Could Latin America Be the Next Sweden?

The reading for this week by Huber and Solt (2004) describes the success and failure of neoliberalism in Latin America. Huber and Solt use five main indicators to measure the growth regarding the development model. These measurements consist of growth, economic stability, poverty, inequality, and quality of democracy. Hubert and Solt also conclude that the neoliberal reforms in Latin American countries have been unsuccessful in creating policies that can enhance the development and stability, and also lower poverty and inequality. They suggest for Latin America to have a more promising future, it should have a careful and deliberate reforms along with an adequate social policy endeavors and an effective way to construct better institution. Furthermore, Hubert and Solt say that poor policy choices in Latin America trigger poverty and inequality. I agree with most of the argument in this article. I believe that a country can achieve a stable economic growth and low inflation through a reform. The process may take a while, and it will not be a simple process, but by putting constant efforts and sticking to an efficient economic reform plan and choosing the right social policies, stability can be obtained.

I will compare Latin America and Sweden since both of these countries had undergone economic disasters. I believe that Latin America can follow Sweden’s steps in terms of progressing towards a better economic development, because Sweden was able to survive the recession by adopting a decisive economic liberalization. Swedish economy had suffered from inflation and weak economic growth as well during the 1990s. However, Sweden took different steps from what most country would do when faced with an economic disaster. Sweden created various regulations that worked well on them, which led them to a strong economy. For example, after experiencing a financial crisis, Sweden decreased its public spending from its GDP and allocated the budget to the social sector such as unemployment benefits. Sweden also restructured its banking system which saves them from the world economic crisis. Moreover, the social security system in Sweden is a brilliant insurance system in a way that it covers all Swedish residents and things like accident insurance or disability assistance. Although some of the efforts that Sweden took on their road to recovery may not work for Latin America, I still think that it is still worth a try for Latin America to follow some of Sweden’s footsteps.

In addition, Huber and Solt state that during these past two decades, the poverty and inequality level in Latin America and the Caribbean region has been increasing. They believed that one of the ways to solve both poverty and inequality in Latin America would be through tax reform and changes in social policies. It is crucial for a state to develop faster by investing in areas such as healthcare, education, and perhaps the research field, rather than cutting these areas so much. I believe that investing in these sectors are significant in the broader economy as it can boost productivity, facilitate job prospects, and benefit human capital development. Overall, Sweden is a far-cry from Latin America because I feel that none of these reforms would ever take place unless there is a structural change in the political institution of Latin America.