Sweden and the Revival of the Capitalist Welfare State
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Sweden and the Revival of the Capitalist Welfare State

  • New Thinking in Political Economy series

Andreas Bergh

This book tackles a number of controversial questions regarding Sweden’s economic and political development: • How did Sweden become rich? • How did Sweden become egalitarian? • Why has Sweden since the early 1990s grown faster than the US and most EU-countries despite its high taxes and generous welfare state? The author uses new research on institutions and economic reforms to explain the rise, the fall and the recent revival of the Swedish welfare state. The central argument is that a generous welfare state like Sweden’s can work well, provided that it is built on well-functioning capitalist institutions and economic openess.
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Chapter 3: The ‘not quite so golden’ years 1970–1995

Andreas Bergh

Extract

As a result of the strong economic growth which began in the mid-nineteenth century, Sweden had in 1970 become the fourth richest country in the world, after Switzerland, the United States and Luxemburg (measured as purchasing power-adjusted GDP per capita). Twenty-five years later, the gap between Sweden and the richest countries in the world was significantly wider. At its lowest, Sweden ranked 16th to 18th in the so-called welfare league, with some variation depending on source and method of calculation. Since then, Sweden has managed to narrow the gap to the top. The ranking of countries in terms of average purchasing power should not be over-interpreted. First, Sweden was richer in 1995 than in 1970 – its fall in the ranking merely indicates that other countries have become even wealthier. Second, it is not very important if Sweden is the 15th richest or 20th richest country in the world, because there is so little separating rich Western countries that ranking becomes precarious. Sweden can these days be found in the group the OECD has termed ‘High middle income group’, which includes 14 countries. Figure 3.1 shows the development of real GDP per capita in the United States, in 15 core EU countries and Sweden. It is easy to see that the period from 1970 to 1995 was not very good for Sweden. From the mid-1990s and onwards, growth has been much higher.

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