5 ms·

First thought: the Swedes are doing well! Why is 60% of GDP the target? What does this do?

CaptainZapp 15y ago
From the explanation : The chart below shows OECD calculations of what it would take governments to reduce gross debt to 60% of GDP by 2026. This is around the level considered healthy and is also the ratio set by the widely ignored Maastricht agreement, which is meant to govern debt in the European Union. It is not pretty.
lucasjung 15y ago
My understanding is that Sweden has drawn a significant portion of its revenues from North Sea oil, but that they are anticipating significant declines in production (and therefore revenue). They are preparing for this by grdually restructuring (read: cutting) government services and benefits to fit their anticipated revenue, with the added benefit that doing so in advance allows them to build up a decent nest-egg. In other words, they are doing something incredibly rare for a government: budgeting in a responsible and rational manner.
- arethuza 15y ago
  I didn't know that Sweden had any oil - unlike Norway next door that is practically floating on the stuff.
- mseebach 15y ago
  I couldn't find anything definitive on Google, but I don't think Sweden has that much oil, and if they do, it's not in the North Sea (which isn't bordering Sweden). (You might have meant to refer to Norway or Denmark which fits your description quite well)
- RuadhanMc 15y ago
  Pretty sure that you are thinking of Norway. Sweden doesn't do oil in any serious way. Sweden is trying to be oil-free. http://en.wikipedia.org/wiki/Making_Sweden_an_Oil-Free_Society http://en.wikipedia.org/wiki/Making_Sweden_an_Oil-Free_Socie... According to Wikipedia (http://en.wikipedia.org/wiki/Economy_of_Sweden http://en.wikipedia.org/wiki/Economy_of_Sweden) Sweden's main industries are: telecommunications equipment, wood pulp and paper products, motor vehicles, pharmaceutical products, iron and steel. That's quite a nice spread.
  - bh42222 15y ago
    Sweden's main industries are: telecommunications equipment, wood pulp and paper products, motor vehicles, pharmaceutical products, iron and steel. And ABBA. (I'm only half joking the royalties on their music equal quite a few Volvos.)
    - bh42222 15y ago
      Replying to myself because someone on the Internet is wrong! ... between 1974 and 1982,they earned nearly twice the GNP of Sweden From: http://www.artistfacts.com/detail.php?id=322 http://www.artistfacts.com/detail.php?id=322
      - RuadhanMc 15y ago
        That is pretty staggering... This too: "When ABBA was active, only the Volvo car company made more money in Sweden.".
- Tuna-Fish 15y ago
  Sweden has practically no oil production at all, and never had any. The Scandinavian country with large oil reserves is Norway. What you are talking about doesn't even describe Norway properly -- they have largely not spent the revenue they got from oil. Instead, it has been collected into a sovereign wealth fund. At present, the fund holds some $100 000 for every Norwegian. Future decline of oil profits will be covered by the investment income from the fund. There hasn't been any cutting of government services to fit revenues -- there hasn't been any need to. Sweden, like the other Scandinavian countries, has held a responsible and rational budget for most of it's existence as a democratic country. So while it might be incredibly rare for governments worldwide, for some reason it seems that the Scandinavians can make the idea of a well-run welfare state work. I have yet to figure out why they can do it and most of the rest of the world seemingly can't.
  - furyg3 15y ago
    The Norway situation you describe is correct. Normally an influx of wealth from oil (or other natural resources, even humanitarian aid) will suppress the country's abilities to be competitive in manufacturing or other (non-oil) sectors. It's often called a "Resource Curse" or "Dutch Disease". Avoiding the curse requires not to spending the oil money directly... and instead to invest it and spend only the interest.
  - henrikschroder 15y ago
