Sunday, February 13, 2005

Social Welfare in Sweden

Currently there is a big debate on the exploitations of the Swedish welfare systems. For those who don’t know about the social welfare system in Sweden I will simply say that it is very, very generous. In fact it is so generous that a study recently showed that 90 % of women actually loose money by working compared to being on sick-leave.

The problem, that most politicians don’t seem to be aware of, is that you will always have injustices. There are two kinds; injustice to individuals, and injustice to society. An example of the former is when an innocent person is sent to jail. An example of injustice to society is when a guilty person is set free. These are usually referred to as “false positive” and “false negative”.

The problem with this situation is that the only way to reduce both kinds of errors is to make better decisions. Any attempt to reduce only one of the injustices automatically increases the other kind. What has happened in Sweden is that we have gone to such lengths at making sure that all individuals that deserve welfare also get it that the injustice to society is really quite huge. Different figures have been mentioned in the debate, but somewhere between 0.5 and 5 % of the budget seem likely. However, since there is a serious lack of control, nobody really knows.

To make the problem even bigger, there has been a big taboo against talking about this cheating of the welfare system. This taboo has arisen because “the ruling party” in Sweden, the Social Democrats, have as a policy to present themselves as the most humane of the serious political parties. Therefore they can’t get away with lowering the benefits and getting tougher on the cheaters without loosing votes. Since they have been in power 64 of the past 73 years, they have also built a huge voter base among the governmentally employed and those enjoying social welfare benefits. This is why they have proposed higher taxes in the country that already has the highest taxes in the western world, instead of dealing with the problem.

The major problem for the Social Democrats isn’t just loosing votes; it is accepting the truth about people. You can never expect people to do more or less than what is rational – if it’s rational to cheat the welfare system, people will. If one refuses to realise this, and accept that one has to design policy accordingly everyone loses. Since society is quite a bit less personal, and it’s harder to get jobs, people are more inclined to exploit the systems than they were just a few decades ago. However, since the Social Democrats have always based policy on some notion of the goodness of man, accepting reality is harder that for any other political party (here I don’t include the environmental fascists and the communists, despite the fact that they got 4.6 and 8.3 percent respectively in the last election).

Reforming the Swedish mentality and welfare systems is at the heart of the election in 2006, if a major change doesn’t take place soon a major economic collapse is likely in the following 10-20 years. Given that people will on average behave rationally, the problem never lies with the people when a system is exploited – it lies with the system. This is a fundamental truth that the needs to be realised either by the people, or the Social Democrats. Personally I’m certain that the former is more likely.