How Did Sweden Get its Welfare System?
If you believe that governments should look after their people, you’ll love Sweden. Sweden’s welfare system—the benefits the state gives to its citizens—may be the best in the world. There’s free health care, subsidized housing, generous pensions, money for the unemployed, and 480 days of paid leave for new parents. Swedes live longer than people from almost every other country and they are happier, too. Part of the reason is their solid social safety net. How did Sweden get it?
Go back one hundred years. Sweden was thriving. It made money exporting iron, steel, and lumber. The railway network was excellent. Its banks were strong. It had a great education system. The country hadn’t been at war for more than a century. Sweden was also very homogeneous: almost everyone was part of a family that had lived there for generations. The government provided support for people who were too sick to work, but it wasn’t much.
Then in 1929 the New York stock market collapsed. The Great Depression that followed affected much of the rest of the world, and governments everywhere struggled to know what to do. Roosevelt became president of the United States and offered his New Deal. In Germany, Hitler created jobs by building roads and weapons.
Sweden’s response to the depression sounded sweet but was in fact remarkably ambitious. They declared that they wanted to make their country like a family. Everyone would have the responsibility to work hard but in return the national family would look after them in hard times. Instead of a society divided by class or gender (there was no ethnic diversity), Sweden would become a home for all its people—or a folkhemmet, to use the Swedish word.
So, in the 1930’s, Sweden’s Social Democratic government passed legislation to make their society more supportive. People received free health care. There were pensions for the elderly, loans for housing, and support for new mothers. Two weeks paid vacation became standard.
How did Sweden pay for all this? Taxes were part of the answer. More important, however, were smart economists and courage. Sweden’s government was one of the first to try direct management of the economy—making their currency less valuable (which helped their exports) and pumping additional money into the system to spur growth. Policies like this would later become common but they took guts in the 1930’s. The strategy paid off: not only did Sweden get a welfare state but unemployment fell from 140,000 in 1933 to less than 10,000 five years later.
Sweden didn’t fight in the Second World War, but as people across Europe called for more generous social programmes after the war Swedish workers joined in. The Social Democratic government was happy to oblige. They wanted to find a middle way between cut-throat capitalism on the one hand and Communism on the other. They saw capitalism as great for generating wealth but didn’t think it right that 10% of the population should have more than 80% of Sweden’s wealth, as was the case in the 1940’s. So the government expanded the programmes that cared for people in their national family.
Most people were grateful. It helped that the economy was growing and unemployment low—that made higher taxes easier to deal with. By the 1970’s, the top 10% had a lower proportion of the nation’s wealth (55%) than anywhere else in the world. In the 1800’s, people in the US had been proud that their society was more equal than Europe’s. After 1945, the situation was reversed. Swedes and other Europeans with their own welfare states were proud that their societies were more equal than America’s.
It hasn’t all been plain sailing. Rising costs have meant that health care is no longer completely free. Pensions are less generous than they were. Most significantly, immigrants who fled the Syrian civil war and now receive benefits in Sweden have made some locals grumpy.
Still, the welfare state and the Social Democratic party continue to be popular in Sweden. The idea of the country as one big family, where everyone has responsibilities and everyone is treated well, lives on. Sweden has managed to combine a flourishing economy with a generous society. No wonder many other countries look on in envy.