    > I have yet to figure out why they can do it and most of the rest of the world seemingly can't. It helps a lot to have a small country with an ethnically homogenous population, extremely low corruption, high tax morale, and high public trust of government offices and institutions.
    - bh42222 15y ago
      It helps a lot to have a small country Maybe, or a big but dictatorial country like China. an ethnically homogenous population Care to elaborate? Would you consider countries such as Switzerland, Canada, Taiwan, and Singapore ethnically homogeneous? extremely low corruption, high tax morale, and high public trust of government offices and institutions. Chicken and egg problem - High tax compliance and trust in government come from having a reasonable tax rate from which you get a lot of effective government services. Low corruption is a pre-requisite for trust in government institutions. I bet what also helps is not having a culture of cousin marriage, that seems to create a culture where is much more difficult to have any kind of trust with people outside of your clan. I think the modern well functioning democracy is to a very large degree a result of complex game theory. You don't have to look back much more the 2 centuries, to see thousands of years of European history that's full of corruption, lawlessness, crushing tax rates, all the typical modern day 3rd world problems and then some. If just being Swedish led to modern Sweden, Swedish history would be a lot less interesting. For one, it would almost certainly be entirely Viking free.
mixmax 15y ago
The Swedes had a serious financial crisis in the mid 90's and learnt their lesson. They've been running a sound fiscal policy ever since.
- arethuza 15y ago
  Maybe the Greeks should invite the Swedes to run their country for them!
  - bh42222 15y ago
    Well.... the EU is sort of, kind of, like that. The treaty of Maastricht, EU regulations superseding national regulations, it's all supposed bring rich north western European style government to the poorer more chaotic south and east parts of Europe. <sarcasm>And it's working out great!</sarcasm>
  - henrikschroder 15y ago
    That wouldn't help, the underlying problem is that the general tax morale is much lower in Greece compared to Sweden.
guelo 15y ago
The Swedes just used basic Keynesian economics to fight the recession. They went into the recession with the budget in good shape, unlike the Bush approach of deficits and expensive wars. Then when the recession hit their huge welfare system kicked into high gear plus they added a stimulus of tax cuts and infrastructure projects, unlike the Obama approach of no net stimulus when you add the smallish federal stimulus minus state government cuts. Also their central bank cranked up QE higher than our Fed, and their politicians didn't run around freaking out about "debasing the currency". Read about it here http://www.washingtonpost.com/business/economy/five-economic-lessons-from-sweden-the-rock-star-of-the-recovery/2011/06/21/AGyuJ3iH_story.html?nav=emailpage http://www.washingtonpost.com/business/economy/five-economic...
- pragmatic 15y ago
  Fantastic point. I don't think enough people understand that Keynes doens't work if you are running a massive deficit all the time. In good times you _need_ to be solvent so that in bad times, extra gov't spending will actually have an effect. The US is not able to implement Keynesian policies b/c we borrow and spend constantly.
  - watchandwait 15y ago
    None of the American "Keynesians" calling for deficit spending today called for a balanced budget 5 years ago during the boom. I'd argue there are no true Keynesians, just politicians looking for an excuse to continue spending.
    - guelo 15y ago
      If you didn't hear liberals complaining that we couldn't afford the wars and Bush's tax cuts then you weren't paying attention.
- beatpanda 15y ago
  In fairness, that wasn't the "Obama approach". The stimulus was whittled down by the Congress.
larrik 15y ago
