Compare and contrast. Britain and Sweden are both members of the European Union. Neither is a member of the single currency. Both have large public sectors in relation to the overall size of their economies. Yet in the second quarter of 2012, when the UK was in the third quarter of its double-dip recession and output fell by 0.7%, Sweden posted quarterly growth of 1.4%.
This was far chunkier growth than the financial markets had been expecting but far from a flash in the pan. Sweden's economy is 4.5% bigger than it was before the start of the global recession (Britain's is 4.5% smaller) and it has performed better than any of the G7, the big beasts of the western industrialised world.
To make David Cameron and George Osborne even more envious, the Swedes are enjoying the sort of export-led recovery the prime minister and the chancellor have sought in vain for the UK. Of the 1.4% rise in Swedish GDP in the three months to June, net exports contributed 0.8 percentage points. So much for the idea that developed countries, with their high wages and generous welfare systems, can no longer cut the mustard in cut-throat global markets. So much, also, for the idea that countries that opt for high levels of taxation to fund social security programmes are inevitably inefficient and uncompetitive.
Like Britain, Sweden is exposed to the risk of a deep and protracted downturn in the eurozone, because that will have an impact on its exports. That said, the Scandinavian country looks a lot better equipped to weather the storm. It sorted out its banks after the financial crisis of the early 1990s. It has a well-educated workforce. It has a well-defined industrial strategy that has kept its manufacturing sector competitive. And it has diversified its exports into the faster growing regions of the world. None of that could be said of Britain.
