The system began crashing after debt-fueled inflation in the ’80s. The ’90s were stained with a massive economic crisis. Banks were on the brink of collapse and, for a brief moment, the Central Bank had 500 percent interest rates to defend the Swedish currency.
Sweden agreed that socialism was not working. In fact, it was a disaster.
“Some of the government’s programs were unsustainable, some of the policies were absurd, and the tax system was perverse,” Norberg said quoting a Swedish Social Democratic finance minister.
The 30-year experiment “was a brief interlude of failure,” Norberg said. To reform and save its economy, Sweden reverted back to its capitalist structure. It reduced public spending by a third, demolished taxes on property and inheritance, and reduced taxes in other areas. Defined benefits were cut and only defined contributions were permitted.
The system became partially privatized with privately-owned accounts. The markets became opened to private providers and private companies who contributed to institutions like healthcare and schools. Sweden also deregulated markets to cause a surge in entrepreneurship.
Swedish healthcare became regionally run and funded by local state tax. Overconsumption had created long hospital lines depriving those with urgent needs of immediate attention. These kinds of inefficiencies of the universal programs caused Sweden to open to more private companies.