The Underbelly of the Nordic Model

by Henry Farrell on November 10, 2007

“This FT article”: is pretty entertaining. First the shock horror headline and findings.

Cheats rife in Swedish welfare system

Swedes say they despise people who cheat the country’s generous welfare system at the same time as many do so themselves, government research has concluded.

A two-year study by the Delegation Against Benefit Fraud and Errors said 95 per cent of Swedes condemn cheating but up to a third have no problem either bending the rules, keeping unearned payments or defrauding the system.

The conclusion exposes the underbelly of one of Europe’s most successful welfare states by revealing that Swedes eagerly support their famed Nordic model while simultaneously tapping it for extra cash because “everyone else is doing it”.

Then the interesting figures:

The delegation said such activities cost the government about SKr20bn (€2.2bn, $3.2bn) last year, around 4 per cent of total social welfare payments from the country’s 60 social security systems of SKr520bn – far higher than has been estimated previously.

So 4 per cent of total social welfare payments seem to go to frauds. Isn’t this shockingly … low????? Perhaps this is enough to scandalize the Swedes (although the article hints that the public may be more upset by the fact that 10 out of 15 cabinet members in the newish right wing government have been caught cheating on taxes for their household employees), but by the standards, say, of US military subcontractors, 4% wastage doesn’t even qualify as chump change.

{ 1 trackback }

11.10.07 at 10:41 pm



bi 11.10.07 at 7:58 pm

Well, I don’t know. Which is worse: cheating on taxes while saying it’s bad to cheat on taxes, or cheating on taxes while claiming to be engaged in a principled struggle against Coercive Taxation by Big Government? It’s a tough call, really…


derek 11.10.07 at 8:23 pm

Also, isn’t it a tenet of Conservative Thought that money taken away from Teh Government is spent by People, which benefits the economy? This is just the trickle-down effect on automatic, surely? I can’t see anything that George HW Bush would object to here.


Tim Worstall 11.10.07 at 9:30 pm

“So 4 per cent of total social welfare payments seem to go to frauds. Isn’t this shockingly … low?????”

Agreed, it is very low (maybe). So what we then need to work out is what is it about Swedish society that makes their high level of income redistribution work when such levels don’t seem to work in other countries?

That statement is subject to a set of qualifiers of course. Is 4% fraud actually low by international standards? Is the way in which such payments are made (leaving aside the fact of them and concentrating upon the method) conducive to less fraud? If, indeed, less fraud there is? What is the level of welfare fraud across countries?

I sure as hell don’t know the answers to those questions but Henry, as you’re stating that those are “low”, how about it?

Points will be lost if you insist that as a racially (tribally, to taste) homogenous society Sweden can happily deal with more such than more fractured societies. I’m sure I’ve seen that explanation for the success of social democracy in the Nordic states already debunked here on CT.


John Emerson 11.10.07 at 10:18 pm

Tim, I think your best strategy would be doubt that the cheating rate is really only 4%. I don’t think that the idea that 4% isn’t a low rate is going to fly.

In the past I have hypothesized that some of the success of the Scandinavian welfare states is dependent on a pretty high degree of moralism, stodginess, and rule-following among the Scandinavian peoples. They wouldn’t work for societies whose citizens admired twinkly-eyed rogues .

I also hypothesized that a long tradition of honest, indigenous government has something to do with it. Most European states and districts have spent long periods ruled by foreigners and wastrels. So Scandinavians could actually survive without developing cheating skills that were necessary elsewhere.

American ethno-ethics boggles at this, but a sexually promiscuous Swede in the porno biz might be ashamed to cheat on his taxes. Of course, in America sexually repressed Christians can proud that they cheat on their taxes.

Solution: more porno!


Stuart 11.10.07 at 10:31 pm

Figures I found randomly on the net (so not reliable in any way) suggest the UK welfare budget is around £150 billion, and estimates of welfare cheats found in the same brief survey go from around £2-5 billion, which suggests 1.75-3%. Of course this is certainly enough to support unending articles in the Daily Mail, but as you say doesn’t seem particularly bad for a large scale government program.


