Sunday, August 14, 2011

Living on the margin totally dependent on the nanny state

Sweden is one of the world's richest countries with a $37,526 GNP per capita, but has a population that is hardly wealthy. While politicians are rubbing their hands on good margins and record high surplus in the Treasury, many citizens desperately hard to get everyday to make ends meet. According to recent statistics presented June 2011 more than one-fifth of the population younger than 45 years could not meet an unexpected expense up to $1,250 without having to borrow, or ask for help. Among single-parent families more than 18 percent has at some time during the past 12 months defaulted on payment of rents or mortgages. Almost all Swedes lack a fortune beyond the value of the dwelling.

How could thing turnout this bad? The Swedish state and the individual are traditionally the two main actors in politics. Like most other northern European countries the socialists has painted the political development in Sweden during most of the 1900’s in the big government colors. Special features of Swedish social democracy is that from the beginning, they have advocated an addiction to the impersonal state instead of free families and a free society.

This transformation has not happened without criticism within the socialist party. Arne Montan and other leading socialists could not understand why the welfare state should take away half a worker’s income. Instead of letting the workers self-manage their security through insurance and savings banks the big government deprived their money and imposed a social-political system. During the past years with big government the feeling of powerlessness have made many Swedes to lose faith in their own ability to influence their lives.

In 1900 the second half grew the Swedish state power relatively quickly. In area after area increased policy influence. The tax burden rose in step with the welfare state ambitions, a development that particularly affect low-and middle-income earners. From a level of 21 percent in 1950 increased the tax burden at a brisk pace for 30 years at 50 percent. 1989 recorded a record level of 56.5 percent.

The Swedish nanny state was founded in several crucial aspects between 1970 and 1980. The welfare principle means that the citizen in relation to the public is assured of certain basic social benefits. Certain rights and benefits are generally guaranteed, regardless of the individual taking any initiative or not. The general welfare nanny state was made more attractive and generous, but it reduced the margins in the everyday life of the citizens. For every dollar taken in taxes, the individual consequently had to give up one dollar that could have been used for his own wisdom. Taxes soared not only for the wealthy but also for the working class and appeared not only on the wage slip but also on the receipts they got in the store or at the hairdresser. Much of the tax burden could largely be explained by the introduction of new invisible taxes, like the value added tax and various excise taxes, as well as a substantial increase in employer

payroll tax. The resistance was low on the conservative side.

As long as the Swedish economy grew and the living standard improved for broad social groups, few critical voices were able to break through. In the 1950’s the country had a healthy public sector share of 25 per cent of GDP. But under government Olof Palme it grew to 50 percent 1970. Eight years later, it would represent the entire 64 percent. While the cost of bureaucracy increased, the resources could be used for productive livelihoods. As the public sector devoured an increasing share of the workers' income it also reduced the space for personal savings. Finally the conservative voice wakeup.

The conservative member of parliament Professor Staffan Burenstam Linder tried to influence developments. In the book “The heartless Welfare State” (1983) he argued convincingly that the welfare state had grown over its banks at the expense of the citizens' individual freedom. Professor Linder had a professorship of International Economics and pointed to a paradox. After paying taxes the welfare state citizens had to little money left to cope with the financial pressures of everyday life. The high tax burden also led to people stopped saving for future contingencies or anticipated needs. Expectations on the state was high. When the government eventually was exposed to an economic crisis and was forced to cut public spending the citizens were often defenseless without their own resources. The big government nanny state had created a brutal system resulting in a double social regression.

During the early 1990‘s the ruling Social Democratic government did not change its line of policy and defended its position. They thought that deeper democracy, where citizens have the opportunity to shape their own future, requires an even distribution of resources, including knowledge and skills, self confidence but also economically. Amazingly they came to the conclusion that a publicly funded welfare system does not deprive the individual responsibility to choose. Eventually the arguments advanced by the conservatives won the ear to the left of center in Swedish politics.

Leading socialists dared to question eternal truths. Not least prevailing power relations in Swedish society was questioned and new ideas of a recognition of the individualistic tendencies was recognized. However, the socialists were clear on keeping the highest tax pressure in the world.

The socialization of the income has resulted in a constant poor private economy, and many find it difficult to cope with temporary loss of income or expenditure increases, such as on new clothes for graduations, unexpected high utility bills, or a new washing machine. The stories of the difficulties to cope with even the most basic expenses are all over the country. It not only about individuals having difficulties managing their everyday finances, but about ordinary families with two full-time working adults. The research literature tends to talk about a lack of cash margins. The Swedish Welfare Administration classifies the absence of a cash margin as one of several poverty indicators, points out that the economic vulnerability may be due to the low income or high expenses relative to revenue. The lack of cash is not a phenomenon limited to certain specific groups in the Swedes society, but a condition of everyday life for most citizens.

It is not only thin margins that are weighing down. Many Swedes do have lack own savings. When Statistics Sweden last investigated the wealth in 2007 it showed that very few individuals had any net worth after excluding the value of their real assets.

A recent survey showed that 20 percent of the Swedish households lack a buffer and over 20 percent of those who say they have a precautionary saving less than $3,125.

The lack of cash that the citizens can use after paying bills are for sudden expenses has not been regarded as a major social problem in Sweden. The basic idea of the kind welfare state has been to satisfy people's needs through publicly funded community schemes.

In the Swedish politicians' rhetoric the concept of welfare over time has become synonymous with social security and public services. Security has become synonymous with big government instruments for care and treatment. A substantial part of the Swedish capital formation has been made in collective state controlled funds which have contributed to the private Swedes' weak capital position. The Swedish government control a lot of capital, both in state enterprises and in the various pension funds. This is a bizarre situation, especially given that the money are citizens' own, which the politician class has transformed to state capital.

The welfare state comes at an extremely high price which is an obvious but in Sweden overlooked fact. Every dollar spent on public welfare is, after all, a dollar less that citizens could use on their own security. While the welfare nanny state confiscates resources to monopolize the citizens social security systems it restricts the people's ability to handle the surprises that life inevitably imply.

Ben Hedenberg

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