Eat the Rich: A Treatise on Economics (11 page)

“We don’t want a society,” said Mrs. Ulvskog, “with large differences—in income, in social welfare, in regions, in men and women.” And good luck to the Social Democrats. Try this with animals, and everything would be a cow. Which may explain why the zoo in Stockholm does, in point of fact, have cows in it.

I asked Mrs. Ulvskog if the differences among people in Sweden could be made narrower than they already are. “No, not really,” she said.

“And in creating the egalitarianism you do have,” I asked, “is it the Swedish political system or Swedish society that works so well?”

“Perhaps,” said Mrs. Ulvskog, “it is the society.”

So the Swedes have come up with a wonderful trick to make everyone equal, but it can only be performed by Swedes. Also, it isn’t working very well anymore.

But Sweden did work for a long time. From 1870 to 1970, Sweden had a higher rate of economic growth than any country in the world except Japan (and Japan was cheating—using the statistical dodge of starting with a nearly Paleolithic baseline). By the 1950s, Sweden was among the richest countries on earth, with a per-capita GDP—an amount of gross domestic product per person—that was twice the European average.

Several things turned this hayseed country in the unheated attic of Europe into a wealthy modern state. Land-reform laws in the early nineteenth century allowed farmers to exercise property rights by enclosing common space, thereby increasing production, though at the expense of landless rural laborers. The medieval guilds, which gave comfy local monopolies to artisans, were abolished in 1846, and business freedom was guaranteed by law in 1864. Craftsmen could now succeed—or fail—at anything they wanted, anywhere they liked. Sweden also had supplies of timber, iron ore, and other minerals. Since these were export commodities, a policy of free trade was instituted. Thus, Sweden’s prosperity was the result of the very deregulation that a socialist government would be expected to abhor.

A socialist will tell you that these policies lead to economic disparities and social dislocations. And the socialist is right. During the late-nineteenth and early twentieth centuries, almost one-million Swedes, nearly a quarter of the population, left Sweden. Fortunately they had someplace to go: Minnesota. Dislocated and disparity-ridden as they may have been, the Swedes did pretty well there.

A Scandinavian economist once proudly said to free-market advocate Milton Friedman, “In Scandinavia we have no poverty.” And Milton Friedman replied, “That’s interesting, because in America among Scandinavians, we have no poverty, either.”

A very different kind of Scandinavian economist, Peter Stein, tried to explain to me the Swedish Model or Swedish Miracle, the so-called Middle Way, which is supposed to deliver all the houses, cars, and nuisance calls from competing long-distance carriers that America has with the perfect social equality of, say, Sweden. Mr. Stein is one of a small group of Swedes willing to believe in complete economic liberty. It is a group so small that I think I met all of them in a room at Stockholm’s free-market-oriented City University, an institution itself so small that it’s housed on a couple of floors of an office building. Mrs. Ulvskog had told me, “A conservative politician in Sweden is closer to a United States liberal than to Newt Gingrich.”

Mr. Stein pointed out that for sixty-two of the one-hundred years of splendid growth, the Swedish socialist welfare state contained no socialism and hardly any welfare. The left didn’t take power until 1932, and when the Social Democrats did get in office, they made socialism work by the novel expedient of not introducing any. Very few industries were nationalized. The Social Democrats may have believed in such things in principle, but they were Swedish and logical. They decided to let the capitalists go ahead and make money, tax the wages and profits, and use those taxes to buy social benefits. They would “nationalize consumption, not production.” But even with these social benefits, the leftists were
lagom.
In 1960 the notorious Swedish tax burden was about the same as the burden is now in the United States: Swedish government spending was 31 percent of GDP, and the deficit hardly existed.

Growth continued, unemployment was minimal, and inflation was low. It was a left-wing Eden, albeit with an occasional stock-and-bond-owning serpent in a Volvo limousine. Most social benefits were tied to having a job, so the Swedes kept working. And they worked cheap. Approximately 90 percent of Sweden’s blue-collar workers and 80 percent of its white-collar workers are unionized. The unions sat down with the Swedish Employers’ Confederation and colluded in centralized wage negotiations. The pay rate was based on productivity and world price levels. As Per-Olof Edin told me, “For fifteen to twenty years it’s been the LO that has been saying wages must be kept low.” This would hardly make for a rousing speech at an AFL-CIO strike rally.

