For the past three decades, Sweden has confused foreigners with its combination of a large welfare state and neoliberal policies such as abolishing the inheritance tax and applying market principles to the state.
When Bernie Sanders, US leftist presidential candidate, cited Sweden as an ideal of “democratic socialism,” he was not likely thinking of universal school vouchers and private pensions.
Sweden is set to confuse observers again with a new combination of a globalized economy and restrictive policies toward immigration.
Illustration: Constance Chou
The first foreigner-confounding confusion was the work of neoliberal intellectuals at think tanks such as Timbro who enjoyed remarkable success in redesigning government policies. The second is the work of the Sweden Democrats who have moved from the neo-Nazi fringes to the center of power as Sweden’s second-biggest party.
At first blush, Sweden is strikingly cosmopolitan. Most Swedes speak excellent English. Stockholm offers Thai and Japanese food as well as herring and meatballs. Sweden was the world’s third-biggest international aid donor in proportional terms after Norway and Luxembourg, spending 0.92 percent of its gross national income on official development assistance. One in five residents was born abroad.
The driving force behind this cosmopolitanism is Swedish business, which specializes in turning the adventurous spirit of the Vikings to commercial ends. The country’s most venerable powerhouses were the product of the first age of globalization before the World War I.
Ericsson AB, a telecoms giant, started selling phones in China in the 1890s. Axel Johnson Group, a food conglomerate, has constructed its headquarters in the shape of a ship, with galley-like stairs between floors and a bridge on top, to commemorate its origins trading with Argentina.
They have been joined during the second great age of globalization by a new generation of Internet-based giants such as Spotify Technology SA.
Its reputation for egalitarianism notwithstanding, Sweden has one billionaire for every 250,000 people, one of the highest rates in the world, with their total wealth accounting for a quarter of GDP.
The Swedes combine the best features of German and US capitalism. German-style Swedish companies dominate global niches through a combination of engineering excellence, high-quality training and constant innovation.
Sandvik AB, which produces everything from machine tools to steel rods for nuclear reactors, boasts that “we sell productivity not products,” and has a productivity center that is devoted to pushing the frontiers of technology — for example, creating the world’s fastest drills.
US-style technology firms are specialists in disruptive innovation fueled by venturesome consumers.
Swedish society is remarkably pro-business. The government allows private companies to run bits of the state, such as schools and hospitals. The Swedish stock market is Europe’s largest, with 950 listed companies — Germany comes second with around 800.
Half the adult population have savings in the Swedish mutual fund account. Sweden has more venture capital investment as a share of GDP than any other European country, much of it drawn from the US, and venture capital-funded investment is thought to have increased GDP by 6 percentage points since 2005.
On second take, Swedish society is turning inward, beclouded by angst and pessimism. Swedes talk obsessively about the spate of shootings and riots in “troubled areas,” and about the rise in crime — the latest scam reportedly involves stealing traffic cameras and repurposing them for Russian drones.
They lament the disappearance of the old Sweden of social cohesion and low crime, the fraying of the welfare state, with hospital waiting times among the worst in Europe, and the decline of educational standards across the board.
Sweden was never able to match its generous policy toward migrants with its ability to absorb them into society. Successive waves of refugees, hailing from Bosnia, the Middle East and Somalia, have been trapped in housing developments on the peripheries of big cities such as Stockholm, Gothenburg, Upsala and Malmo. The combination of geographical isolation with low skills in a high-wage economy — with minimum wages negotiated at two-thirds of the median wage — proved toxic.
Parallel societies based on clan and religious ties developed. Young people were recruited by criminal gangs. Drug-related crime and violence exploded.
The final straw came in 2016 when Sweden granted 156,031 residence permits to refugees, the most in its history for a single year. New immigrants spilled out beyond the hidden housing estates to areas where Swedes encountered them. The riots and crime of no-go Sweden became talking points.
Since 2018, Sweden has had the highest rate of death by shootings in Europe, a tiny figure compared with the carnage in the US, but a shock to a country with such a peaceful recent history.
Sweden’s angst over immigration drove the hard-right Sweden Democrats to the heart of the country’s politics. In 1993, the fledgling party organized a “riot night” in Stockholm, complete with blazing torches and swastika flags. About 150 people were arrested.
