Swedish Failure and Slovakian Success
[21.12.2006, Johnny Munkhammar, NEWS]

It is a bit odd for me as a Swede to have Vladimir Manka, Socialist Member of the European Parliament from Slovakia, telling me that I am wrong about my own country. Still, I am really happy that he engages in the debate and indeed it makes me proud that he likes Sweden. I am also a great fan of my country – and the other Nordic countries – but I fear that Mr Manka and I appreciate the opposite aspects.

My main message – in Bratislava (Johnny Munkhammar: Copy the Nordic Solutions – Not the Problems!, CEQLS Lecture held by Conservative Institute on October 23, 2006) and elsewhere – is that the so-called social model of big government in Western Europe is the main cause of many problems. High taxes will lead to low economic growth, a regulated labour market will lead to unemployment, vast social security systems will lead to many people living off the state. The solution is radical market-oriented reform, such as lower taxes, privatisations and de-regulations.

Why else would the problems be the most serious in those countries that have the most of this model, like France, Germany or Italy? Why else would the countries in Eastern and Central Europe that did the most reforms be the most successful – such as Estonia, Latvia and Slovakia? In fact, we are talking about an anti-social model that is particularly devastating for young and immigrants, which lead to riots in Paris.

The Nordic countries are very different from each other, but they basically show the same thing. Whenever they introduced big government, there was massive failure. And whenever they reformed, there was success. Denmark de-regulated the labour market and has low unemployment, Finland decreased public spending and growth went up, Sweden de-regulated the telecoms market and we had Ericsson and the great development in telecom.

Coming to Sweden, where there were free-market reforms, there was success. That explains some of the positive figures Mr Manka points at. And where we stuck to big government, we still have problems. People wait for months for health care, for example, because it is a public monopoly. Why else would we wait for health care but get a new mobile phone within minutes?

My message in Bratislava was that other countries can learn from the successful free-market reforms of the Nordic countries, but should avoid the failed parts. My impression is that Mr Manka and other politicians with an ideological preference for big government would like to copy the wrong parts. I would advise the citizens of Slovakia not to support such ideas – facts strongly speak against it.

Speaking about facts, Mr Manka mentions the Swedish labour market. The official figure of unemployment is 7,8 per cent, according to Eurostat. But McKinsey Global Institute has estimated the total unemployment rate to be 15-17 per cent. (The 25 per cent figure was from a Swedish trade union economist, Jan Edling.) Sweden has a lot of unemployed hidden in sick-leave and early retirement, for example. Indeed, employment has grown weaker than in almost all EU countries during the last ten years.

The point here is not to discuss figures and statistics. What is important is that serious analysts have looked at the Swedish labour market and its vast problems are now generally acknowledged, despite a positive business cycle at the moment. And the Swedish labour market suffers from massive government intervention with taxes, welfare contributions and regulations. It is a part of our society that needs free-market reform, and our new government has started doing that. I would advise nobody to copy the failed model.

Finally, it is amusing when people in the debate criticise the credibility of the opponent rather than the facts and message. It suggests that the debater in question has nothing to say about the issues. Timbro is one of Europe’s oldest and biggest think-tanks, that is internationally respected and we are proud of our values of a free society. But the most important point is that one plus one is two regardless of whether a socialist or a libertarian is saying it. The message should be focused in a serious debate.

And last, my book, “European Dawn”, from which several facts in my analysis come, has been praised by Robert Mundell, Alain Madelin, Carl Bildt, Bill Emmott and Martin Wolf, among others. Anyone interested in knowing more about how free-market reforms can solve Europe’s problems could do like them and read it – particularly Mr Manka. And I would be very pleased if he accepted my invitation to a public discussion in radio or TV, where we could further exchange views and point at correct facts about these issues.

TREND - Týždenník o ekonomike a podnikaníJohnny Munkhammar is a Program Director at Timbro, Sweden.

Published in the Slovakia`s leading economic weekly TREND.

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