Alan 11.10.07 at 10:36 pm


Defects in public welfare administration in Sweden provide more evidence (if any were needed) of the evils of the Bushevik regime.

Next on Crooked Timber: survey of Siberian lichens proves that home-schooled kids in Idaho are … oh, I don’t know, insert whatever you don’t like.


Henry 11.10.07 at 10:57 pm

tim – I thought it would be pretty obvious from the post that ‘low’ here means something like ‘low by the standards of what you might expect to read in articles with lurid headlines about how welfare fraud is rife in Sweden.’ Perhaps I needed to spell that out.


Uncle Kvetch 11.10.07 at 10:59 pm

oh, I don’t know, insert whatever you don’t like

…70% more likely to use really lame strawmen in their blog comments?


Uncle Kvetch 11.10.07 at 11:12 pm

Meanwhile, here in the good ol’ up-by-the-bootstraps US of A, where there’s nary an effete Eurabian or do-gooder socialist to be found, “An estimated 30 percent to 40 percent of taxpayers cheat on their returns, defrauding the government of some $290 billion a year, according to an Internal Revenue Service analysis of 2001 returns.” (Source)

Would that be the soft underbelly of the US Model, or the piece of skin at the nape of the neck?


John Emerson 11.10.07 at 11:59 pm

I celebrate the birthdays of large government organizations quietly at home, like the Bible says. I always make a pineapple upside down cake for the Marines.

I suppose that’s the wrong cake for the Marines. Damn.


Jacob Christensen 11.11.07 at 1:06 am

This has been making the rounds in Swedish media (with the government properly embarrassed by revelations of tax dodging among political functionaries – and then we haven’t even mentioned the PM’s deputy minister who was spotted in an intense encounter with a TV journalist at a Stockholm bar while she was on duty as coordinator of the disaster organisation) lately.

One point could be that the Nordics (rightly) expect their governments to be non-corrupt. Another that Sweden has a relatively high rate of people on sickness benefits compared with Denmark or Norway.

Payments of benefits for the care of a sick child (simply known as VAB-days) is another troublespot in Sweden.


dave heasman 11.11.07 at 1:28 am

A major part of welfare outgoing is Old Age Pension payments. In countries that have been accurately registering births and deaths for over 100 years, and I imagine the UK and Sweden both qualify here, it is quite difficult to defraud the Old Age Pension system by very much at all. So really the proportion might be more interestingly expressed as a percentage of the fiddleable welfare.


Stuart 11.11.07 at 1:37 am

OAP payments are just as fiddleable as the rest, identity fraud being one of the keys for that particular one – there are even organised gangs that bus around old people in the UK to pick up pensions at multiple different locations in an area using different fake identities.


Johan 11.11.07 at 2:22 am

Akin to what has been said here, I believe that much of what makes the “Nordic Model” work is the very fact that we get outraged at a 4% rake, the fact that we have such ruthless expectations on our ministers as well as populous.

Much of what I see wrong and failing on the US side of the pond is this repulsive apathy, a complete expectation that senators fly private jets funded by lobbyists, that political office in any way elevates you as a citizen. I’m in the same appointment queue as everyone else over here. Pinning down the top 0.1% (or whatnot) is persay always difficult, and yes rich Swedes can always use private sector medical services or fly abroad, but Sweden does a pretty good job of pinnig down the issues, so that everyone is working on/troubled by the same system. Ideally. There are of course exceptions.

On the other hand I’d like to criticize Swedish media for being terrible cowards, rarely ever criticizing politicians actions, but merely their tax records/parking tickets/etc. Numbers are easier to point to, and you don’t have to stand for anything, just howl. While I do believe this accountability is central to the Nordic Model, the media is losing their teeth, fast.

A particular flavor of the US apathy that worries me is the satire of Stewart/Colbert. While hilarious, it seems that a frieghteningly large portion of those laughing their head off at Colberts Doritos sponsorship are going to be OK with the next round of bloodsuckers that take office. It seems to me that Washington DC needs to be flushed out, seriously…



LordActon 11.11.07 at 3:49 am

So what exactly is the “Nordic Model”?

