Sweden's major overhaul

Some readers have rebuked me for my comment in yesterday's post, Sweden moves to the right, that "the much vaunted 'Swedish model' is set for a major overhaul". Likewise, Andrew Leonard over at How the World Works, wrote in his post Nordic welfare woes:

The New Economist promptly declared that the "Swedish Model" is set for a "major overhaul," and the righty blogosphere is hooting with glee at the "socialist" defeat. But the New York Times' prediction that a "fine tuning" is in the offing seems more likely. Observers have been quick to point out that four years ago the Moderates campaigned on a platform of big tax cuts and were trounced. Their proposals for reform have since become considerably more, er, moderate.

...Salon contributor and U.K. journalist Andrew Brown is working on a book about "Sweden and the Future." Taking time off from writing a column for the Guardian on the election to exchange a quick e-mail, he noted that this shouldn't be interpreted "as a big swing to the right. The thing about Swedish politics is that there is always a pretty tight consensus among the ruling class about what ought to be done; just sometimes a disagreement about who ought to do it."

Well, let's clarify what I meant. I don't expect Sweden's uber-generous welfare state to be radically reformed (though the incoming government did pledge during the campaign to cut unemployment benefit). But let's not pretend that nothing has changed. This morning's Financial Times front page has a story by David Ibison in Stockholm: New Swedish government vows to cut role of state in economy

Sweden's new government plans to reduce the state's role in the economy substantially, and will sell off government stakes in some of the country's best known companies, including SAS, the airline, and Nordea, the Nordic region's largest bank. In a shift in economic direction, it has pledged to spin off holdings in unlisted state-controlled firms and to open large parts of the economy to private sector competition.

...The Alliance's plans clear the way for a period of significant corporate restructuring and rapid changes to the private and service sectors. The new government's policy was expected to involve a three-stage period of privatisation and deregulation over the next three to five years, bankers said.

The first stage involves the sale of stakes in listed companies, then the sale of unlisted state-owned groups and finally the possible sale of public service companies, such as utilities. It will see the sale of 20 per cent of Nordea; 45 per cent of Telia-Sonera, the telecommunications group; 7 per cent of OMX, the stock market operator; and 20 per cent of SAS.

Fredrik Reinfeldt, prime minister elect, has not committed himself to a timetable for the sales but said they would go ahead when the best price was obtained. They have a combined market value of about SKr150bn (£11bn).

Carl Bildt, a former prime minister and leader of Moderaterna, the main party in the Alliance, told the Financial Times: "We need to do with the service sector what we did with the private sector in the 1990s." He was referring to the deregulation of the banking, telecoms, retail and automotive sectors in the 1990s. That created some of the country's most powerful companies, such as Ericsson, the communications company, and Volvo, the world's second largest truck maker.

That may not seem like a 'major overhaul' to US readers, but if any European readers believe a rolling five year campaign of privatisation and deregulation won't shake up the Swedish model they're engaging in wishful thinking.

Comments

[Andrew Leonard]

I've got to get a subscription to the FT. That _does_ sound like more of an overhaul than a fine-tune.

[Tom Geraghty]

The FT article is very interesting. Not a word about youth unemployment or labor market reform -- it's all about privatization and deregulation.

Funny, since according to the OECD Swedish product market regulation is barely above US levels. With Sweden's high productivity growth and excellent ratings on global competitiveness, I didn't realize that was a problem area. But we now have a better idea of what this "New Moderate" coalition is all about.

Maybe the Swedes can ask British rail users or California electricity consumers how much they have enjoyed their deregulated enterprises.

[A. PERLA]

"Maybe the Swedes can ask British rail users or California electricity consumers how much they have enjoyed their deregulated enterprises."

Is this really the point? What is the purpose of comparing apples and oranges. It is obvious that both are fruit, but then what?

Ever been in a freeway tie-up outside of Los Angeles or London? That is the ONLY similarity between the two transport systems. If Norway was next to California and not Sweden, would California not benefit from cheaper petroleum products?

Every year, the number of Americans that move around their country (usually in search of better working conditions) equals the Spanish population. Is Europe that flexible? Of course not.

Each country/region has its own particular economic context. It is not easy to compare them on a micro-economic level.

[Lars Smith]

"He was referring to the deregulation of the banking, telecoms, retail and automotive sectors in the 1990s. That created some of the country's most powerful companies, such as Ericsson, the communications company, and Volvo, the world's second largest truck maker."

Volvo and Ericsson created in the 1990s?

[gary]

I live in California and if anybody thinks utilities are deregulated should look again. To remove a few trivial controls and call it deregulation is fraud. I never seen a shortage of anything in the US, except government regulated items, you simply raise the price. Swedes need to take econ 101.

[Lafayette]

Comment: "Observers have been quick to point out that four years ago the Moderates campaigned on a platform of big tax cuts and were trounced."

Don't be fooled by elections. Sweden has its own "Hidden Solution to its Over-Population Problem".

With taxation at nearly confiscatory levels, the Swedish rich leave for the south of France or even the Far East. This reduces, obviously, the population to Swedes who would prefer the Swedish Model, though it seriously reduces the tax base.

And, there are MANY Swedes who remain, so the Model can't be so bad, can it? The problem is that the Model is not exportable.

For instance, rich Yanks insist on staying in America; strutting their exaggerated riches as a sign of achievement. Which is quite in keeping with the mindlessly competitive society that developed there. (I'd strut as well if I'd spent 80 hours a week at Goldman Sachs to earn a 100 Mega-bucks. Wouldn't you?)

Though, there is hope given by some other examples -- the French rich have departed for both Brussels and Geneva on the periphery of France. London attracts the ex-Colonial Rich, even if the UK in general seems to prefer unrepentant Russian ex-oligarchs. The English rich debark in Monaco. And, the Chinese rich are reportedly buying Bordeaux vineyards.

Rest assured, for as long as there are the super-rich, there will always be expats ... (;^)

[Arthur Eckart]

Lafayette: "America...the mindlessly competitive society." No country can achieve a high level of living standards being mindlessly competitive. However, a country can achieve a lower level of living standards being mindlessly uncompetitive (although Sweden's government mindlessly competes with business). Also, you stated the Swedish model is not exportable. It isn't, because the U.S. doesn't want to retard living standards, and poor countries can't afford the waste. I suspect, the optimal size of government expenditures is normally less than 10% of GDP. Economies should be driven by economics, not politics.

[Lafayette]

AE: "I suspect, the optimal size of government expenditures is normally less than 10% of GDP."

Keeping in form, aren't you? Such troglodyte thinking surprises no one, AE.

Suspect whatever you like. I am no longer wasting keystrokes arguing otherwise with you.

[Arthur Eckart]

Also, Americans believe in fairness more than equality, while the Swedes seem to believe in equality more than fairness. It's fair that when people want to actually consume, they should actually produce. If an entrepreneur works, shouldn't the employees also work? Employers and employees are both people. It's destructive to a society when employers and employees, government and business, employed and unemployed, etc. work against each other, rather than work together.