Wednesday, March 14, 2012

Mything the point on Sweden

by Casey Lartigue, Jr.

Korea Times

March 13, 2012

The message was clear: "Don’t do what we’re doing" when it comes to welfare and economic policies.

That’s what (former) Senator Franco Debendetti and lawyer Alessandro De Nicola of Italy, and University of Athens professor Aristides Hatzis said in policy forums organized by the Center for Free Enterprise (CFE) in Seoul last August and October. Professor Hatzis took it one step further, in a speech that caught the attention of Korean president Lee Myung-bak: "If you see Greece doing something, then do the opposite thing."

"But what about Sweden" was the response from those pushing for universal welfare policies in Korea. That has become the common refrain from politicians and academics around the world for several decades in the West and recently in Korea. "What about Sweden?"

With that in mind, CFE invited Johnny Munkhammar, a member of the Moderate Party in the Parliament of Sweden, to Seoul from March 5 to 7. Munkhammar surprised the audience and Korean media with his talk, "Sweden's Welfare State: Fact and Fiction."

Munkhammar said the lesson to learn is that free markets created success in Sweden and that the country’s turn to bigger government led to an array of problems that Sweden is trying to recover from now. He cites the 1870s as a turning point in Swedish history, when, rather than hiding behind trade protectionism and the "infant industry" argument favored by popular Korean author Chang Ha-joon, Sweden opened its economy to the world with free trade and economic freedom.

That continued for a century until the 1970s when the welfare state was greatly expanded and increased regulations and taxes were imposed on the economy. Sweden began to reverse that in the 1990s, implementing reforms that would have made Adam Smith proud: state-owned enterprises were sold; public monopolies in health and education were replaced with free competition; product and financial markets were deregulated; and the central bank was made independent.