If Sweden was a U.S. state, how rich would it be? (HINT: Not Very)

The Claremont Institute ^ | December 7, 2004 | Joey Tartakovsky

[Stoat]

If Sweden was a U.S. state, how rich would it be?

 

Two Swedish economists recently published a study that asks how European countries would fare if suddenly admitted into the American union. The results? If the UK, France, or Italy became U.S. states, they would rank as the fifth poorest of the fifty, ahead only of Arkansas, Montana, West Virginia, and Mississippi. The richest EU country—Ireland—would be the 13th poorest. Sweden would be the 6th poorest. In fact, the study found that 40% of all Swedish households would classify as low-income in the U.S.

 

This means that poorer U.S. states enjoy affluence comparable to that of richer European states—Denmark is equivalent to Kentucky—whether measured in terms of home ownership, or number of microwaves and cars possessed. “Material prosperity,” the authors write of the U.S., “is high and not associated with the material standard of living which many people in Europe probably associate with poverty. Good economic development, in other words, results in even poor people being relatively well off.”

 

By the 1880s, the U.S. had become the world’s richest nation (measured in per capita GDP). In the 1990s, U.S. growth was twice that of Europe’s, and three times that of Japan’s. The U.S. per capita income is now 55% higher than the EU-15 average, and 50% higher than Japan’s.

 

Here’s the not-so-secret recipe for achieving European-style stagnation and decline. First, combine high unemployment and aging populations to ensure that welfare costs far exceed worker contributions. Then, stuff with generous entitlements, massive tax burdens, rigid labor markets, and regulation-mad bureaucracies. For flavor, add dashes of socialism and right-wing paternalism. Bake. (For additional recipe ideas, consult Joy of Administrating by Ted Kennedy, or English departments everywhere.)

Joey Tartakovsky is assistant editor of the Claremont Review of Books.

(Here's the study's preface - the entire document is 49 pages)

PREFACE
IF THE EU WERE A PART of the United States of America, would it belong to the richest
or the poorest group of states?
At the beginning of the 1990s, there was no need to ask. Europe’s economic future was
a subject of growing optimism. Productivity growth had for some decades been higher
than in other countries of similar standing, and that growth was now going to be hugely
accelerated by the elimination of trade barriers and the closer economic integration resulting
from the Single Market. The EU as an institution was – and was undoubtedly seen as
– a vehicle for growth and economic liberalisation. In other words, the EU was able to do
what politicians in several member countries had wished for but had failed to achieve: to
increase economic openness, to strengthen the process of competition, and harness the
political process behind a liberal reform agenda.
Today, the perspectives on the EU, and the outlook on its future, are radically different.
Economic growth during the 1990s never became what many had wished for. Some
countries performed reasonably well, most notably Ireland, but on the whole the EU
was lagging far behind other countries during the whole decade. Productivity growth
decreased and by mid-decade the EU was running behind the US in this respect. The
process of convergence in productivity, a much talked-about process since the 1970s,
had once again become a process of divergence.
The role, and status, of the EU in the economic reform process has also changed. Instead
of a clear focus on economic reforms and growth, the EU (the Commission as well as the
Council) has concentrated its ambitions on other political objectives. Hence, the EU no
longer is – or is seen as – the great economic liberator of Europe. It is generally not
performing as a vehicle for reforms, nor as leverage for policies that are needed but
impossible to accomplish in the national political arenas.
Is it possible to break the spell of economic stagnation in Europe? Yes, undoubtedly.
But, alas, it seems highly improbable. The member countries have agreed on a relatively
far-reaching reform agenda in the Lisbon accord (yes, in the modern European context it
is far-reaching). But the agenda lacks impetus. Not to say a true awareness of the need
of reforms. Worse still, many European politicians and opinion-formers seem totally
unaware of the lagging performance of the EU economies and that a few percentage
units lower growth will affect their welfare in comparison with other economies.
Such is the background to this study on the differences in growth and welfare between
Europe and the US. Too many politicians, policy-makers, and voters are continuing their
long vacation from reality. On the one hand, they accept, or in some cases even prefer, a
substantially lower growth than in the US. On the other hand, they still want us to enjoy
the same luxuries and be able to afford the same welfare as Americans can. Needless to
say, that is not possible. But the real political problem is that lower welfare standards –
as with inequality in general – are a relative measure for most people. They are always
viewed by comparison with others, and rarely in absolute terms. People would rather
weep in the backseat of a new Mercedes than in the backseat of a second-hand
Volkswagen.
This study is based on a widely acclaimed and thought-provoking book – Sweden versus
the US – that was published earlier this year in Swedish by the same authors – Dr. Fredrik
Bergström, President of The Swedish Research Institute of Trade, and Mr. Robert
Gidehag, formerly the Chief Economist of the same institute, and now President of the
Swedish Taxpayers’ Association. The study presents important perspectives on European
growth and welfare. Its highlight is the benchmark of EU member states and regions to
US states. The disturbing result of that benchmark should put it at the top of the agenda
for Europe’s future.
Fredrik Erixon
Chief Economist, Timbro

 

[AZLiberty]

The purpose of Islamic immigration is to complete the conversion of Europe into a Third World continent.

