Hamish McRae: The most successful society on the planet

Sweden is already retreating from tax and spend government, and has been for more than a decade
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The Independent Online

So even the Swedes have become fed up with paying high taxes and thrown out the centre-left government, a fact that our Lib Dems seem to have noted - or maybe not.

We have mixed-up views about Sweden. For some it is still the socialist paradise that built the world's most comprehensive welfare system. For others it is the advanced industrial society, pioneers in electronics and communications, the supposed model economy Gordon Brown so admires. For others it is the largest exporter in the world per head of population of... pop music.

In a way it is all of those. It is in many ways a hugely successful society, one that has a great deal to teach the rest of us. But the lessons we should learn are, I suggest, both rather different and much more interesting than the "Swedish centre-left defeat has lessons for New Labour" message that we have got to date.

The first thing to understand is that Sweden is on many measures just about the most successful society on the planet. For example it ranks second equal with Australia, just behind Norway, in the World Bank's human development index, which adds to standard of living such measures as life expectancy, health and gender equality. It is number two in terms of spending on R&D per head, number three in information and communications technology, and number five in business innovation.

Push aside the figures and catch the feel of the place. As anyone who visits from Britain will immediately notice, Stockholm and the surrounding area seem a haven of middle-class order and comfort. The easy equality between the genders and the absence of evident poverty are layered on top of the physical beauty of a gorgeous city set in a jewelled sea.

Now of course there is a dark side: the grotty housing estates, the concealed unemployment particularly among the young, the political tensions that have led to the murder of the foreign minister, Anna Lindh, just three years ago. With Iceland it is one of the two countries that have even higher recorded crime, relative to the population, than the UK. (Did you know, by the way, that US recorded crime levels are now less than half those of Britain?) So while it is a very advanced and in many ways enviable society, it has its share of social and other problems.

It is those problems, I suspect, that are as responsible for the desire for a change of political leadership, rather than a desire to retreat at a faster rate from the Swedish model of the welfare state.

You see, Sweden is already retreating rapidly from tax-and-spend government and it has been retreating for more than a decade. Back in the early 1990s government spending reached 67 per cent of gross domestic product. By 2005 it was down to 56 per cent, which, while the highest in Europe and indeed in the developed world, is not that far above France's 54 per cent. (The UK spending ratio is now nearly 45 per cent, up from under 41 per cent in 2002.)

As far as I can see, with the possible exception of Ireland, no developed country has shrunk its public spending ratio as fast as Sweden has over the past decade. Insofar as the New Moderates have pledged to trim the welfare state further, all they will be doing is to carry on a policy established under the Social Democrats but maybe a bit more swiftly.

What should we learn from this? Not that Sweden is suddenly rejecting a set of policies that have governed the country for most of the past 70 years, because they are not. Rather there seems to be a global normal range for the appropriate size of government and Sweden, having been way above it, is now heading towards this range. Sweden is, so to speak, become more "normal".

Swedish exceptionalism has been not just in the extensive nature of its welfare state but the excellence of its general education and the foresight of its business community. That shows up in those measures of technical excellence noted above: clever, well-educated people are available to drive Swedish business forward. Moreover, they are quite cheap. Swedish companies have the advantage of what are now by world standards quite low salaries. High taxation means there is not much point in paying vast differentials and the supply demand ratio in Sweden for skilled labour holds down rates. One rather troubling statistic is that virtually all the growth in jobs since the 1950s has been in the public sector.

Low-ish salaries mean that it is very hard for Swedish companies to attract talent from abroad, and may help to explain the considerable emigration of university graduates. I was told by a young electronics engineer that part of the deal if you work for a large company is that you will get a posting abroad, either in the US or UK, at a high salary so you can amass some savings. But while there is a problem, the fact remains that the large Swedish companies have managed to marshal the human capital to keep them at the cutting edge of the hi-tech world.

A key element of that is education. Sweden may not have a Cambridge or an Oxford - or even an Imperial - but it does great strength in depth right through its education system. The last time I discussed this with Swedish friends they said, "Ah, well, it is not as good as it used to be", and that may be true. Still, the country not only scores high on the OECD comparable studies of educational attainment, but seems to have managed to teach softer artistic skills, as well as science, maths and impressively good English. Why is the country such a large exporter of pop music? Because it has put enormous effort into teaching its kids about music.

There are other things we should learn. Sweden ranks at or near the top of the corruption league table: it is among the least corrupt nations on earth. It is number four on the environmental sustainability index - OK, easier if you have all that forest - and it scores high on its institutional capacity to deal with environmental challenges. It is also number three in terms of newspaper sales per head of population, so it deserves a bow from journos for that.

So we should not view Sweden's society through rose-coloured specs; nor should we read too many wider implications from the shift in political direction that its electorate has called for it to take. We should learn from its excellence in education and research and watch closely how it manages to downsize its government further without abandoning its broad strategic aims. After all, we certainly need more excellence, and we may need to do a bit of downsizing ourselves in the none-too-distant future.