Despite challenges and doomsday predictions, the Nordic welfare states with high taxes and public expenditure are still with us. This paper describes strategic choices for policy makers of the welfare state and uses the case of Sweden to argue that the high tax welfare state has survived several challenges through a process of incremental change, where the welfare state is modified in order to maintain political support from voters who would otherwise favor cutbacks. This gradual adaptation leads to heterogeneous universality characterized by flexibility, freedom of choice, and financial solutions that involve both public and private funding. While such policies may increase inequality, they play a crucial role in maintaining political support for high taxes and expenditures. Compared to likely counterfactual scenarios, this gradual adaptation may be the political strategy that minimizes inequality in the long run.
Related content: Working Paper No. 101
Bergh, A. (2008). Explaining the Survival of the Swedish Welfare State: Maintaining Political Support through Incremental Change. Financial Theory and Practice, 32(3): 233-254.