Zoftig? … oops … wrong ethnic model there

How very surprising that people cheat on their taxes or about taking welfare payments. NOT!


nu 11.11.07 at 7:12 am

While searching for figures in different countries, I ended up reading a very angry french article full of examples of welfare queen and foreign criminals cheating the system and the amount was estimated to 500 millions euros over 3 or 4 years.
That’s out of a 350 billions yearly budget.

Between that and the british figure above, Sweden’s 4% seems to be high.


acb 11.11.07 at 8:25 am

As someone who lived in Sweden in the late Seventies, and thus remembers the morality prevalent then, I am actually shocked far more by the behaviour of politicians caught cheating on their taxes and surviving than by the welfare fraud.

The trouble with both sickness benefits and “staying home to look after the children” is that the government to some extent encourages both frauds, since the alternative to sickness is unemployment, which looks worse in the statistics, while looking after your children, again, looks good in the statistics. But it is well-known that men in the north of the country only take time off to look after their children in the elk-hunting season. When I lived there, the whole child-care system ran on tax fraud, since there were only, legal, subsidised places for about two thirds of the children who needed them, and everyone else had to pay cash more or less officially. So there has been a generation brought up to regard tax fraud by the self-employed small businessman as something like speeding: not really an immoral crime at all.


Michael B Sullivan 11.11.07 at 8:57 am

4% doesn’t seem “shockingly low” to me. Perhaps not outrageously high, either. But, then, I don’t know much about how much cheating in welfare systems goes on in other countries.

It seems to me that there’s probably an objective answer to the question. Is it high, low, or neither in comparison to cheating rates in other countries?


Tim Worstall 11.11.07 at 9:09 am

“Perhaps I needed to spell that out.”

Uncle Kvetch: not sure what fraud in the paying out of Govt money has to do with fraud in the collection of it.

The Swedes themselves seem to make a distinction.
“Swedes have relaxed attitudes towards
black work. A majority who has bought
black work is happy for having done a
good business and only one of four would
have a bad conscience [10.2]. Many of
those who have bought black regard black
work as necessary to keep Sweden going

NR estimate of black income from work is
based on the discrepancy between reported
incomes and reported expenditures in the
household sector. This discrepancy has for
year 2002 been calculated to SEK 115-120
billion, which corresponds to some 10 percent
of total income from work.”

That’s small by, say, Italian standards, certainly. But more or less than the US? I don’t know, you tell me.
BTW, that number doesn’t include excise tax evasion, VAT fraud etc.


bi 11.11.07 at 9:37 am

Tim Worstall, you’re trying to say a bunch of statistics is not “low”, by throwing up a _different_ bunch of statistics.

Yet another instance of the standard crapmill tactic.


Tim Worstall 11.11.07 at 11:18 am

Err, no. It was Kvetch who first compared the Swedish welfare system fraud to the US tax payment one. I compared the US tax payment one to the Swedish tax payment one.


Gdr 11.11.07 at 11:22 am

The UK’s National Audit Office has a report on fraud and error in the UK social security system. This report estimates a total of 2.3% overpayment due to fraud and error. (This averages benefits like Housing Benefit and Income Support where the rate of fraud and error is around 5%, with benefits like Retirement Pension where it is close to zero.)

The Department for Work and Pensions has more detailed reports.


John Emerson 11.11.07 at 11:48 am

The 4% figure isn’t low compared to some other actual figure, but compared to the rhetoric about rampant fraud and abuse coming from free-market ideologues. It seems to be enough to bother the Swedes, or some of them at least, and I don’t think that anyone is saying that they shouldn’t be bothered.

The following is true more or less everywhere in the US. Many U.S. small businessmen take pride in their tax evasion, on the grounds that if free riding is possible, they want to be first in line.

So there has been a generation brought up to regard tax fraud by the self-employed small businessman as something like speeding: not really an immoral crime at all.


