How Laissez-Faire Made Sweden Rich | Libertarianism.org

From Johan Norberg:

…But in one century, everything was changed. Sweden had the fastest economic and social development that its people had ever experienced, and one of the fastest the world had ever seen. Between 1850 and 1950 the average Swedish income multiplied eightfold, while population doubled. Infant mortality fell from 15 to 2 per cent, and average life expectancy rose an incredible 28 years. A poor peasant nation had become one of the world’s richest countries.

…And so Sweden—a small country of nine million inhabitants in the north of Europe—became a source of inspiration for people around the world who believe in government-led development and distribution.

But there is something wrong with this interpretation. In 1950, when Sweden was known worldwide as the great success story, taxes in Sweden were lower and the public sector smaller than in the rest of Europe and the United States.

Read more at How Laissez-Faire Made Sweden Rich | Libertarianism.org.

Tom Devine: Why I now say yes to independence for Scotland

Tom Devine, Scotland’s most celebrated historian of recent years, reveals why he now intends to vote in favor of independence on September 18:

I come from a Labour background that includes my grandfather, mother and father and I was very much anti-independence at the start of the campaign. For me, the catalyst for change has been how threadbare the union has become since the early 1980s and linked to that is the transformation of Scotland. I wouldn’t have voted for this in the Scotland of the 1970s or 80s. It’s the Scotland that has evolved since the late 80s and 90s that is fuelling my yes vote. It now seems to me to be in a fit condition to run a successful economy. There is a list of reasons for this.

There has been a Scottish parliament which has demonstrated competent government and that parliament has also indicated, by the electoral response to it, that the Scottish people seem to be wedded to a social democratic agenda and the kind of political values which sustained and were embedded in the welfare state of the 1950s. In fact, you could argue that it is the Scots who have tried to preserve the idea of Britishness in terms of state support and intervention, and that it is England that has chosen to go on a separate journey since the 1980s.

There has been an enormous increase in a sense of Scottishness and pride in Scottish identity which has itself been sustained by an explosion in Scottish writing and creative arts since the 1980s, especially in relation to my own subject. We now have a proper modern history of Scotland which we didn’t have until as late as the 1970s and 1980s. We now have a clear national narrative sustained by objective and rigorous academic research. In 1964, one of my great predecessors Professor Hargreaves said that the history of modern Scotland is less studied than the history of Yorkshire.

There has also been a silent transformation of the Scottish economy. As late as early 1980s it was not sustainable owing to the continuing domination of the dinosaur heavy industries. The problem there was simply that labour costs not be sustained in an emerging global economy where goods and machines could be made cheaper elsewhere. Of course the process could have been managed much more sensitively and more thoughtfully by a Labour government, instead it was the radical surgery of Thatcherism and Toryism that had its way. What we have now – and this has been the case since the mid-1990s and de-industrialisation – is a diversified economy in which heavy industry, light manufacturing, the electronics sector, tourism, financial services have come together. And the vibrant public sector is important in terms of employment. We now have a resilient economic system.

We also have considerable reserves of one of the most important things for an independent state and that is power; power through the assets of oil and also through the potential of wind energy. Scotland is disproportionately endowed with these, compared to almost all other European countries. So, in other words, because of this economic transformation, which has undoubtedly led to social dislocation for many communities – and let’s not forget that – we now have an economy that can sustain itself in a resilient way in world markets.

I support his decision, but am concerned that Devine doesn’t seem to realize that Scotland has a thriving and vibrant economy precisely because it has moved away from the welfare state policies of the 1950s and 60s. Oil will obviously play a part, but Scotland has no future as an independent nation unless it follows the Irish model of an open economy, encouraging global industries to locate there. Nothing would discourage global industry faster than a glimpse of 1960s-style British Labour policies.

Read more at Tom Devine: why I now say yes to independence for Scotland.

The magic pudding state – The Drum Opinion (Australian Broadcasting Corporation)

Benjamin Herscovitch writes:

It seems many of us have been taken in by the conceit that the welfare state can offer never-ending free lunches. We expect governments to offer more social security payments, health care, education, etc., all the while assuming that we will not have to pay for it. It is time to let go of the delusion of a magic pudding welfare state and get our expectations for social services in line with our willingness to pay for them.

