How Sweden Put Socialism to Work

As I explained in the first installment of this article, it is simply not true that Sweden has just had a brief flirtation with democratic socialism. The truth is that the democratic socialists, who ruled Sweden uninterruptedly from 1932 to 1976, began transforming the country in the image of their ideology already before World War II. 

If we are to believe the stories being floated around out there, emanating primarily from Cato Institute senior fellow Johan Norberg, the Swedish socialist government that won the 1932 election sat on their hands for 40 years, until the last 2-3 years of its continuous reign, and only then began rolling out the welfare state. 

This is absurd, of course, not only from a point of common sense but also for anyone who has actually studied the history of the Swedish welfare state.

The Swedish welfare state was elaborate enough already in the 1950s to attract global interest. It was so well known and so thoroughly debated that it profoundly influenced policymaking even in the United States. As I document in my book The Rise of Big Government (Routledge, 2018), Harvard economist John Kenneth Galbraith—a top advisor to President Lyndon Johnson—was heavily influenced by the very architect of the Swedish welfare state, economist Gunnar Myrdal.

Galbraith was the intellectual leader of the team that designed President Johnson’s Great Society project (also known as the ‘War on Poverty’). Galbraith had begun proposing a Swedish-style American welfare state already in the late 1950s. He had studied the welfare  state reforms that the Swedish democratic socialists had been rolling out since the late 1930s. 

Those reforms were very deliberate; they were part of a grand plan, and they transformed practically every aspect of Swedish society. Most of those reforms were penned by Gunnar Myrdal and his wife, Alva Myrdal. He was an economist and founder of the Institute for International Economics in Stockholm who shared the 1974 Nobel Memorial Prize in Economics with F.A. Hayek. She was a sociologist, a member of the Swedish parliament, and for a time served as deputy minister of foreign affairs. She was awarded the Nobel Peace Prize in 1982 for her involvement in the global disarmament movement.

The ideological well, so to speak, for the Swedish government’s welfare state reforms was the Myrdals’ book from 1934 called Kris i befolkningsfrågan in Swedish. It has never been translated to English, but an appropriate title would be The Demographic Crisis. This book eerily predicts the rollout of the Swedish welfare state, which—as I document in The Rise of Big Government—took place from the late 1930s through the 1950s.

Starting in 1938, the democratic-socialist government invaded practically every aspect of the lives of Swedish families. They put housing, medical services, childcare, and education under central government funding and control. They introduced tax-paid income security and retirement security. 

The 1940s was a big decade for housing reforms. The government introduced national housing standards, almost to the tee following what the Myrdals proposed in The Demographic Crisis. The purpose was to make the national housing standard an entitlement, not something that depended on a person’s income.

When micromanagement of the housing market sent home prices soaring, the Swedish government responded by introducing subsidies for ‘low-income’ families. They also had government take over home construction financing, effectively nationalizing the provision of credit to the residential construction industry. 

The Swedish Riksdag also passed a law that allowed municipalities to create their own nonprofit housing corporations. Taken altogether, these reforms led to a practical government monopoly on multi-family housing before the end of the 1940s.

Alongside the government’s de facto takeover of the Swedish housing market, they also began a long, relentless effort to nationalize the Swedish education system. By 1949 they had begun transferring control over local schools to the national government. The concept of a national unitary school system was introduced in 1950; the first formal national school curriculum came five years later. 

Just like with the housing reforms, the democratic-socialist government found inspiration for its school reforms in the Myrdals’ book: as they explained in The Demographic Crisis, to pay for the high taxes needed to fund the welfare state, Sweden would need a centralized education system that could maximize the productivity of the workforce. Therefore, curricular focus was gradually shifted away from traditional education to vocational and professional training of a future workforce.

Next on the list was the health care system. Until the 1950s, Swedes funded their medical needs through ‘sjukkassor,’ private health-cost societies. The Myrdals were passionately opposed to this private model: a national, government-run, single-payer model was far more efficient in their view. 

The nationalization of the health care system began in 1948 with the Riksdag appointing a commission to outline the best way to ‘reform’ the system. Due to strong resistance, primarily from physicians, the government refrained from a swift nationalization. Instead, they used a step-by-step model to gradually replace the private sector as the base for funding and operating the health care system. 

It worked. Before the 1950s had ended, physicians in private practice had virtually no way of surviving on private funding.

There were other reforms. A government study in 1938 led to a national child-care subsidy system, which, based on a proposal from Alva Myrdal, was put to work in 1944. A year later, the national government tied those subsidies to educational standards for kindergarten staff. 

And there was more: 

• 1938: tax-paid dental care for children; 
• 1948: a cash benefit to mothers based on the number of children; 
• 1955: a package of income-security programs, including paid family leave. 

A special referendum led to the creation of universal retirement security (modeled on U.S. Social Security) in 1960.

These are some of the features of the Swedish welfare state and how and when they were implemented. Once the welfare state edifice was complete in 1960, the democrat-socialist government shifted focus in an even more radical direction. However, by the late 1960s, the Swedish economy was suffering such systemic ailments related to the welfare state that it could no longer feed all the entitlement systems. Economic growth suffered, which led to notoriously inadequate tax revenue.

The 1970s were characterized by economic turmoil. High inflation was caused in part by international oil crises and in part by the high taxes that the democratic socialists began introducing already in the 1950s. By 1976, enough voters had lost confidence in an increasingly radicalized democratic-socialist government. 

Since then, though, both center-right and leftist governments have spent much of their time being good stewards of the Swedish welfare state. Marginal reforms in one direction or another have not helped fix the systemic ailments that characterize every economically redistributive welfare state. 

There is a strong case to be made for true conservative policy reforms in Sweden. Unfortunately, at present there is no credible alternative available at the ballot box. Hopefully, that will change in the future, but as things look now, Sweden is stuck with a welfare state behemoth that keeps the economy from growing and the people from realizing their full personal, entrepreneurial, and spiritual potential.