Sweden also seems to offer free college tuition, even for advanced degrees. Coincidence? Maybe... It's too bad you apparently can go to jail there if you have sex with someone, they regret it, and then a politician wants to make that a crime afterwards.
- Vivtek 15y ago
  ... and you refuse to comply with requests for investigation and flee the country.
  - marshray 15y ago
    If you're referring to Assange, as I understand it he'd already spoken with prosecutors once and they explicitly declined to prosecute. He was not under any order not to leave, so he didn't "flee the country". I would probably decline to return to some country for my transparently politically-motivated prosecution too.
icegreentea 15y ago
60% is the something like the global average.
pragmatic 15y ago
The Swedes are just ahead of the curve. They crashed in the 90's: http://en.wikipedia.org/wiki/Economy_of_Sweden http://en.wikipedia.org/wiki/Economy_of_Sweden Then they reformed and recovered.
pragmatic 15y ago
Can any Swedes confirm/deny this summary of the pension plan: http://www.heritage.org/research/reports/2000/06/pension-reform-in-sweden-lessons-for-american-policymakers http://www.heritage.org/research/reports/2000/06/pension-ref... "Partial privatization. Workers can invest 2.5 percentage points of the 18.5 percent of their income that they must set aside for retirement. Soon workers will be able to choose the pension fund into which the funds will go." Any talk of even partial privatization in the US gets the old folks quite worked up. Political scare tactics and such. Plus a healthy (and not unwarranted) distrust of Wall Street that would love to get it's filthy paws on _even more_ retirement money.
- CaptainZapp 15y ago
  I can't speak for Sweden, but for Switzerland where your pension rests on three pillars. Two of them mandatory and one where you're free to invest, but receive tax benefits if you do: Pillar 1 is called AHV (AVS in French). This is the responsibility of the federal government and there are no plans to privatize this; ever. Since there is a maximum payout, which is quite low it has a certain wealth redistribution component. That is: When you make a lot of money you pay a percentage into the fund, which is a percentage of your earnings. So, a person making a lot of money pays more into it, but since the payout is capped at a fairly low level, he may get the same benefits as somebody who earned much less and thus payed much less into the fund Pillar 2 is the actual pension plan, which is mandatory. Every company must insure their employees and big companies run their own schemes. While those funds are privately run, there are strong restrictions in place how they can invest the money of their insureds. The difference to the AHV is that the payout depends on the amount you payed in over your lifetime as a worker. Payout is based on a formula and the age of retirement can be dependent on the insurer. Employees don't have a choice about which pension plan they have and there are differences in quality. I could imagine that the system in Sweden is comparable (private, but very restricted in how they invest) but must admit that I'm assuming here. Pillar 3, incidentally called pillar 3 (3. Säule) is not mandatory. You can pay a maximum yearly amount into a fund, a bank account or to an insurer (~ 7500$ if employed ~ 38000$ if you're not part of a pillar 2 pension plan) and this amount is fully tax deductible. The string is that you can only get it out when you turn 60. There are ways to get the money out before that. Either when you invest in a house, or apartment or when you leave the country for good. Same goes for the pillar 2 assets accumulated. There's no such thing that a company can legally pull an Enron and invest the assets of their employees into their own company. I know that the Swiss system is considered excellent. The dutch system is considered even better, but I have no expertise to discuss it.
chrismealy 15y ago
60% is the magic number from Reinhart and Rogoff. Their work is flawed because they failed to distinguish between public debt borrowed in a country's own currency versus other currencies.

