Monday, October 15, 2012

The Economist discovers social democracy

Interesting to see The Economist lauding Sweden: The new model. Sweden has a generous welfare state, strong trade unions, and high living standards. What's more, at the moment Sweden is one of the few advanced democracies that is growing and has a budget surplus. So it's about time some of the mainstream commentariat starting to notice what was going on.

In fact Sweden is not really an outlier or an exception. If we look around the advanced democracies, the best performing countries have been those with the most generous welfare states and most entrenched trade unions (Sweden, Netherlands, Finland, and of course Germany). In contrast the countries with deregulated financial markets, weak trade unions and limited welfare states are mostly suffering, and the PIIGS of the Eurozone periphery, despite popular myth, also have weak unions and patchy social coverage.

So the crisis, in fact, has exposed the bankruptcy of the free market, anti-social model that has dominated politics and economic policy since the 1980s. Strangely, political leaders have failed to catch on, and continue to plug the same snake oil, in the guise of 'structural reform', which has brought disaster. The misery of the current recession, instead of sparking a search for equitable solutions, has instead led to a descent into masochistic and self-defeating austerity policies, with a bit of free market liberalism thrown in. After 2-3 years of this medicine has failed to turn around any of the economies it has been applied in, a rethink is overdue. Unfortunately it will probably take total social breakdown (probably in Greece and/or Spain) before the humble pie is consumed.

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