August 13, 2000
|Even Sweden is Privatizing Pensions|
by: F.R. Duplantier
"Sweden has a long tradition of social insurance," observe Goran Normann, president of Norman Economics International, and Daniel Mitchell of the Heritage Foundation. Normann and Mitchell point out that Sweden was "the first nation to implement a mandatory government retirement system for all citizens. Nevertheless," they report, "Sweden is now one of the world's leaders in the global shift to private pension systems."
If a nursemaid nation like Sweden can stop babying its citizens and begin fostering their independence instead, there may be hope for retirees in the land of the free. "The Swedish pension program faced financial problems similar to the troubles plaguing the U.S. Social Security system," Normann and Mitchell emphasize, "and the Swedes decided that partial privatization was the best solution. For Americans," they argue, "the Swedish example shows that pension reform and privatization are sound solutions to a pressing problem."
Normann and Mitchell say Swedish policymakers "from both sides of the political spectrum realized that reform was the only way to ensure a safe and comfortable retirement income for today's workers. During the 1980s," they recall, "Swedish lawmakers became increasingly aware that the country's National Basic Pension and National Supplementary Pension were not well adapted to meet future challenges [and] decided that both individual workers and the overall economy would benefit if the old-age system were partially privatized."
Sweden's situation is by no means unique. "All industrialized nations are confronted by the same challenge," Normann and Mitchell affirm. "Their tax-and-transfer pension programs face serious demographic and financial pressures. In effect, policymakers have only two choices. On the one hand, they can raise taxes and cut benefits in an effort to prolong the solvency of government-run old-age systems. Alternatively, they can give workers private retirement accounts."
Normann and Mitchell conclude from Sweden's success that "it is possible to change from a pay-as-you-go entitlement scheme to a system of personal accounts. In the case of Sweden," they note, "policymakers not only privatized a portion of the system, but dramatically reshaped the part of the pension program that remains under government control." Normann and Mitchell predict that "Sweden's reform will be good for workers, good for taxpayers, and good for the Swedish economy."
* from Politickles: Limericks Lampooning the Lunatic Left