From the explanation : The chart below shows OECD calculations of what it would take governments to reduce gross debt to 60% of GDP by 2026. This is around the level considered healthy and is also the ratio set by the widely ignored Maastricht agreement, which is meant to govern debt in the European Union. It is not pretty.

lucasjung 15y ago

My understanding is that Sweden has drawn a significant portion of its revenues from North Sea oil, but that they are anticipating significant declines in production (and therefore revenue). They are preparing for this by grdually restructuring (read: cutting) government services and benefits to fit their anticipated revenue, with the added benefit that doing so in advance allows them to build up a decent nest-egg. In other words, they are doing something incredibly rare for a government: budgeting in a responsible and rational manner.

arethuza 15y ago
I didn't know that Sweden had any oil - unlike Norway next door that is practically floating on the stuff.
mseebach 15y ago
I couldn't find anything definitive on Google, but I don't think Sweden has that much oil, and if they do, it's not in the North Sea (which isn't bordering Sweden). (You might have meant to refer to Norway or Denmark which fits your description quite well)
RuadhanMc 15y ago
Pretty sure that you are thinking of Norway. Sweden doesn't do oil in any serious way. Sweden is trying to be oil-free. http://en.wikipedia.org/wiki/Making_Sweden_an_Oil-Free_Society http://en.wikipedia.org/wiki/Making_Sweden_an_Oil-Free_Socie... According to Wikipedia (http://en.wikipedia.org/wiki/Economy_of_Sweden http://en.wikipedia.org/wiki/Economy_of_Sweden) Sweden's main industries are: telecommunications equipment, wood pulp and paper products, motor vehicles, pharmaceutical products, iron and steel. That's quite a nice spread.
- bh42222 15y ago
  Sweden's main industries are: telecommunications equipment, wood pulp and paper products, motor vehicles, pharmaceutical products, iron and steel. And ABBA. (I'm only half joking the royalties on their music equal quite a few Volvos.)
  - bh42222 15y ago
    Replying to myself because someone on the Internet is wrong! ... between 1974 and 1982,they earned nearly twice the GNP of Sweden From: http://www.artistfacts.com/detail.php?id=322 http://www.artistfacts.com/detail.php?id=322
    - RuadhanMc 15y ago
      That is pretty staggering... This too: "When ABBA was active, only the Volvo car company made more money in Sweden.".
Tuna-Fish 15y ago
Sweden has practically no oil production at all, and never had any. The Scandinavian country with large oil reserves is Norway. What you are talking about doesn't even describe Norway properly -- they have largely not spent the revenue they got from oil. Instead, it has been collected into a sovereign wealth fund. At present, the fund holds some $100 000 for every Norwegian. Future decline of oil profits will be covered by the investment income from the fund. There hasn't been any cutting of government services to fit revenues -- there hasn't been any need to. Sweden, like the other Scandinavian countries, has held a responsible and rational budget for most of it's existence as a democratic country. So while it might be incredibly rare for governments worldwide, for some reason it seems that the Scandinavians can make the idea of a well-run welfare state work. I have yet to figure out why they can do it and most of the rest of the world seemingly can't.
- furyg3 15y ago
  The Norway situation you describe is correct. Normally an influx of wealth from oil (or other natural resources, even humanitarian aid) will suppress the country's abilities to be competitive in manufacturing or other (non-oil) sectors. It's often called a "Resource Curse" or "Dutch Disease". Avoiding the curse requires not to spending the oil money directly... and instead to invest it and spend only the interest.
- henrikschroder 15y ago
  > I have yet to figure out why they can do it and most of the rest of the world seemingly can't. It helps a lot to have a small country with an ethnically homogenous population, extremely low corruption, high tax morale, and high public trust of government offices and institutions.
  - bh42222 15y ago
    It helps a lot to have a small country Maybe, or a big but dictatorial country like China. an ethnically homogenous population Care to elaborate? Would you consider countries such as Switzerland, Canada, Taiwan, and Singapore ethnically homogeneous? extremely low corruption, high tax morale, and high public trust of government offices and institutions. Chicken and egg problem - High tax compliance and trust in government come from having a reasonable tax rate from which you get a lot of effective government services. Low corruption is a pre-requisite for trust in government institutions. I bet what also helps is not having a culture of cousin marriage, that seems to create a culture where is much more difficult to have any kind of trust with people outside of your clan. I think the modern well functioning democracy is to a very large degree a result of complex game theory. You don't have to look back much more the 2 centuries, to see thousands of years of European history that's full of corruption, lawlessness, crushing tax rates, all the typical modern day 3rd world problems and then some. If just being Swedish led to modern Sweden, Swedish history would be a lot less interesting. For one, it would almost certainly be entirely Viking free.

mixmax 15y ago

The Swedes had a serious financial crisis in the mid 90's and learnt their lesson. They've been running a sound fiscal policy ever since.

arethuza 15y ago
Maybe the Greeks should invite the Swedes to run their country for them!
- bh42222 15y ago
  Well.... the EU is sort of, kind of, like that. The treaty of Maastricht, EU regulations superseding national regulations, it's all supposed bring rich north western European style government to the poorer more chaotic south and east parts of Europe. <sarcasm>And it's working out great!</sarcasm>
- henrikschroder 15y ago
  That wouldn't help, the underlying problem is that the general tax morale is much lower in Greece compared to Sweden.

guelo 15y ago

The Swedes just used basic Keynesian economics to fight the recession. They went into the recession with the budget in good shape, unlike the Bush approach of deficits and expensive wars. Then when the recession hit their huge welfare system kicked into high gear plus they added a stimulus of tax cuts and infrastructure projects, unlike the Obama approach of no net stimulus when you add the smallish federal stimulus minus state government cuts. Also their central bank cranked up QE higher than our Fed, and their politicians didn't run around freaking out about "debasing the currency". Read about it here http://www.washingtonpost.com/business/economy/five-economic-lessons-from-sweden-the-rock-star-of-the-recovery/2011/06/21/AGyuJ3iH_story.html?nav=emailpage http://www.washingtonpost.com/business/economy/five-economic...

