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

 

[SolutionsOnly]

Doesn't Sweden also have one of the highest suicide and alcoholism rates of all the European nations as well? I thought

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

Agreed. Look the the stats for Alaska - the same problems exist there

[SolutionsOnly]

Does this also apply to Alaska?

Yes

[Killing Time]

Thanks. Not trying to make any particular point here, just that I know at least one person who does really suffer from SAD, which doesn't seem to be a made-up disease.

So it is not counter intuitive, for me at least, to think that those latitudes which are sun starved for long parts of the year might suffer high rates of depression, irrespective of any other factors.

[tomjohn77]

Well either all states in the US is above average in income or this little study is false. I know the numbers for some states. Average income in the US is not much higher than in Denmark and Ireland and lower than in Luxembourg by far. Income in the US is a lot lower than in Luxembourg it can not comparable. So this little study is crap and nothing more. I have been traveling around Europe and the US and I love statistics and facts. So I will say that Denmark and Ireland is comparable to the US in wealth. France, UK, Italy and Germany and Sweden are somewhat poorer. Spain is poorer than them, but a wonderful country that I want to live in if I got a good job there. But without compareson Luxembourg is the most wealthy and the US can not compare to the lifestyle there. Belgium is also pretty good.

[longtermmemmory]

The study is significant but the article is spun like a top.

They try and make the EU look good but can't.

Basically the riches EU is still among the poorest states. It reminds me of the days of the USSR when their population upon encountering americans would call them liars for saying they had TWO cars and their hould house and land with (grass just for show).

The citizens of the countries of the EU are intentionally kept blind.

[longtermmemmory]

Most europeans don't even realize there is a fox or that CNN is fourth of three.

It also points out that the use of the "ic" and the end of democrat is a MSM tool to imply the republican party is not democratic.

Both parties are democratic (per se). If these people went to journalism school they should have been taught and remember GRAMMAR! Its Democrat Party not democratic party.

[americanbychoice2]

Everything is relative.
I ahve lived in Europe for a total of 34 years and still go there 4 times a year.

While Iceland and Luxemburg are very high income countries, you should use "after tax income".
Now look at VAT, prices for goods, etc. The disposable income of Europeans is very small compared to the US. You can't argue that point with most Europeans though.

I went to Iceland a few months ago and couldn't believe the high cost of products there. High Income=high costs in most situations.

[Sam Cree]

I thought that was a PJ O'Rourke quote!

[bray]

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.

They can't even afford a Double Wide in France!

Pray for W and Our Troops

[Polybius]

The richest EU country—Ireland—

I did not know that.

How times change.

[Plutarch]

The main question is when do "Swedish Bride" web sites begin to compete with the "Russian Bride" sites?

[JeffersonRepublic.com]

"To be loved, you have to be nice to others EVERYDAY!.
To be hated, you don't have to do squat." Homer Simpson

America rules! Euroweenies suck!

[tomjohn77]

Well lets just say that i know that Luxembourg is the richest country and by far more wealthy than the US when purchesing power parity is accounted. It can not be argued

[americanbychoice2]

Bottom line, no. Higher gross income than the US, yes.
Compare the prices in country( If you have enough dollars to exchange) :-)

[tomjohn77]

and North Dakota atleast

[Polybius]

My Swede acquaintances say their system is better because they don't have any poor people.

Have they visited Malmö lately?

Swedish authorities in the southern city of Malmö have been busy with a sudden influx of Muslim immigrants - 90 percent of whom are unemployed and many who are angry and taking it out on the country that took them in. .....one quarter of Malmö's 250,000 population is now Muslim, changing the face and the idea of what it means to be Swedish. Asylum seekers may bring spouses, brothers and grandparents with them. Civil servants say the city is swamped.

[tomjohn77]

I said Purchesing power parity. If you dont know the term then I will end this discussion because then you have no grasp of economy etc

[tomjohn77]

please list the GDP per capita in the European countries that you have