“Sweden got rich first with free trade and an open economy before we had the big government,” Norberg explains. “In the 1950s, Sweden was already one of the world’s richest countries, and back then taxes were lower in Sweden than in the United States. Only then did we start expanding the government dramatically. And you know what happened then? We started losing, from having been the fourth-richest country in the world in 1970; 25 years later, we were only the 14th richest. And no new jobs had been created in the private sector. It all ended in a terrible crisis.”
Sweden only ended its downward slide after liberalizing its economy again, with new waves of deregulation and free trade with other countries — as well as lower taxes, school vouchers, and partial pension privatization.
“Sure, Sweden is great,” Norberg concludes. “I love it here. But be careful so that you imitate the stuff that brought us wealth, and not the stuff that almost brought us ruin.”
Norberg provided a far more detailed examination of Sweden’s prosperity in a commentary for the Cato Institute’s Libertarianism.org website. Titled “How Laissez-Faire Made Sweden Rich,” the article explains how Sweden came to have such a high degree of economic freedom, and how that led to its position as one of the wealthiest countries in the world.
“Liberalism had transformed Sweden completely,” Norberg wrote. “A society that used to be rigorously controlled—in which all occupations were thoroughly regulated and trade with other countries was practically forbidden—suddenly opened the floodgates of creativity that had been pent up for centuries. Creativity was now rewarded, not penalized. Open markets and a minimum of regulations meant that capital could flow to the best ideas and that companies were free to hire and fire. The old trades were mechanized, and Sweden could now export what it did best to Britain and other countries in exchange for imports that Sweden couldn’t produce as well.”