I am from Sweden, and after having started my Mexican stay with exchange studies, I am now working. I have no problems formulating myself in Spanish, but in order to make may argumentation smoother I will keep to English.

I have read several of your participating texts, and with great interest. I will introduce myself by some thoughts from yesterday night’s discussion with a friend, about the classical subject of neo-liberalism vs. socialism. With a special focus on the subject I know best in this matter, my own country, I hope to avoid the risk of repetition from what you may have already discussed in this list.

First, I am of the opinion that everybody are to a certain extent formed by their ambient: and grown up in a country of high taxes I find it natural to contribute to that system by paying high taxes, whereas I would, perhaps, be of another opinion as grown up in another country. My newly awaken interest for the question of social welfare is a result of the reaction I have met by many international friends, towards Sweden’s high taxes (topping or nearly topping the world comparison, by an average country-tax level of around 55%, including social tax, income tax and VAT or IVA). The high taxes are politically motivated by the broad social welfare system.

However, this system is controversial, especially in times of recession, which struck Sweden hard in 1991 and onward.

Apart from the ideological critic of letting the group of "better-off citizens" (and companies) pay to the "worse-off", another principal point of critics, often expressed by neo-liberal groups, is the inherent risk of misuse by "parasites" (social aid receivers which are actually not in need for support). This is a problem. However, the principal debate in Sweden has a focus on the third point, that the welfare system itself (all these people employed in the system) has grown too big, in the sense that it requires too much resources.

The problem, as I see it, is the large size of the public sector, which by ideological (under the socialists) and real politic reasons (such as improving the employment numbers etc.), grew large in the 70’s and 80’s. However, in the context of Sweden’s 1995 entrance in the European Union (with its conditions of budget control), as well as increasing international competition, the economy have done less good during the 90’s, and the country have lost a great deal in competitiveness, as compared with the 60’s.

One great difference between now and then is the dramatic growth of the public sector. The system have been financed by raised taxes, which have some implications for the economy.

The first is best explained by the "Laffer curve", which explanatory value is the illustration that too high tax levels in fact decreases the governments total tax incomes, by reducing the work force’s incentive to work, and thereby their contribution to the governments budget (the Laffer curve have received unfair critic due to its misuse by Ronald Reagan, who referred to the curve in order to support US tariff cuts, which were just substituted by international loans to support the 80’s cold war expenses).

Another problem is the growth of an informal sector, also resulting in lesser tax incomes. The third problem, which is the one most debated in Sweden, is that important major companies move abroad to countries with less tax burden. This has already happened. Nevertheless, it is debated whether this is really a great risk or not, as the company tax is actually low as opposed to the private income tax.

The economic problems of the 90’s have put pressure on the social welfare expenditures, as the high tax levels are considered to be the major problem. The question that have shaken the Swedish population is if the welfare system has to be abandoned, and if so, if a neo-liberal system of the US-type is the only option for long term growth?

I think not. Of course one can not neglect the competitive nature of the globalized economy, and the argument that the country that offer the most investment attractive climate will attract the important companies, which by the lower tax rates will be able to offer the most competitive prices on the world market. Thereby, companies in high tax countries would loose ground in the long run, and all economies would have to adapt to a low tax level (another issue is that regionalization and globalization themselves make the country-concept less important, but the localization discussion, however, continues to be the same).

On the other hand, Holland, for example, is a good example of a country which combines high GDP/per capita numbers and a sophisticated social welfare system. I think the solution in the long run to prevail social problems (with potential threat for the political as well as economical system) but in the same time support economic growth, is a social welfare system supported by taxes, but in the same time subject to competition by a contract system between the state and para state organizations.

This system have been experimented in Sweden, with partly bad result (when free enterprise profit-hunger has lowered quality), but with better auditing this may be helped. And as I see it, a system which gains confidence from the taxpayers, sufficiently to motivate relatively though not extremely high tax levels, is the only way to support a broad welfare system.

Per Stromberg