Imagine retiring at a young age as a “registered disabled” person. The reason? Alcoholism. The Swedish solution is for the state to pay you money to stay home and remain drunk. Treatment is optional. Interpretation of alcoholism is subjective and often left to the one claiming it as a disability. Doctors’ visits are often symbolic. People can and do remain on “disability” for their illness. It is common knowledge that alcohol consumption is very high among the Northern top of Europe (Russia, Sweden, Norway, Finland, Denmark, Iceland, the UK, and Ireland), which is sometimes called the “Liquor Belt.” The Russians, Swedes, and Finns are particularly known for their ability to consume large quantities of vodka. The Norwegians and Danes prefer more beer, as are the Brits and the Irish.
Sweden’s alcohol disability program, on the surface, is intended to allow registered alcoholics enough government money to pay for all their basic necessities, including alcohol. The program has several aspects. First, the official number of alcoholics is clouded by the fact that people can be “retired early” for alcoholism, but registered as an early retiree instead of an alcoholic. This method works well for those above 50 years-old. For younger people, they are registered as “generally disabled.” Though Swedish employment laws make it difficult for employers to fire employees, it is much easier to place them on “disability” if their performance falls below expectations.
The state-sponsored alcoholic welfare program is rooted in the good intentions of the Swedish Riksdag (Sweden’s legislative body). Many members have enormous compassion for people with the “sickness” and believe that people should take their time in finding a cure for the disease. This is the reason for optional treatment and not very rigorous medical examinations. Allowing people to easily be placed on “disability” also lowers the unemployment level. This is perhaps a more important political benefit of being compassionate. Instead of having employers lay off people (and creating more strife with Sweden’s strong unions), these “disabled” people are placed outside of the workforce statistics.
Sweden’s alcohol policies have been unique. In the 19th century, the country experienced chronic levels of alcoholism, which resulted in a nationwide prohibition campaign. The legacy of prohibition still hangs over Sweden. In fact, disproportionate numbers of members of the Riksdag consumer very little or no alcohol, unlike their constituents. Sweden operated a modified national prohibition system from about 1910 until 1956.
During this time, some Lans (counties) were completely alcohol-free. Others required that all alcohol purchases be recorded by the state in official books to track and limit consumption in some areas. People were given quantitative restrictions on how much they could purchase on these records. When prohibition was finally lifted in the 1950’s, it was done primarily to increase tax revenue for the state. In fact, the major reason why prohibition never completely took hold in the country, unlike in the United States, was because of the need for tax revenue.
The Swedish government’s love-hate relationship with alcohol continues today. Hard liquor must be purchased from State stores (bars and nightclubs buy directly from State stores). The alcohol tax remains very high. Roughly 75% of the cost of spirits at the retail level is tax. Popular Swedish brands such as Absolut are owned by the Swedish government.
The “registered alcoholics” who use their welfare funds to purchase alcohol are, in effect, largely reimbursing the government with their purchases. The system feeds itself. Some Riksdag members with a teetotaler mentality still believe that the high tax discourages even more consumption. This is the classic perception of a “sin tax”.
Recent developments with Sweden’s neighbors have complicated its well-intentioned, somewhat hypocritical alcohol program. Both Denmark and Finland dramatically reduced their alcohol taxes in March 2004. The result is that a 500-ml bottle of Absolut, Sweden’s national brand of vodka, in Malmo, Sweden, costs 310kr ($40.80) at a State Store. If you drive across the bridge into Copenhagen, that same bottle can be purchased for 100kr ($13.16).
With Finland, the price differences are not quite as extreme but are still easily worth a two-hour boat ride to Aland (a group of islands in the Gulf of Bothnia between Sweden and Finland, near Stockholm). The Danish and the Finns are responding to pressure with their own alcohol smuggling problems. The tax rates in Germany, Denmark’s southern neighbor, are much lower, forcing Copenhagen to reduce its taxes. For Finland, alcohol taxes and prices in general are rock bottom in nearby Estonia and neighboring Russia. Sweden’s neighbors are responding from European Union pressure and global competition.
In March 2004, while visiting numerous offices within Sweden’s Riksdag, the debate of what to do with the alcohol crisis raged. Everyone in the building knows of people who have circumvented the alcohol tax system by making a quick trip to Denmark or Finland. Many of them have made those kinds of purchases themselves. Still, frustration brews. Sweden’s parliament building sits in a fitting geographic position. Situated on an island in the middle of Stockholm.