[A Ruckus of Dogs]

Suicide yes, I don't know about the alcohol rates.

[A Ruckus of Dogs]

They do have a smaller percentage of their population living in poverty.

Probably true, however, keep in mind that the US gets a very high number of 3rd world immigrants which will skew the numbers.

[RAY]

They do have a smaller percentage of their population living in poverty. Sweden: 6.5% United States: 17%

An the rest of the story:

How do they measure poverty? The Swedes tell me they don't have any poor people.

And who in their country experiences poverty Vs who in the USA?

Why do most Swedes who come here to work want to stay?

Why do the Swedes in our country make fun of our show of patriotism? They say they would never fly their national flag on the front porch of their homes, as we do.

Why is their suicide rate so high - this is what they tell me: "suicide rate is much higher than in the USA." -- higher quality of life????

[Balding_Eagle]

They assumed that our shopping area was a Potemkin mall

My ignorance is showing. What is a Potemkin Mall?

[Savage Beast]

Capitalism promises universal prosperity and requires freedom. Marxism promises economic destruction and requires totalitarianism. Yet millions of European and American Leftists, including the Democrat Party, insist upon imposing Marxism upon the Western Republics.

The 2004 Bush landslide victory was--among other things--a rejection, by the American people, of the Marxist agenda of the Democrat Party and its spokespersons in the "Mainstream Newsmedia", adacemia, Hollywood, et al., personified by Hanoi John Kerry.

[LexBaird]

Gee, things must be getting better in Sweden. According to this article from 2002, Sweden would be the very poorest state in the Union.

You think things are getting better there, or is it just that at least one of these studies is wrong?

The decline of the dollar vs the euro may account for the apparent rise in per capita income.

[Maceman]

The decline of the dollar vs the euro may account for the apparent rise in per capita income.

Gee, I guess that when the Eurobubble bursts, as it inevitably must given that there is no real underlying economic value to sustain it, things aren't going to look too pretty in Sweden.

[LexBaird]

. . . things aren't going to look too pretty in Sweden.

Whatever is left in Sweden that is pretty will be covered in a burka under sharia law.

[ArrogantBustard]

Derivative of "Potemkin Village".

[jrp]

Here’s the not-so-secret recipe for achieving European-style stagnation and decline. First, combine high unemployment and aging populations to ensure that welfare costs far exceed worker contributions. Then, stuff with generous entitlements, massive tax burdens, rigid labor markets, and regulation-mad bureaucracies....

Be patient. We're working on it.

[LexBaird]

What is a Potemkin Mall?

A Potemkin village is a "stage set" living area used for propaganda; an idealized village that is dressed up for visitors while the peasants actually live in squalor.

That is to say, the visitors thought they were being shown a shopping area for elites that was not typical for America.

[Balding_Eagle]

Thanks.

[Killing Time]

Doesn't Sweden also have one of the highest suicide and alcoholism rates of all the European nations as well? I thougt I read that somewhere a couple of years back.

Little to do with economics: Scandinavian countries have high rates of depression and suicide due to sunlight deprivation.

[normy]

Are you trying to split the coalition with that remark? LOL! You know you call it American Football. We call it Football. Your sport is called Soccer or if we want to be smart asses "futball" (pronounced f-oooo-tball)

[A Ruckus of Dogs]

Little to do with economics: Scandinavian countries have high rates of depression and suicide due to sunlight deprivation.

Does this also apply to Alaska?

[Slipperduke]

Ha! The split won't be permanent. As soon as you chaps learn how to play it, we'll welcome you back in!

I must confess, I do enjoy the Superbowl final. The 2001 extravaganza was about the most spectacular thing I've ever seen.

Well, aside from Southend beating Luton on a rainy day in Essex in 1993. I guess you had to be there.

[1Old Pro]

This article should give comfort to anyone who might be afraid of "competition" from the EU countries economies. These are highly inneficient economies and very little threat.

China however will become a greater threat. Germany and France can go scratch, they are insignificant in the world.

[1Old Pro]

quality of life as measured by the Human Development Index, which uses life expectancy, school enrollment, literacy and income to rank 177 countries.

Is this "index" a creation of some socialist group?

[HostileTerritory]

The dollar-euro exchange rate changed, which magically makes the lifestyle of Europeans 20% better. That's why analyses like these are pretty shaky.

There's a grain of truth to the argument that Americans have much more material wealth than Europeans. Our houses are bigger, are cars are bigger, our portions are more generous, and you can buy four times as many types of cereal. That's the American way. We also spend a lot more for health care which is superior to European health care, and also more for health care which is worse than Europeans get (people who rely on ERs for their PCP.) Our system rewards initiative and hard work and that is strongly reflected at the extremes and among the middle classes when individuals do well. It's also easier to crash and burn here. Americans prefer our system, as well we should.

But anyone who has been to Europe knows that comparisons to the poorest of the poor in America are completely off-base.