Sweden and the Large State
Taleb argues that a high tax share can obscure how Nordic governments distribute power. In his account, local control over spending and room for private economic activity complicate the picture of a large centralized state.
THE IDEA
Sweden and the Large State
Aside from France, I was baffled by the puzzle of Sweden and other Nordic states, which are often offered as paragons of the large state “that works”—the government represents a large portion of the total economy. How could we have the happiest nation in the world, Denmark (assuming happiness is both measurable and desirable), and a monstrously large state? Is it that these countries are all smaller than the New York metropolitan area? Until my coauthor, the political scientist Mark Blyth, showed me that there, too, was a false narrative: it was almost the same story as in Switzerland (but with a worse climate and no good ski resorts). The state exists as a tax collector, but the money is spent in the communes themselves, directed by the communes—for, say, skills training locally determined as deemed necessary by the community themselves, to respond to private demand for workers. The economic elites have more freedom than in most other democracies—this is far from the statism one can assume from the outside.
Further, illustrating a case of gaining from disorder, Sweden and other Nordic countries experienced a severe recession at the end of the cold war, around 1990, to which they responded admirably with a policy of fiscal toughness, thus effectively shielding them from the severe financial crisis that took place about two decades later.
When to use it
Analyzing the economic structure of a country to understand the true distribution of government power and spending.
Evaluating policy responses to economic crises and their long-term impacts on resilience.
Comparing different models of governance (centralized vs. federal/decentralized) in terms of efficiency and citizen satisfaction.
Examining whether claims about government size distinguish taxation, spending, and the level at which decisions are made.
FROM THEORY TO EVERYDAY LIFE
In practice
Sweden's Decentralized Spending
Taleb describes tax revenue being spent under local direction, including skills training that responds to local demand for workers. His point is that the scale of taxation alone does not describe who makes spending decisions.
Sweden's Response to the 1990 Recession
Taleb credits fiscal reforms after an earlier recession with helping Sweden withstand the 2008 financial crisis. This is his account of how an earlier crisis prompted changes intended to improve resilience.
A MOMENT TO REFLECT
Put it to work.
How might the structure of state spending (centralized vs. local) affect perceptions of government size and efficiency?
In what ways could the Nordic model of decentralized decision-making be applied to other policy areas or countries?
Consider the concept of 'gaining from disorder'—how can a government use a crisis (like a recession) to implement reforms that yield long-term benefits?
CONTINUE THE CONVERSATION
Source texts
- Antifragile (Nassim Nicholas Taleb)