Read more at The magic pudding state – The Drum Opinion (Australian Broadcasting Corporation).

Sweden has reformed its welfare state to deliver both efficiency and equity | EUROPP

Will Tanner writes:

At face value, the Swedish welfare state is an unlikely poster child for sustainable government. In 2011-12, government spending was 53.1 per cent of GDP, paid for by taxes on the average worker of 42.7 per cent. The country’s “cradle to grave” social security system has long been used as evidence that government can and should be bigger, not smaller. Despite this, the Swedish state is showing policymakers the world over how to deliver high quality services at low cost.

Read more at Sweden has reformed its welfare state to deliver both efficiency and equity – the UK should learn from its example. | EUROPP.

New Research from Finland’s Central Bank Confirms that Government Spending Is Causing Stagnation in Europe | International Liberty

Dan Mitchell reports on new research from the Bank of Finland:

Europe suffers from a growth slowdown. The GDP growth in Europe has lagged behind the GDP growth in the US and has been far worse than the GDP growth in the NIC countries, particularly China… However, what is the reason for slow or rapid economic growth? …In many respects, the labour market plays the key role in the economy because it determines both the use of the labour input and the level of overall competitiveness of a nation. Obviously, the functioning of the labour market is not independent of the public sector. A large government is almost inevitably associated with a large tax wedge, and the functioning of the labour market appears to be critically dependent on the size of the tax wedge. It may be fair to say that the harmful consequences of a high tax wedge are exceptionally well and unambiguously documented in the literature. …On the basis of the estimates derived in this study, the following guide for growth policies appears to be warranted: …Do not over-expand the welfare state. Larger governments are associated with slower growth rates.

Read more at New Research from Finland’s Central Bank Confirms that Government Spending Is Causing Stagnation in Europe « International Liberty.

Portuguese drug policy shows that decriminalisation can work, but only with other policies. | EUROPP

Alex Stevens writes on decriminalizing drug use:

International analysis, both by the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) and in my book Drugs, Crime and Public Health suggests there is little correlation between the level of punishment for drug offences and the rate of drug use or drug problems. The EMCDDA looked at levels of drug use in countries which had increased or decreased penalties for cannabis possession. It found no evidence that increasing penalties reduces use, or that reducing penalties increases it. I looked at the prevalence of drug use across a range of countries. I found no link between the enforcement of drug laws and levels of use.

I did find a suggestive correlation between one of the most harmful forms of drug use, by injection, and the generosity of the welfare state…… Countries with lower levels of pensions, sick pay and unemployment benefit tend to have higher rates of injecting drug use. The USA, for example, has a minimal welfare state and very tough punishments for drug offences. It still has the highest prison population in the world, with nearly half a million people imprisoned for drug offences. But it has internationally high levels of drug use, high rates of drug related deaths, and excessive rates of HIV among injecting drug users.

So to argue that criminal penalties (or their reduction) are the answer to drug problems is to miss the point.

Read his article here Portuguese drug policy shows that decriminalisation can work, but only with other policies. | EUROPP.

Insight: Making France work again | Reuters

Marc John identifies the challenges facing France and how it can recover its lost vigor.

In just over 30 years after World War Two, France lifted itself from the ignominy of Nazi occupation into a sleek and modern Group of Seven economy with world-beating industrial champions in sectors such as energy and aerospace.

Its welfare system is among the most generous in the world. A road and rail transport network means its companies are within hours of tens of millions of potential customers. It is a leader in luxury goods and is the world’s top tourist destination.

But somehow that Gallic vigour is being lost.

Unemployment is at 14-year highs as plant closures mount, France’s share of export markets is declining, and the fact that no government in three decades has managed a budget surplus has created a public debt pile almost as big as national output.

After three decades of uninterrupted post-WWII boom — often described as the “Glorious 30” — the French government lost its way.

By 1980, French economic growth had shrunk to two percent compared to its pre-oil crisis rate of above six percent – a rate which France and most rich states have not seen since.

In the years that followed, governments around the world reacted in their fashion: Britain’s Margaret Thatcher faced down Britain’s unions in a drive to free up labor markets, while Scandinavian leaders sought to free their economies of debt.

