Stockholm Syndrome

Wake up and smell the coffe, Socialism only works on paper, in practice it creates a dependent class that is forever beholden to a "bureacratic monarchy". Can anyone say "New Orleans"?

From IBD:
Posted 6/12/2006

Welfare State: The architects of the cradle-to-grave Swedish system said that if it couldn't work there, it wouldn't work anywhere. Well, it didn't and it doesn't.

Sweden was supposed to be the model for the soft-socialist state. The left has cited it as the paradigm that every nation should copy. It's been hailed as the Third Way, a cross between free-market capitalism and the redistributive state that nurtures the public and treats its ills.

And Sweden didn't disappoint, performing relatively well from its inception in the 1930s. In 1970, it had the world's fifth-largest GDP per capita.

For a while, it performed well for the very reason that its master planners, Nobel Prize winners Gunnar and Alva Myrdal, thought it would: that Sweden was the ideal country to try the welfare state experiment.

"The Swedish population was small and homogeneous, with high levels of trust in one another and the government," Johan Norberg, a Swede himself, explains in the current issue of The National Interest.
Other factors, Norberg writes, included: an honest, efficient civil service; an ingrained and culturally supported Protestant work ethic that drove people to work hard even as taxes rose and welfare spending grew; and productivity fueled by a well-educated population and a strong export sector.

Even with all that, "the Swedish model is rotting from within," Norberg writes. "Ironically, the unique social and economic foundation that first allowed Sweden to construct its political edifice — and which makes it such a difficult model for other countries to emulate — has been critically weakened by the system it helped create."

Norberg's analysis will no doubt meet with denial. For us, though, there's no surprise. Free-market capitalism and the welfare state, particularly one where the labor market is as highly regulated as it is in Sweden, are incompatible — an inconvenient truth, as it were, that we might one day have to relearn the hard way.

Funding the welfare state is a massive strain on a free economy. Entitlements and the administrative bureaucracy to manage it must be paid for.The only way to do that, aside from printing more currency, is to tax and tax again the wealth-, prosperity-creating private sector. That's a recipe for stagnation, not growth.

Sweden's slope became most slippery from 1960 to 1980, when public spending increased from 31% of the economy to 60% in order to keep the Swedes rolling in the government payments they have become dependent on and to fund the bloated public sector.

That was deadly to the private sector and contributed to an economic erosion, the effects of which are still being felt. Once thought to be the promised land, Sweden today ranks about equal with the fifth-poorest U.S. state in per capita income. Likewise, among the wealthy nations that make up the OECD, it slipped from fifth in income in 1970 to 15th in 2004.

There's not much optimism for a turnaround, frankly. Norberg believes that as "old attitudes about work and entrepreneurship" fade and dependence on the public sector grows, the country's once-vibrant economy will continue to fall behind.

The rot is alarming, not only for Sweden, but also for the U.S. If it's not careful, the U.S. will take the same well-trod path to stagnation as Sweden. That's especially true if it doesn't rein its growth in entitlement spending, bureaucracy and regulations.