(FORTUNE Magazine) – This item begins by broaching a weird analogy. At least, it received this rating from our friend the movie critic. We had called him to ask which was the Cagney film in which Jimmy is about to swagger the last mile to the electric chair but suddenly makes a conscious decision to collapse and pretend he is scared stiff, the point of this charade being to persuade certain impressionable young criminals -- the ''Dead End Kids'' -- that gangsterism is nothing to admire. Or something like that. Anyhow, our friend the critic instantly said we were thinking of Angels With Dirty Faces (1938), and asked why we needed the citation. We stated, truthfully, that we were thinking of comparing Cagney's behavior to that of the Swedish economy. ''Weird,'' he stated, after a long pause. ''Weird.'' Okay, the analogy will not be pushed too far. And yet we still sense that it was quite wonderful of Swedish social democracy to completely fall apart just when impressionable East Europeans were all set to embrace it as a role model. As recently as 1989, the Poles, Hungarians, and Soviets were still sending endless delegations to Sweden, fascinated by its egalitarian politics and high living standards. ''The Swedish model has interested us for a long time,'' said then-Foreign Minister Eduard Shevardnadze, who was plainly echoing the views of many other democrats in Gorbachev's entourage. Those views had not in truth made a whole lot of sense in recent years, when Sweden's economy was in a prolonged period of stagnation. But until September's dramatic political turnaround, it was possible for outsiders to at least tell themselves that the Swedes liked the system. The electoral loss by the long-dominant Social Democratic Party -- which had been in office almost continuously since the early Thirties -- undermined that view and forced attention on the god-awful mess left behind by the perpetrators of the ''Swedish model.'' The main question raised by the model was this: In a developed democratic country, how far can the government go in raising taxes, redistributing income, and creating boundless economic security for everybody -- without ultimately destroying incentives to invest and work? Sweden clearly went much too far. Not long ago, marginal tax rates were over 60% for average families and close to 90% for some. The government sector represented two-thirds of national income (vs. about 40% in the U.S. and perhaps 45% for the Organization for Economic Cooperation and Development countries as a group). In its last years, the desperate Social Democratic Party reduced those figures somewhat, but they are obviously still too high. The mess has many dimensions. Swedish economic growth in the Eighties averaged only 2%, far below the OECD average (and below the U.S. average of 2.8%). Swedish inflation in recent years has crept into double-digit territory. Labor costs in Sweden remain absurdly high, and the work ethic has been substantially undermined in a country once famous for it. Among the instruments of destruction: pressures on companies to create lifelong employment rights while equalizing wage structures. Also implicated were provisions for abundant sick leave at 90% of pay. A recent revision of this extraordinary law still gives the worker 60% of pay during the first three days on leave, with the figure rising to 80% through the 90th day and 90% thereafter -- an arrangement that will continue to raise serious questions about the case for getting out of bed in the morning. Young workers, who have never known another system, naturally take a lot of days off -- about 50% more than do older workers. In part because of overstaffing to offset absences, Swedish productivity has been lower than that of any other OECD country since around 1973. Sweden's so-called middle way was a beacon to liberal Democrats in the U.S. long before the Russians got fascinated by it. We assume that the Russians, and maybe even the Dead End Democrats, will now draw some appropriate conclusions.