In France, governments of left and right chose entrenchment: strong rises in public spending which helped ease the social and employment shocks but which sent national debt soaring from 20 percent of output in 1980 to its current record of 91 percent.

The next three decades are sometimes called the “Pitiful 30”.

Influence exerted by interest groups — or “insiders” — prevented government reform of the labor market, making France increasingly uncompetitive in the face of global competition. This is the same problem that Mancur Olson identified in Great Britain after WWII — when Britain floundered while Germany and Japan flourished. Narrow interest groups maximize their own welfare at the expense of the broader economy.

France faces massive challenges in overhauling — possibly “dismantling” — its welfare state and restoring international competitiveness. Responsibility has fallen to the unlikely figure of socialist President Francois Hollande.

Read the entire article at Insight: Making France work again | Reuters.

Noam Chomsky: “Europe’s policies make sense only on one assumption: that the goal is to try and undermine and unravel the welfare state.” | EUROPP

Noam Chomsky in an interview with EUROPP editors Stuart A Brown and Chris Gilson:

Europe’s policies [austerity during a recession] make sense only on one assumption: that the goal is to try and undermine and unravel the welfare state. And that’s almost been said. Mario Draghi, the President of the European Central Bank, had an interview with the Wall Street Journal where he said that the social contract in Europe is dead. He wasn’t advocating it, he was describing it, but that’s essentially what the policies lead to…….

Chomsky has the cart before the horse. Collapse of welfare states in Europe led to austerity — not the other way round. Joe Hockey had a slightly different take on events in Europe in his April address to the Institute of Economic Affairs:

The Age of Entitlement is over. We should not take this as cause for despair. It is our market based economies which have forced this change on unwilling participants. What we have seen is that the market is mandating policy changes that common sense and years of lectures from small government advocates have failed to achieve.

Reduction of trade barriers and shrinking of the technological advantage enjoyed by developed nations will lead to the inevitable demise of the social contract. Free competition demands efficiency. Countries cannot remain competitive while carrying burdens imposed by a welfare state.

via Five minutes with Noam Chomsky – “Europe’s policies make sense only on one assumption: that the goal is to try and undermine and unravel the welfare state.” | EUROPP.

France to ArcelorMittal: if you don’t like losing money, get out of France – Quartz

By Simone Foxman

It’s clear that [Arnaud Montebourg, France’s Minister of Industrial Renewal] is confusing the culprit with the victim. The continued failure of European politicians to resolve the region’s debt and banking problems for good has finally caught up with companies across the euro area. Those firms that waited for a more competitive, more integrated, and more stable monetary union have been forced to cut their losses and change their strategies to survive, as politicians bicker at the bargaining table……

via France to ArcelorMittal: if you don’t like losing money, get out of France – Quartz.

Sweden: Failure of the welfare state experiment

…..Sweden has a large welfare state and is successful. This is often seen as a proof that a ‘third way’ policy between socialism and capitalism works well, and that other nations can reach the same favourable social outcomes by simply expanding the size of government. If one studies Swedish history and society in-depth however it quickly becomes evident that this simplistic analysis is flawed. The Swedish experience might as well be used to argue for the benefits of free-market oriented policies, and as a warning of the economic and social problems that can arise when government involvement in society becomes too large…….In the long run….. even the well-functioning societies in Scandinavia have been adversely impacted by welfare dependency and high levels of taxation. The ‘third way’ policy has not persisted – it can be viewed as a short-lived and failed experiment. Throughout most of its modern history Sweden has had a favourable business environment. The period characterised by the most extensive welfare state policies, where Sweden deviated strongly from the western norm, around 1970-1995, is an exception. That period was associated with a stagnant economy.

…….The transition towards an extensive welfare state that occurred in Sweden led….. to an economic cost in terms of reduced entrepreneurship, as taxes and regulation hindered the development of private businesses. It also led to a significant crowding out of private employment. Between 1950 and 2005, the Swedish population grew from seven to nine million, but net job creation in the private sector was zero. Jobs in the public sector expanded rapidly until the end of the 1970s. As it became difficult to further expand the already large public sector, job creation simply stopped (Bjuggren and Johansson, 2009).

Nima Sanandaji, The Institute of Economic Affairs, Sweden Paper August 2012.pdf (application/pdf Object).