February 12, 2014 by History in a Hurry
How Government Cutbacks Ended Sweden’s Great Depression
Mises Daily: Wednesday, December 25, 2013 by Per Bylund
During the recent financial crisis, Sweden has emerged as one of very few financially sound economies. The country’s strong position, setting it apart from most Western nations, makes it an interesting example of what could — or should — have been done. Indeed, Paul Krugman, the former economist and Nobel Prize laureate, has repeatedly pointed approvingly at how the Swedes handled their depression in the early 1990s as the reason for their recent success. Specifically, he notes the nationalization of some banks at the time of the crisis. While he misses the point by focusing exclusively on a narrow selection of short-term measures rather than longer-term changes, as is the hallmark of a Keynesian, Krugman is right that Sweden has done some things right.
Sweden successfully rolled back its unsustainable but world-renowned welfare state. Despite Krugman’s wishful thinking, this is the real reason for Sweden’s success in riding out the present financial crisis.