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Sweden’s 30 years of income redistribution

from David Ruccio



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.

And now, three days of rioting in poor immigrant suburbs have rocked Stockholm.

After decades of practicing the “Swedish model” of generous welfare benefits, Sweden has been reducing the role of the state since the 1990s, spurring the fastest growth in inequality of any advanced OECD economy.

While average living standards are still among the highest in Europe, governments have failed to substantially reduce long-term youth unemployment and poverty, which have affected immigrant communities worst.

The left-leaning tabloid Aftonbladet said the riots represented a “gigantic failure” of government policies, which had underpinned the rise of ghettos in the suburbs.

“We have failed to give many of the people in the suburbs a hope for the future,” Anna-Margrethe Livh of the opposition Left Party wrote in the daily Svenska Dagbladet.


  1. ezra abrams
    May 23, 2013 at 1:55 pm

    isn’t it std practice to plot three lines on the fit – the fit, and some indication of error or uncertainty ?
    I know there are excel sheets on the web that you can download, and put your data into for this, although i’m not enough of a stats person to know if those sheets are good, and what would be the proper type of uncertainty to plot

  2. Herb Wiseman
    May 23, 2013 at 3:00 pm

    Once again we appear to see the outcome of the Friedman ideas and changes made to the thinking of the policy makers that originated in the mid 70s. What are the strategies used by Swedish governments to fight inflation? What is the Swedish debt? To whom isi it owed? How did these things change and affect the current situation? When did the change start?

  3. henry1941
    May 23, 2013 at 7:47 pm

    This is a complex story. Large numbers of immigrants have been let into the country but are unable to assimilate due to cultural and language difficulties – people do not arrive with a knowledge of Swedish, and now this is developing into a second-generation problem as well.

    The problem is compounded by high payroll taxes and the very low threshold above which income tax is payable. Benefits are high but have to include a substantial element to cover sales taxes (MOMS), and the predictable result is high unemployment especially amongst the young and unskilled.

    Sweden’s much-needed tax reforms still need to formulated, let alone discussed. Sweden was never a success story – its good fortune is due largely to a small population and a land reform which took place in the 1680s, as a result of which there is nothing much in the way of a powerful landed hereditary class.

  4. Allen
    May 24, 2013 at 9:36 am

    Henry1941’s last sentence says it all (almost).

  5. May 27, 2013 at 12:56 am

    before 2006 the trend is stablished. Centre-right government was not to different from Social Democratic

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