Sweden never was a communist country, even though it was "very much social democratic". All men served in the conscript defence force for 8-18 months untill the late 1990:s, and the enemy was always
to the east, and was alwys red. To understand the social democrats relation to the Swedish communists, please read about "the IB affair"
. The truth is the social democrats of Sweden was more afraid of communists than right wingers for the most part of the 20:th century.
The 1970-1990 was from my point of view dark years with irratic regulations and crazy taxes. In 1976 Astrid Lindgren wrote the political pamphlet of the witch "Pomperipossa" when realising she was about to be charged 102% tax. The finance minister first claimed it was impossible, but later admitted she was right. That must be some sort of record of 1) tax rate 2) complex tax system. A fun detail is that when Astrid was to get Pomperipossa published, she called the editor of a newspaper and said: "hello, this is Astrid Lindgren, former social democrat". The tax system was completely changed in 1991.
If someone claims Sweden is a communist country it might be interesting to know that an extremely small part of Swedish trade and industry is in public hands, lower than the US. The school voucher system so controversial in US is up and running since 1993 here. A big portion of elementary schools are profitable private enterprises (but publicly funded). From this year even the annual vehicle inspection can be made by a private business.
Today I would say the biggest issues with "the swedish economic model" is a inflexible labour market
. As stated by the World economic forum, Swedens 3:rd place in global competetiveness is as of today held down by a rigid labour market. Senior employees have a rigid protection against beeing sacked just by beeing senior and so on. When discussing "credit score" it is worth mentioning that having a permanent employment is close to godlike, even though younger employees often switch jobs and have limited security through their employment. Another issue here is regulated residential rent which makes the potentially flexible rental homes rigid. People in the US has an impressive ability to move far away for work opportunities, which swedes do to a lesser extent - or even can´t because of lack of reasonable accommodation. Residential rent needs to be priced by the market.
Another thing is the maginal tax rate (not capital gains, wish has 30% flat rate). You pay progressive tax spanning from zero (<$2.810/year) up to about 23,5% at $ 62.350 where I live. The marginal tax rate at the top is about 28%. Now, between $62.350 and $88.400 you pay additional 20% (marginal 48%), and over $88.400 you pay another 5%. Where I live this means marginal tax rate of 53%. In some municipalitys with higher taxes that is 55-57%. I have no problem with progressive income tax, but marginal tax rates of over 40-45% is a hard sell, and might even be contrproductive. My brother runs his own business as a IT consultant (on his own). Even though he is in his mid 30:s, he takes 6-10 weeks unpaid vacation since he feel working more don´t pay that much after taxes. The salary we are talking about here is at a lever where teachers, health care workers and so on loose incentive to work overtime - or even full time. The first step as far as I am concerned would be keeping the (inflations adjusted) brackets, but instead of 20+5 tax rate make it 10+10.
Third. Corporate profits are in reality taxed twice if payed in dividend. First with 25% corporate tax, then with 30% capital gains tax when payed as dividend to shareholders/owners. At the same time you pay 30% on capital gains, 30% of capital losses are deductible. The gvernment tax profits and subsidize indebtedness. And we wonder why there is a financial crisis?
Housing debt has been growing 8-10% 1998-2008, and still grow 4-6% annually even thoug inflation is 1% and income is increasing by 2-4%. Household debt is now 160% of income, a historically high level. The average amortization time is 80 years for houses and 120 years for apartments (!). We are closing in on a house bust. In the long term, we should be lowering the tax rate and tax deductions from 30% to 20%. Not popular along indebt households but all the western world really need to "deleverage".
As stated, the Swedish public pensions is, even if "balanced", not very good. Pension lobbyist now talk about merge the two systems in order for seniors to basically steal money from young people in order to give them a more stable, higher pension. The logic thing is to do the opposite. The 16% I pay on top of my salary to finance pensions beeing payed out today (against an IOU to my kids and grandchildren) should gradually decrease over the next decades. This would mean gradually diluting "old pensions". At the same time the payment to the individual funded account (2,5% of salary) should increse at something like a 1/3 rate. The reality today is that young people pay massive pension costs in order to pay pension greater than what they will get - to people who did not finance pension for themselfs - or their parents
Sweden, along the rest of the western world really need to reform the function of government deposit guarantee. Today I can deposit up to €100.000 ($130.000) in an guaranteed acount that gives me 3,15% gross interest rate (tax is 30%). The national bank prime rate is 1,25%. People get mortgages (three month fixed) under 3%. The financial institution that pays me 3,15% clearly takes risk in order to make a profit. This shows the system is skewed. Massive risktaking should not be subsidized by the national bank/government