Interesting chart that shows that government spending as a share of GDP were the same in the USA in Sweden in 1960.
The large increase in government spending took Sweden from near the top of the OECD in income per capita to about 20 in short order – about two decades.
Another chart shows that the income share of the top 1% in Sweden started to grow again in the 1970s.
Daron Acemoglu, James Robinson, and Thierry Verdier have a new paper that asks “Can’t We All Be More Like Scandinavians?” Their answer is no. The answer follows from a model they develop in which
- Countries choose between two types of capitalism. “Cutthroat” capitalism provides large financial rewards to successful entrepreneurship. This yields high income inequality, but it stimulates lots of entrepreneurial effort and hence is conducive to innovation. “Cuddly” capitalism features less financial payoff to entrepreneurs and more generous cushions against risk. This yields modest income inequality but less innovation.
- Because of the difference in innovation, economic growth initially is faster in cutthroat-capitalism nations. But technological advance spills over from cutthroat nations to cuddly ones, so growth rates then equalize. Over the long run, GDP per capita is higher in cutthroat-capitalism nations (due to the initial burst) while economic growth rates are similar across the two types.
- Average well-being may…
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Utopia, you are standing in it! 
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