A policy of “solidaristic” wages was pursued, meaning the same pay for the same kind of work, regardless of the employer’s ability to cough up. This favored the most efficient and productive (and largest) companies, though it screwed small businesses and start-up entrepreneurs. Companies were allowed to fire workers for any material reason. Featherbedding was forbidden. Labor mobility was encouraged by government emphasis on retraining and placement instead of unemployment checks. Free trade was maintained. No attempt was made at centrally planned production or marketing. The Swedes may have pestered their barnyard fowl, squeezed it, jiggled it, and poked it in the bottom, but they did not kill the goose that laid the golden egg.

Then something went wrong. The Swedish government started granting entitlements that weren’t dependent on holding a job and were often dependent on
not
holding one. At the same time, the concept of full employment was extended to sectors of the population that didn’t even necessarily want to be fully employed, such as the handicapped and mothers of young children. Likewise, an attempt was made to maintain full employment in failing industries where employment previously would have been discouraged. Steel mills, shipyards, and textile factories were nationalized to “preserve” jobs. Public-sector employment grew from 20 percent to 30 percent of the workforce between 1970 and 1983. Taxes rose to stinking heights but not high enough to cover costs. Social services continued to expand without regard for budgets.

As more people worked at government jobs where productivity was hard to measure, if not actively discouraged, centralized wage negotiations broke down. “Same pay for same kind of work” was replaced by “same pay for any kind of work.” Peter Stein, in his bluntly titled monograph
Sweden: From Capitalist Success to Welfare-State Sclerosis,
wrote, “Swedish doctors work an average of only 1,600 hours a year, compared to 2,800 worked by U.S. doctors. It pays doctors to stay home and paint their own houses rather than spend their time practicing medicine and hire painters.” A society is only slightly better off with its doctors painting houses than it is with its housepainters performing liver transplants.

Until 1976 the Social Democrats had ruled alone or in coalition for forty-four years. They were socialists, so they figured Sweden’s success must be the result of socialism. The Social Democrats forgot that the Swedish Miracle was the result of fragile and elaborate compromises and also of, as Marita Ulvskog called it, “standing outside the war.” Nice phrase.

Politicians had achieved control over the Swedish economy, but they were now trapped by their own power. The free market quit following the rules of economics and began following the rules of universal suffrage. The Social Democrats confess to it. “A ‘political market’ then emerged,” Mrs. Ulvskog said. “You had to give something to the voters. We couldn’t tell the voters we were going to cut.” The electoral process turned into a vote auction, with both socialist and nonsocialist parties upping the ante. “Going once…going twice…SOLD to the Social Democrats for free Ph.D.s and 100 percent disability benefits. Do I hear any bids for the next Parliament? Yes? The gentleman from the Liberal-Moderate coalition says lower taxes and more police.” Under such circumstances, even the best people, even the Swedes, could not resist the temptation to vote themselves more goods and services for less cost and bother.

This may have been more naive than cynical. The Swedes seem to have no natural distrust of government. There is in Scandinavia a long tradition of communal decision making. The Vikings had an assembly of all adult males that met once or twice a year and was called the Thing, surely the best name ever for a legislative body. Swedish peasants always had some land-ownership rights, and they usually maintained friendly relations with their king. Class distinctions existed, but pesky nobles made their money more by war and trade than by gouging the rustics. The Swedes never had feudalism to build a real Magna Carta hatred of central power. The Swedish constitution is long and so detailed that somewhere in it is probably a schedule for trimming the hedges, but it doesn’t contain checks and balances. There is no Supreme Court, no federalism, no Tenth Amendment. The Parliament can do anything it wants, including change the constitution (by voting to do so twice with one parliamentary election between votes). Not that the Swedes are alarmed by this. “We think of the government as one of us,” they say. The government is part of the community, and a very strong sense of community have the Swedes.

