29 August 2023

Socialist? In fact, Sweden has a long history of pioneer capitalism


Today, many people – wrongly – associate Sweden with the term ‘democratic socialism’. But the ‘socialist’ period in Sweden did not last very long, roughly from 1970 to 1990. The period before that, from 1870 to 1970, was characterised by ‘decentralisation and limited government’ and during these years, Sweden had one of the least regulated economies in Europe, as the renowned Swedish economist Assar Lindbeck has shown.

Adam Smith’s book The Wealth of Nations, published in 1776, has become famous all over the world, but eleven years earlier (1765), the Finnish-Swedish economist Anders Chydenius published a booklet, Den nationella vinsten (in English: The National Gain), which presented very similar thoughts to those contained in Smith’s book. The Swedish book was very thin (36 pages) and not comparable to Smith’s monumental work, but the central theses were identical. Chydenius explains that politicians lack the knowledge to recognise which businesses have the greatest chances of success. When government decisions favour a particular business, he argues, people are drawn to it who would otherwise engage in more productive activities elsewhere in the economy. He points out that parts of Sweden that had more free-market economic policies were also more successful economically at the time. Like Smith, Anders Chydenius advocated free trade and opposed excessive government regulation.

In a recent paper on The Evolution of the Swedish Market Model, the economists Nima Sanandaji, Victor Ström, Mouna Esmaeilzadeh and Saeid Esmaeilzadeh show that ‘Sweden historically pioneered many aspects of a modern market economy’. One example: Sweden hosted the world’s first public company, which financed the Falun copper mine, which supplied two-thirds of the world’s copper production in the seventeenth century. This mine is the origin of the first public company in the world. The first known share in the Falun mine was awarded in 1288. Companies with shares are a cornerstone of the modern capitalist market economy, ‘and it is relevant in an account of the evolution of the Swedish market model to point out that the oldest known company with shares in the world has roots in the country,’ the four authors explain.

They also point out that the first bank to issue credit notes and the first central bank were also established in Sweden. ‘This is again an example of how the Swedish market model has influenced the development of global economics’. Sweden was also the first county to allow women to pursue professions and own businesses.

And how are things today? After the socialist aberrations of the 1970s and 1980s, Sweden has returned to the capitalist path. An international survey of 34 countries by the polling firm Ipsos MORI for my book In Defense of Capitalism on popular perceptions of the market economy and capitalism found that Sweden was among the group of countries where support for the market economy is at its strongest. 

Swedes were presented with six statements about a ‘good economy’ – three that supported a strong influence of the state and three that supported a free market economy. An analysis of the responses to the pro-state and pro-market statements reveals that statements in favour of a stronger role for the government meet with 21% approval, compared with 26% approval for pro-market statements in favour of a reduced role for the government. Dividing the average of positive statements by the average of negative statements yields a coefficient of 1.21. A coefficient greater than 1.0 mean that pro-economic freedom attitudes dominate, a coefficient less than 1.0 mean that anti-economic freedom opinions dominate.

In only six of the 34 countries in which the survey was conducted was support for the market economy even greater than in Sweden. Support did decline somewhat when the word ‘capitalism’ was used, but even then, support for capitalism was significantly higher in Sweden than in all other European countries – with the exception of the former socialist countries Poland and the Czech Republic. In our survey, there are only nine countries that exhibit more pro-capitalist tendencies than Sweden, in contrast to 24 countries where attitudes toward capitalism are negative. The most positive attitudes toward capitalism are held by people in Poland, the USA and South Korea.

In 10th place in the 2023 index, Sweden is well ahead of the USA (25th). What is particularly remarkable is how Sweden’s score has increased. Sweden gained a total of 16 points over the past 28 years – rising from 61.4 points in 1995 to 77.5 points in 2023. Only a handful of countries, including Vietnam and Poland, saw a somewhat larger increase. In comparison, the United States lost six points during the same period and, with a score of 70.6 points, is now well behind Sweden.

It’s tempting to conclude from this that the more economic freedom people get, the more they like it, but perhaps it’s just a case of Swedes getting back to their roots.

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Rainer Zitelmann is the author of 'In Defence of Capitalism'

Columns are the author's own opinion and do not necessarily reflect the views of CapX