Sweden’s Olympic standing goes downhill, weighed down by taxes

Patrick Chisholm Writer/Editor, PolicyDynamics.Org
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In the Olympic medal count, Sweden does OK for a country of its small size. But in the days of old, it consistently ranked at the top. What accounts for the downtrend? A big factor must be taxes.

During this year’s Olympics, Sweden took home 11 medals. That gives it a ranking of 9 out of 26 countries that won medals, putting it in the 65th percentile. That’s on par with recent decades; since the 1960s its average percentile has been 56, both for winter and summer Olympics.

But since the start of the Olympics a century ago until the 1950s, Sweden averaged in the top 76th percentile of medal winners (80th if you don’t include 1920), for both the winter and summer Games. In 1948 and 1912, it even brought home the most medals of any country, winter and summer Games respectively.

I e-mailed a number of sports reporters and economists, mostly Swedish, asking them what explains the downtrend. Most didn’t respond. But one Swedish reporter suggested that since Sweden wasn’t involved in the two world wars, it didn’t lose star athletes like other countries did, giving it an advantage during the post-war years. That’s plausible, although its 1912 top ranking was before the two wars.

Another plausible explanation for Sweden’s slippage is that unlike top-performing Norway, which focuses resources on a chosen few athletes, Sweden has “emphasized sports for the masses in recent decades,” which hurts medal counts, according to Stephen Seiler of Agder College in Norway.

Daniel Kent Neil Johnson, an economics professor at my alma mater Colorado College, has developed a model for predicting Olympic medal counts based on factors such as per capita income, population, climate, and political structure. He suggested to me that other countries have emerged as athletic powerhouses, to Sweden’s disadvantage. He also pointed to new sports in the Olympics dominated by North Americans, such as snowboarding.

But other factors must be at work. Sweden has continued to be at or near the top in men’s cross-country skiing and biathlon over the decades, and has improved in hockey and downhill skiing. But it used to be a powerhouse in speed skating, ski jumping, and earlier in the century, figure skating—yet today is nowhere to be found in those sports. It’s a similar phenomenon for Summer Olympics; as shown in the above-referenced medal count map, Sweden used to dominate in many more sports than currently.

Regarding the rise of other countries, there has been the Soviet Union/Russia to contend with since around 1960, and South Korea and China in recent years, but compared with other Western European countries and the U.S. and Canada since mid-century, Sweden has lost ground, for both for winter and summer.

A big factor must be Sweden’s after-tax per capita income (what economists call disposable income). When one pays an individual federal tax rate ranging from 29 percent to 59 percent, and a 32 percent payroll tax and a hefty value-added tax, as is the case in Sweden, one doesn’t have a lot of extra income to finance the enormous costs of raising an Olympic athlete.

It typically costs hundreds of thousands of dollars to raise an Olympian. Prior to making it to the national team, parents and athletes have to shell out big money over the years on equipment, clothing, coaches, sports leagues, travel, lodging, competition fees, lift tickets, ice time, and everything else associated with excelling at a sport. If most of your income is taxed away, you won’t be able to afford those high costs.

According to a Forbes article, the yearly cost for a World Cup-destined downhill ski racer can reach $30,000; for ski jumpers it’s as high as $14,000; speed skaters, $13,500.

Other sports cost less. They include cross-country skiing at $6,000 to $8,000. Perhaps it’s no coincidence that that’s the sport in which Sweden brought home most of its medals this year.

Sweden’s tax burden has risen significantly since mid-century—from about 20 percent of GDP in 1950 to more than 50 percent now—to the extent that parents, even high-earning ones, undoubtedly have a lot less disposable income to finance their children’s sports careers than they otherwise would.

Johnson acknowledges this point, and indicates it would be worthwhile to test whether there’s a correlation over time between tax rates and Olympic performance. “On the one hand, low taxes make it easier to pay for one’s own training. On the other hand, low tax rates make it harder for public funding to support athletics,” he noted.

Despite the fact that Swedish federal and local governments provide a lot of financial support for sports, and despite Swedes’ tremendous amount of leisure time—typically five weeks of paid vacation—which they can devote to sports, those advantages still don’t make up for the tax bite’s negative effect on individual financing of sports.

The country’s Olympic decline ties in with other negative trends there. According to Swedish economist Nils Karlson writing in 2004, no net new jobs have been created since 1950. Its GDP per capita went from the 4th highest in 1970 to the 17th highest now. From 1890 to 1950 Sweden was the fastest-growing economy in the world. Now it’s one of the slowest. And “none of the top 50 companies on the Stockholm stock exchange has been started since 1970,” writes Karlson.

There are lessons here for the United States as the president and Congress try to push us in the direction of the Swedish welfare state. The more successful they are at that, the more our Olympic medal count will suffer, decades hence. And that’s just one of the minor consequences.

One final thought. One of my sports heroes, Swedish ski racing legend Ingemar Stenmark, moved to Monaco. Why? According to Wikipedia, for tax reasons. No surprise there.

Patrick Chisholm, a former Christian Science Monitor columnist, runs PolicyDynamics.Org and is founder & creative director of Accentance, a D.C.-area video production company. E-mail: pat@policydynamics.org.