Today, the Sweden Democrats are dictating many of the country’s policies. This extraordinary growth was partly a verdict on the Swedish establishment’s refusal to talk about immigration — issues do not disappear just because people are too polite to mention them — and partly the result of the patient leadership of the “gang of four” who took over the party in 1993.
Sweden Democrats leader Jimmie Akesson is deliberately low-key and commonsensical, the very opposite of former US president Donald Trump. The party has made a fuss about expelling extremists, and has increased its votes in every election since 2000. In the current election, it became too big to shun any longer with 20 percent of the vote: Conservative parties such as the Moderate Party agreed to work with it, though without giving its members of parliament government jobs.
The new government is implementing a range of policies designed to reinforce Sweden’s borders and strengthen its confidence in domestic security: freezing the asylum numbers at a bare minimum permitted under EU law, deporting irregular migrants and making access to benefits conditional on learning Swedish and subscribing to “common values,” restricting immigration to people who have jobs with median wages, cutting Sweden’s foreign aid contributions by 15 percent of the previous government’s targets, increasing defense spending, hiring new police officers, building new nuclear reactors and reducing taxes on petrol.
Although the minority government could easily fall apart or lose its working majority, Sweden’s left-wing parties have adopted a much more restrictive policy. For example, the Social Democrats have proposed to cap the number of “non-Nordic” citizens allowed to live in “troubled areas.”
Sweden’s turn to the right is part of a wider Nordic trend. Denmark and Norway have preceded Sweden in incorporating far-right parties into their governments and implementing more restrictive policies.
What does the rise of the second Sweden mean for the first? Surprisingly little when it comes to the labor market and other economic fundamentals. Forecasters worry that Sweden’s population would decline in the long run, with too few young people to look after the elderly. A few labor-intensive industries such as logging are complaining about possible labor shortages.
However, most companies are reconciled to the current tightening. Sweden’s economic success has been based on high productivity and high skills rather than the UK’s model of a flexible labor market that is good at absorbing low-skilled workers. Migration has primarily been driven by moral, not economic, considerations.
Unemployment among the foreign-born is more than three times that of native-born Swedes. It takes about eight years for half the new arrivals to start working part-time.
High immigration has imposed net costs on the wider society. The Swedish central bank calculated that the 2015 immigration shock, when Sweden took in the equivalent of 1 percent of the population, led to a reduction in GDP per capita of 1.7 percent and an increase in aggregate unemployment of 2.2 percent.
It means much more for the country’s general orientation. The aim of policy must be to preserve what is best about cosmopolitan Sweden while understanding why it generated such a powerful backlash.
The respectable parties are right to turn their attention to immigration: If something that worries the majority of the population is ignored in a fit of moral superiority, it would be exploited by radical parties.
However, the government needs to link a more restrictive policy with an emphasis on integrating about a million refugees who are already there. Despite all the talk about training and Swedish-language classes, there is no better force for integration than a job.
Conservatives need to realize that it is not enough just to improve the efficiency of the welfare state through market mechanisms, the default position of recent years. They also need to think more about the values of security and solidarity, not in the nostalgic sense of reviving the Folkhemmet — or “People’s Home” — of the 1930s, but in a more forward-looking sense of reinventing patriotism for a more fluid world.
Liberals need to realize that posing as a moral superpower can be counterproductive if it is not followed up by considered decisions about integrating migrants.
Sweden’s more hard-headed approach to refugees coincides with a more hard-headed approach about foreign policy in general. The “feminist foreign policy” is being replaced by one that is increasing military spending and joining NATO.
Sweden has an exceptional history of producing policies that combine globalization with a recognition of society’s need for roots. The People’s Home was financed by big global companies in its global age. It was saved from death through over-extension by neoliberal intellectuals who breathed new life into the model while also cutting it back, and a new generation of global companies that rejuvenated the economy.
Sweden needs to produce a new set of policies for the current, more modest, phase of globalization, one that drops the naive talk of a borderless world and ethical foreign policy, and recognizes the irreducible importance of the nation-state and the limits of that state’s ability to solve all the world’s problems.
Adrian Wooldridge is the global business columnist for Bloomberg Opinion. A former writer at The Economist, he is author of The Aristocracy of Talent: How Meritocracy Made the Modern World.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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