By Casey Lartigue, Jr.
The message was clear: “Don’t do what we’re doing” when it comes to welfare and economic policies.
That’s what (former) Senator Franco Debendetti and lawyer Alessandro
De Nicola of Italy, and University of Athens professor Aristides Hatzis
said in policy forums organized by the Center for Free Enterprise (CFE)
in Seoul last August and October. Professor Hatzis took it one step
further, in a speech that caught the attention of Korean president Lee
Myung-bak: “If you see Greece doing something, then do the opposite
“But what about Sweden” was the response from those pushing for
universal welfare policies in Korea. That has become the common refrain
from politicians and academics around the world for several decades in
the West and recently in Korea. “What about Sweden?”
With that in mind, CFE invited Johnny Munkhammar, a member of the
Moderate Party in the Parliament of Sweden, to Seoul from March 5 to 7.
Munkhammar surprised the audience and Korean media with his talk,
“Sweden’s Welfare State: Fact and Fiction.”
Munkhammar said the lesson to learn is that free markets created
success in Sweden and that the country’s turn to bigger government led
to an array of problems that Sweden is trying to recover from now. He
cites the 1870s as a turning point in Swedish history, when, rather than
hiding behind trade protectionism and the “infant industry” argument
favored by popular Korean author Chang Ha-joon, Sweden opened its
economy to the world with free trade and economic freedom.
That continued for a century until the 1970s when the welfare state
was greatly expanded and increased regulations and taxes were imposed on
the economy. Sweden began to reverse that in the 1990s, implementing
reforms that would have made Adam Smith proud: state-owned enterprises
were sold; public monopolies in health and education were replaced with
free competition; product and financial markets were deregulated; and
the central bank was made independent.
Universal welfare advocates point to Sweden’s generous policies, but
not Sweden’s history of free markets and its recent switch back. It is
unlikely that South Koreans will be ready to accept such reforms during
this election cycle. For example, Munkhammar shocked reporters in
one-on-one interviews when he informed them that Sweden has no
inheritance tax (it was abolished in 2005). In contrast, Korea’s
emotional debate on “polarization” makes it unlikely that local
politicians will push to repeal or lower estate taxes.
Sweden has few restrictions on trade imports. In contrast, since the
late 1980s, Koreans have fiercely battled against efforts to open
various markets and, even now, opposition lawmakers are trying to
nullify the KORUS FTA. Sweden doesn’t have a wealth tax, but Korea’s
majority party recently implemented the Buffett tax and the minor
parties are threatening to impose more taxes if they win April 11’s
Cherry-picking in research and politics is the process of ignoring
information that may undercut one’s argument. Welfare state advocates
point to Sweden’s welfare state, but ignore Sweden’s historical model of
having free markets and free trade.
If the proponents of a universal welfare state are serious about
following Sweden’s model, then they might want to consider the following
grand compromise based on Sweden’s history: Eliminate tariffs and
barriers on imports, eliminate wealth and inheritance taxes, eliminate
subsidies for business with more of a laissez-faire approach, set up a
school voucher program, and sell off state enterprises. After that is
done, set up a universal welfare state.
But that’s only if they are serious about following the Swedish
economic and welfare model. It is more likely that they will keep
perpetuating the myth about Sweden in order to keep pushing for
universal welfare policies while blocking market liberalization.
The writer is director for international relations at the Center
for Free Enterprise in Seoul, Korea. He blogs at cfekorea.com and can be
reached at cjl(at)cfe.org.
This article was originally published in the Korea Times on March 14, 2012.
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