The Economy: How the Swedes Do It

A SMALL sense of deprivation often nags Americans visiting abroad. They note the frequency of London's shiny red double-decker buses, the scrubbed-clean streets of Paris and the tranquil, carefully manicured parks of Frankfurt. At a time when public services in the U.S. are in such a mess, Americans wonder how the Europeans manage to do so well.

A major reason is that Europeans accept tax bites that would numb Americans. Though partly warped by differences in purchasing power, some comparisons are enlightening. An unmarried German worker earning $5,000 a year pays about $1,500 in income and social taxes; a single American earning about the same pays $800. An Englishman who is married, has two children and earns $12,000 a year has income taxes of $3,257. An American in the same category pays $2,154. Europeans also pay savage excise levies: 400 on a gallon of gasoline in Germany v. about 120 in the U.S. The English pay excise taxes of 45% on cameras, watches and other "luxury" items. Beyond that, many European countries have a value-added tax, a kind of national sales levy that pounds up prices on everything from shoelaces to plumbing repairs. In France, the VAT is a towering 23%.

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When it comes to high-level public spending for high-quality services, no Western country can match Sweden. Its taxes total 41% of its gross national product, compared with 31% in the U.S. Swedes earn less than Americans; wages of blue-collar workers average $6,270 v. $7,400 in the U.S.

On the other hand, Swedes are cushioned from birth to death against a wide variety of social and economic jolts. When a Swede cannot work because of sickness, he is insured against lost wages. When he is too old to work (over 67), he can collect up to two-thirds of his salary annually. Cities are sparkling clean, and police and fire services are excellent. Rail transport is modern and efficient, as are the highways. A monthly ticket on Stockholm's smooth-running subway, good for unlimited rides, costs $10.50.

Practically all medical and hospital care is free. Swedish hospitals have first-rate staffs and the most modern equipment; they lead the world in number of beds—17 for every 1,000 people. Sweden also has long had the world's lowest rate of infant mortality. Its men have the world's longest life expectancy, 71.7 years, and its women the second longest, 76 years, just behind Iceland. High-class, tuition-free education right through university is available to all academically qualified Swedes. University students get about $2,000 a year in living costs, partly in the form of state grants and mostly in low-cost loans.

Under the Swedish system, workers with average incomes get the most value from their tax kronor. A typical example is Paul Lundmark, who is married and the father of three children, ages 4 to 10. He lives in Orebro, a city of 275,000. Lundmark earns an average blue-collar salary of $6,500 a year by working in a paper mill. He pays more than one-third of this, $2,300, in direct local and national income taxes.