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The Swedish Alternative to Austerity

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Back in Sweden again. (I travel back and forth.) What strikes me this time is the great contrast between the political and economic mood here and in the UK. Britain is gripped by ‘austerity’, and full of gloom and doom (except for the very rich). More cuts in social provision are promised, hitting the poorest and most disadvantaged, and the NHS is collapsing for want of funds. The government is using the ‘crisis’ to extend privatisation and diminish the state, on what appear to be purely ideological grounds.

In my part of England (Hull), shops are boarded up and poverty is rife. The tabloids are blaming immigrants for taking their readers’ jobs and ‘sponging’ off what remains of the welfare state. Hence the line taken by the UK government in its negotiations with the rest of Europe, making the narrow issue of immigration the main one in determining whether we stay in the EU or not. The political right, in the slightly comic form of Ukip – but we should beware of comedians; look at Trump – is on the march. The chancellor of the exchequer, starting to acknowledge that the five years of cuts he has presided over probably won’t substantially revive the UK economy, is blaming ‘global’ factors for this. That seems plausible. After all, the whole Western world is suffering, isn’t it?

Until you come to Sweden. I know my impression is subjective, and may mark a difference not so much between Britain and Sweden as between a very poor provincial city in one country and the capital of the other. So I’ve been looking at some statistics. Sweden’s economy grew by 4.5 per cent in the last quarter of last year – twice the rate of Germany’s. Incomes are rising. Most of this is export-driven. At the same time, ‘low interest rates have boosted consumer spending and borrowing, with house prices rising to new all-time highs’ (as in southern England), though they are levelling off now. ‘Unemployment is also finally falling as the government is boosting spending on welfare and caring for a record-surge of asylum seekers from war-torn countries like Syria, Iraq and Afghanistan.’ (All this is from a recent Bloomberg report.)

Notice the reference to asylum seekers there. Sweden’s generous policy towards refugees is causing some social discontent – to put it mildly; neo-Nazis have been burning down their shelters – but economically, and especially as regards employment, it is seen as a plus.

The Swedish social welfare system, though nibbled away by the previous Moderaten-led government, still boasts free university education and what may be Sweden’s greatest glory: universal childcare and parental leave arrangements, for fathers equally with mothers, all funded out of taxation. Doctors and hospitals – I’ve experienced both – are less hard-pressed than in the UK. It would be wrong to pretend that there are no desperately poor people here. Some of them are Roma from Eastern Europe. The Swedes are divided over how to cope with – or look after – them. I don’t think Sweden’s reputedly high taxation is more of a burden on ordinary people than Britain’s is: the last time I compared my taxes with my Swedish partner’s there was little to choose between us – and look at what they get for it. If taxes are high, then according to ‘orthodox’ economics in Britain and America, that should be a drag on growth. So should the Swedes’ short working day and long holidays. But it doesn’t seem to work like that.

Why? How come the Swedes can manage this, and the British can’t? My instincts and – if you like – prejudices veer to the Keynesian and socialist ends of the political and economic spectrums, so I should like to attribute the success to Sweden’s powerful but co-operative trade unions, tighter regulation of manufacturing and financial industries (along with the fact that it still has some manufacturing industry, and is less dependent on finance), and social security system. But what do I know?

The only lesson I want to draw from this is that there is an alternative to ‘austerity’, and all the neo-liberal values and policies tied up with it; and there is at least one place in the world where it seems to work. Maybe the Swedish model isn’t applicable to Britain, or it would require too painful a revolution to take us there. (It would have been easier pre-Thatcher.) But if so, we need to be told why.

Comments

  1. streetsj says:

    I’m not sure that quoting growth in one quarter is very illuminating.
    Since 1980, Swedish GDP per capita has trebled from $20,000 to $60,000. UK GDP per capita has quadrupled from $10,000 to $42,000.
    An awful lot depends on where you start from. Swedes used to be twice as rich as Britons in 1980 when we abandoned Keynesianism and now they’re only 50% richer.

    • But with their wealth distributed more equitably, perhaps?

    • Alan Benfield says:

      And GDP per capita can be misleading as a measure of how ‘rich’ a country is (and how healthy its economy), as it misses out things like trade balance and government debt. See my post further down the page.

      The UK may have caught Sweden up a bit since 1980 in GDP/capita terms, but it also carries a huge load of debt and a negative trade balance which isn’t making it go away.

      Anyway, surely abandoning ‘Keynesianism’ should have led to the UK overtaking nasty ‘socialist’ Sweden by now (or isn’t 35 years long enough?).