Matt Weiner 11.11.07 at 12:43 pm

500 millions euros over 3 or 4 years.
That’s out of a 350 billions yearly budget.

But 4% is the percentage of total welfare, not the percentage of the total budget.


Uncle Kvetch 11.11.07 at 2:16 pm

Uncle Kvetch: not sure what fraud in the paying out of Govt money has to do with fraud in the collection of it.

I was addressing what I thought was the clear subtext of the FT article, a staple of the Anglo-American business press: A generous welfare state leaves a nation “rife” with “cheats.” (As John Emerson alludes to in #24.) Conversely, the lack of said welfare state would supposedly result in a more “responsible” populace.

But then again, two minutes after I posted my first comment, it occurred to me that someone would be along very shortly to point out that cheating the welfare state is stealing, whereas cheating on your taxes is merely taking back what’s rightfully yours. Not an argument I have any desire to engage, so I probably shouldn’t have bothered.


Matt Weiner 11.11.07 at 3:14 pm

Another question is: Even if a more generous welfare system leads to more cheating, so what? Is the fact that some people cheat so bad that it’s worth making the system less generous, or is that throwing the baby out with the bathwater?

And a more restricted — means-tested or what have you — system is worse even for the people it’s designed to help. The more restrictions are in place, the more degrading the system is even to people who meet those restrictions, and the more likely those people are to be wrongly denied benefits. See here and here.

So we have to ask ourselves — is it a worse problem if some people get benefits that they aren’t entitled to, or if the system doesn’t reach the people it’s trying to help, and humiliates the people it does reach?


nu 11.11.07 at 3:57 pm

Matt, the 350 billions figure is the budget of the welfare..


Hermenauta 11.11.07 at 4:08 pm

Last year, the brazilian ministery in charge of the “Bolsa Família”, the biggest welfare program of the Worker’s Party government, discovered that 4% of the benefits were fraudulently issued _ and that by merely crossing database files, not active fiscalization, what means that the actual figure must be bigger. I think that by world standards 4% is not a very large fraud in welfare programs _ well, at least in developing countries, not quite the swedish example.

In any case, this should be confronted with the cost of not having an welfare system at all, and all the crime, police, detention facilities, vigilance system, health costs and the like it would ensue.


Hermenauta 11.11.07 at 4:11 pm

No idea about what triggered that italics. :)


Barry 11.11.07 at 4:36 pm

“Tim Worstall, you’re trying to say a bunch of statistics is not “low”, by throwing up a different bunch of statistics.

Yet another instance of the standard crapmill tactic.”

Posted by bi

Considering that Tim is part of the right-wing propaganda industry, I’m genuinely surprised that he doesn’t have some more persuasive statistics near to hand.

Henry – I think that you’re right; I’d bet that any executive in a defense contractor who couldn’t steal 40% would be considered ‘weak and wothless’.


DRR 11.11.07 at 4:49 pm

So we have to ask ourselves—is it a worse problem if some people get benefits that they aren’t entitled to, or if the system doesn’t reach the people it’s trying to help, and humiliates the people it does reach?

The only people that have to ask this currently are the Swedes themselves. My guess is most Swedes see the cheating of the system as a regrettable but unavoidable aspect, one not worrying too much over and perhaps, if they’d like some quality time off to Elk Hunt, something they’d like the possibility to potentially exploit in the future. But seeing as how social democratic models, particularly the scandinavian models are based on a communitarian honesty and sense of public commitment (tax cheats are looked down on) The possibility that the continued cheating and exploiting of the system (especially if it increases) leads to Swedes judging that the integrity of it’s welfare institutions, seeing as how the country is so dependent on them, supercedes the possibility that someone might have to suffer the indignity in order to recieve their generous state goodies.


Matt Weiner 11.11.07 at 5:35 pm

The only people that have to ask this currently are the Swedes themselves.

