There is something about Sweden that provokes a mix of envy, horror, and bewilderment among American observers. Liberals have traditionally celebrated its cradle-to-grave safety net, while conservatives have disparaged its high taxes and centralized health-care regime. Yet both groups have generally agreed that Swedish-style socialism is a far cry from rough-and-tumble U.S. capitalism.
In fact, contemporary Sweden is much less socialist than many Americans realize. Since the early 1990s, when it suffered a painful financial crisis, the Scandinavian country has deregulated key industries (such as airlines, telecommunications, and electricity), lowered its overall tax burden, established universal school vouchers, partially privatized its pension system, abolished certain government monopolies, sold a number of state-owned enterprises (including the parent company of Absolut vodka), and trimmed public spending. Several years ago, it eliminated gift and inheritance taxes. The World Economic Forum now ranks Sweden as the second-most competitive economy on earth, behind only Switzerland. According to the 2010 Index of Economic Freedom (compiled by the Wall Street Journal and the Heritage Foundation), Sweden offers greater business freedom, trade freedom, monetary freedom, investment freedom, financial freedom, freedom from corruption, and property-rights protection than does the United States.
Since taking office in 2006, the center-right administration of Prime Minister Fredrik Reinfeldt has reduced income and corporate taxes, repealed a longstanding wealth tax, tightened unemployment and sick-leave benefits (which are still exceedingly generous), and privatized various state assets. On September 19, Reinfeldt became the first conservative premier in modern Swedish history to win reelection, though his government apparently fell just short of securing a parliamentary majority. The once-mighty Social Democratic party captured less than 31 percent of the vote, its worst performance in nearly a century. Meanwhile, the far-right Sweden Democrats (SD) — a populist-nationalist party critical of Muslim immigration — finally gained entrance into the Riksdag, picking up a remarkable 20 seats (out of 349) and virtually doubling its vote share from 2006.
Both the ruling coalition and the left-wing opposition have rejected an alliance with the SD, whose impressive electoral showing hit Sweden like an earthquake. The party has neo-Nazi roots, but it has worked hard to purge members with Nazi ties, rebrand itself, and achieve greater respectability. Its growing influence reflects widespread anxiety over the sluggish pace of Muslim assimilation — anxiety that the mainstream parties have failed to address. This failure has given the SD a boost, especially in southern Sweden around Malmö, the country’s most Muslim city.
The broader story of the 2010 election is the collapse of Sweden’s old political order, which was dominated by the Social Democrats (who held power for all but nine years and a few months between September 1932 and October 2006). “There is a general change in Swedish society,” Stockholm University political scientist Jenny Madestam told the New York Times prior to the vote. “Social-democratic ideas are losing their grip on Sweden, and we are getting more and more individualistic.” Indeed, the country is a far more market-friendly place today than it was 20 years ago, thanks in part to reforms implemented by the Social Democrats themselves. Over the past two decades, it has been one of Western Europe’s most energetic liberalizers — cutting taxes, loosening regulatory shackles, and increasing competition.