Sweden frequently is offered as a shining example of successful socialism. A picture is drawn of the attractive, cheerful, and socially-conscious Swede living out his days in the euphoria of the welfare state; and the visitor to that country finds his cursory observations seem to confirm that appraisal.
The accuracy of that picture, however, depends on —
1. How prosperous the people are,
2. Whether Sweden’s prosperity is because of, or in spite of, its degree of commitment to socialism, and
3. The cost of state intervention in material as well as human terms.
As an American banker managing a Scandinavian branch of his bank recently told me, "The Swedes are too smart to kill the source of the wealth which makes possible their massive welfare programs. There are few nations in the world that rely more on the free enterprise system in the production end of the economy." The following figures confirm this point by indicating the extent of private ownership of production in prominent areas of industry and trade.
Not only has the productive end of the economy remained for the most part in private hands, but the Swedes have also made sure that within a framework of government guidelines, there remain some real incentives and rewards for producing.
While there are both local and national corporate tax rates, the national rate is 40 per cent and the combination will seldom reach 50 per cent. In turn, the determination of income for tax purposes shows the relatively liberal treatment the corporation receives in Sweden. Swedish tax law is especially lenient on inventory evaluation, depreciation, and certain investment reserves. Swedish tax rules allow a corporation discretion within a wide area to take large or small deductions in any one year. This discretion allows a corporation considerable latitude in leveling out annual results in building up reserves. Though details of the three areas would be too extensive to present here, the liberality of depreciation of machinery and equipment is worth noting.
In areas of capital gains and losses, the Swedes are again relatively liberal in their tax treatment. Stocks and bonds and other capital assets (apart from real property) are not subject to income taxes if the capital gain is taken after five years — real property is nontaxable if held for ten years.
PERCENTAGE OF OWNERSHIP OF INDUSTRY (Based on Number of Employees in 1951) ¹
|
|
Private Gvt |
Cooperatives |
Forest 82.5 17.1 |
- |
Mining & Manufacturing 92.4 6.1 |
1.5 |
Timber 96.7 2.6 |
0.7 |
Pulp & Paper 97.0 1.5 |
1.5 |
Food 83.5 7.9 |
8.6 |
Textiles 97.7 1.1 |
1.2 |
Chemicals 90.9 8.5 |
0.6 |
Electric, Gas & Water Power 31.7 61.7² |
6.6 |
Building 71.6 27.7 |
0.7 |
Wholesale Trade 97.4 0.6 |
2.0 |
Retail Trade 88.3 1.1 |
10.6 |
Transport & Communication 45.7 54.3 |
- |
Shipping 97.5 2.5 |
|
Railways 5.5 94.5 |
|
Bus & Tram Companies 61.4 38.5 |
0.1 |
Commercial Banks3 92.6 7.4 |
|
Insurance 92.8 7.2 |
|
1 Stockholm’s Enskilda Bank, Some Data About Sweden, 1965.
2 State 10.2 per cent, municipals 51.5 per cent.
3 Number of employees 1963.
A Lot of Welfarism
Does this relatively liberal policy toward corporate enterprise and capital gain mean that Sweden is, in fact, the world’s best example of the free enterprise state? Hardly — Sweden, like almost all of the Western nations, embraces a mixture of the free market and considerable state direction. In Sweden, however, the line seems rather clearly drawn between the relative freedom of the productive end, and the massive interference of the government in the distributive or consumptive end of the economy.
Social security, compulsory health insurance, a recently-enacted supplementary pension to the basic old-age pension, family and child welfare programs, unemployment insurance programs, direct rent subsidies, and government housing loans are well known institutions to the Swede (as they now are to Americans). Rent control was enacted in 1942 with rents on housing built as of that date fixed at the 1942 level. Rents on new housing are set to supposedly reflect the cost of construction. But rent control has affected the housing supply to the extent that some 400,000 persons are on the waiting list for housing in Sweden — 120,000 in Stockholm alone. Admittedly, were rents allowed to stabilize at free market equilibrium, many of those now applying for housing at below market rates would no longer be applicants. But the free market advocate would maintain with much empirical evidence that, to the extent government interferes in any market, including the housing market, the consumer is denied the standard of living and personal freedom he would otherwise achieve.
Welfare Costs to a Typical Swedish Wage Earner
What is the actual cost of socialist schemes to the Swedish wage earner?
It is, of course, impossible to arrive at an actual monetary price. Seldom are government welfare programs funded from taxes attributed to a particular program. General tax revenues invariably are drawn upon for the major portion of the cost of a "social benefit." At the least, this blurs the price to the individual of the government services. However, reading between the lines of Some Data About Sweden, one discovers that a typical Swedish household has earnings of about $3,000 a year, of which $1,050 goes for taxes. In return for such taxes a typical household might anticipate some $150 worth of free education, another $150 worth of free medical care, $150 worth of national defense, and an old-age pension promise of about that same $150 current value. Supplemental pension benefits recently have been promised, but these will call for higher tax rates, too, before they can be realized. These four major governmental services thus account for approximately $600 of the $1,050 paid in taxes. What of the remaining $450? There is a family allowance of about $140 a year for each child under 16. Unemployment insurance, housing loans and rebates, and miscellaneous costs of government should account for the remainder.
It would seem obvious that the wider the dispersal of tax-paid services among the entire population, the wider the tax base must be. Lawrence Fertig says that "in the United States 80 per cent of tax revenue is derived from taxable income up to $6,000. If the government actually confiscated all income remaining to taxpayers whose annual income was $50,000 a year or more, the Treasury would collect about $173,000,000, hardly enough to run the Federal government for a few hours."5 The principle applies to Sweden as well. It is obvious that for practical purposes capital accumulation must occur in Sweden as it must in the United States, through capital gains. Materially, any citizen of an ever-growing socialist state finds he must work harder and harder to keep up with the tax burden treadmill, which in turn progressively binds him to the state. The loss of spiritual values resulting from ever-present government can only be measured in the hearts and minds of individual citizens.
Must America Follow Sweden?
The socialist would defend the Swedish pattern, and probably treat its welfare programs as only a step in the right direction. Though many Western world socialists have dropped nationalization of industry from their design for utopia, they all advocate continually increasing government intrusion into service areas and equality of material possessions through redistribution of income. Their defense is invariably that their policies provide for "the people’s security" (and one might add, "whether they like it or not"). However, the pattern of life which one sees emerge, while perhaps on a higher material scale, is merely another one of the authoritarian social structures which evolved from the revolutionary doctrines of Rousseau, Hegel, Babeuf, and Marx.
The American can no longer smugly claim this country as the last defender of the free market and individualism, when it is obvious that almost every device for effecting the eventual total welfare state in Sweden is now a feature of our own system of government. And both nations prosper relative to their more socialistic neighbors only to the extent that the social planners pragmatically allow the free market to function.