up during the
previously laissez faire era.

Supply chains, investor sentiment, etc all take time to change so a tax hike
might not make its effect on GDP immediately evident.

Also, many investments have a time delayed effect on GDP, like large capital
projects which can take a decade to complete. Investments in the lower tax era
could have only begun outputting goods well into the new high tax era, giving
the false impression that the high tax era was responsible. Think a factory
that takes a decade to come online for example.

~~~
data_required
>I think one could reasonably attribute the growth for the first decade or two
after tax rates began increasing to the momentum built up during the
previously laissez faire era.

It's a bit much to expect growth to peak during the era 20-40 years after
laissez faire ended, and think that it was because of the previous laissez
faire policies.

>Supply chains, investor sentiment, etc all take time to change so a tax hike
might not make its effect on GDP immediately evident.

These things did not use to be so sophisticated a century ago.

Without a doubt at least, high taxes and health and wealth clearly coexist in
many countries. In fact, outside of some tiny countries and also some
countries with oil wealth, it's the _only_ form in which wealthy countries
exist in this world.

And at the state level in America, this pattern is even clearer.
[https://en.wikipedia.org/wiki/List_of_U.S._states_by_income](https://en.wikipedia.org/wiki/List_of_U.S._states_by_income)

Except for Alaska (small population, vast natural resources), every state in
the top 12 by income is liberal-leaning in its voting patterns.

Likewise, except for New Mexico, every state in the bottom 16 by income is
conservative-leaning in its voting patterns.

~~~
CryptoPunk
>>It's a bit much to expect growth to peak during the era 20-40 years after
laissez faire ended

We need to look at Sweden's peak growth relative to other countries in my
opinion, because its absolute growth rate was mediated by more than its own
policies.

For example the entire developed world saw its peak economic growth rates
during the postwar era, suggesting there were certain global economic
conditions created by the establishment of the post-war order that could have
played a major role in their economic performance.

So a better indicator of policy effectiveness would be to look at its economic
growth relative to its contemporaries.

IIRC, Sweden's economic performance relative to its contemporaries, like the
US, began to lag soon after it increased its tax rates to above theirs.

>>Without a doubt at least, high taxes and health and wealth clearly coexist
in many countries.

But that's not in dispute. The dispute is over whether those countries are
rich because of their current high tax policies, or their past low tax ones.

The article tries to demonstrate that in the case of Sweden at least, it
acquired most of its wealth during the past eras.

~~~
data_required
Those are some good & reasonable points, thank you for making them :).

It would even be quite interesting if potentially the best approach to a
healthy & wealthy society would be to be very libertarian for a while, and
then very high tax after that...

------
oblio
Personal anecdote and gross generalization: people who consider Sweden or the
other Nordic countries socialists are Americans or have been “Americanized”
through consumption of US media. Don’t feel ashamed, I’m also one of these
people.

These countries actually are social democracies:
[https://en.m.wikipedia.org/wiki/Social_democracy](https://en.m.wikipedia.org/wiki/Social_democracy)

Big difference based on just 1 word.

Also, Sweden was never truly poor, by world standards. You don’t have to
believe me, check the Maddison Project. Even when it was “poor” 200 years ago,
it was probably 100-200% richer than my home country, Romania, and probably
another 100-200% richer than the truly poor parts of the world.

~~~
mlevental
I don't understand? Romania and the rest of Eastern was almost all serfs 200
years ago. are you saying because people had clothes (as opposed to I guess
indigenous peoples in Africa or something) Romania wasn't poor (and therefore
Sweden was actually wealthy?

~~~
oblio
I'm not sure how exactly my comment is not clear, but I'll clarify anyway :)
(Edit: found it - the last phrase in my comment should say "at that time",
unfortunately I can't edit my comment)

Let's pick some moments in time, say 1500, 1800, 2000 and some countries, say
Sweden, Romania and Asgard® (I'm going to use a fictitious country name to
avoid offending anyone from a poorer country :) ).

My statement was that in 1500, 1800 and 2000, the wealth levels for these
countries were like this:

Sweden > Romania > Asgard.

for all 3 moments in time (or any other, more or less)

The description in the article doesn't make sense, he's appealing to our
modern sensibilities. Of course Sweden in 2000 is richer than Sweden in 1800.
But it doesn't make any sense to compare things like that. If you want to get
a true measure, you need to compare things at that point in time: Sweden in
1800 with Romania in 1800 and with Asgard® in 1800.

So, for your comment:

> are you saying [...] Romania wasn't poor and therefore Sweden was actually
> wealthy?

1\. Romania in 1800 was comparatively poorer than Sweden in 1800, but richer
than Asgard® in 1800. So, Romania was still poor, but not as poor as other
places.

2\. Sweden, as a result, "was actually wealthy" for that time, compared to
many other countries in the world, at that time.

