(Bloomberg) -- Higher taxes and a relentless fight against inequality are making Sweden great again.
That’s the opinion of the country’s finance minister, Magdalena Andersson, who has overseen one of Europe’s fastest growing economies.
She’s offering a markedly different model to the tax-cutting and deregulation agenda espoused by U.S. President Donald Trump, and in the process is delivering economic growth of more than 3 percent, record employment and swelling state coffers. Sweden has also taken in more refugees than any other country in Europe, as a percentage of the population.
“People have been arguing if it’s possible to have this kind of model with high taxes/high welfare also in a globalized economy,” she said in an interview in Stockholm on Wednesday. “So far, what we see is that we have higher growth, higher employment, strong public finances also in a more globalized world.”
Facing what looks to be a tight election in September, Andersson now promises even more spending on welfare, as well as a tougher stance on crime. At the same time, the Social Democrat-led government of Prime Minister Stefan Lofven is looking into lowering corporate tax rates. The proposal is intended to be fully financed through higher taxes on other corners of the economy.
Sweden’s economy barreled ahead at the end of 2017, growing 3.3 percent as exports recover. The International Monetary Fund in January predicted global economic growth in 2018 will reach the fastest pace in seven years, in part helped by the U.S. tax cuts.
But Trump’s agenda of trade tariffs and tax cuts is a cause of “real concern,” Andersson said, speaking a week before Lofven heads to Washington to meet the U.S. president. “The world as a whole gains from international trade and more globalization,” she said.
Andersson’s government has angered business groups with proposals for higher taxes, many of which the minority government couldn’t get through parliament.
But she says the intention is to clamp down on profits at private welfare providers.
Meanwhile, Sweden is enjoying rapidly falling public debt levels as higher tax revenue builds surpluses. Andersson is now considering whether to lower the budget surplus target of a third of a percent of GDP, if debt falls below a debt anchor level. Creating a sovereign wealth fund is also something that “will be discussed if we keep on having a prudent fiscal policy,” she said. But swelling coffers won’t tempt her to go on a spending spree.
“I mean, the Swedish Social Democrats, we have always had a tight fiscal policy,” she said. “It’s part of how we have our public finances. And of course also in an election year and when we have big surpluses, we always have a prudent fiscal policy.”
©2018 Bloomberg L.P.
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