In the midst of a global recession, Sweden has recorded a 6.9% year-on-year increase in GDP last quarter, and unemployment is falling. Unusual facts: the central bank has been raising rates and the government has been cutting taxes for all groups including the very rich.
Source link: http://archive.mises.org/14786/the-sweden-plan/
The Sweden Plan
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Epic read.
Yes, but the interest rate was extremely low. From the article linked :
“Sweden’s central bank raised its benchmark interest rate by 0.25 points to 1.0 percent last month, the third increase since July as the country’s economy makes a strong recovery from recession”
I’m not so sure that this is all due to tax cuts. Part of it could be a phony boom driven by low central bank interest rates. Actually it looks like the Bush/Greenspan boom all over again with the exception of the state’s budget surplus.
http://www.riksbank.se/templates/stat.aspx?id=17777
2006 November 2.5 2.5 2.5 2.5
2006 December 2.5 2.5 2.5 2.5
2007 January 3 3 3 3
2007 February 3 3 3 3
2007 March 3 3 3 3
2007 April 3 3 3 3
2007 May 3 3 3 3
2007 June 3 3 3 3
2007 July 3.5 3.5 3.5 3.5
2007 August 3.5 3.5 3.5 3.5
2007 September 3.5 3.5 3.5 3.5
2007 October 3.5 3.5 3.5 3.5
2007 November 3.5 3.5 3.5 3.5
2007 December 3.5 3.5 3.5 3.5
2008 January 4 4 4 4
2008 February 4 4 4 4
2008 March 4 4 4 4
2008 April 4 4 4 4
2008 May 4 4 4 4
2008 June 4 4 4 4
2008 July 4.5 4.5 4.5 4.5
2008 August 4.5 4.5 4.5 4.5
2008 September 4.5 4.5 4.5 4.5
2008 October 4.5 4.5 4.5 4.5
2008 November 4.5 4.5 4.5 4.5
2008 December 4.5 4.5 4.5 4.5
2009 January 2 2 2 2
2009 February 2 2 2 2
2009 March 2 2 2 2
2009 April 2 2 2 2
2009 May 2 2 2 2
2009 June 2 2 2 2
2009 July 0.5 0.5 0.5 0.5
2009 August 0.5 0.5 0.5 0.5
2009 September 0.5 0.5 0.5 0.5
2009 October 0.5 0.5 0.5 0.5
2009 November 0.5 0.5 0.5 0.5
2009 December 0.5 0.5 0.5 0.5
2010 January 0.5 0.5 0.5 0.5
2010 February 0.5 0.5 0.5 0.5
2010 March 0.5 0.5 0.5 0.5
2010 April 0.5 0.5 0.5 0.5
2010 May 0.5 0.5 0.5 0.5
2010 June 0.5 0.5 0.5 0.5
2010 July 0.5 0.5 0.5 0.5
2010 August 0.5 0.5 0.5 0.5
2010 September 0.5 0.5 0.5 0.5
2010 October 0.5 0.5 0.5 0.5
We have a housing bubble of rather largish proportions in Sweden. And most of the boom is consumption-driven. I fully expect a bust as rates are brought up. To put it simple – we’re about 4 years behind the United States.
But yes, some economic reforms like tax cuts have probably helped the economy. Also, we did very frugal amounts of “fiscal stimulus” (almost none), which may have helped spur a recovery. Finally, the government is actually PAYING DOWN government debt, and has been since the 90′s. Still though, that blasted housing bubble ….
“In the midst of a global recession, Sweden has recorded a 6.9% year-on-year increase last quarter, and unemployment is falling. Unusual facts: the central bank has been raising rates and the government has been cutting taxes for all groups including the very rich.”
Interesting how that works, huh?
Tax revenue in Sweden: 49.7 percent of GDP
Tax revenue in the US: 28.2 percent of GDP
. . . Yep, real funny how that works.
In addition to illustrating that high-tax states can be vibrant and successful, Sweden’s modest tax cuts illustrate another important point — large states can become smaller, not just vice versa, there is no “slippery slope” that makes it impossible to reduce the economic footprint the the state.
Add a third libertarian sacred cow to the pile:
“When the recession came, Sweden was badly hurt, as one would expect from an export-orientated economy trading with a stricken continent. But the damage was limited because Sweden had properly regulated financial institutions (having been stung by a serious financial crisis in the 1990s.”
“Properly regulated financial institutions” who’du thunk?
And the country is one of the very few in Europe that is becoming more freedom and free-market oriented.
except for the notorious Swedish social engineering schemes, which still remind everyone that they are just mindless peons the state needs to take care of.
well you cant have everything eh. nice to see that these policies appear to be working. i wish we didnt have a minority parliament here in canada. we probably wouldnt have done stimulus at all if it wasnt for our liberal socialist opposition threatening to take over the government if the conservatives didnt do it.
One interesting note was in the second article – “its laws prohibit politicians running up the national debt in boom years.”
Does anyone know more about this little detail?
Yes, since i live in sweden.
There is a budget law taken years in advance that stipulates how big the budget can be.
Now there are pretty obvious way’s around it, like using pension funds instead of tax revenue and lowering taxes instead of raising expenses (which is a good loophole more of that).
It’s biggest influence is on the fissical debate the ex-communists don’t want this and because of it is seen as a party that can’t be in the government.
By far the biggest influence on Swedish “austerity” i would put on the 90′s crisis being in people memory. The crisis was the collapse of the swedish model and it hit hard, also the cures where brutal. People still remember and nobody wants to go through that again because people instinctivley understand economics in Sweden and there is still outrage if a governemnt tries to do something that’s unfunded.
One also has to remember that tax revenue doesen’t equal governemnt spending and that taxes are the least damaging form of government revenue, the other two are loans and money printing.
Sweden’s tax revenue matches the expnditure to a higher degree then in the US whic is good. Sweden has a boloated state buraucracy which is bad, but it is much better functioning then any US state bureaucracy because the way laws are written in Sweden.
It might be easier to get statist laws passed but they are atleast better written, the healtcare law of the US would be laughed at for it’s legislative language in Sweden’s parliament.
Thanks for the info! I’ve found an interesting study about the reforms and their effects and added it to Sweden’s page for later processing.
Please let me know if you come across other interesting information!
If I may engage in some self-promotion, this is exactly what I discuss and analyze in my chapter on the welfare state in the new book edited by Tom Woods: Back on the Road to Serfdom. In the chapter I show that the reason Sweden has been relatively unharmed (so far) in the global financial crisis is due to a long cleaning up in the public finances, cutting down on welfare programs and benefits, while lowering taxes and reinstating sound economic incentives for the Swedish population. Also, the Swedish government had its own depression back in 1992 when the currency was basically crushed by speculators in the financial markets (it was terribly over-valued). In other words, the public finances in Sweden are relatively sound, there are no deficits, and the public debt has been paid off (the debt-to-GDP ratio has halved over the last decade or so). Of course, the case of Sweden – despite being a socialist state – is another capitalist success story.
We have had very low interest rates for some time now also there was a covert bank bailout when the crisis hit.
I belive we’re mostly gaining from having low budget deficits and stable finances. The budget should be in the blacks next year.
Everyone is talking Keynes in the government though and i’m terrified because this is the alledged “Right” and all i see is policies the Social-Democrats could have carried out had they been in power.
Hopefully the government lies this time as well and lowers taxes more then they say they would in the election.
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