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Lessons From Afar


By Michael Hasselmo

SWEDEN is not a politically volatile nation in 1976, the ruling Social Democrats had held power for 44 years. But when taxes climbed up over 80 percent on a $30.000 income, even the reticent Swedes began to complain Author Astrid Lindgren wrote a particularly harsh attack when she was assessed for 102 percent of her royalties. The disillusionment with high taxes and government interference at all levels contributed to the defeat of the S-D prime minister Olof Palme in the 1976 elections, just as it helped Ronald Reagan oust then president Jimmy Carter in 1980.

The analogous circumstances of these elections may indicate a worldwide trend towards questioning the ideals of a welfare state. But Reagan who has based so much pre and post--election rhetoric on this apparent phenomenon would be wise to compare his problems to the tribulations of the victorious parties in Sweden, for just last fall voters reinstated the Social Democrats.

Just as Reagan's 1980 win depended on U.S. moderates voting with the Right the S-D loss in Sweden in 1976 came about through the unified effort of moderate and conservative groups. Though the Swedish population as a whole votes toward the left end of the American political spectrum, the new prime minister Thorbjorn Falldin still had to manage an uneasy coalition consisting of the Liberals (Folkpartiet) the Conservatives (called the Moderates) and his own Center parts. This coalition government united only by its opposition to the Social Democrats, suffered the same in-fighting that has plagued the heterogeneous. Republican party since Reagan's election. And though the Swedes fell short of Laffer's napkin-based whimsy in their economic policies, they too were trapped between a mountainous government spending deficit and the campaign promise to control taxes.

Falldin did not have to deal with the extravagant military budget required by Reagan's friends in the military-industrial complex and rightist religious sects. His fiscal albatross was the heavy burden on the government's social programs, increased by the gradual failure of large Swedish industries such as shipbuilding, steel and iron one mining. The LO, the Swedish equivalent of the APL-CIO, complained fiercely even at the unemployment rise from 2 to 4 percent. The coalition tried to hold the brakes on social spending, but government service still grew to 65 percent of the GNP. At the same time, the budget deficit grew from 2 to 13 percent of the GNP, or $15 billion. (In the U.S. this would be comparable to a $200 billion deficit--a figure remarkably similar to that projected for next year.)

Finally, in 1981, the imbalance forced Falldin to compromise with the Social Democrats, who directly control the LO. He agreed to increase taxes in several areas. Rather than tolerate such weakness, the Conservatives left the coalition. Falldin resigned, and though other non-socialists succeeded him, the stage had been set for the return of the Social Democrats.

Clearly, the parallel is not perfect: Americans are less committed to an egalitarian society, the New Deal and Great Society have lost their appeal in the face of the new selfishness, and one cannot be sure that voters will respond so directly, Still, a welfare state has a certain amount of inertia. One cannot easily deprive people of privileges they have had a taste of, and even Reagan has been forced to compromise, sparing Social Security, signing the new $5 billion jobs bill, and even raising some taxes. But the pressure for new taxes will continue as the projected deficit becomes a really and the patience of some of Reagan's Rightist supporters has already been stretched thin. Reagan's political strength comes from his clear separation from the policies of the Democrats: like Falldin, he cannot abandon the image he built in his campaigns and expect his support to remain intact.

The economic realities of Reagan's budget are beginning to appear, and the American people are being faced with the realization the Swedes had last year: Sometimes the solution is worse than the problem. Like Falldin, Reagan is trapped between the firm, if unrealistic, demands of his conservative backers and the abyss of the national budget. He cannot compromise too far; he can only hope that by some miracle, supply-side economics will begin to work. Otherwise, he will learn a simple lesson: Voters are ready to give new things a try, but lose their nerve swiftly. When an experiment fails to be all things to all parties, voting citizens are quick to forget how dissatisfied they once were.

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