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October 25, 2005

Polly on Sweden.

Polly seems finally to have noticed several things about Sweden that make the place work. I wouldn’t go quite so far as to say that I helped her to see such things although she has  both received and responded to emails that point them out.

It is curious to observe Blair and Milburn misusing Sweden as an example of a social democratic nation privatising and outsourcing its public services. If Sweden does it, what can possibly be wrong with it, they ask disingenuously. But here is the real story. It was the right that did these things last time they were in power. They allowed selection in schools, which are now far more class- segregated in a country that once prided itself on relative classlessness in education. The right allowed people to set up small private schools within the state sector - almost all used exclusively by the upper middle classes. It was the right that privatised hospitals, though only three - one to a private company, two not-for-profits.

So she notes that Sweden has a pure voucher system for schools and is slightly disingenuous about the health system. Concentrating on the hospitals isn’t the point, the entire structure is not, unlike the NHS, a centralized one for the entire country nor, in the provision of services, does it distinguish so heavily between public and private provision. The provinces run their own health systems, local taxation paying for local care. There is therefore at least some level of competition....not for profits to be sure, but between different levels of provision and different methods of doing things.

Still at least that’s something of an advance, she’s noted that her perfect society does things differently from what she advocates for us. Now we need to get her onto the other economic matters she discusses:

What's more, Sweden runs a handsome cash surplus.

No, the Swedish Government does. Rather a different thing.

How does the Nordic model work? It supports open markets and job flexibility, with all the restructuring employers need to shake out their workforce to match changing demands. But that only wins the backing of strong unions because of the generosity of the benefits safety-net to cushion frequent, unsettling change.

This part is true. There’s a paper out about this tomorrow or Thursday actually, comparing the (roughly) three welfare models in Europe. The one that attempts to "save jobs" (so called Continental)  works worst and the two (roughly Anglo-Saxon and Nordic) that insist upon companies being able to hire and fire do work.

Growth rates are predicted to stay at around 3%, soaring above the EU. Interest rates are just 1.5%,

Not part of the euro you see, able to fit macroeconomic policy to local conditions. So we should also stay out then, according to our Poll.

The rest of it is all about how awful the right is, evil, evil people. Except for this:

exports boom while its giant companies - Volvo, Ikea, Tetra Pak, Eriksson - are so far resisting the pull to outsource to developing countries.

Lessee. Volvo is part of Ford, the Ikea owner lives in Holland (with a wonderfully tax efficient foundation in place), the owner of Tetra Pak lives in the UK and Eriksson is a public company (....and yes, damn right they offshore a lot of their production, like all of their silicon fabrication).

So it’s such a wonderful society that the rich don’t live there. Ho hum, can’t have everything I suppose, certainly not taxes from the wealthy when rates go up to 70%.

October 25, 2005 in Economics | Permalink


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"So it’s such a wonderful society that the rich don’t live there."

So there's no rich people in Sweden? Jesus, Tim, don't you ever get tired of talking shite about that country?

Posted by: Jim | Oct 25, 2005 10:26:39 AM

"What's more, Sweden runs a handsome cash surplus.

No, the Swedish Government does. Rather a different thing."

That "handsome" surplus by the way, comes largely from the pension funds. Which shouldn't be regarded as the governments money at all, unless you think that the government can steal them and use for something else. That is also the reason why Eurostat wants Sweden (and some other countries I think) to change the way Sweden reports the surplus/deficit not later than spring 2007.

"exports boom while its giant companies - Volvo, Ikea, Tetra Pak, Eriksson - are so far resisting the pull to outsource to developing countries."

Strange, Volvo has at least one factory in China. IKEA have some production there as well, Ericsson uses outsourcing and I would be surprised if Tetra Pak don't.

Posted by: Dennis | Oct 25, 2005 11:37:11 AM

And I forgot the perhaps most important part. The Social Democrats have changed, it's far from the same party as they were in the 70s and 80s. Then some of the economic policies we have today were out of the question; maximum spending for the government, an independent central bank, a new pension system, etc. These are policies that the right wanted, and started to implement in the early 90s. Now the Social Democrats embrace them as well.

Posted by: Dennis | Oct 25, 2005 11:44:58 AM

By the way, the Swedish people have issues with the social democrats that go beyond economics.

Many Swedes I know are concerned about failure to integrate immigrants. Sweden has been fantastic with admitting asylum seekers and immigrants but have failed to assimilate them into society. There are growing Balkan and Arab societies that are existing in isolation of the larger Sweden. Swedes are tolerant and want immigrants to be part of, rather than outside society.

