Sweden is the world’s 16th wealthiest country. Its Gross Domestic Product (GDP) per capita is just below Germany’s in the OECD’s rankings.
It’s a country of high-tech capitalism and extensive welfare benefits. The vast majority of enterprises are privately owned.
Daniel Waldenström at the Stockholm Research Institute of Industrial Economics says that Sweden’s economic success is due in large part “to our stable economic and political institutions, which allowed us to focus on producing wealth. That’s in addition to being in Europe, where the economic boom all started”.
So, how rich is Sweden, really?
GDP is only one way of measuring wealth. It doesn’t tell the whole story.
By all economic measures, Sweden is a relatively wealthy country, but this doesn’t necessarily trickle down to everyone.
Seven percent of working Swedes have an income below the EU’s at-risk-of-poverty threshold (although this is under the EU average of 10 percent).
According to Statistics Sweden, 184,000 people were estimated to be in severe material deprivation in Sweden last year, meaning they couldn’t afford vital things like rent, a car, or telephone. This is still lower than nearly all other countries, but doesn’t square with the idea of folkhemmet, a welfare state for the people. Yet it has one of the world’s most extensive welfare systems, funded by government wealth (and debt).
How did Sweden get so rich?
Sweden only started to really accumulate wealth as it started to industrialise sometime in the mid-19th century. Before then, it was suffering from a period of relatively slow growth that forced more than one million Swedes to emigrate to the North America before the turn of the century.
Through luck and well-placed geography, Sweden had the kind of natural resources (iron ore and wood) needed when countries like Britain and Germany industrialised.
“The industrial revolution made the iron in our ground very important,” Waldenström told The Local.
The last time Sweden took part in a war was 1814. Benefitting from relative peace for more than 200 years, it also profited from exporting its iron and other raw materials to Germany during the Second World War.
While Sweden struggled to rebuild along with the rest of Europe post-war, compared to the belligerent countries, Swedish industry was not destroyed.
After the 1930s there was a long era of almost unbroken rule by Social Democratic governments, and according to a 2016 paper by Waldenström, this “paved the way for the emergence of one of the world’s most extensive welfare states”.
Benny Carlson, professor emeritus at the Department of Economic History at Lund University, describes Sweden’s modern-day economy as following “the middle way”.
“On the one hand the deals between well-organised employers and trade unions create fairly peaceful labour market conditions, on the other hand the welfare state guarantees social security and reasonable income equality,” he told The Local.
Basically, Sweden is wealthy thanks to relative peace, social security, and a bit of luck.