~~~
db48x
> Of course Sweden in 2000 is richer than Sweden in 1800. But it doesn't make
> any sense to compare things like that.

It's definitely possible to get poorer as time progresses, rather than richer.
Venezuela is a recent example.

~~~
oblio
Yes, of course, there can be major fluctuations in any direction. But the data
that we do have (see the Maddison Project) points out to many countries being
in roughly the same quartiles across centuries. Sweden or Romania would be
some of those. China would be an example of an undeperformer from 1800 to 1990
and Saudi Arabia an overperformer from 1960 (I think).

But these scenarios are not the common case, there’s a reason they are called
economic disasters or miracles.

Oh, and the present day has way more noise than the past, cause of
industrialization. Now a country can truly be 10-100 more productive per
capita than another. But before the Industrial Age it was waaaay harder to
stand out, you needed some exquisite social systems to do it, it happened
extremely slowly and rarely.

------
lkrubner
This article leaves a lot out. For instance, the loss of population to North
America. In the early 1900s Sweden had a population of 4 million and it also
had a diaspora of 4 million. In other words, it had lost nearly half its
people overseas. The ruling class was terrified by the loss of people and so
subsidizes for housing were introduced. Sweden thus became the first Western
nation to introduce housing subsidies. The subsidies were for a particular
kind of house, of which several survive. You can see a few in Stockholm near
certain parks.

But more so, the standard of living in Sweden remained well behind that of
other Western nations till after World War II. The big increase in the
standard of living was something that happened during the post war boom. All
Western nations grew rapidly then, but Sweden was able to close the gap
between itself and other Western nations. We could argue all day about whether
the boom or the socialists deserve credit, but it seems clear that laissez
faire had nothing to do with it.

------
tim333
Liassez-Faire may have made Sweden rich but most western countries went from a
poor state 150 years ago to prosperous now pretty much regardless of the
political systems they had. Even Russia did kind of ok. I think the advances
were driven by improvements in technology more than anything else.

~~~
p0ints
> Even Russia did kind of ok.

That may be true from 10 thousand miles away. Upon closer inspection, there's
a huge difference in current wealth and standard of living between Russia and
say Finland, while 100 years ago they were roughly the same. Not to mention
the unimaginable wealth of natural resources that Russia has, which, under
proper political and economic policies, could make it into a Norway-like
paradise.

~~~
yostrovs
Finland was part of Russia 100 years ago, which led to another experiment
comparing systems for the next 70 years. The results are always the same.

~~~
fulafel
Very different from slavic Russia back then though, having previously changed
hands from swedish to russian empire.

------
crdoconnor
Sweden did well after WW2 for much the same reason that the US did: it was
industrialized and not destroyed.

It's always tempting to believe that there was something special about their
"ideological prowess", but that isn't really the case. With or without laissez
faire they would have done well. With or without a welfare state they would
have done well.

Econ 101 is "people respond to incentives". Think tanks representing the rich
and wealthy (of which libertarianism.org/CATO is one) have a strong incentive
to try and give laissez faire credit for every positive economic development
ever. It's what makes their donors wealthy.

The Kochs (a major source of funds for this website) would particularly like
you to think this because of some of the truly _epic_ fights that they have
had with the environmental protection authority. To them, "regulation is bad,
mkay". Guess why?

Hence why, even though I'm sure he honestly believes it, Johan Norburg gives
free markets credit for Sweden solving their infant mortality problem.

~~~
patricius
> Hence why, even though I'm sure he honestly believes it, Johan Norburg gives
> free markets credit for Sweden solving their infant mortality problem.

What would be a better explanation in your opinion?

