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SWEDEN. With the highest tax level in the world, Swedes sensed four years ago that the feasible limits of their pioneering welfare state had been reached: after 44 years, they turned out the Social Democrats. To pay for Sweden's virtually risk-free society, tax rates have reached the point where hard work is actually discouraged. A man with a nonworking wife and two children who earns $19,000 a year from a full-time job has an after-tax income of $13,000. If he works half time, his net income is just $1,800 less because child benefits remain the same and rent subsidies actually increase. As a result, 25% of Sweden's 4.2 million laborers now work only part time, many of them on nondemanding public sector jobs. Says Nils Lundgren, former director of the National Institute of Economic Research: "The welfare state worked at first precisely as it was intended because we still shared a common Lutheran work ethic. But now a second generation of young people takes the soft option of a post in the state bureaucracy. We have a word for such people in Sweden, flum. It means easy, wet."
FRANCE. Although austerity-minded Premier Raymond Barre has tried to keep government spending in check, the rapidly rising use of medical benefits—doctors' fees, drug prescriptions, hospital and other expenses—threatens the stability of a welfare system that not long ago was considered relatively healthy. Unlike other Western European countries, which pay for social services largely from general tax revenues, France finances social benefits separately from employee (24%) and employer (59%) deductions. The government contributes only 8%. But social security and medical costs have grown so rapidly ($124 billion in 1980, vs. only $31 billion in 1970) that the government now faces a deficit of $5.3 billion this year.
BRITAIN. Embattled Conservative Prime Minister Margaret Thatcher has emerged as the boldest challenger to what she considers the destructive excesses of European welfarism. As a symbol of her determination to cut public spending, she charged government ministers $54 a head for the traditional Cabinet dinner before the opening of Parliament in November. Embarked on a "great experiment" to restore risk, incentive and reward to Western Europe's most sluggish economy (the growth rate is expected to drop this year by as much as 3%), Thatcher is trying to impose a change in national priorities that would put production ahead of welfare.
That drive, however, seems to be foundering. Many of her Cabinet ministers have been unwilling or unable to prune the overgrown bureaucracies they govern. Meanwhile, an inflation rate still above 15%, interest rates no lower than 16% for private borrowers and a strong pound sterling that inhibits exports have conspired to send British industry into a deeper recession. Unemployment, already above 2 million, is projected to be nearly 3 million a year from now; the payment of benefits to the jobless, if the rate continues, could easily wreck Thatcher's program. Threatened by revolt inside her own Cabinet and facing protests by Tory business leaders as well as by her Labor opposition, Thatcher was forced to reduce her demand for a $4.8 billion public spending cut by virtually half.