Seeker Blog

“We all know what to do, but we don’t know how to get re-elected once we have done it.”

Johnny Munkhammar looks for reform lessons in other countries. There is definitely a lot to be learned from the bold reforms of such as Sweden — where 85% of the public school cost is available as vouchers to parents. Not to mention Irelands 12.5% corporate tax, and the flat tax schemes of 16 countries.

Clearly, there are many opponents to reform - such as populist media, special interests and within the civil service. And reforms usually have a short-term cost, but larger long-term gains.

Reforming successfully usually demands that political leaders have the ability to stand up for what they know to be right and endure criticism in the short term. Indeed, that is what Ronald Reagan once did - and he was both re-elected and praised afterwards. In the current race for Presidential nominations in the US, there is much talk about change. But how much substance and determination is actually behind the words?

Every industrialised country in the world has launched free-market reforms during the past two to three decades. About a dozen of these countries have reformed substantially in a number of areas. The United States is one of these. But other countries have achieved more in areas where the US still has a lot do to. And the economic and social results from the reforms have often far exceeded expectations.

Spain managed to integrate more than one million non-European immigrants in the regular labour market, in a country with a population of 40 million. Openness to immigration was combined with temporary work contracts, de-regulations and tax decreases - later also combined with an amnesty for almost another million illegal aliens. Currently, employment rates among immigrants are at the same level as for native Spaniards.

Several countries cut taxes substantially and made them simpler. Ireland was the first country to decrease corporate tax radically, from 50 to 12.5 per cent. Average incomes have now doubled in one decade, and the low-income households decreased as a share of total households from 42 to 14 per cent in 15 years. Some 16 countries have introduced flat tax systems, making taxation simple and education beneficial.

The Netherlands launched a thorough health care reform, providing all citizens with private health care insurance - and care from providers in free competition. This allows choice, and most Dutch have used that right. It also benefits efficiency and quality. A price ceiling guarantees that people with chronic illnesses can afford treatment. Other countries have also opened up health care for competition, noticing increases in productivity.

…Sweden introduced school vouchers. Pupils and their parents get a voucher from the state representing 85 per cent of the public education cost, which can be used to pay for education in any school. The share of pupils in primary school that attend private schools increased from zero to eight per cent and for high school from almost zero to fifteen per cent in little more than a decade. Studies have shown that choice and competition lead to increases in quality in both public and private schools.

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