WORLD

Taxed to the limit

Angry voters reject the Social Democrats

ANDREW BILSKI September 30 1991
WORLD

Taxed to the limit

Angry voters reject the Social Democrats

ANDREW BILSKI September 30 1991

Taxed to the limit

WORLD

SWEDEN

Angry voters reject the Social Democrats

For 59 years, Sweden has offered a socalled third way between capitalism and communism—a unique mixture of private enterprise and public services that has been the envy of Europe. Its citizens enjoy a cradle-to-grave welfare system including free health care, free education from kindergarten through graduate school and a generous public pension plan. But the cost of those social programs is immense: last year, taxes—the

highest in the West—equalled 56.9 per cent of Sweden’s gross domestic product. That has led many of the Scandinavian country’s wealthiest citizens, including tennis star Björn Borg, to choose exile in more favorable countries. Last week, Swedish voters finally rebelled against the expensive welfare state. In the Sept. 15 general election, the ruling Social Democrats and their leftist allies won just 154 seats in the 349-seat Riksdag, or parliament—and Prime Minister Ingvar Carlsson and his cabinet promptly resigned. Declared the conservative Stockholm daily Svenska Dagbladet “Since 1932, the Social Democrats have dominated Swedish politics. This era has ended.”

In fact, the Swedes still seem unwilling to completely tear apart their social safety net. Like many other Westerners, including Canadians, Swedes express strong discontent with the high cost of their social programs, but demands for dismantlement are muted. In the

election, the biggest winners were the conservative Moderates, who led a centre-right coalition to 170 seats in parliament. Carlsson, in office since 1986, agreed to head a caretaker administration until Moderate Leader Carl Bildt can form a coalition government. But to do so, the 42-year-old Bildt, who called the election result “a very strong mandate for change,” would need the support of the rightwing New Democracy party, which holds the

balance of power with 25 seats. Its leader, Count Ian Wachtmeister, favors a far more extreme restructuring of the welfare state than the Moderates advocate.

As a result, political analysts said that the Moderates and Liberals, who jointly support tax cuts and privatization of the public sector, may have to form a minority government. They would then seek outside support on an issue-by-issue basis. Declared former Moderate leader Ulf Adelsohn: “I’m sure there will be a non-socialist government, but it is virtually impossible to know what it will look like.”

Analysts claimed that a weakened economy caused the Social Democrats’ defeat. In recent years, Sweden has suffered from high inflation and slow growth. In turn, the level of social services has declined, and there are long lineups for some medical operations. At the same time, day care centres and old-age homes cannot keep up with demand. To deal with

those problems, the government raised interest rates. And in hopes of creating a more entrepreneurial climate, it cut the personal income tax rate—to a high of 50 per cent from 72 per cent— and imposed a 25-percent value-added tax, compared with Canada’s seven-per-cent GST.

Those measures angered blue-collar workers, the party’s traditional supporters. Still, voters did not give the Moderates a clear mandate. “We are witnessing an unprecedented polarization of politics in Sweden,” said Olof Johansson, the Centre party leader in the Moderate-led coalition.

“There will be substantial problems in governing the country now.”

It remains unclear whether a similar tax revolt will eventually take shape in Canada, which also provides a high level of social services. Last year, taxes equalled 35.7 per cent of Canada’s gross domestic product. In the seventh annual Maclean’s/Decima poll, published in January, 35 per cent of respondents said that they were “very upset” about the amount of

taxes they pay, while 40 per cent said that they were “somewhat upset.” But among those frustrated taxpayers, the overwhelming majority said that they would do no more than write protest letters or grumble about the situation.

Stanley Winer, an economist at Ottawa’s Carleton University, maintains that Canadian voting patterns “don’t reveal a willingness to increase the size of the public sector.” But

Winer added: “I don’t see any desire to radically reduce it either.” In fact, Conservative Prime Minister Brian Mulroney has effected only minor changes to the nation’s safety net, which he has called a “sacred trust.”

In Sweden, whatever the makeup of the new government that the Moderates expect to form next month, changes are inevitable in the socialist system. Even the Social Democrats realized Swe£ den’s need to become ö more competitive. They 'S. applied for membership in g the European Community § in July. And to meet the ^ challenge from Europe’s single market after 1992, they began phasing out farm subsidies and drew up plans to partially privatize some state-run industries. Sweden’s swing to the political right will clearly accelerate that process. What remains to be seen, however, is how much the Moderates will reduce the social programs that many Swedes have grown to regard as a birthright.

ANDREW BILSKI with correspondents’ reports