Saturday, December 17, 2011

A Comparison of Sweden and the US

The other day someone pointed out that if Sweden were a U.S. state it would not rank very high on per capita GDP. This was a Facebook conversation and the tone of the post was "see you socialist left wing fanatics, even in the best case your socialist state is worse off than almost all of the U.S.". This, of course, created a small firestorm of posts, which I think was the object of the provocation. The comparison is interesting though.
There are cases where the differences in governance, national attitude and results are stark. For example, Haiti and the Dominican republic share an island, but the contrast between the two is stark. The same can be said of Costa Rica and Nicaragua. Sweden is not, of course, a socialist state. The U.S. and Sweden are both industrialized nations with relatively educated populations. The U.S. has a leg up because of its vast natural resources.
Given the general similarity of status of Sweden and the U.S. as industrialized nations, a comparison of social policy and the results for the average citizen is worthwhile. I think the differences between Sweden and the U.S. are largely a reflection of basic philosophical differences in national attitude. As a nation the U.S. attitude is: social darwinist, each man for himself, pull yourself up by your bootstraps, if you cannot make it here don't blame anyone but yourself, government always does a worse job than the private sector. I have never been to Sweden so I cannot report firsthand on conditions there. From the outside its social policy seems more: we are all in this together, each does better when all do better, we are all people and things happen so let us support each other, government programs work well at providing the basis for us to build strong lives.
The Swedish GDP for 2010 is about 458,000 (millions). With a 2011 estimated population of 9,415,300 the per capita GDP is about $48,640. This is roughly the same as North Dakota at 47,714 which ranks as the 20th highest state GDP per capita. There is some disagreement about these numbers. For example the wikipedia article on the Swedish economy gives a per capita GDP of about $37,775, which would make it closer to Michigan, the 42nd poorest state. Sweden cannot prop up its social welfare system with natural resources like North Sea oil (Norway, Britain). It must pay through basic productivity.
In the World Economic Forum (the Davos folks) Global Competitiveness Report, Sweden ranks above the US (because of the recession)
Sweden is not going bankrupt. Its overall national debt is 40% of GDP compared to 60% - 90% for the United States (depending on whose number you use). Sweden went through a real estate and financial crisis in the early 1990s and had to re-adjust its social spending to accomodate lower GDP. Sweden is now used as a model for how a nation should handle financial crises. Sweden can afford its social programs. Because it is somewhat poorer pre capita than United States, we could afford similar programs if our national philosophy allowed it. The difference is choice, not money.
Sweden ranks high in taxation about 48% of GDP (2007). In the developed world, Sweden is on the high end of taxation exceeded only by Denmark. In the U.S. taxes are about 27% of GDP (2006). The U.S. tax rate is one of the lowest in the developed world. Only Mexico, Turkey, Korea, and Japan have lower taxes as a percent of GDP.
So, which resident gets the better deal: someone living in Sweden with its not-outstanding per capita GDP and high taxes or a resident of Michigan/North Dakota.
Health care in Sweden requires patients to pay a fee per visit/prescription, but total costs to the patient is limited to about $360 per year. In comparison to the US Sweden has more doctors and nurses per capita. Life expectancy is higher, and infant mortality is lower. Over 80% of all medical costs are paid by the government (vs. 45% in the US) but the total cost spent on health care is so much lower that the US government pays more as a percentage of revenue than Sweden does. So, in Sweden everyone is guaranteed health care, the cost is lower both to the individual and the government than in the U.S.. The outcomes of health care are generally better, and citizens do not need to fear medical bankruptcy.
In education, Sweden works hard to make sure that opportunity is equalized for children. Grants from the national government take into account the economic conditions of the particular region. Poorer regions are subsidized and richer regions bear an extra cost. Rural regions are compensated for transportation costs and smaller class sizes. There are independent schools, roughly equivalent to charter schools in the U.S. Parents may have to pay a fee for preschool and childcare, but there is a ceiling to those costs which takes household income into account. Higher education is essentially free to the students. Students must pay for text books, and equipment needed for personal use. This means that students enter the workforce essentially debt free.
This contrasts with the United States which has limited pre-school support and where higher education is increasingly unaffordable. Two thirds of students leave higher education with an average debt of $23,000 dollars. We have created a generation of young adults who, instead of leaving college and becoming entrepreneurs, are forced by debt to ender the labor force as employees. In the United States, public dollars going to higher education have decreased and tuition costs have increased. The United States of America is the only OECD country where 25-34 year-olds are not better educated than 55-64 year-olds. This may be in part because other countries had more room to improve over the past 25 years.
In Sweden, taxpayers spend about 6.6% of GDP on education. In the U.S. about 5.5% of GDP is spent by the government on education.
We all know how skewed incomes are in the United States where the top 400 wealthiest people have more than the bottom 150 million.
About 80% of the Swedish workforce is unionized. As might be expected in a place where people tend to feel part of a single society and look after each other, the unions make the society more equal, but do not eliminate inequality or reward laziness. In hard times, looking after each other may mean unions accepting pay cuts to save jobs. The Swedish unemployment system looks much like the US unemployment system.
If we honestly compare industrialized societies, the US doesn't look so good. We have a national mythology that we are a nation of rugged individualists in a country that provides the opportunity for everyone with drive and determination to make whatever they want of their lives. While we do pretty well on the individualist side, shunning all non-business forms of collective action. We do less well on the opportunity side. American families are less socially mobile than families in other countries.
Much of the U.S. national catechism is simply incorrect.
People do not do best as rugged individuals working for their own benefit. We are social creatures who do best as collections of individuals working together and helping each other.
People are not naturally dishonest or working to game the system. There is a persistent, endemic problem of dishonesty, but this is the exception not the rule. Most people getting unemployment benefits, welfare, food stamps, WIC payments, social security, medicaid ... are ordinary hard-working folks just like you and me who have hit hard times. Most of them will be back on their feet in a little while, they just need some help to see them through.
Work and money are not the center of most people's lives. Most people work for money to earn enough to live, but are not particularly interested in accumulating large amounts of wealth. Everyone would love to be wealthy, but if you talk to people about what they would do once they got that big pile of cash, very few of them talk about accumulating more. Most people would simply do more of what they currently enjoy the most. We should not be educating our children to be effective workers, we should be educating them to understand themselves and the world around them.
Government can be effective. Government is comparable to other large organizations in efficiency and effectiveness. I have worked as a consultant to both government and private entities. The problems are somewhat different, but both government and private entities tend to have about the same level of bone headedness. If we look around the world, we can see examples of more effective governance. Sweden seems to be one of those places.
The United States has low taxation, both at the individual and the corporate level. The question in most of the developed world is not "how much am I taxed", but "what do I get for my tax dollars". As an example, the citizens of every country with universal health care are basically pleased with their system do not want a privatized system.