Four months ago the European Central Bank officially kicked the euro zone into the liquidity trap with its zero interest rate. Non-euro members of the EU have been resisting – or pretending to resist – the temptation of going all the way out with their central banks. But now Sweden has succumbed to the temptation. The Telegraph reports:
The world’s oldest central bank has slashed interest rates to a record low of 0pc as it battles to ward off deflation. Sweden’s Riksbank decided to cut its benchmark “repo rate” by 25 basis points from 0.25pc at this month’s monetary policy meeting, following three previous rate cuts this year. The decision was not expected by polled analysts who forecast the benchmark rate to be lowered to 0.1pc. The move is designed to increase lending and push up prices and reflects worries about the real threat of deflation which have now gripped the economy.
The Swedish central bank is foolish. The ECB has already proven that you cannot fend off deflation with massive money printing. The ECB has also demonstrated that zero interest rates do not bring about the recovery that almost-zero interest rates did not bring about. In other words, the marginal policy effects of going to a zero interest rate are just that – zero.
While there are no benefits from the zero rate, there are certainly costs and risks associated with it.
To begin with, the zero rate opens the last floodgates of liquidity supply. Banks can borrow money from the central bank at practically no cost. This pushes even more money out to the supply side of the credit markets, primarily for mortgages. With an already overheated real estate market, Sweden will now see further injections of virtually cost-free lending to home buyers and speculators.
At the same time, private consumption has been driven in good part by virtually cost-free access to credit. Swedish families are among the most indebted in Europe, with a household debt-to-income ratio far higher than it was here in the United States – even if we go back to right before the recession.
Loans are collateralized against real estate, which essentially means that most of the growth in private consumption in Sweden is directly related to the easy access to mortgages. The situation is increasingly unsustainable, and it is only a matter of time before the national legislature either puts an end to the debt fest by reintroducing amortization requirements for mortgages (yes, interest-only loans are very popular in Sweden) or the market puts an end to the endless upward price trend as banks run their balance sheets to the end.
The former is a distinct possibility – the latter is increasingly plausible as shareholders begin to worry about if mortgage-happy banks will ever get their money back…
The latter could actually happen simply by means of growing loan defaults. Yes, a lot of home owners do not even pay on their loan principals, but a notable tightening of fiscal policy could send many of them out in unemployment. The new green-socialist coalition government has just presented a budget filled to the brim with tax increases. Among them is a restoration of a higher level of payroll taxes for young employees, which will very likely wipe out tens of thousands of jobs for individuals and couples just getting started with their lives. Many of them have bought their first, tiny little apartment and now risk being hurled out in joblessness – and homelessness.
A wave of loan defaults would quickly gain the critical mass needed to send a shockwave through the entire Swedish mortgage industry. That will shut the door for one investment opportunity for the mass of liquidity floating around in the banking system. Banks will have to go find another place to turn their liquidity into revenue.
And here is where the zero-interest central bank policy gets in the way: by dropping their key interest rate to zero, the price of treasury bonds has by definition reached its expectational maximum. The only way for bond prices to go now is down. Therefore, the only place to go is to the stock market.
The problem with the Swedish stock market is that it operates in an economy that is stuck in a long, irritating recession. There are profitable corporations to invest in, but those are of limited supply – especially when the supply of liquidity on the stock market increases rapidly as the real-estate market grinds to a halt. This will push investors out from the low-risk, safe stocks toward stocks that carry increasing rates of risk. As investors go after increasingly risky stocks they will demand speculative returns to match that risk. This exacerbates risk taking, putting the market at risk for self-magnifying destabilization.
It is no longer impossible that Sweden could end up in a situation where both the real estate market and the stock market destabilize at the same time. I would consider this risk theoretical at this point – the stock market is sophisticated and operated with both derivatives and other stabilizing instruments. However, so long as the Riksbank’s monetary policy had some restraints on it, there was not even a theoretical possibility of two-market instability.
Many economists dismiss this scenario by saying that Sweden has performed spectacularly from a macroeconomic viewpoint. However, the seven-year average, inflation-adjusted GDP growth rate covering the entirety of the Great Recession (2007-2013) is a not-so-impressive 1.39 percent. If you deduct the effect from exports and from debt-driven consumption, there is nothing left. In fact, private consumption including that paid for with second and third mortgage loans has averaged 1.1 percent since 2007.
It is therefore irresponsible, not to say reckless, to suggest that Sweden can handle zero interest rates because of some underlying macroeconomic strength. That strength does not exist. The slightest aberration in real estate price trends could eradicate the domestic source of GDP growth.
Sweden has made the same mistake as the rest of Europe: they combined tight fiscal policy with very lax monetary policy. This is a recipe for liquidity-trap stagnation – just as Lord Keynes explained some 80 years ago. Students of Austrian economics have also reached this conclusion, especially through the analysis of the role that lax monetary policy plays in a modern economy.
Sadly, both Keynesian and Austrian economics are left out of the curriculum when modern graduate schools train tomorrow’s generation of economists. Advanced econometrics is passed off as the fix-it-all for our profession. Yet as Paul Ormerod and others have explained so elegantly, econometricians get it right so long as nothing is happening in the economy. Once the economy starts moving like it did in 2008-2009, prediction models based on stability rapidly become useless.
