Sweden the Country of Inequality; The Commitment to Reducing Inequality Index 2022
By Max Lawson
One of the most unequal countries in Europe
Imagine a country where up until the early 20th century, the number of votes you had depended on how rich you were. Where a member of the least wealthy group got one vote, but where a rich person could cast over 50 votes. In some elections, this meant that a rich single voter could in fact cast 25% of the votes. Needless to say, no women were allowed to vote either.
Moreover, this was a country where the top 10% of society owned 88% of the wealth, and the bottom 50% just 1% of the wealth. Where laws were in place that allowed anyone without a job or sufficient property to live on to be arrested and sentenced to forced labour. Where 75% of the land was owned by just 0.5% of the population, and where landless workers made up 60% of the population, many living in desperate poverty.
Victorian Britain you might think, or feudal pre-revolutionary China or Russia. In fact, this was Sweden, which was one of the most unequal countries in Europe and indeed the world until the early part of the 20th century.
Today, Sweden and Swedes are known worldwide as a nation of equality, of high taxes on the rich, of a generous and universal welfare state, a champion of women’s rights. But up until 1920, Swedish society and the Swedish economy was deeply and profoundly unequal. Even the Victorians did not have a system of awarding people more votes the richer they were.
The fight to make Sweden an equal country
The year was 1917, three years into World War 1. Europe was unsafe, and the war disrupted the food trade, so food supplies were running low. People were scared, frustrated, hungry and in Sweden most of them were not given a vote – a voice. This all changed when trade unions and a huge popular movement of workers culminated in massive peaceful protests in 191., People were hungry and frustrated as bread had been rationed and general food prices increased. The frustration towards the government grew. In January 1917, protest began in the capital, started by working class women. In what became known as the Potato Revolution, the protests grew, and during the last two weeks of April over a quarter of a million people participated in food protests all over Sweden. In other European countries, similar revolutions had led to overthrowing those in power. The Swedish Potato Revolution had a different outcome, most notably the equal right to vote and a strengthening of workers’ rights.
In the face of revolutionary unrest and soldiers joining the protestors, conservatives were forced to agree to universal suffrage. Swedish social democracy rose as a result of suffrage to the working class and women, and the strong trade unions and other people’s movements. This led to the election of the Social Democrats who went onto lead Sweden almost continuously for over 60 years, winning election after election, building the profoundly equal society that Sweden was to become known for across the world. From 1950 to 2000 it was the country that claimed the highest share of national income in taxes and had the highest social spending in Europe.
Economic growth remained strong, and real wages increased, with strong trade unions ensuring the benefits of growth reached workers, even before the impact of taxes and government spending. Swedish brands became household names, as did Swedish pop stars.
During this time the myth of Sweden, and indeed other Nordic countries like Norway and Denmark, as being somehow naturally egalitarian gained strength at home and abroad. The government actively fostered such ideas, to defend the idea that the Swedish welfare model and Social democracy was unique and different from that of the Soviet Bloc and East Germany. Inequality massively reduced, reaching an historic low in the 1970’s of a Gini Coefficient of 0.21., and the share of wealth owned by the top 10% halved.
Inequality on the rise again in Sweden
In the 1990’s, this began to change. Sweden liberalised its banking sector in the 1980’s which led to banking crisis in the 1990’s which profoundly shook society. This led to a critique of the supposed problems of Sweden’s social and political model of high tax, high spend, low inequality. The Social Democrats lost support, and more neoliberal ideas gained relevance. From 1991-1994 a centre-right coalition governed Sweden. Amongst other tax reforms, they exempted interest and dividends from taxation. Inheritance tax and the wealth tax were eroded and then eliminated. From 1990s until today, parties on both the left and the right have all contributed to undermining of the Swedish tax system – away from progressive taxation where the richest pay the most to one that puts an increasing tax burden on workers. In addition, in late 1990s instead of the hugely successful system of government funded public schools for everyone, a private school reform was introduced. Private schools were allowed to compete with public schools for government funds – making schools subject to competition with each other, and in practice challenging the concept of an equal education for everyone. Sweden fell down the global education rankings. In short, Sweden lost confidence in its own path and all parties embraced neoliberalism.
These policies and others led to Sweden in recent decades having the fastest rising inequality in the OECD, and it is now only the 10th most equal country in the OECD. Meanwhile, the public and political debate on inequality has been almost completely non-existent. Instead of songstresses and equality, Sweden became known instead for dark dramas about crime and serial killers.
This fall from grace has been documented too in recent years by our own Commitment to Reducing Inequality index, which has shown that Sweden is a downward spiral of increased economic inequality. In 2017 Sweden was at the top of the list, noted as the number one country in fighting inequality, only 6 years later it has fallen to 20 – and is now the worst country in the Nordics when it comes to economic inequality. The fall in the ranking is a result of political choices in the past decades which have widened the gap between the rich and the poor, and on new policies that have been implemented in the past few years which will likely continue this negative trend. The main factor is the changes in taxation, which have resulted in a a model in which work is heavily taxed, but wealth and assets are barely taxed at all.
