https://www.cato.org/blog/globalizations-race-top-case-study-bangladesh

Johan Norberg

In my essay Globalization: A Race to the Bottom – or to the Top?, part of Cato’s Defending Globalization project, I show that the belief that an open world economy would hurt working conditions turned out to be false. On the contrary, trade and investment are associated with higher wages, less child labor, safer working conditions, and better environmental performance. Between 2000 and 2016, the global rate of deaths related to work declined by 14.2 percent.

One of my examples is the effect of Bangladesh’s garment export industry in reducing poverty and creating better jobs, especially for women.

An interesting new study by Laura Boudreau of Columbia Business School, recently featured on the excellent podcast Trade Talks, sheds light on one transmission link between globalization and progress: how businesses and consumers in the West put pressure on suppliers to improve working conditions.

After the collapse of the Rana Plaza building, which killed at least 1,260 textile workers in 2013, foreign multinational apparel buyers decided to oblige every factory they bought from to introduce an Occupational Safety and Health Committee. Boudreau conducted a year‐​long field experiment with 84 supplier factories, randomly enforcing the mandate on half. She found that the commitment was not just PR. Because factories did not want to miss out on business, they formed committees, and these also correlated with small improvements in workers’ health and safety in those factories.

The conclusion is the complete opposite of what critics of capitalism have warned about for decades, when claiming that Western multinational companies (MNCs) take advantage of countries with weak governance to put downward pressure on standards. On the contrary, they often step in when governments fail. Boudreau writes: “In weaker states … it may be MNCs or multi‐​stakeholder coalitions with MNCs’ participation that provide enforcement. This research suggests that in such contexts, MNCs can contribute to increasing compliance with labor standards.”

For more on globalization’s race to the top and related issues, be sure to check out my full essay and all the other content on Cato’s Defending Globalization project page.

https://www.cato.org/blog/sweden-during-pandemic-pariah-or-paragon

Johan Norberg

During the pandemic, it seemed like the world was watching and worrying about Sweden, because my home country chose to stay open during the crisis. Many people warned that it was a reckless experiment that would end in disaster, and some people think Swedes came to regret this policy.

Today, I am publishing the Cato Policy Analysis paper, Sweden during the Pandemic: Pariah or Paragon? where I look at what Sweden did and summarize how it worked out. In the end, Sweden did better than other countries when it comes to school results and economic performance. That was to be expected as Sweden was one of few countries where schools and workplaces remained open. More surprisingly, Sweden also did better than most western countries on health outcomes.

Remarkably, Sweden had one of the lowest excess mortality rates during the three pandemic years 2020–22 – less than half of America’s. It seems like voluntary adaptation to the pandemic worked better than most people expected, and it suggests that it was not Sweden but the lockdown countries that engaged in an unprecedented experiment, depriving millions of their freedom without a discernible benefit to public health.

Read it here.

https://www.cato.org/blog/debunking-myth-swedish-socialism-again

Johan Norberg

Whenever I lecture around the world, whatever I talk about, there is almost always someone in the audience who wants to ask me about Sweden. Is it the successful example of socialism that many assume?

I try to explain that we have been socialists and we’ve been successful—but never at the same time.

I’ve written about this in a Cato Policy Report and I’ve done a documentary about it for U.S. public television, but people keep asking me. So I decided that I had to write a book about it for the Fraser Institute to tell the whole story, The Mirage of Swedish Socialism: The Economic History of a Welfare State.

And it’s actually one of the best examples we have of the benefits of free markets and the perils of socialism. Between 1870 and 1970, Sweden had a smaller government and a more open economy than most comparable countries, and that was the era when Sweden grew faster than any other developed country but Japan.

Then, when Sweden had already become one of the richest countries in the world, Sweden began to experiment with socialist ideas. From 1970 through 1990, government was massively expanded, taxes were raised, and the economy was regulated. This was not the golden era of socialist nostalgia, but more like an Atlas Shrugged moment: Swedish companies like IKEA and Tetra Pak and lots of successful entrepreneurs left Sweden and not a single net job was created in the private sector. It was the one moment in Sweden’s modern history that we lagged behind other countries.

After a devastating financial crisis in the early 1990s, politicians from both the left and right agreed to end this experiment. Instead, they reduced public spending, taxes, and regulation to get back to the growth model that made Sweden successful. Sweden started to outperform its neighbors again.

If Bernie Sanders and AOC wants to imitate actually existing Sweden today, they would have to liberalize markets in many ways, reform Social Security, introduce school vouchers, get rid of the minimum wage and most occupational licensing, and abolish taxes on inheritance and property.

Sweden still has a bigger welfare state than the United States, but the receivers pay for it themselves. The tax burden falls heavily on low‐ and middle‐​income households in Sweden, making the tax system much less progressive than in the United States and almost all other rich countries.

The lesson Swedes took from the 1970s was that you can have a big government or you can make the rich pay for it all, but you can’t have both.

I explain this history and detail how Sweden’s welfare state works in the book, but if you want the shortest possible takeaway from Sweden’s modern political history, listen to Kjell‐​Olof Feldt, Social Democratic Minister of Finance (1983–1990): “What we believed in as young socialists simply turned out to be impossible in practice.”