[music playing]
-My country has made an effort to make people’s lives more equal.
We’ve relatively free markets in business.
It’s fairly easy to start a company and compete
without being stopped by licenses, regulations and tariffs.
But when people are allowed to compete freely,
some win and make a lot of money.
Some lose and they lag behind.
EQUALITY OF OUTCOME
That’s when the Swedish government steps in.
[music playing]
To reduce differences of outcome,
we tax heavily and redistribute wealth among our citizens.
To many, this is the best of both worlds
since we don’t really have equal chances in life.
Some people have parents who give them an interest in learning,
ambition and opportunities. Some don’t.
Some are lucky in the genetic lottery and some aren’t.
Some have good health and some don’t.
To reduce the gaps that such differences might lead to,
our government steps in.
Sweden chose to make equality a priority in the 1970s,
when we were already one of the richest countries in the world.
Taxes were raised and benefit systems were made more generous.
Public spending almost doubled between 1960 and 1980,
from 31% to 60% of GDP.
Some would say that this has made our country better.
But it has also reduced the rewards
for working hard and taking risks.
[music playing]
This is a museum recreation
of the original workshop of Lars Magnus Ericsson.
He was a very important person in Swedish history
because more than 130 years ago
he produced cheap and reliable versions of the telephones
that he had seen in the United States.
And because of this, Stockholm became a global center for telecommunication
in the late 19th century and it laid the groundwork
for one of Sweden’s most successful companies: Ericsson.
And today, it still employs more than 80,000 people
in 150 countries.
This should make me proud as a Swede,
but in fact it makes me a bit worried,
because almost all big Swedish businesses
share Ericsson’s heritage.
And they probably all had boardrooms that looked a bit like this.
The average big Swedish company is 94 years old.
We have apparently not had the policies that encourage people
to start the new businesses that might become tomorrow’s Ericsson.
Today, Swedish entrepreneurs are the oldest in the world.
This is the other side of the coin.
The young people and the immigrants who should be our future,
are not starting the new Ericssons.
In fact, we have many examples of young Swedes
and entrepreneurial immigrants
who move from Sweden to Britain or the United States
because the rewards are much greater there, where taxes are lower.
[music playing]
In many suburbs like this, outside of Stockholm,
the unemployment rate is higher than 50%.
Even in the midst of the economic boom
almost a quarter of the working-age population in Sweden
did not go to work in the morning,
but got their checks from the government.
It does seem to support the view that economic incentives matter.
With a sickness benefit of up to 80% of your income,
perhaps it wasn’t surprising that Swedes
were off sick more than any other people,
even though we objectively were healthier
than almost any other population.
In 2004, sickness benefits absorbed 16% of the government’s budget.
These statistics have improved since
but interestingly, only after a determined effort by the government
to reduce the equality of income by lowering taxes
and making benefit systems less generous.
So, it seems that these changes increased the incentives to work.
Friedman emphasized something counter-intuitive.
There’s a positive benefit to inequality of outcome for everybody.
Some people become millionaires, and some become billionaires,
but that is because they were the ones
who made their customers happy.
-That’s the economic system that has transformed our society
in the past century and more.
That’s what gave the Henry Fords, the Thomas Alva Edisons
the incentives to produce the miracles that have benefited us all.
They went in with their eyes open,
they knew what they were doing, and win or lose, we, society,
benefited from their willingness to take a chance.
-If we did not allow a Lars Magnus Ericsson, a Thomas Edison,
or a Bill Gates to become incredibly rich, we would be more equal.
But Friedman would ask: would we be better off?
If entrepreneurs did not think that a possible reward
for all the sacrifices they make,
all their hard work, all the risk they take,
is a lot of wealth, then they might do something else instead.
And in that case, we would not have the goods and the services
and technologies that make our lives better.