Economic Theory

Book review: “The Mirage of Swedish Socialism: The Economic History of a Welfare State” by Johan Norberg (Part 1)

Scandi-romanticism has been around for as long as I can remember. But it has taken different forms at different times. Until about the middle of the last decade, “Scandinavia” – and “Sweden” in particular – was often used as a shorthand for “progressive”, “socially just”, or “everything the Left likes”. It was a place of projection as much as a real place.

Since then, and in the context of the return of socialism as a hip and trendy youth movement, it has acquired a rather different meaning. Some socialists started to use “Sweden” or “Scandinavia” as a get-out-of-jail-free card to avert the question that socialists hate like no other: “Can you name a successful socialist economy?”

To be fair: not all socialists do this. Many don’t. I have read at least a dozen articles and book chapters from contemporary socialists who explicitly distance themselves from Scandinavian social democracy, and make it very clear that the system they have in mind has nothing whatsoever to do with Sweden. Socialism, they say, has nothing to do with how large the public sector, or how generous the welfare state is. It is about who owns the means of production. For an economy to be socialist, a large welfare state is neither necessary, nor sufficient.

But in doing so, those socialists also have to admit, at least implicitly, that they cannot point you to any example where the kind of system they have in mind has ever worked. They have to admit that they are asking you to take a big leap of faith. They are, in effect, saying: “What I am suggesting here as never worked anywhere. But I just know that it will this time. This time is different. Just trust me.”

That works perfectly well for them when they are talking to a sympathetic audience. They can do that in Jacobin magazine, or Novara Media, or Teen Vogue, or Tribune magazine, or at The World Transformed, or the Marxism festival, or on Twitter, or at a university debate. But it works less well for a political candidate who is talking to swing voters, or a hostile interviewer. In such a situation, “Sweden” may not be an honest answer. But if your audience doesn’t know much about Sweden, you can probably get away with it.

Besides, it is not even a complete lie. It is just that when socialists refer to Sweden, they are not talking about the actual country: certainly not the country as it is now, or even the country as it ever really was. They are talking about the country that Sweden once seemed to be turning into. They are taking about a very specific period in Sweden’s history, and even then, this is not so much about what actually happened during that period, but about the political atmosphere that prevailed there at the time, and what seemed possible in it. 

We’ll get there.

In his new book The Mirage of Swedish Socialism: The Economic History of a Welfare State, Johan Norberg breaks the economic history of modern Sweden down into four distinct periods: the liberal period (1870 – 1970), the socialist period (1970 – 1990), the crisis (1990 – 1995), and the capitalist welfare state (1995 – ?).

Sweden was a late-industrialiser. Its Industrial Revolution did not fully take off until well into the second half of the 19th century, and consequently, Sweden was much poorer than the Western European average at the time. This is because, until about the middle of the 19th century, the Swedish economy was more feudalist than capitalist, with non-agricultural production controlled by a guild system, and foreign trade heavily restricted. This all changed with a series of liberal reforms that turned Sweden into a modern market economy.

It started a relative golden age, during which Sweden rapidly transformed itself from a poor agrarian country to one of the richest countries in the world. Between 1870 and 1950, real GDP per capita more than quadrupled, life expectancy shot up from 45 years to 71 years, infant mortality dropped from over 22% to under 3%, and maternal mortality dropped from over six per 1,000 live births to less than one. Some world-leading Swedish companies, which (or the successors of which) are still with us today, were set up in this period. 

In the 1920s, the social democrats became the dominant political force: they have been in government for just over 70 out of the last 100 years, which includes one uninterrupted 40-year spell. However, Norberg does not see this as, in itself, a departure from the liberal period. He shows that for most of that period, the social democrats were not an especially anti-capitalist party. They left the market economy largely intact, and while they built up a welfare state, even public spending remained remarkably modest. Until 1970, the Swedish state spent less than 30% of GDP, and thus less than its counterparts in the United States, Britain or West Germany.

Alas, liberal periods always come to an end. Sweden’s was no exception.


Continue to Part 2


Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

1 thought on “Book review: “The Mirage of Swedish Socialism: The Economic History of a Welfare State” by Johan Norberg (Part 1)”

  1. Posted 18/09/2023 at 19:29 | Permalink

    Worth reading or watching.
    This analysis (e.g. education choice) has been out there for 4+ years.
    Sweden: Lessons for America? A Personal Exploration by Johan Norberg delves into the economic and social landscape of the Swedish scholar’s homeland.

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