pragmatic 15y ago
Fantastic point. I don't think enough people understand that Keynes doens't work if you are running a massive deficit all the time. In good times you _need_ to be solvent so that in bad times, extra gov't spending will actually have an effect. The US is not able to implement Keynesian policies b/c we borrow and spend constantly.
- watchandwait 15y ago
  None of the American "Keynesians" calling for deficit spending today called for a balanced budget 5 years ago during the boom. I'd argue there are no true Keynesians, just politicians looking for an excuse to continue spending.
  - guelo 15y ago
    If you didn't hear liberals complaining that we couldn't afford the wars and Bush's tax cuts then you weren't paying attention.
beatpanda 15y ago
In fairness, that wasn't the "Obama approach". The stimulus was whittled down by the Congress.

larrik 15y ago

Sweden also seems to offer free college tuition, even for advanced degrees. Coincidence? Maybe... It's too bad you apparently can go to jail there if you have sex with someone, they regret it, and then a politician wants to make that a crime afterwards.

Vivtek 15y ago
... and you refuse to comply with requests for investigation and flee the country.
- marshray 15y ago
  If you're referring to Assange, as I understand it he'd already spoken with prosecutors once and they explicitly declined to prosecute. He was not under any order not to leave, so he didn't "flee the country". I would probably decline to return to some country for my transparently politically-motivated prosecution too.

icegreentea 15y ago

60% is the something like the global average.

pragmatic 15y ago

The Swedes are just ahead of the curve. They crashed in the 90's: http://en.wikipedia.org/wiki/Economy_of_Sweden http://en.wikipedia.org/wiki/Economy_of_Sweden Then they reformed and recovered.

pragmatic 15y ago

Can any Swedes confirm/deny this summary of the pension plan: http://www.heritage.org/research/reports/2000/06/pension-reform-in-sweden-lessons-for-american-policymakers http://www.heritage.org/research/reports/2000/06/pension-ref... "Partial privatization. Workers can invest 2.5 percentage points of the 18.5 percent of their income that they must set aside for retirement. Soon workers will be able to choose the pension fund into which the funds will go." Any talk of even partial privatization in the US gets the old folks quite worked up. Political scare tactics and such. Plus a healthy (and not unwarranted) distrust of Wall Street that would love to get it's filthy paws on _even more_ retirement money.

CaptainZapp 15y ago
I can't speak for Sweden, but for Switzerland where your pension rests on three pillars. Two of them mandatory and one where you're free to invest, but receive tax benefits if you do: Pillar 1 is called AHV (AVS in French). This is the responsibility of the federal government and there are no plans to privatize this; ever. Since there is a maximum payout, which is quite low it has a certain wealth redistribution component. That is: When you make a lot of money you pay a percentage into the fund, which is a percentage of your earnings. So, a person making a lot of money pays more into it, but since the payout is capped at a fairly low level, he may get the same benefits as somebody who earned much less and thus payed much less into the fund Pillar 2 is the actual pension plan, which is mandatory. Every company must insure their employees and big companies run their own schemes. While those funds are privately run, there are strong restrictions in place how they can invest the money of their insureds. The difference to the AHV is that the payout depends on the amount you payed in over your lifetime as a worker. Payout is based on a formula and the age of retirement can be dependent on the insurer. Employees don't have a choice about which pension plan they have and there are differences in quality. I could imagine that the system in Sweden is comparable (private, but very restricted in how they invest) but must admit that I'm assuming here. Pillar 3, incidentally called pillar 3 (3. Säule) is not mandatory. You can pay a maximum yearly amount into a fund, a bank account or to an insurer (~ 7500$ if employed ~ 38000$ if you're not part of a pillar 2 pension plan) and this amount is fully tax deductible. The string is that you can only get it out when you turn 60. There are ways to get the money out before that. Either when you invest in a house, or apartment or when you leave the country for good. Same goes for the pillar 2 assets accumulated. There's no such thing that a company can legally pull an Enron and invest the assets of their employees into their own company. I know that the Swiss system is considered excellent. The dutch system is considered even better, but I have no expertise to discuss it.

chrismealy 15y ago

60% is the magic number from Reinhart and Rogoff. Their work is flawed because they failed to distinguish between public debt borrowed in a country's own currency versus other currencies.