Sizing up Sweden

I commented recently on two recent Internet posts, one from William Anderson, whose blog is called “Krugman-in-Wonderland”. In his blog, he critiques what he characterizes as the mostly false arguments of Paul Krugman. Here is Anderson commenting on Krugman’s post on Sweden:

What Krugman (who is a multi-millionaire and really doesn’t have to worry about what things cost) does not tell people is that Swedes pay much more for goods than do Americans, yet Swedish incomes are not as high, and their real incomes are substantially lower than ours.

The argument from Krugman was that Sweden was a thriving country despite high taxes and a welfare state. Anderson noted the use of the word ‘despite’ and wondered if the wording was intentional, i.e. does Krugman believe that high taxes and a generous welfare state are impediments to growth and prosperity, or does he believe the growth and prosperity are due to the high taxes and generous welfare state?

In the comments section, I quoted from a tweet that I had posted in response to Hans Rosling (a Swede), who asked:

Sweden collects 50% of GDP in tax & has 5% growth, US collects 25% & has 1% growth. Is tax good for growth or who explains the paradox?

My response:

Sweden has roughly same population as North Carolina. Let’s try 50% state tax for NC and 0% federal taxes and see how they do!

The rest of my comment on Anderson’s site read:

The point is that a society like Sweden is much more directly comparable to one of the states in the United States rather than the entire nation. I think that’s why Milton Friedman always caveated his statements on freedom as such: “I do not know any exception to the proposition that if you compare like with like, the freer the system, the better off the ordinary poor people have been.”

The comparing of “like with like” would suggest that comparing the Sweden with the United States is unfair. If Swedes were also burdened with the majority of their taxes being paid directly to the European Union versus the government of Sweden, their tax system and economy would probably look quite different.

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