Secondly Sweden has largely been shielded from the outside world for long while destinations like the UK have been popular, now the dynamics are changing as eastern european countries next door who joined the EU with poorer peoples move into Sweden. The government is not addressing the issue - there is possible nothing to address but people worry about it and the government is not speaking about it. An example is that a huge amount of building work is now given to Polish builders who accept "cash in hand" outside taxes. Swedish builders who have traditionally worked within the law (i.e. expensive) are beginning to feel the pinch.

Another example here is that any foreigner can study at Swedish University FREE OF CHARGE. The government admits everybody, spends a lot of money and then cannot provides employment for them in Sweden - in fact, in most cases, they are not even allowed to work in Sweden after being educated by Swedish taxpayers money. These are the little stupidities that are borne out of GOOD traditional social democratic principles of Free Education but that costs Sweden money when applied now to a society that is more globalised.

Lastly, the unemployment figures are very untrue. It is officially around just under 6% but a huge number of people in government schemes for employment FEEL unemployed. Sweden churns out a ton of educated (up to Masters level) graduates who are sitting idle and they have international friends and their aspirations are not exactly Swedish as it was before. They are getting fed-up!! In Göteborg for example the number of educated young people (super educated) out of work is astonishing.

Polly mentioned the continued growth and success of Sweden compared to the rest of the EU. That is great. The thing is for those between 25 who just left university to 35 who are working or have been looking for jobs for a long time, this growth or great time is barely noticeable. They've not known anything else, they would only notice a significant hike in growth. Ask a Swede in the age bracket if Sweden is better off today than 4 years ago and they think not.

Posted by: Joel | Oct 25, 2005 12:19:40 PM

By the way, they just walked off with Marconi.

Posted by: Alex | Oct 25, 2005 5:44:39 PM

The country of Sweden also runs a current a/c surplus, doesn't it?

Posted by: dsquared | Oct 25, 2005 8:15:42 PM

I don't know what Tim means about Ericsson "offshoring their silicon fabrication".

The fact is that many electronics equipment companes used to have in-house semiconductor companies. The economics of the semiconductor industry mean that this is no longer viable, because the investment now required for new technologies is so much greater and the in-house demand is insufficient to justify this. Equipment manufacturers now buy most of their semiconductors in the form of standard components sold to many customers as the advantages of custom designs are more than negated by the time and investment required. This has accelerated the split between equipment companies and semiconductor companies. Indeed, many semiconductor companies have now gone 'fabless' themselves - outsourcing their manufacturing to foundries because they could not fill a production facility of their own or develop new process technologies.

This is a worldwide phenomenon and what this has to do with Sweden specifically, I do not know. Tim, could you explain please?

Tim adds: Nothing at all to do with Sweden specifically....just that Polly probably didn’t know it.(It’s also highly likely that some of their design work came to hte UK, to ARM).

Posted by: HJHJ | Oct 26, 2005 11:21:10 AM

Tim: Re ARM.

ARM designs and licences microprocessor cores (doesn't manufacture anything), principally to semiconductor companies. I very much doubt that Ericsson ever designed its own microprocessors - it will always have sourced them elsewhere (i.e from semiconductor companies), whether proprietary designs or widely licensed designs such as ARM or MIPS.

Hence I just don't understand what your point is. What does any of this have to do with Sweden?

Tim adds: Oh, come along, it’s not that difficult. Polly says Ericsson is a big Swedish company and that such companies don’t outsource. As we’ve both shown, this one does. I.e., Polly’s wrong.


Posted by: HJHJ | Oct 26, 2005 4:09:36 PM


I'm sorry, but this is complete nonsense. She was talking about outsourcing to low cost/developing countries. What you describe is just normal international trade between technology companies which has been going on for as long as the electronics industry has existed. When did systems companies ever make a majority of the components they use in-house?

P.S. I have a 20 year career in the electronics industry so I know what I'm talking about.

Tim adds: Now you’re confusing me! Outsourcing is outsourcing, wherever you send it to. Has exactly the same effect.

Posted by: HJHJ | Oct 26, 2005 5:58:24 PM

So what you're saying, Tim, is that Swedish companies don't start by digging minerals out of the ground and then performing every process involved in turning these materials into final products, in-house. In fact, they buy many things ready made from other companies in order to make their own products.

What a revelation!

Polly may be wrong about many things but she never suggested that they did.

P.S. You clearly don't understand the semiconductor business one bit. Ericsson don't outsource their own 'silicon production' - they buy other people's silicon products which is a very different thing. Ericsson never have been or aimed to be, an IDM or fabless IC company. Many of their suppliers aren't even IDMs either.

Posted by: HJHJ | Oct 26, 2005 9:51:41 PM