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Chapter 1: What economic challenges is Europe currently facing?
In recent years, Europe's economy hasn't been doing that well.
Britain's economy shrank unexpectedly in the three months to October. Germany is facing a third straight year of economic crisis, with most Germans increasingly worried about making ends meet. They're unlikely to be able to get France's debt under control anytime soon. It reached 3.3 trillion euros in June. That's a
The main picture has been somewhat sad over the last few years, that there has been little growth, just repeated shocks that the economy struggles to rebound from.
Tom Fairless is our global economics correspondent. Are there any countries in Europe that are doing well? Certainly Sweden does stand out. Sweden? its economy is growing at roughly the same rate as the U.S., which is to say, pretty fast. The Nordic country that was once synonymous with big government is doing something else.
Sweden, from an American point of view, from most countries' point of view, is the sort of gold standard of democratic socialism. What I found through this reporting is that actually what drives the dynamism is the extent to which it's rolled back the state.
That's what a lot of the economists I spoke to said, that in the 20 or 30 years since they've been liberalizing, incomes have doubled, real incomes have doubled after inflation. So this kind of gold standard of democratic socialism is actually a laboratory for free market capitalism.
Welcome to The Journal, our show about money, business, and power. I'm Ryan Knudsen. It's Monday, June 8th. Coming up on the show, how Sweden embraced capitalism. Sweden's reputation for big government and high taxation comes from the 1960s and 1970s, when the government was growing rapidly. And when I say high taxes, I mean really high taxes.
There was an author, a Swedish author, who wrote an essay about how her marginal tax rate was 102%. 102%?
How is that even possible? Are you taxed more than you make?
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Chapter 2: Why does Sweden stand out among European countries?
Then came an economic crisis in 1990. Major banks collapsed, and property prices plummeted by about 50%.
So there was a general feeling that the economic model wasn't working. And then there was this great depression. So there was affection for this, the big state idea, and we're all in it together, all for one, one for all. But there was a sense that it wasn't cutting it in the modern economy.
So in the 1990s, Sweden started undergoing a capitalist makeover. At first, it was just to stabilize the economy.
So they started by bailing out all the banks, and then I think they put in these strict government spending rules.
Then it was ending government monopolies in certain industries.
And then they started to privatize, and to privatize lots of different sectors, like electricity and the postal service, telecoms, to introduce some private energy into those.
It also partially privatized its healthcare system. Today, nearly half of the country's primary clinics are privately owned, many by private equity firms. Tom went to see one.
They have these beautiful clinics where it looked like kind of spas. So yeah, very, very different from the sort of, I mean, I'm British, very different from the experience we're used to in most of Europe with publicly funded healthcare.
How is the system funded though? I mean, they don't have health insurance there, do they?
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Chapter 3: How did Sweden's taxation levels impact its economy?
You know, the ways that they would try to save money are problematic and maybe reduce school standards.
Sweden's standing in international testing has fallen recently, leading to a fierce debate about whether privatization could be a factor. The government is trying to tighten the rules around running a for-profit school so that only long-term, high-quality operators remain.
The private school operators argue that they're cutting administrative waste and that they need profits to be able to reinvest. Some Swedes are also getting squeezed in the housing market.
Young people, they seem to be struggling much more because the rental prices have risen. And there used to be a culture of providing social housing for young people as well. And as the money is drained out of the public sector, those kind of opportunities are less. And I think in Europe, People in their 20s often live with their parents.
Sweden was an exception for many years, but more and more Swedes are spending longer at home with their parents because there are fewer options for them.
— Another group that's been hurting is immigrants. Over the last 20 years, Sweden has seen waves of immigration after major wars, from Afghanistan to Syria, and most recently Ukraine.
This relatively homogeneous society had a huge influx of immigrants. So the share of foreigners in the population increased from about 9% or so in 2000 to currently about 20%, which is higher than the U.S.,
But as the country has cut back on benefits, it's meant that these immigrants have had a harder time getting a foothold.
They're giving people sort of minimal benefits when they arrive and requiring that they join the labor market for five years before they get any benefits. And because a lot of the newcomers struggle to get into the labor market and struggle with those high unemployment, there was also a lot of crime in some of the areas where they arrived.
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