Are free markets the secret to Sweden's success?

Sweden stopped outperforming other countries after a dramatic leftist shift in economic policies, Karlsson writes.

Erik Martensson/Scanpix/Reuters/File
In this July 2012 file photo, Volvo Chief Executive Olof Persson is silhouetted as he attends a news conference in Stockholm. Karlsson writes that Sweden led the world in per capita economic growth between 1870 and 1950, when free-market policies dominated its economy.

Nima Sanandaji has written an interesting paper about Sweden. It largely points to the same historical facts that I have mentioned in my previous writings, namely that Sweden during its most free market oriented era, from 1870 to 1950, had the highest rate of per capita economic growth in the world. After massive tax and spending increases during the 1950s and 1960s, Sweden stopped outperforming other countries, and after a dramatic leftist shift in economic policies implemented by Socialist Olof Palme after he became prime minister in 1969, Sweden started to seriously lagg other countries. However, free market reforms implemented in the 1990s, and in recent years, have enabled Sweden to once again outperform other Western countries in growth.

He also discusses possible cultural factors, and also points out that Sweden in 1920 had a relatively low level of economic inequality, despite the fact that government spending and taxation at that time was only 10% of GDP.

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