Edward Conard

Top Ten New York Times Bestselling Author

  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
Upside of Inequality Oxford Unintended Consequences

AI Summary. Sweden's welfare-state model faced a severe crisis in which unemployment rose from 1.4% to 9%, government spending exceeded 70% of national income, the budget deficit reached 12% of GDP, and the debt-to-GDP ratio doubled. Preceding the crisis were slow productivity growth, stagnant private-sector employment, and recurring current account deficits and currency devaluations.

Richard Freeman National Bureau of Economic Research
Date Posted:
Is Database:
Database

Sweden’s economic model faced a severe crisis in the early 1990s with unemployment surging to 14% and government spending exceeding 70% of national income.

Can a large welfare state sustain growth and employment?

Core argument: Swedish unemployment rose from 1.4% to 9% in the early 1990s crisis, with a further 5% in labor market programs, producing a 14% unemployment insurance rate.

The Swedish economic model, once seen as a successful form of capitalism, faced a severe crisis in the early 1990s. Unemployment surged from 1.4% to 9%, with an additional 5% in labor market programs, resulting in a 14% UI [Unemployment Insurance] rate. Government spending exceeded 70% of national income, and the budget deficit reached 12% of GDP. The debt-to-GDP ratio doubled between 1990 and 1994. Prior to the crisis, Sweden experienced slow productivity growth, stagnant private-sector employment since the 1960s, and recurring current account deficits leading to currency devaluations. These factors eroded Sweden's real per capita income position relative to other OECD countries, challenging the sustainability of its welfare state model.

Takeaways by Macro Roundup® AI

  1. Swedish unemployment rose from 1.4% to 9% in the early 1990s crisis, with a further 5% in labor market programs, producing a 14% unemployment insurance rate.
  2. Swedish government spending exceeded 70% of national income, the budget deficit reached 12% of GDP, and the debt-to-GDP ratio doubled between 1990 and 1994.
  3. Before the crisis, Sweden had slow productivity growth, private-sector employment stagnant since the 1960s, and recurring current account deficits that led to currency devaluations, eroding its real per capita income position relative to other OECD countries.

Richard Freeman on the failure of Swedish socialism

".... The Swedish economic model is perhaps the most ambitious and publicized effort by a capitalist market economy to develop a large and active welfare state. For a long time, many viewed the Swedish model as a more humane and successful form of capitalism and thus as a model for other countries to emulate. This view was shaken when Sweden fell into severe economic crisis in the early 1990s. Between 1990 and 1993, open unemployment rose from 1.4 percent to 9 percent of the labor force. An additional 5 percent of the labor force participated in labor market programs so that 14 percent of the labor force was jobless. The employment rate fell by 12 percentage points from its precrisis peak. The economic decline brought government spending above 70 percent of national income, raised the budget defi cit to 12 percent of gross domestic product (GDP), and forced the government to reduce public- sector employment. Between 1990 and 1994, the ratio of debt to GDP doubled. Even before the crisis, however, Sweden’s economic performance was not exemplary. Slow productivity growth had eroded Sweden’s position in real per capita income relative to other Organization for Economic Cooperation and Development (OECD) countries; private- sector employment had not grown since the 1960s; and recurring current account defi cits led to currency devaluations. The Swedish model was no longer anyone’s envy..."

Richard Freeman, Birgitta Swedenborg, and Robert Topel, "Reforming the Welfare State: Recovery and Beyond in Sweden," National Bureau of Economic Research, February 2010, https://www.nber.org/chapters/c5357.pdf

Showing 193 database articles primarily about Government Spending