This week a new right-wing government was established by the liberal and conservative parties, who will, for the first time, rely on nationalist, populist Swedish Democrat party to get support for its programme in Parliament. Earlier this the new government and the Swedish Democrats presented an extensive joint programme on policies that they will push in the coming for years, including slashing development aid and severely reducing immigration to Sweden, as well as imposing limitations on migrants’ rights. Additionally, more tax cuts were announced, including reduced tax on investment savings accounts amounting for people with large savings. At the same time, cuts in social welfare were announced, for example lowering the level of subsistence allowance.
My colleagues and comrades in Oxfam Sweden have been using the CRI findings this past week to put pressure on the government and fuel the debate as to Sweden’s rapidly rising inequality.
This story of Sweden’s incredible history is for me at once heartening and sobering. Heartening, as it shows clearly that no nation, no group of people are somehow naturally more egalitarian than another. Brazilians, South Africans, or citizens of the USA are no more naturally unequal than Nordic citizens are naturally egalitarian. Dramatic reductions in inequality, and the construction of profoundly equal societies, are instead within the reach of all nations. They are the result instead of working-class mobilisation, trade unions, and campaigning, and of constructing efficient state institutions that are dedicated to levelling the playing field and giving opportunities and freedoms to all.
Yet sobering too, as for a nation such as Sweden, which to my mind largely had it all, to go through such a lurch to the right and questioning of its own identity shows the power of forgetting, the power of neoliberalism and capital, and how hard-fought gains can be so easily eroded. It shows that we can never rest, and as one of my heroes, the UK politician Tony Benn famously said, ‘Every generation must fight the same battles again and again. There's no final victory and there's no final defeat.’
The Commitment to Reducing Inequality index (CRI) 2022
Last week we launched our CRI together with our partners Development Finance International, at the Annual Meetings of the World Bank and IMF.
This is the fourth edition of our index, which measures 161 governments, looking in detail at what they are doing and what they are not doing to reduce inequality. It measures three things; social spending, tax and support to workers, and gives countries an overall score.
You can find the report, index and all the data at inequalityindex.org.
I like the CRI, not just because it is an enormous and original piece of research, which is a true labour of love; I also like it because even in the darkest days, it shines a light on countries that are doing important and useful things to reduce inequality.
Countries this year that shone were Costa Rica, increasing taxes on the richest, Nepal, increasing health spending by 50%, Barbados introducing comprehensive protection for women in the workplace. South Korea scored well on all three pillars, because their previous government had strongly committed to reducing inequality and this led to them rising up the index significantly. Perhaps my favourite was the Occupied Palestinian Territories, who managed to increase health and social protection spending dramatically.
Nevertheless, despite these sparks of hope, they were it felt even more the exception than usual. This year’s index included detailed analysis of what happened during the peak of the COVID-19 pandemic and made for sobering reading.
Despite the biggest global health emergency in a century, half of low-and lower-middle-income countries saw the share of health spending fall during the pandemic, half of the countries tracked by the CRI Index cut the share of social protection spending, 70% cut the share of education spending, while two-thirds of countries failed to increase their minimum wage in line with gross domestic product (GDP).
Whilst every government has policy space to tackle inequality, even the poorest nations, nevertheless, governments are under enormous pressure. Oxfam and DFI analysis shows that based on IMF data, three quarters of all countries globally are planning further cuts to expenditures over the next five years, totalling $7.8 trillion dollars. In 2021, lower income countries spent 27.5 percent of their budgets in repaying their debts - twice the amount that they have spent on their education, four times that of health and nearly 12 times that of social protection.
Given this huge financial pressure, the most frustrating thing for me was that 95% of countries failed to increase taxes on corporates or rich people during the pandemic, and inexcusably 11 countries cut taxes on the richest. Countries that did support their citizens through the pandemic did so instead largely by printing money and borrowing, and now are planning to cut services worldwide.
History shows that taxes on the richest and corporates are increased dramatically at times of crisis, when the sense of national need and solidarity overcomes the power of vested interests, so this was truly a dramatically missed opportunity.
As we are now in the midst of a new full-blown energy, food and cost of living crisis, we must use evidence like the CRI to ensure that lessons are learned in real time and governments across the world act now to increase tax on rich people and corporates. There are some promising signs, with windfall taxes being implemented, and the new progressive governments in Latin America in particular eyeing increases in tax. Our Davos paper next year will be all about taxing the rich.
For more information on the CRI do read the brilliant blog by my friend and colleague Anthony Kamande, the research coordinator for the project:
‘As I sat down to write this article, I reflected a little bit on the power of public services. The fifth-born in a family of eight siblings, I am the first to have completed secondary education, and the first to have gone through university. All my other elder siblings stopped at the primary level, except one that dropped out midway through his secondary education because of a lack of fees. I was able to do this only because the government introduced free public primary education in 2003, the year I started my primary schooling, and Free Day Secondary Education in 2008. Otherwise, you would not be reading this article.’