  2. flitting says:

    Good commentary, but posting on LRB means that you are preaching to the choir. Would love to see a short op ed like this in the FT or Telegraph or Times.

  3. Graucho says:

    I wonder if they would be doing so well if the were in the Euro ? Any LRB economists are invited to comment.

  4. davidnoelgardner says:

    Yet today the Swedish Treasury is empty and the Swedish tax poayer is made the debtor for gigantic loans taken by the present Government to pay for the hundreds of thousands the tax payer now has to provide all the high taxation social benefits and housing and food and cash in hand etc to out of their ransacked and pillaged pockets.
    And worse on this International Women’s Day in Sweden it is a day to mourn as today the police warn all women in Ostersund not to go out alone because of the frequent sexual attacks in the last week on women by migrant groups which is now is a daily fact of life for Sweden’s women and young girls and all children. Women work in night jobs in such towns and in this till now safe country were free to work at night and travel back and forth to work alone. This has ended.
    Women and and young girls and children and their hard won freedoms and rights and very lives in northern EU nations have been sacrificed and will be even more so by the Merkel onslaught and it is all sthum.
    What a disgraceful International Women’s Day in Northern Europe.
    And more is threatened in the implosion of the EU to vanquish them and their lives and freedoms and autonomy and dignity for generations to come.

    • Alan Benfield says:

      The Swedish treasury empty? How so? Sweden generally has a positive trade balance (1.6 billion Kr in January 2016) and its national debt is about 44% of GDP (GDP was about US$571 billion (£400 billion) in 2015), mild by European standards.

      Equivalent figures for the UK: -£17,457 m (Q3 2015) and 89% (roughly 1.6 TRILLION pounds, by the way).

      I don’t think you know what you are talking about.

  5. davidnoelgardner says:

    It is disconcerting that the LRB blog is not spared and descends to insubstantial “shoot from the hip” uninformed and, sorry to say, truly ignorant responses with personal insults as “I don’t think you know what you are talking about.”

    Inform yourself, read Sweden’s newspapers and other data on Sweden since August 2015 and how they have had to fund the arrival of hundreds of thousands they support entirely for all their needs at their high social benefit standards.

    Give some due to those who write in the LRB BLog to engage in substantive dialogue and write when informed with the expectation for valuable substantive informed exchange, polite and respectful, rather than rubbish personal verbal spats.

    • Alan Benfield says:

      As usual (in common with many of your ilk), you fail to deal with the substance of what I said: I did not refer to your remarks regarding the influx of refugees, but merely questioned your intemperate remarks regarding the Swedish economy. I restricted myself to a critique of your apocalyptic view of the Swedish economy, which seems to be entirely false. There are no up to date figures available (that I can find) about the impact of the approximately 165000 refugees which Sweden took up in 2015, so I wonder if you could point me to the relevant data, if you know where it can be found. If not, your post is simply unsubstantiated polemic. Or, as we normally refer to it, bullshit.

      Pointing us to ‘Sweden’s Newspapers’ is unhelpful: searching for information about the various issues in English leads immediately to an article in the Daily Express (and another in the Mail) which immediately confirms all your prejudices, but is very light on references (i.e. none). I also did have a look at other sources, including Swedish newspapers across the political spectrum. The results were mixed: the tabloids were predictably inflammatory, the others reflected their political character. The police in Östersund seem to have gone out of their way not to make racially inflammatory statements (so as not to encourage the Sweden Democrats). But who ever said newspapers were reliable? You could at least give us some links to relevant information so we can assess their value.

      Do you live in Sweden? You seem very concerned. Or are you just scouring the internet to find information supporting your anti-EU and -Schengen worldview?

      By the way, on such attitudes as yours, pogroms are made: http://www.telegraph.co.uk/news/worldnews/europe/sweden/12131460/swedish-far-right-migrant-attack-stockholm.html

      This is not to belittle the social problems with which Östersund, and Sweden, now find themselves saddled. But it’s a policing problem. It will be dealt with. Sweden (in common with all EU member states) was not a sexual violence free zone before 2015.

      But if your next post could be a little less foam-flecked than usual, your remarks about ‘substantive dialogue’ might carry a little more weight, by the way.

  6. aikmania says:

    Interestingly, in the most recent Human Development Index (from the 2015 UN Human Development Report) Sweden and the UK are both tied in 14th place. I presume those who compiled it didn’t visit Hull.


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