Yet even with deep government involvement in the welfare of its citizens, Sweden, unlike France, has a large private sector. The government does not make extensive laws on corporate hiring, but it does require benefits and picks up the tab of unemployment, allowing companies more economic maneuverability without sacrificing welfare benefits. Thus, even though Swedish unemployment is speculated to be higher than represented in government reports, it is still less than the double digit figures endured in France. By avoiding the responsibilities of overly regulated industry while still capitalizing on the returns of high tax rates, Sweden’s government manages to support both the private sector and its welfare ledgers.

A final contrast between the Nordic country and its southern counterparts is national unity. With a largely homogenous population, Sweden’s view of community is unique. Unlike France, which is a nation historically marked by prejudice and racial conflict, Swedes are more willing to submit to the large tax rates that support the large government payroll and expenditures.

Today, the government of France is caught in a tight niche of possible actions. On one hand, if it moves to increase employment through deregulation, worker unions will rise in anger at the loss of benefits. Moving to sustain benefits by increasing taxes will lead to much of the same from the general populace. Yet doing nothing will only serve to fuel criticisms of the current regime, link it with the past, and drag it down as an archaic good-for-naught political administration. Sweden’s government has so far managed to avoid this fate, but it cannot do so forever.

Heading toward Trouble?

Government figures and case studies against other nations present a rosy picture of Sweden in the short term, but the Swedish economy will not be nearly as idyllic in the long run. Despite a decade of reform, many dormant problems remain and have started to manifest themselves in recent years. High tax rates and government programs continue to create distortions, and the issues of the past are beginning to resurface. Ironically, the same creative government involvement that has saved Sweden from the social unrest of other European welfare states is the factor that has the most potential to condemn it in the future.

Government injection is not sustainable in the long run. The private sector may be prospering now, but with the aging population, employment in the private sector will no longer be as high in the future. Because employee benefits are so generous, many abuse the system by faking illnesses and escaping work. Absenteeism is the largest unaccounted-for contributor to the discrepancy between government data and actual statistics. Also fueling the inaccuracy is the number of people either supported by or working for the government. Especially considering the massive bureaucracy that is the Swedish government, and the numerous people who are on the government payroll just for the sake of being employed, it is clear that the 5 percent unemployment rate is experiencing unnatural boosts from the government, not all of which are productive or beneficial.

Transfer payments in the form of welfare and pension benefits also contribute to the inefficiencies that are slowly rotting the core of this model. Because the government is taking so much money from certain citizens and gifting it to others, there is a corresponding loss of consumerism on the side of the former and loss of a drive for productivity on the latter. High taxes further decrease consumer spending, leading to the need of more government interference in the market and creating a cycle in the economy. While individually they have been ignored, all of these small factors of inefficiency aggregate and contribute to the ongoing harms inherent in the Swedish welfare model.

A new issue altogether is increased apathy toward the Swedish government. Decreasing voter turnout reflects a populace that cares less for its government. There are two possible explanations for this drop. First, the Swedish people could be disillusioned with the government and its policies, possibly heralding a fledgling discontentment that has in the past resulted in troubles for other welfare states. Once a country’s citizens are unhappy with governmental policy, they are much less likely to be pleased with paying for it. This could prove to be a disrupting factor in the seemingly well-run model.

An alternative explanation lies in the changes and modernization taking place throughout the country. The Sweden of today features an increasingly diverse population. This results in less emotional and cultural investment in the nation as a whole, as well as less willingness to shoulder the burden of welfare for one’s fellow Swede. The homogeneity that differentiates this Nordic nation from other European welfare states is starting to dissipate, and with it possibly the security of the model’s success.

Time for Reform

Sweden progressed past its European counterparts over a decade ago in its first series of reforms. In order to overcome further hurdles, it needs to adopt the same adapting spirit seen in the years after 1993.

In 1997, economists recognized that the Swedish income tax was much more reasonable that year than it had been during the 1980s. Today, the same drastic change needs to be made once again. High taxes, while assisting in the maintenance of government programs, also fuel increased government spending and stifle consumer spending. It is mainly the former that will harm the system far into the future. The perceived sustainability of government spending, resulting from high tax revenue, lulls the government into a false sense of complacency.

In order to address this issue, the Swedish government needs to not only reduce taxes, but also cut government bureaucracy. This would lead the way in reducing the inflated government figures of employment and stability, thereby allowing Sweden’s actual economic reality to be observed. Furthermore, the Swedish government needs better regulations for sick leave, so as to create a greater disincentive toward unemployment and absenteeism. Not only would this system greatly reduce the inefficiencies of the government, it would also contribute to mitigating the high government spending problems. Because of the abuse of social programs, many welfare benefits are not serving to help the masses, but are instead being milked by undeserving individuals. With more stringent law enforcement and tighter individual accountability, social programs would be more effective and the government would reduce spending.