Perhaps too strong. Dr. Westholm, of the Federation of Private Enterprises, said, “There are no Swedish moral scruples about taxes.” Otherwise a marvelously honest people, the Swedes have a blind spot about taking certain property that isn’t theirs, as long as the loot is fairly divided.

And come to think of it, the Vikings were the same way. It makes you wonder what was going on in those longboats. Maybe discussions of political economy, Viking style. “Yah. We pillaged Ireland. Good. But Sven had seven rapes, and Nils only had one, so we all get to rape Sven.”

Sweden is no longer the homogeneous herring-choicer back-forty that it was when the Swedish model was invented. More than 12 percent of today’s Swedes were born abroad or have at least one foreign parent. They’ve come to Sweden for the same reason that Swedes went to Minnesota: to find a better life. They’ve also come to escape oppression. Sweden has a generous refugee policy and gives political asylum to some 20,000 people a year.

Thomas Gür, a Swede of Turkish descent and the author of a book about the problems of immigrants in Sweden, offered to show me Rinkeby, one of Stockholm’s “toughest” neighborhoods. We left from the subway station at Sergels Torg, a large sunken plaza from the
Brady Bunch
architectural era and one of the few truly ugly spots in downtown Stockholm. It’s known as the “declining square” both because the terrazzo paving has a distinct slant and because of the people who hang out there. This is the gritty heart of the metropolis where drugs are sold and youth gangs roam. Or are supposed to. The gangbangers and dope pushers seemed to be on one of their five weeks of legally mandated vacation when Mr. Gür and I walked through.

Swedish subway stations are each decorated by a different prominent contemporary artist and raise the question, Which is worse: vandalism or modern art? We took a very long subway ride, a ride that even in the largest American city would have carried us to the realms of golf and polo (the brand if not the ponies). But when we emerged, we were in a housing project.

The residents were mostly Middle Eastern, Turkish, Kurdish, Azerbaijani, a few Somalis—“new Swedes” as they’re called—plus one old Swede, age about twenty-five, drunk in the middle of the day. He was the only dirty or disorderly element in the suburb. Everything else was a perfect grid of apartment house boxes without ornament or identifying feature, all built in 1960s crap-colored bricks, each the same distance from all the others with nothing but a vacuum of snow between, except here and there a tree standing foolishly by itself.

And that was it. There wasn’t anything else to see except three or four shops, a dusty café, and a windowless mosque in a drab cement commercial square. The people on the sidewalks—sidewalks laid out straighter than people have ever walked—looked gray, sad, cold. Of that great marketplace which is the Middle East, with all its hawking and haggling in items and ideas, its idling, conniving, its news, gossip, and, indeed, its crime, there was nothing. Only two old Kurdish men selling sweaters out of a box. The sprawling new Swede families were crated up in the dinky flats designed for a working class with 1.9 children per cohabitational unit. “Some of these buildings were even built without windowsills,” said Mr. Gür, “because people would put ugly things on them.” I saw one woman in a chador lean out a sill-less window and spit. And that’s all I saw of humanity.

Swedes do not seem particularly prejudiced against the immigrants. There are a few Swedish skinheads, who sometimes gather in numbers of about a hundred at the statue of King Carl XII in Stockholm’s Kungstradgarden. They are regularly beaten up by about a thousand antifascist activists who then break store windows to protest the skinhead outrage.

The Swedish government pursues a confused—but fair!—policy of multiculturalism, encouraging immigrants to assimilate themselves into Swedish society while also encouraging immigrants to maintain customs they may not want anymore. “Kids are doing Turkish folk dances that they never would have done in Turkey,” said Mr. Gür.

The multicultural policy isn’t working. Unemployment among Turkish Swedes is 25 percent. And that’s of those seeking jobs. Thomas Gür says that as many as 50 percent of Turkish Swedes aren’t seeking them. The number of newer immigrants, such as Somalis, who are looking for work is even fewer. They have discovered, for instance, that they don’t have to learn Swedish to get paid. Thanks to government programs, they can get paid to learn Swedish.

Of course, the immigrants are assimilating in their own fashion. There was a poster on the wall of the mosque that was so multicultural it doesn’t even need translating: