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Swedish Welfare - Impressions and Expressions of Ijon
July 11th, 2006
12:48 am


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Swedish Welfare
Here's an interesting overview of the rise and apparent-slow-fall of the Swedish welfare state I've read recently. I'd like to know more about macro-economy, but can't allocate real time to study it.

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(8 comments | Leave a comment)

Date:July 11th, 2006 04:59 pm (UTC)
Your reference to macroeconomics here seems misplaced to me. I've just skimmed the article to which you refer, but it really isn't one that most economists would take as on or employing macroeconomic thinking.

Although economists have long studied aggregates, macroeconomics became a distinct discipline when economists such as Keynes insisted that the relationships amongst aggregates such as over-all unemployment and over-all levels of production need not make reference to smaller-scale relationships. Keynes, indeed, insisted that such smaller-scale relationships were insufficient and largely irrelevant, and when the Keynesians came to power they tried to prove this by teaching macroeconomics before microeconomics. Even more recently, when almost all economists acknowledge that microfoundations shoud be found for macroeconomics, the intention of most would be to derive relationships that did not subsequently require frequent return to microeconomic ponderings.

My own take on the study of macroeconomics is that it is for the most part a history of theories that have failed or become largely irrelevant. (One sort of irrelevancy developed when it became impossible to reliably measure the over-all supply of money.)
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Date:July 11th, 2006 07:48 pm (UTC)
Thanks for the insight! This is how ignorant I am of economics... But your comments whet my appetite even more! Can you recommend a good textbook or an Intelligent-Person's-Guide-to kind of book on economics? (Preferably without relying too deeply on phenomena or legal issues peculiar to the US economy.)
Date:July 11th, 2006 08:04 pm (UTC)
Roughly how much reading would you have in mind? What is your attitude about mathematical presentation of such a subject? Towards understanding what sorts of issues would you like to apply what you gain?

I doubt that I'll know an ideal book no matter how you answer, but I'll try to suggest something worthwhile.
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Date:July 11th, 2006 11:30 pm (UTC)
there's a couple of writers.

Anthony Gideon's "third way" could be a good one. he's one Tony Blair's spiritual guides if so to speak.

the third way has to do with the path that social democratic parties (such as the Labour party in the UK) chose to follow after realising that their policy's failed and their ties with worker unions werent that good either. on the other hand they didnt want to be seen as the conservatives - neo liberals.

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Date:July 11th, 2006 05:55 pm (UTC)
While the article is indeed well-written, it appears to merely reiterate points that capitalists usually use to discredit the idea of well-fare state:
1. If you can earn money without working (i.e. - unemployment benefits) people will not work.
2. If working people notice that too much of their wages is going to support non-working people, they will become very unhappy and may stop working too (or just stop paying taxes).
3. The higher minimum wage goes, the more unemployed you have.

Of these, point #3 is the only one that has actual support. The others are just educated-but-biased guesses.
Some may argue that while minimum wages indeed cause some unemployment, this is a reasonable price to pay in order to prevent blatant exploitation of workers.

In short, the article did not really contain new insights, and I'd look for a bit more supporting information before deciding that the well-fare state is indeed going the way of the Dodo.
Date:July 11th, 2006 08:51 pm (UTC)
First, since the word is used for so many different things (and has been since its inception) you need to define capitalist or use some other term, or there will be especially limited hope in understanding what you mean.

Second, the article presents a history of the Swedish welfare state; that history is taken as an illustration of the author's points. To wave away those points, one show that they do not fit the history, or at least provide an alternate structure of explanation.

Third, your characterizations of the points is just plain sloppy. The author wouldn't stand pleased, nor his argument undermined, if some trivial amount of work were required to receive transfer payments; and the second point as you've stated it would be both tautologically true and rather useless.

Fourth, one would like to know what you mean by actual support. When it comes to minimum wages, the nature of the support is primarily theoretical. Unambiguous direct empirical evidence is difficult to assemble. (Note the mess caused by Card and Krueger.) But claims that effort is responsive to reward are supported by theory and by every-day experience (indeed, or measure of rewards is ultimately a reflection of the responses that they elicit!) and by controlled experimentation; claims that people observe others and mimic succesful behavior are likewise supported. And, while I'm not familiar with a theoretical model of transfer resentment that isn't ad hoc, certainly ever-day experience and controlled experiment support its commonality.

Fifth, of anyone who'd actually argue (rather than just baldly claiming) that minimum wage laws were a reasonable price to pay to prevent blatant exploitation of workers, I'd like to ask the following:
  • What, here, constitutes exploitation?
  • What makes blatant exploitation worse than covert exploitation?
  • What distinguishes reasonable from unreasonable prices?
  • Is it acceptable to reduce the exploitation (however identified) of workers exactly by reducing the number of workers?
  • What do minimum wage laws do to the exploitation of the unemployed?
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Date:July 11th, 2006 11:27 pm (UTC)
how about the fact that the lower the corporate tax in a country, the higher the investment in industries which causes more employment.

in a welfare states - corporate tax is a levy to raise funds for state activities.

in any case, lets face it - state intervention is unefficiant. isnt the bituach leumi enough of an example?
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Date:July 11th, 2006 11:54 pm (UTC)
as far as i can say about macro economy, there are 3 forms (though off course nations will be moving in between these forms).

1. the minimalist state with state intervention only in what is a must (security for example) and leaving other fields open for private corps to act in (for example - private education and not public education, no regulation of communication market etc).

2. the modern state which tries not to interfere that much but does have a grip over most issue's relating to an individual's life and in addition will regulate markets which are seen as crucial or where it doesnt want cut-throat competition (I see Israel sitting in this spot)

3. State planned economy - see communist countries (yes, even China to a limited extent though they have done the impossible so far by combining a centralistic political system with an open market).

some basic rules:
1. open markets means open political systems (except for the china case)

2. resource rich countries is not a neccarily good thing. what do i mean:
2.A. the dutch disease:
2.A.1 The Netherlands found OIL (1970's i think) and went all happy.
2.A.2 The new found resource made the nation rich with foriegn currancy which now came from this new industry.
2.A.3 The profits and market optimism strengthened the Gilden, as a result Export became less profitable and all markets but the oil industry went into depression.
2.A.4 Unemployment rose, the gilden went down again and eventully a new market balance was found.
2.A.5 A couple of years later when the Norwegians found Oil... they saw what happened to the Dutch and so they channeled all the Oil profits to saving accounts outside norway, leaving it there for a rainy day (imagine that!!)
2.B. under develop countries are better off without resources then with resources as having resources will cause dependency and corruption created around the mining of resource. while resource poor countries which are underdevelop will be forced into economic reform early (no money) and will hence invest in manpower quality - See Israel, Japan and Malaysia for the good, Nigeria, Ghana, Venezuela for the bad.

If you want - I can mail you a paper i did in winter term in a very intresting course titled: International Business Environment. the paper had to do with the question: "Will the rich developed economies merge into one model?" (rich developed countries have primarily 2 models - liberal market economy (usa, uk) and co-ordinated market economy (germany, sweden, japan) and many variants in between).
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