~~~
crdoconnor
The standard explanation: Sweden built a good social welfare system.

------
RobertoG
If somebody is interested in a more data driven view, I would recommend this
paper (1) by Ha-Joon Chang:

"This free trade phase, however, was short-lived. Sweden started using tariffs
as a means to protect the agricultural sector from American competition since
around 1880. After 1892, it also provided tariff protection and subsidies to
the industrial sector, especially the newly-emerging engineering sectors [..].
Because of this switch to protectionism, the Swedish economy performed
extremely well in the following decades"

"The Swedish state made great efforts in facilitating the acquisition of
advanced foreign technology, including state-sponsored industrial espionage.
However, more notable was its emphasis on the accumulation of “technological
capabilities” [..]. It provided stipends and travel grants for studies and
research, invested in education, helped the establishment of technological
research institutes, and provided direct research funding to industry"

(1) -
[http://www.personal.ceu.hu/corliss/CDST_Course_Site/Readings...](http://www.personal.ceu.hu/corliss/CDST_Course_Site/Readings_old_2012_files/Ha-
Joon%20Chang%20-%20Kicking%20Away%20the%20Ladder-
The%20%E2%80%9CReal%E2%80%9D%20History%20of%20Free%20Trade.pdf)

------
pensativo
People already poited out that a) Sweden wasn't very poor in the first place
b) didn't participate much in conflict during the time; and, most importantly
c) technology was extremely influential in the sense that there was just more
to go around.

I want to point out that I think (c) is by far the most important fact but
that the post ignores; however, it also ignores lesser factors such as the
widespread participation and effects of labor unions.

I see the post as grossly oversimplifying (by conveniently ignoring many other
historical factors) while the last time I check, this is something that's
still very much debated by modern economists.

------
jazzyk
Pretty simple, really:

1\. Neutrality - not being ruined by 2 consecutive world wars

2\. Profiting from wars - in Sweden's case, by selling arms and minerals
(Bofors, iron ore, etc.) to both warring sides.

"Peace-loving" and "neutral" Sweden continues to be a major exporter of arms,
all the while relying on protection of its allies (spending a mere 1% of its
GDP in 2015 on its own defense)

3\. Until the influx of immigrants (started slowly 30 years ago), a
homogeneous, protestant, population.

[https://www.politico.eu/article/neutral-sweden-arms-
pedlar-e...](https://www.politico.eu/article/neutral-sweden-arms-pedlar-
extraordinaire/)

[https://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS?locat...](https://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS?locations=SE&view=chart)

------
Melchizedek
While it is true that Sweden was economically liberal when it grew rich,
liberalism is not enough -- you also need stability, an educated high-IQ
population and high trust/low corruption.

The mass immigration (and the word 'mass' is really an understatement) of
people with much less education and non-Western culture/values is destroying
those other factors, not to mention the fact that they overwhelmingly vote
socialist to increase welfare payments.

While Sweden's economy has seen some growth (but really not that much per
capita) due to limited liberalization, a floating currency and most of all a
huge increase in household debt to pay for soaring house prices caused by
population growth (also due to immigration) and extremely low interest rates,
the chickens will eventually come home to roost.

Sweden really has no future.

~~~
oblio
> Sweden really has no future.

Bold claims are like low percentage shots.

A developed country, full of highly educated people, in a peaceful part of the
world, should be able to self-correct to some degree. It might, relatively to
the rest of the world, not be in as good a state as before, but saying “it has
no future” is stretching things quite far, IMO.

~~~
mieses
The self-correction needed is cultural and will take too long. Decades of
progressive indoctrination will not be be undone overnight. It's a safe bet
that it's too late.

~~~
oblio
And what do you think will happen? Sweden will become a warzone? I highly
doubt that. It will still be rich and developed, just with lower social
cohesion.

~~~
mieses
Social cohesion is not the issue or a goal. There will be a lowering of
freedom, individualism, and other "western" values at the expense of becoming
"rich", "developed", and other metrics than can be measured as data rather
than on subjective cultural scales. It's interesting that this anti-humanist
statistical model of human development is championed by the left. Anything to
spite "western" culture.

~~~
oblio
I’m neither right or left, but I am an optimist. I guess only time will tell
who’s right.

