Sweden Has Recently Changed Beyond Recognition — In the New Model, There's Less State, More Capitalism and Market
The country, where the state once cared for everything — from schools and hospitals to the elderly care system — is now increasingly relying on private business, competition, and market mechanisms. The epitome of collectivism is turning towards strict individualism.
Stockholm. Photo: Lingxiao Xie / Getty Images
Even at the beginning of the 20th century, Sweden was a relatively poor agrarian country, but within a few decades, it managed to transform into one of Europe's wealthiest economies. By mid-century, it was already among the three richest countries on the continent, and back then, the Swedish economy did not yet rely on a giant state sector and ultra-high taxes.
The large-scale expansion of the welfare state began in the 1960s-1970s when the Social Democrats, who dominated politics in the post-war period, rapidly increased state spending, taxes, and social programs. As a result, Sweden gradually transformed into one of the main symbols of the Scandinavian model of universal welfare. By the early 1990s, state expenditures reached about 70% of GDP.
It was then, the Wall Street Journal reports, that the main problems of the model emerged. Economic growth slowed, after-tax incomes barely grew, and the budget deficit and public debt increased. The banking crisis of the early 1990s was the culmination.
Stimulating Entrepreneurship
Then, under pressure from investors, the dismantling of the old system began.
Over the following decades, Sweden consistently reduced unemployment benefits, privatized public services, and even abolished wealth and inheritance taxes in the mid-2000s.
The results of these reforms are impressive: according to WSJ data, the country's public debt is only 36% of GDP (compared to 129% in the US), and total public spending has decreased to 24% of GDP, which is lower than in France or Italy.
As a result, wealthy entrepreneurs who had previously fled high taxes began to return. Over time, attitudes towards wealth also changed in Sweden. According to international polls, Swedes are now more tolerant of wealth than the French, Germans, Spanish, or Italians, and evaluate the market economy more positively than residents of any European country except Poland.
According to the WSJ, the reduction in the state's role was one of the reasons for Sweden's technological boom. Between 2015 and 2024, the country saw over 500 initial public offerings (IPOs) – more than Germany, France, Spain, and the Netherlands combined.
Today, Sweden surpasses the US in the number of billionaires per capita, thanks to its flourishing startup scene and gaming industry, which created hits like Minecraft and Candy Crush.
Today's Sweden looks very different from how many abroad imagine it. Finance Minister Elisabeth Svantesson openly states that Sweden wants capital to remain in the country and for conditions for business growth to be maintained. While many European states are raising taxes, the Swedish government has been lowering them for the third consecutive year. The top income tax rate, which approached 90% in the 1980s, is now around 50%.
As the WSJ notes, this has allowed the country to significantly reduce the size of the public sector. Total public spending in Sweden is now about 24% of GDP. This is roughly on par with the US and less than in France or Italy, where the figure exceeds 30%.
According to IMF forecasts, by 2030, the Swedish economy will grow by 2% annually — approximately twice as fast as the economies of France and Germany.
Stockholm
Private Medicine in Sweden Replaces State Healthcare
The new course is particularly noticeable in healthcare. Almost half of primary care clinics are now private, and many medical services operate like technology companies.
For several years, St. Göran's private hospital in Stockholm has been using artificial intelligence for early detection of breast cancer. AI has learned to identify signs of the disease that doctors cannot always spot on their own.
The system analyzes examinations of 80,000 women annually so quickly that queues at the hospital have significantly shortened. Medical staff no longer need to work evenings and weekends, and the hospital itself has started admitting patients from overcrowded public clinics that lack such AI systems.
Private competition has benefited the entire industry (healthcare in Sweden is state-funded). On average, healthcare spending in Sweden from 2014-2024 grew by approximately 1% annually, adjusted for inflation. This is about half the rate of growth in the UK and a third of that in the US.
In medicine, technology companies are also playing an increasingly significant role.
One of the most famous examples is the Kry service, founded in 2015. Through this app, you can book an online consultation with a doctor, get a prescription or a medical certificate without leaving home.
As the WSJ writes, Kry now has more users in Sweden than Netflix. Virtual appointments are available 24/7, and doctors speak various languages, including Arabic.
However, as the WSJ notes, critics argue that private clinics tend to concentrate in affluent urban areas where patient treatment is cheaper. Public institutions are left with the most complex and expensive cases in poor or rural regions.
Schools
A similar discussion continues around education. Today, one in three public secondary schools in Sweden is managed by private entities, and approximately one in ten teenagers attends schools run by AcadeMedia, a publicly traded company.
These schools receive state funding based on the number of students but decide themselves how to spend it.
In Malmö, Bryggeriets school, founded by the local skateboarding community, has become an example of what non-profit private education can look like. Each student receives a MacBook Air, and the school employs two teachers per class instead of one for 25-30 children, as in the public system. The school rents inexpensive premises in a former brewery building.
Private status allows for quick decision-making. When state funding was cut, the school quickly increased the number of students and reallocated classes. In the public system, this would have taken up to a year.
The Turning Torso is Malmö's most famous architectural landmark. Photo: Kentaroo Trymen / Getty Images
However, the mayor of Malmö worries that commercial schools are interested in saving on quality for profit. Furthermore, private schools are better at attracting the most successful students from wealthy families, while public schools are left with more problematic children, including those from immigrant communities.
Sweden has recently dropped in international education rankings. Proponents of private schools blame high immigration for this, while critics argue that the segregation of strong and weak students between schools worsens the country's average results.
Winners and Losers
As the WSJ author notes, the new Swedish model has already created its winners and losers. Middle-class representatives who own their homes and benefited from rising incomes and real estate prices gained the most.
At the same time, the situation of tenants and poor immigrant communities, who historically depended more on the state, worsened.
The proportion of Swedes aged 20 to 27 living with their parents increased from 15% in 1995 to 26% in 2023 due to rising housing prices.
Authorities in Malmö and other cities complain that after cuts in funding from the central government, it has become increasingly difficult for them to maintain education and social services.
At the same time, the lack of public investment in infrastructure has led to problems with railways and deteriorating transport services, which have been particularly strongly felt by less affluent people.
Critics argue that the reduction of the state has gone too far. Inequality is rapidly growing in the country. In dozens of suburbs with large immigrant populations, gang violence has erupted, creating areas where local criminal networks challenge state authority and hinder police work.
Police near a school in the Swedish city of Örebro, where eleven people died and five were injured. February 4, 2025. Photo: Nils Petter Nilsson / Getty Images
Even some architects of the reforms admit that the process might have gone too far. Therefore, a discussion about the role of the state is now beginning again in Sweden. Ahead of the parliamentary elections, social democrats demand a ban on profits in the school system, increased funding for social services, and criticize tax breaks for the wealthy.