Lesson 4: The Mirage of Swedish Socialism

Introduction

For half a century, Sweden has been associated with socialism. When asked to give an example of a successful socialist country, advocates of socialism often mention Sweden. This image of Sweden became fashionable in the 1970s, but it is outdated. In this lesson students learn how before their experiment with socialism in the 1970s and 80s, Sweden was one of the most open economies in the world.  Since socialism, they have returned to a very open economy with a large welfare state paid for by the population at large.

Key Terms

Budget Deficit
The situation where expenditures exceed tax revenues.

Budget Surplus
The situations where tax revenues exceed expenditures.

Inflation
A general increase in the price level.

Nationalization
The process of taking private property and transferring ownership to the state.

Public Debt
The total amount owed by the national government to those from whom it has borrowed to finance the accumulated difference between annual budget deficits and annual budget surpluses.

Socialism
A society in which the state controls resources and makes decisions about production and equitable distribution.

Taxes
Payments that individuals and businesses are required to make to local, state, or national governments.

Objectives

Students will be able to 

• Identify examples of how entrepreneurship was negatively affected by Sweden’s move toward socialism.
• Describe the relationship between the move to socialism and increased budget deficits.
• Explain how a transition back to markets alleviated the Swedish economic crisis.

Voluntary National Content Standards in Economics

CONTENT STANDARD 11: Money and Inflation

Money makes it easier to trade, borrow, save, invest, and compare the value of goods and
services. The amount of money in the economy affects the overall price level. Inflation is
an increase in the overall price level that reduces the value of money. 

• Benchmark 5:  In the long-run, inflation results from increases in a nation’s money supply that exceed increases in its output of goods and services.

CONTENT STANDARD 14: Entrepreneurship

Entrepreneurs take on the calculated risk of starting new businesses, either by embarking on new ventures similar to existing ones or by introducing new innovations. Entrepreneurial innovation is an important source of economic growth. 

• Benchmark 1: Entrepreneurial decisions affect job opportunities.
• Benchmark 2: Entrepreneurial decisions are influenced by tax, regulatory, education, and research support policies.
• Benchmark 3: Productivity and efficiency gains that result from innovative practices of entrepreneurs foster long term economic growth.

CONTENT STANDARD 16: Role of Government and Market Failure

There is an economic role for government in a market economy whenever the benefits of a government policy outweighs its costs. Governments often provide for national defense, address environmental concerns, define and protect property rights, and attempt to make markets more competitive. Most government policies also have direct or indirect effects on people’s incomes. 

• Benchmark 9: Governments often redistribute income directly when individuals or interest groups are not satisfied with the income distribution resulting from markets; governments also redistribute income indirectly as side-effects of other government actions that affect prices or output levels for various goods and services.

Time Required

45 minutes