Sweden: No Longer the Free Market Conversation Stopper

A great piece in Bloomberg that takes apart the “What about Sweden?” non-argument that invariably comes up in debates over the free market. (Thanks to Chris B.)

Incidentally, Bob Murphy notes that Paul Krugman, in his typical style, misleads about what’s been happening in Sweden. Bob writes: “Did you have any idea that Sweden ran a budget surplus of 2% of GDP in 2011? Me neither. Reading Krugman certainly did[n’t] give me any reason to suspect that. Krugman had produced a chart and implied that the United States was engaged in more austerity than Sweden. Go look at his post. He calls it ‘spending side austerity’ presumably to cover his bases. But it’s not like he says, ‘Oh, admittedly, Sweden is running a budget surplus, but I’m saying that’s because of their loose monetary policy which has boosted revenues and allowed them to reduce transfer payments…’ No, none of that. He just implies that conservatives are insane, puts up an irrelevant chart, and then gives a very misleading analysis of it.”

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  • J Cortez

    This is a common talking point in arguments. People of social democratic bent always bring up Sweden as if it ends the argument, but it doesn’t. The reality is much more nuanced as this post shows.

  • http://www.facebook.com/people/Joseph-L-Scott/679442081 Joseph L. Scott

    Thanks for you vigilant and knowledgeable analysis of the real situation.  Evidently Nobel prize recipients can be as evasive, deceptive, and manipulative as any partisan, eg Obama, a Nobel recipient for doing absolutely NOTHING !

  • http://www.facebook.com/mongoosenewyork David Mondrus

    That’s typical Krugman.

  • http://www.facebook.com/profile.php?id=754616557 Paul Glynn

    “He just implies that conservatives are insane, puts up an irrelevant chart, and then gives a very misleading analysis of it.”

    That is precisely how I explained Krugman to someone last night.

  • http://profiles.google.com/patrokov Pat H

    I like how P.J. O’Rourke puts it in Eat the Rich.  (Paraphrasing) “So the Swedes made Socialism successful for the first 40 years by not having any…”

  • http://www.facebook.com/bjorn.sterner Björn Sterner

    I think the debate about high taxes really took off when our beloved Astrid Lindgren noticed she had paid 102% (!) taxes in 1976.

    She wrote a fairytale about it and was the contributing factor that made  the socialists lose the election.
    Still a lot of work to do here thou believe me..

    Keep up the good work, Tom!

    /the swede

  • Anonymous

    Krugman, like his intellectual guru J.M. Keynes is a brilliantly deceptive man.
    He is smart enough and knowledgeable enough to B.S. his way through any debate.
    You have to be really familiar with the subject matter and of a skeptical bent
    to see through the con. Paul Krugman is like a really good 3 card monty street
    swindler. One gets the sense that he has engaged in a Faustian bargain with
    you-know-who to obtain his unearthly power and riches. Then there is his
    insufferable arrogance, inability to admit doubt or error and tendency to
    dismiss crtics out of hand or simply ignore them. The man is to economics what
    eye gouging and crotch kicking are to wrestling.

  • Anonymous

    A 56% tax rate hardly permits us to argue that Sweden is a paragon of the free market. This is troubling to my Austrian sensibilities that they have had success with this high tax rate, and if Tom Woods were more candid, he would admit that too.

  • Paul Petrides

    To really know if they have had success with this rate, you would have to say that they are better off than they were if the rate were less.  Maybe the growth that they are capable of is much higher and the 56% rate is holding it back.

  • http://twitter.com/daleholmgren Dale Holmgren

    Hmmm, that sounds a lot like Obama’s argument: “The recession would have been worse had we not done what we did.”  For us to truly win the argument, we cannot have countries even having the perception of some success while their government taxes them 56% – without any national defense spending!

  • http://www.facebook.com/matthew.swaringen Matthew Swaringen

    If you’re arguing with a positivist you’re not going to win because they will always find a way out of it by pointing to some other empirical evidence you can’t answer because you aren’t familiar with it.  You can’t know everything and the most you can raise is doubts.  

    Swedes do well outside of Sweden without a 56% tax rate.  That’s really all you need to know to confound the hypothesis that the tax rate makes them better off.  It’s up to the other side to prove causality over correlation if they want to make some kind of case.  I’ve never seen them attempt this, it’s more like they throw down Sweden as defacto proof and that’s it, without regard to the differences between countries, cultures, etc.  These things are legitimate factors.  

  • http://www.facebook.com/matthew.swaringen Matthew Swaringen

    They aren’t a paragon of the free market, but they are productive enough despite the 56% tax rate due to a better culture, probably have more natural genetic advantages, more homogeneity (not as much in the last few decades, but still not like the US), etc.

    It’s easier to create a one-size-fits-all system for people who are apt to follow it and don’t tend to vary as much in preferences.  This doesn’t mean the incentives aren’t broken there and that they have never had problems and won’t in the future.  

  • Cristobal

    Krugman is obviously mentally handicapped. Probably some form of autism.
    He knows all the details about his theories, but can’t see the reality of what those theories create.
    Keynesianism failed in the 60’s and 70’s,; it failed when Reagan stimulated our economy by tripling the national debt; it failed when Clinton “balanced the budget” with smoke and mirrors and the fed fueled the dot-com boom; it failed when Bush let Greenspan stimulate the economy after the collapse in 2000; and it continues to fail under BHO’s stimulus packages and subsidies.
    What Keynesianism has done is made us a spoiled group who gives itself fiat money while impoverishing the rest of the world by rigging the game. As an added bonus, it also allows the insane Neocons to spread fascism globally by funding the military statists.
    Welcome to the new world order.

  • Anonymous

    It seems to me that the “without any national defense spending” explains a lot. Something forgotten though is that Sweden benefits from all the corporations based there. Were it not for the benefits the corporations get, then there would be less revenue for the Swedes, thus they would not seem as successful.

  • theDude

    They also don’t waste all their money on unsustainable wars

  • John

    great comment – simple, precise and covers everything !