The Riksdag faces a freshwater lake to its west side and the Baltic Sea on its east. The situation is somewhat symbolic of where the parliament stands with responding to outside pressures. The alcohol crisis is one of many to come for a country that is imbued with a socialist ideology. Its agreements with the European Union have forced it to reform. The reluctance is intense.
Sweden’s governing Social Democratic Party is privately split over the alcohol tax crisis. Decisions to lay off State Liquor workers in Scandia (the far south of Sweden) have been made, but that is a temporary measure. As more Swedes make shopping trips outside of Sweden, less VAT is received by the government. The problem is compounded.
With less tax money, pressure will be applied to try to make it more difficult to receive an alcohol pension. However, requiring more medical treatment will also cost enormous amounts of money. In some cases, it is simply cheaper to keep someone continually on alcohol rather than pay for an expensive treatment session numerous times.
The Riksdag physical fitness expert, Yngve Borgstrom, stated that, “Many alcoholics go through programs many times without any long-term result.” Borgstrom, who is originally from Malmo, also added that sometimes when he visits family in southern Sweden it is nice to make a shopping trip to Denmark. Borgstrom, as a very disciplined retired Major in the Swedish army, does not condone purchasing large stocks of alcohol to bring back to Sweden, but he certainly understands the logic.
Black markets, or informal markets, exist whenever government restrictions prevent people from obtaining their needs. Most people think of contraband such as narcotics or weapons, but the clear majority of world’s black-market goods are non-illicit. Bringing alcohol into the country is not illegal according to the European Union’s laws. However, it is an act of substitution, where instead of buying within one high-tax zone people buy in another.
At a local level, American counties would dare not increase its sales tax to 15%. In recent years, the malls have been clogged for the tax-free sales weeks. A 15% sales tax would make a county’s shopping malls vacant, and precipitate a flurry of sales in nearby counties. That is what is happening to Sweden on a large scale. Even registered alcoholics can buy in bulk and pay less than their neighborhood State Store.
When asking students at Sweden’s premier university in the ancient capital of Uppsala, their general response was that alcohol prices have no impact on deciding whether they drink or not. For some Uppsala students. Higher prices affect their ability to buy as much alcohol, but many of their friends will bring back large amounts of alcohol, stock it away, and consume it over the semester. Swedish students are known around the world for their love of travel. A southward excursion into Denmark or a jump across the Baltic Sea to Finland is as simple as Florida’s students making a weekend trip to the beach.
A small concession in recent years, according to the Social Democrat Member Per Erik Grantor of Lapland, was a beer tax reduction. A typical beer at a Seven-Eleven in Sweden runs 14SEK for 500 ml. Beer in Sweden falls into three categories: 2.5%, 5%, and above 7%. Since prices in Denmark and Finland, remain about 30% to 40% lower, some black-market activity for beer continues in Sweden.
Norwegians, who pay even higher taxes on beer, will often drive into Sweden and purchase truckloads of beer. Of course, the growing popularity of home brewing kits in Norway has reduced that. As a more isolated country than Sweden, the Norwegians are discovering it is more convenient to make their own, than smuggle some across their very porous eastern border with Sweden.
Nonetheless, in Sweden it remains entirely possible for someone under 30 to become a registered alcoholic for many years, if not life. That person can conveniently be seen as disabled and is no longer of concern for employers, labor economists, or the unions. In the short term, everyone is happy, especially the alcoholic, who effectively receives free booze money. Sweden will ultimately succumb to market pressures and reduce taxes. But what will happen to those who have been promised a secure life of registered “disability” if that umbilical cord is ever cut?
As a witness to the dramatic changes in Eastern Europe, where millions of people essentially one day woke up and realized that they had to write a resume to find work; Sweden’s economic atmosphere seems to smell of a lighter version of the Soviet collapse.
Questions to Consider:
1.) What makes Sweden’s welfare system different from the U.S. system?
2.) Describe the unique problem of Sweden’s alcohol tax. Do we have this
problem in the United States? Why or why not?
3.) What is the governing party of Sweden? What future political challenges
does the Swedish leadership face in this article?
4.) What is the VAT? How much is it in Sweden? How does this compare with
U.S. tax rates?
5.) What kind of alcohol policies does the Swedish government have? How are
these different from the United States? Are there similarities?