by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Sweden’s period of classical economic liberalism did not last. The decades that followed were characterized by the growth of the generous cradle-to-grave welfare state envied by Ocasio-Cortez, Senator Bernie Sanders, and their fellow progressives. They featured government intervention, an increase of tax rates, and the regulation of previously free markets. The country’s total tax burden peaked in 1990, at 52.3 percent, with a corresponding negative impact on business and job creation.
These socialist golden years were not so golden for economic performance. While Sweden’s growth was second in the world in 1970 (Japan was first), it quickly dropped by 1990 to the second-lowest within the Organization for Economic Co-operation and Development (OECD). A subsequent financial crisis in the 1990s saw GDP growth sink and unemployment spike, while the government raised interest rates to a staggering 500 percent in an effort to avoid devaluing its currency. …
… It seems as if Ocasio-Cortez’s Scandinavian Shangri-la exists in her own fantasy world. The truth is that Scandinavian countries enjoyed prosperous economic systems before the welfare states we know today were established.
If the congresswoman were truly interested in learning from the Nordic experience, she would note that Sweden began to revise its economic model based on lessons drawn from its recession of the 1990s by implementing reforms that would have made many of her Republican colleagues on the other side of the aisle proud.
As the ideal image of socialism lost its sparkle, state-owned companies were sold and financial markets were deregulated, while public monopolies were replaced with competition. Sweden needed healthy companies and skilled workers, so top tax rates were rolled back. Many government welfare programs were redesigned. These reforms laid the ground for today’s competitive Swedish market-oriented economy based on openness and the promotion of global free trade.