John Fredrik Reinfeldt’s government in Sweden looks certain to lose an election on Sunday. That is unfortunate. His government, in office since 2006, has done much to transform the Nordic country.
Once hamstrung by outdated economic and social policies, Sweden is now among the most competitive and dynamic countries in Europe — due in no small part to Reinfeldt’s program.
When Reinfeldt first became prime minister in 2006, Sweden was one of the most heavily taxed nations in the world with rates going up to 60 percent. The conservatives quickly reduced income taxes and eliminated a tax on wealth. The previous, Social Democrat government had already scrapped the inheritance tax. As a result, Sweden’s tax burden fell to 52.8 percent of national income last year, down from 55.7 percent a decade earlier — close to the European average and well below countries such as Belgium and France.
Sensibly, the government also cut taxes on labor. An earned income tax credit incentivized especially workers with low skills to find a job rather than stay on welfare. Benefits were made less generous and union membership dues no longer qualify for tax relief. Unemployment dropped as a consequence until the 2008-2009 financial crisis hit.
Reinfeldt’s government says the combination of tax cuts and spending restraint helped Sweden maintain its pristine credit rating and allowed it to outpace much of the rest of Europe through the crisis. The numbers seem to bear out that claim. GDP per capita has risen almost 20 percent since Reinfeldt was elected. (For comparison, neighboring Finland achieved 10 percent growth in the same period. Denmark saw a 14 percent increase.)
But not everyone has benefited equally. The Social Democrats are keen to point out that more Swedes now have less income than half the national median than when they were in power. Inequality has also risen — if minimally.
In 2006, the 10 percent highest earners accounted for 19.6 percent of national income while the bottom 10 percent accounted for 3.3 percent. In 2012, the figures were 20 and 3.4 percent, respectively.
The left nevertheless insists rising inequality was behind last year’s riots in Stockholm, the capital. “Growing inequality also means you can get growing tensions,” party leader Stefan Löfven, a former trade unionist, told the Reuters news agency earlier this year. “We just don’t accept inequality will grow.”
The nationalist Sweden Democrats, by contrast, who are also making gains in the polls at the expense of Reinfeldt’s Moderate Party and its coalition partners, saw the unrest, which was concentrated in immigrant neighborhoods, as a vindication of their xenophobic platform.
Reinfeldt saw the rioting for what it was. He called it “hooliganism” and refused to change policy.
The unrest certainly wasn’t stirred by cuts in public spending. In 2012, the government spent extra to finance infrastructure and research investments while it reduced the corporate tax rate. The next year, government spending equaled 52 percent of economic output — well below the 67 percent peak reached in 1993 but still ahead of most other Western countries.
The Swedish state also still takes better care of its citizens than do most. For example, 70 percent of children from the poorest fifth of the population are in daycare centers or schools either run or financed by the government.
In education, the right has attempted liberal reforms that put more power in the hands of teachers and parents. Private management in health care is also on the rise. But Swedish media unfortunately spend more time reporting on the failures than successes of these reforms. Voters hear and read far more about private schools which go bankrupt and scandals in hospital services run by private equity firms than they do about expanded choice, competition and better quality.
Polls then show most Swedes feel the cuts in welfare and liberalization of services has gone too far. Perhaps they have also simply tired of the man who has run their country for eight years.
Let’s hope the left, when it comes to power, doesn’t undo too much of what Reinfeldt has achieved. He leaves Sweden a far better place than he found it and that is something he ought to be reelected for in most other countries.