Think the answer to America's problems is bigger government?

http://www.forbes.com/forbes/2009/0803/international-invest-guide-obama-sweden-public-downsizing.html

Sweden's Public Downsizing
Anita Raghavan, 07.15.09, 06:00 PM EDT
Forbes Magazine dated August 03, 2009

Think the answer to America's problems is bigger government? Swedish
Finance Minister Anders Borg has seen the result up close and says
it's not pretty for the economy or investors.

Anders Borg has a message for those who look to government to take
over health care, rescue the financial system and run troubled
corporations: I have seen the future--and it doesn't work.

As the finance minister of Sweden, Borg is the chief financial officer
of a country long known as a walking billboard for a social welfare
state. In Borg's view, the 1970s and 1980s were lost decades for
Sweden. Left-leaning politicians pushed government spending, excluding
investment outlays, from 22% of gross domestic product in 1970 to 30%
in 1980. Real growth fell from an average of 4.4% annually in the
1960s to 2.4% in the 1970s and remained low for the next two decades.

"Like many societies, we went too far in our welfare-state ambitions,"
say Borg (pronounced "Bor-ee").

These days President Obama is overseeing the largest increase in the
U.S. government's share of the economy since it was conducting a world
war almost seven decades ago. Economic stimulus, bailouts and expanded
health care will all have to be paid for someday with either taxes or
inflation. Borg is pushing Sweden in the opposite direction,
encouraging the legislature to cut taxes, cap spending and privatize
parts of health care.

"If you're working yourselves upwards in taxes and deficits, we're
working ourselves downwards," says Borg. (FORBES recently interviewed
him in Berlin, where he had delivered a speech.)

If you think Borg has the right idea, put your money on it. Sell some
U.S. stocks and buy some Swedish ones (see table, below).
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Borg, 41, doesn't look like a finance minister or fiscal conservative.
The Stockholm native wears a long ponytail and gold loop earring. His
hippie appearance hides a dyed-in-the-wool free marketeer who
champions the idea of "making work pay." That is a revolutionary
concept in a country where the penalty for working has historically
been high taxes and the reward for staying home a comfortable welfare
or unemployment check.

In a 1988 debate that is now a YouTube favorite of conservative
Swedes, Borg calls for a "night watchman's state" in which the
government provides security but little else. In a book from that era,
The Sleeping People, Borg's boss, Prime Minister Fredrik Reinfeldt,
compared the effects of Sweden's welfare state to the plague and aids.

"It was a very youthful comment," Borg says of his call for
near-elimination of government. "When you become older, you get
children. [He is married with three children.] You change your views."

Or you go into politics and tone them down. Borg was born into a
family of Social Democrats. He became disenchanted after concluding
the indulgent government was turning Sweden into a "boring, stagnant
society." Borg's idols were free marketeers Margaret Thatcher and
Ronald Reagan.

After studying political science, economic history and philosophy at
Uppsala University, Borg worked for four years as a political advisor
to then prime minister Carl Bildt. Following Sweden's 1990s financial
crisis, when it bailed out its own banks, he became a securities
analyst. The first thing he noticed was how little faith investors had
in Sweden because of the size of its government sector. He came away a
firm believer in free markets and sound government finances.

Next year Sweden's government is projected to be on the hook for gross
financial liabilities equal to 57% of GDP, which is up from 48% two
years ago. The debt of U.S. government entities, by contrast, is
expected to nearly equal GDP by next year, versus 63% in 2007, says
the Organization for Economic Cooperation & Development.

Borg says it's quite possible to combine "a flexible, market-oriented
system with the traditional values of Sweden." By "traditional" he
means valuing social cohesion, a publicly financed safety net of some
sort and gender equality. Parity between the sexes is a tenet of the
Social Democratic swing of the 1980s and, Borg says, of the Viking
era.