The Economist has done it again
Usually an excellent magazine, the Economist has a predilection for admiring the Nordic countries that I, as a Swede, find somewhat puzzling. True, us Scandinavians still live in fairly orderly societies, and presently our economic development is better than that of France and Germany. But all is not well on the Nordic front.
Sweden has an official unemployment rate of slightly above 5 %, but it hides a very different reality. The government hides people in programs that have been shown to not add to the chance of getting employed. Students who would prefer to work but instead go into government-subsidized programs are not counted. Sweden has Europe's second healthiest population, but Swedes are several times more likely to go on sick leave than other Europeans. Add to this the people who have been given government subsidies to go into early retirement, and the unofficial unemployment rate for Swedes ages 20 - 65 is around 15 - 20 %. In Finland, the official unemployment rate is around 9 %. Norway is held up with oil money, but is suffering increasingly from the Dutch desease. The Danes are doing pretty well, I'll give them that. Add to this the fact that not a single net job has been created in the Swedish private sector for the last 30 years or so, and that Swedish multinationals are not investing their profits in Sweden, and the picture looks somewhat bleaker.
Why then the bravo for us Nordics? Part of the reason is who you compare with. The Nordic countries are small, hence their inefficient big government systems are somewhat more manageable than those of e.g. France and Germany. Also, our labor laws are still somewhat more flexible than those of France and Germany, although the Swedish unions are working successfully to make that change. In addition, 2006 is election year for Sweden, which means that the ruling Social Democrats are spending money to get more voters, although banks and the OECD warn of over-heating risks.
The 1990s was a period of crisis, especially in Sweden and Finland, and many good reforms were enacted by both the right and the left to deal with the crisis. However, in recent years, there has been a push to the left by the Social Democrats, since they are too weak to govern independently, and hence must lean on the Greens and the reformed (?) communists. The result is heaps of legislation that is stupid, at best. So has the Swedish government shut down one nuclear power plant to appease the Greens, but increased the output of another one. Stockholm will under the year 2006 experience a toll-road experiment, called the "Stockholm try". However, due to rushed legislation and because of limits given by the Swedish constitution, the toll will be collected as a tax, which means that the money cannot be targeted directly to Stockholm's transport system. Swedish small businesses are taxed for "over-liquidity" if it is suspected that their owners are keeping money in the businesses to avoid taxation. Who knows what the appropriate level of liquidity is? The tax agency of course! The government is considering legislation that will force employers to give part-timers full time jobs if they want to, and full-timers part-time.
The overall result is a system that is good for those who don't make an effort, or for those who are smart, lucky or connected enough to get past all the hurdles and become really rich. If you don't want to work, don't worry. The Social Democrats are happy to buy your vote with other peoples money. If you already have a lot of money, you can put them in tax havens. The business climate assures you of very limited competition on the Swedish market, and you can black-mail the government for special deals. You can also control your company without owning it, by using as system with A and B shares, A shares giving more votes by a factor of say, 10.
The rest of us are stuck paying marginal taxes of 55 % (for a yearly salary of over € 35 k) on a salary to which the employer must pay an additional 30 % in employer's fees. The sales tax is 25 %. In total, the effective tax rate if you consume your salary in Sweden is anywhere between 60 % for people of lower income to 70 % for people who make above say € 50 k a year. If you instead want to start your own business, be prepared to drown in legislation, union demands and haphazard legislation.
It is indeed nice to be Nordic.
Sweden has an official unemployment rate of slightly above 5 %, but it hides a very different reality. The government hides people in programs that have been shown to not add to the chance of getting employed. Students who would prefer to work but instead go into government-subsidized programs are not counted. Sweden has Europe's second healthiest population, but Swedes are several times more likely to go on sick leave than other Europeans. Add to this the people who have been given government subsidies to go into early retirement, and the unofficial unemployment rate for Swedes ages 20 - 65 is around 15 - 20 %. In Finland, the official unemployment rate is around 9 %. Norway is held up with oil money, but is suffering increasingly from the Dutch desease. The Danes are doing pretty well, I'll give them that. Add to this the fact that not a single net job has been created in the Swedish private sector for the last 30 years or so, and that Swedish multinationals are not investing their profits in Sweden, and the picture looks somewhat bleaker.
Why then the bravo for us Nordics? Part of the reason is who you compare with. The Nordic countries are small, hence their inefficient big government systems are somewhat more manageable than those of e.g. France and Germany. Also, our labor laws are still somewhat more flexible than those of France and Germany, although the Swedish unions are working successfully to make that change. In addition, 2006 is election year for Sweden, which means that the ruling Social Democrats are spending money to get more voters, although banks and the OECD warn of over-heating risks.
The 1990s was a period of crisis, especially in Sweden and Finland, and many good reforms were enacted by both the right and the left to deal with the crisis. However, in recent years, there has been a push to the left by the Social Democrats, since they are too weak to govern independently, and hence must lean on the Greens and the reformed (?) communists. The result is heaps of legislation that is stupid, at best. So has the Swedish government shut down one nuclear power plant to appease the Greens, but increased the output of another one. Stockholm will under the year 2006 experience a toll-road experiment, called the "Stockholm try". However, due to rushed legislation and because of limits given by the Swedish constitution, the toll will be collected as a tax, which means that the money cannot be targeted directly to Stockholm's transport system. Swedish small businesses are taxed for "over-liquidity" if it is suspected that their owners are keeping money in the businesses to avoid taxation. Who knows what the appropriate level of liquidity is? The tax agency of course! The government is considering legislation that will force employers to give part-timers full time jobs if they want to, and full-timers part-time.
The overall result is a system that is good for those who don't make an effort, or for those who are smart, lucky or connected enough to get past all the hurdles and become really rich. If you don't want to work, don't worry. The Social Democrats are happy to buy your vote with other peoples money. If you already have a lot of money, you can put them in tax havens. The business climate assures you of very limited competition on the Swedish market, and you can black-mail the government for special deals. You can also control your company without owning it, by using as system with A and B shares, A shares giving more votes by a factor of say, 10.
The rest of us are stuck paying marginal taxes of 55 % (for a yearly salary of over € 35 k) on a salary to which the employer must pay an additional 30 % in employer's fees. The sales tax is 25 %. In total, the effective tax rate if you consume your salary in Sweden is anywhere between 60 % for people of lower income to 70 % for people who make above say € 50 k a year. If you instead want to start your own business, be prepared to drown in legislation, union demands and haphazard legislation.
It is indeed nice to be Nordic.
posted by Hugin at 19:20
<< Home