For decades, the European model of social democracy has served as a beacon for American progressives. Taxpayer-funded healthcare, high income tax rates, and generous welfare programs were held up as the enlightened path America should follow.
But as CNN’s Fareed Zakaria pointed out over the weekend, that model is failing across much of Europe. The one country that has adapted, and is now leading in many significant measures of genuine progress, has largely abandoned the old European vision and returned to what has always worked: free markets.
For decades, Sweden was known for its inclusive welfare state and its strong voice on human rights.
— Fareed Zakaria (@FareedZakaria) August 16, 2026
But recently, the country has come to resemble something very different: an ultra-capitalist haven, with an increasingly tough approach on immigration.
I explained what changed: pic.twitter.com/Z3epDw8IBl
"Across Europe, liberal democracies are paralyzed. Their growth has stalled, their debts are climbing, and they cannot bring themselves to change course. France has not balanced its budget in more than 50 years and spends nearly a quarter of all public spending on pensions. Britain's new prime minister, Andy Burnham, has inherited a daunting task of possibly having to raise taxes further to cover the rising costs of health and social care. This paralysis leaves much of the continent with little room to meet today's challenges, from tech innovation to rearming against Russia," Zakaria said. "But one country offers a way out, Sweden."
While American progressives have long held Sweden up as a socialist paradise, the country has steadily moved toward free-market reforms, and the results have been quite decisive.
Carl Bildt, who became prime minister in 1991, the first conservative leader in six decades, steered Sweden away from an overgrown welfare state and toward greater prosperity. The top income tax rate has fallen from nearly 90 percent in the 1980s to around 50 percent today. Social spending has dropped to roughly 24 percent of the economy. Those shifts may not sound dramatic, but coming from a former social democracy they represent steady, consistent progress that in key ways now outperforms the United States.
While much of Europe's economy remains tied to older industries and has failed to lead the world in innovation or technology, Sweden has produced a striking number of tech unicorns, companies valued in the billions, including Spotify and Skype. Its debt-to-GDP ratio has also plunged and now stands far below that of the United States. As Lars Jonung, former chief economic adviser to Bildt, put it: “We have put a capitalist revolution into a former very strongly socialist oriented society.”
The shift toward greater realism has even extended to immigration, where Sweden has steadily built one of the most restrictive systems in Europe.
"The country's new model of a leaner state and tighter borders now has broad support across both right and left," Zakaria said. "Ultimately, the Swedish experience shows a relentless ability to reach consensus in times of crisis and then adapt."
That capacity for adaptation is what makes free markets so important. They do not merely create prosperity; they turn ordinary people into engines of innovation, giving them the freedom and incentive to adjust to changing circumstances in their daily lives. That flexibility has long been one of America’s great strengths, and it must remain so. Yet the Left, and even some on the Right, have come to portray free markets as one of the country’s greatest weaknesses.
In reality, since the end of the Reagan era, Americans have moved steadily away from faith in markets, innovation, and economic freedom. We have traded one of our foundational beliefs for the comforting but false promise that government can solve every problem.
What if the solution to so many of our problems lies in what we have spent decades abandoning: the freedom to build, compete, create, and adapt?