Well the FT article refers to this as the dark underbelly of the Nordic model, so I took it that it was also supposed to serve as a warning to the rest of us. And here in the US it’s not a question of lucky duckies “suffer[ing] the indignity in order to receive their generous state goodies”*; benefits are quite ungenerous, and the suffering inflicted by the restrictive welfare bureaucracy is by no means trivial. Check out this again (in the earlier post I farked the permalink, which is to the post “Standing in Line”), or for a more personal story this about standing in line for your paltry benefits:

I’ve decided that there must be a giddy sense of power that comes from being able to command poor people to stand in line, at the drop of a hat.

or this for a Canadian view.

*I apologize if you didn’t mean to dismiss the concerns I expressed about the costs of a restrictive system.


Tom Hurka 11.11.07 at 5:51 pm

Not exactly the same issue, but similar:

Tyler Cowen (in Discover Your Inner Economist) reports that on a given work day around 25% of Norway’s workers are absent from work, either “sick,” “undergoing rehabilitation,” or on long-term disability. The percentage is especially high among government workers.

Now 25% strikes me as a very high number. Any explanations? (Cowen’s suggestion is that the norms people accept and abide by vary from culture to culture: some may think it unacceptable to cheat on taxes but OK to take days off work, while others do the opposite. He takes Norwegians, and Scandinavians generally, to fall in the first group.)


John Emerson 11.11.07 at 9:20 pm

A very interesting question. One possibility I considered is that Cowen might be wrong. Their economy doesn’t seem to be suffering.


Gdr 11.11.07 at 11:30 pm

The UK’s example suggests that the rate of fraud and error is to some extent a feature of the benefits system, not of the culture.

According to the UK Department of Work and Pensions, the rate of fraud and error in Job Seeker’s Allowance and Income Support was around 10% in 1997–1998, but fell to around 5% in 2005–2006 as a result of fairly aggressive target setting by the government.

No doubt this change has negative consequences for benefit recipients, for example more difficulty claiming benefits, and increased bureaucratic intrusion. And I’m pretty sure some of the fraud has merely been pushed around the system into other areas like Housing Benefit (where fraud and error have increased slightly over the same period) and Disability Living Allowance. But I don’t think British attitudes to benefit fraud have changed much over the last ten years.


Jacob Christensen 11.12.07 at 12:10 am

@34+35: I think Cowen has confused some numbers (a harsh criticism of an economist, I know).

If you look at the Nordic Statistical Yearbook – available as a pdf for free here – table 48, page 108 (or figure 35, page 109), you get somewhat lower figures for the general workforce – and given the high share of local council employees, we should expect higher numbers if 25% were absent. That there are interesting variations between the private and public sector beyond what can be explained by gender is correct.

And we Nordics are interested in the variations between states as well: The Danes have notoriously bad health (as in: We die earlier), but the Swedes and Norwegians are sicker than we are.


John Emerson 11.12.07 at 1:26 am

Danes have slightly more fun, right?

In a recent study of the US which I can’t recover at the moment, they separated out one very peculiar demographic: about 3 million poor whites in the Upper Midwest (which tends to be Scandinavian or German). They were healthier than any American group (including prosperous whites and poor whites elsewhere) except Asian Americans. I tend to think it’s because of the Aryan tendency not to have much fun.


John Emerson 11.12.07 at 1:29 am

Asian Americans aren’t exactly party animals either.


david 11.12.07 at 3:10 am

Not entirely off topic, but the movie “Together” offers a pretty great view of Sweden in the 70’s, and makes the Nordic model seem pretty appealing and flawed by the end.


Jacob Christensen 11.12.07 at 9:01 am

@John Emerson: :-P (Yes, Danes drink and smoke more than the Swedes. And they also have a health care system which has been pathetic in dealing with cancer)


Katherine 11.12.07 at 9:14 am

@ 31 “Tim is part of the right-wing propaganda industry”

I think that is a rather harsh assessment of Mr Worstall. He certainly is from the right wing side of the economic debate, but I’ve never seen him deliberately dissemble or distort to put his views forward. Or at least, not to the point of labelling him part of a “propoganda industry”. Call him that, and you have to call CT part of the left-wing propoganda industry.


