Monday, September 17, 2007

The Nordic Option

Published: September 17, 2007


Think Sweden and what comes to mind is probably not a youthful finance minister, with his long dark hair in a ponytail and a gold ring through his left ear, explaining that his ambition is to make it “more profitable to work” than to sit around on welfare.

But Anders Borg, 39, poster boy of the “New Moderates” who have put the long-governing Social Democrats out of office, does just that, and when the question of his coiffure comes up, the retort is swift: “This is northern Europe, a modern society. Your public deficit or surplus is more important than your hairstyle.”

Right. Sweden, of course, has a surplus that the deficit-ridden United States can only envy, as well as a knack for staying out of wars that borders on the obscene. It’s that reasonable, semi-socialist, Volvo-driving, super-taxed Nordic place that gave the world Ikea’s cheap furniture and Bergman’s dissection of marriage.

Or is it? The ponytailed finance minister — a world first? — is just one sign that something funky is up in the Swedish woods. A government that includes the country’s first black, avowedly gay and bisexual ministers (that’s three distinct people) has set about a radical reform of the generous welfare state that defined the Swedish condition.

In doing so, it has adopted a few core principles. It should be more profitable to work than not to work. Welfare should mean caring for people who cannot care for themselves. Unemployment insurance should be adjustment insurance rather than an open-ended sinecure. Employers should be encouraged to hire through lower taxes.

Hardly rocket science, you might say, but all of this has proved radical enough to make “systemskifte,” or “system shift,” the buzzword in Sweden. The term might be applied to much of northern Europe, where in recent years the welfare state has been upended even as its essence has been preserved.

Europe, at peace and undivided, has not been foremost on the American mind of late. Old images of “Eurosclerosis” — the vacationing worker (or non-worker) stripped of initiative by an overbearing nanny state — have tended to endure. But in countries including Britain, the Netherlands, Denmark and to some degree Germany, welfare has ceded to what Borg calls “work-fair.”

The transformation has brought streamlined state sectors; more flexible labor markets; a focus on social fairness through improved education and health care rather than through attempts at income redistribution via high taxes; a restored work ethic (“Make Work Pay” is a Swedish government slogan); and a rediscovery of entrepreneurship and choice.

“Our principle is you should show solidarity with people who have problems for a space in their lives, but they should not be supported permanently by the welfare state,” Tobias Billstrom, the migration minister, says.

Billstrom is all of 33 and sports multicolored buttons on his shirt. He’s a backer of the reforms because Sweden doesn’t want the immigrants pouring into the country to think collecting subsidies and working on the black market are the Swedish way.

Sweden has learned that a rigid labor market is a devastating form of exclusion (France, take note). Its aging population, like others in Europe, needs immigrants to find jobs and so pay the taxes that will fund pensions into the future.

By slashing unemployment benefits, making it easier and cheaper to hire, offering tax credits to employers taking on people who have been jobless for a long time, and providing tax incentives to lure domestic jobs out the black market, Sweden has cut unemployment to 4.4 percent, or about half the French rate.

Growth in 2007 of 3.2 percent will be among the highest in Europe and handily top the U.S rate. Surpluses keep accumulating. All nine million Swedes have health insurance, while 47 million Americans, or the equivalent of five Swedens, do not. And the school system delivers high standards.

Of course, Sweden doesn’t have the world to run, and a top personal income tax rate of 56 percent would make Americans pale. Still, Sweden’s new Nordic model merits attention.

“My idea,” Borg says, “is to combine the entrepreneurial spirit of America with the welfare of Sweden. That’s my ideal world: the creative impulse and restructured welfare. The lowest quarter of our population is well educated. The United States could learn from that.”

It could indeed. Northern Europe has looked to America for some of its reforms. America, Iraq-obsessed, has not looked to a changing Europe. A stagnating middle class, losing jobs and health insurance, holds the key to victory for Democratic candidates next year if they can suggest strong programs for better education and universal health care.

A stop in funky Stockholm is in order for Hillary Clinton, John Edwards and Barack Obama.

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