Tim Worstall 11.12.07 at 10:37 am

Thank you Katherine. However, the fact that I’ve worked for TCS, currently do so for the Adam Smith Institute (as a freelance writer), occasionally for The Times and The Daily Telegraph in the UK: yes, for some that makes me a fully paid up member of the right-wing propaganda industry.

That my actual views on welfare are that we should simply abolish the entire system makes me more so, that I would replace it with a citizen’s basic income, well, that could put me almost anywhere on the map.


Erik Lundbom 11.12.07 at 11:48 am

I have to agree with drr; the reason for the outrage in Sweden is at least partly due to the honesty required to make the model work. Yes you are entitled to benefits if you require them but you are also expected to do your bit for the common god, i.e. work if you can and pay your taxes. In the last twenty or so years there has however – in my experience – been a rather marked change in attitude among many, especially in the lager cities.
The other reason, as I see it, for the outrage is the political agenda of large parts of Swedish mainstream media. They have, at least since the early nineties, been pushing neocon views and the dismantling of the welfare state has been high on the agenda. Most of the things that made Sweden in the seventies one of the best places in the world to live are gone, and my prediction would be that you will see the Scandinavian countries slowly adapt to standard eurolevels of corruption and greed as time goes on.


ajay 11.12.07 at 2:54 pm

42: exactly. It’s worse than that; he actually believes what he says. (“Citizen’s basic income.” Love it.)


Peter Clay 11.12.07 at 3:55 pm

“Citizen’s basic income.”

What’s wrong with that?

My hobby horse would be asking for a minimum marginal wage, a less drastic but harder to implement change.


Mr. Svinlesha 11.13.07 at 8:57 am

Here’s the thing: with regard to the “4%” figure, that isn’t really a measure of how widespread the cheating actually is. With regard to VAB days, for example, recent studies have discovered something like a 25% level of cheating (if memory serves) — meaning that 25% of parents admit to having cheated at some point and falsely claimed VAB payments. (VAB stands for “VÃ¥rd av barn”: that is to say, workers are insured for 80% of their income loss for a day of work, if they are required to stay at home with a sick child.)

Now, the problem is two-fold. One, it has been discovered that many parents take advantage of this by taking a day off while claiming to be home with a sick child. But of course, they don’t do that all the time: they might do it once or twice a year. So the cheating is widespread, but still only makes up a fairly small proportion of the total insurance payments.

The other, rather astounding, problem, is the fact that the social insurance program has no control system in place. That really speaks to the very high social morality one finds over here, but even with such a high level of social cooperation, of course there will always be freeloaders, and so obviously some sort of controls need to be established.

Before drawing conclusions about what the high level of cheating means, one needs to take this into account. The new right-wing government has instituted new controls on the payouts: they have people call the daycare centers and confirm that the child was really absent on the day the parent applied for VAB. This seems to have resulted in a major decrease in the number of VAB days claimed by parents, (although this system is also somewhat controversial).

Of course, there will always be freeloaders in a generous welfare system. As an American ex-pat now living in Sweden for almost two decades, I will gladly accept that minor inconvenience in exchange for the excellent social welfare I and my family receive over here, thank you very much.


Katherine 11.13.07 at 10:55 am

Ajay, that he believes what he says and is fairly honest about it would lead me to think that the way to address him would be with honesty and try to persuade him of your view with bona fides, rather than dismiss him as a right wing propogandist. You’re never going to bring him back from the dark side with that attitude.


Jacob Christensen 11.14.07 at 2:12 pm

While we’re at it: Media tells us that the Swedes are a bunch of thieves, at least when it comes to shoplifting. (Caution: The inquiry was made by a firm which sells surveillance equipment for retail shops).


engels 11.16.07 at 1:31 am

However, the fact that I’ve worked for TCS, currently do so for the Adam Smith Institute (as a freelance writer), occasionally for The Times and The Daily Telegraph in the UK: yes, for some that makes me a fully paid up member of the right-wing propaganda industry.

Ya think?

Comments on this entry are closed.