But that is a topic we will have to return to later.
The political momentum has definitely turned against a unified Europe. Exhibit #1 is the referendum in Scotland:
Travelers to Scotland, beware. In buses, pubs and street rallies, people have only one thing on their mind these days: Scottish independence. They wear bumper stickers with “Yes” or “No thanks”, dye their hair white and blue, sing folk songs and hand out leaflets. Posters are everywhere. For the yes camp, it is about a nation going its own way, breaking away from a political elite in Westminister. To “naysayers”, it is a foolish decision instigated by populists, that will ruin two nations for generations to come. Both camps are virtually equal, with pollsters saying the referendum on Thursday (18 September) can go either way. The referendum will also have an impact on other independence-minded regions in the EU, such as Catalonia in Spain and Flanders in Belgium. Scotland will set a precedent for how Brussels deals with territories breaking off from an EU member state.
Alas, Exhibit #2, the independence movement in Catalonia:
Around 1.8 million Catalans took to the streets of Barcelona on Thursday (12 September) calling for the right to vote on independence. The demonstration marks the beginning of a critical period in Barcelona-Madrid relations. Dressed in red and yellow – the national colours – people shouted “in-inde-indepedencia!” and “volem votar!” (we want to vote) while waving the Catalan independence flag. Almost a quarter of the 7.5 million Catalans celebrated Catalan National Day – La Diada – in the streets of Barcelona, according to the local police forces. The day commemorates Catalonia’s loss of independence in the War of the Spanish Succession in 1714, exactly 300 years ago. Earlier this year, the Catalan Parliament voted two-thirds in favour for a consultative referendum to be held on 9 November, asking the Catalans “whether Catalonia is a state” and “if yes, whether that state should be independent”. The central government in Madrid, however, has said that it has ”all the mechanisms in place” to prevent such a vote.
Catalonia is the most prosperous region in Spain, having paid a big price for the country’s ill-designed austerity measures. It would be foolish of the Madrid government to try to suppress the Catalonian independence movement. A much better way forward is to recognize the undercurrent of anti-EU sentiments that also fuel this independence movement. The harsh austerity policies over the past couple of years where imposed on Spain by Brussels; if Spain was independent of the EU or at least had the backbone to stand up to their mad policy ideas the Catalonians would have much less of a reason to want to secede.
Anti-EU sentiments also played a major role in Sweden, our Exhibit #3. Last Sunday’s election sent nationalist Swedish Democrats skyrocketing to a position as the nation’s third largest party. In addition to their criticism of the current immigration policies in Sweden, the SD party is the only outspoken party against Swedish EU membership. They loosely resemble other EU-critical parties, such as Exhibit #4 in Germany:
Germany’s anti-euro party Alternative for Germany (AfD) got a further boost on Sunday (14 September) entering two more state parliaments following regional votes. “We are a party that is renewing the political landscape in Germany where people turn their back to traditional parties that have lost their profile,” said AfD party head Bernd Lucke. “One can’t deny it anymore: the citizens are thirsting for political change,” he added. Preliminary results suggest the right-wing party secured around 10.6 percent of the vote in Thuringia state and 12.2 percent in Brandenburg. The two states are traditionally seen as a power base of support for Chancellor Angela Merkel’s Christian Democrats. Founded 19 months ago, the AfD manifesto calls for a scrapping of the euro in favour of the German Deutsche Mark. The eurosceptic party has strongly criticised the eurozone bailouts and opposes the concentrated power base of the EU institutions in Brussels.
So long as the economic crisis continues it will be close to impossible for pro-EU politicians to gain back the momentum. And, as I have repeated ad nauseam, the crisis will not end until they structurally reform away the welfare state. Which, again, won’t happen.
The sad part of this is that the movements trying to roll back the EU for the most part want to do it to protect their national welfare states from EU-imposed austerity. The only real exception is UKIP which fundamentally is a libertarian party. But everywhere else the goal is to localize control over fiscal policy so that they can perpetuate their own version of the standard, redistributive welfare state.
In short: the way things are going now it is a safe bet that the EU will be history long before the European welfare state.
Sweden holds a national election on Sunday, September 14. The current parliamentary majority, a center-right coalition called The Alliance, is set to lose its majority. A three-party group of red-and-green socialists is expected to come in a few parliamentary seats short of majority, leaving the next prime minister and his cabinet dependent on nationalist, self-proclaimed “socially conservative” Swedish Democrats.
Not a lot has been said about the election outside of Sweden. This is unfortunate, because the country that American liberals used to tout as their role-model society is on the brink of a social and economic disaster up and above what any European country has experienced since the military coups in Greece and Portugal in 1967 (not counting the Balkan War).
I have covered Sweden in scattered articles, and my new book Industrial Poverty has an entire chapter on the crisis of the Swedish welfare state. However, time constraints have precluded me from analyzing the situation there in more detail on this blog. Therefore, I am grateful that the Economist reports on the pending election and its consequences. Unfortunately, the reporting is not entirely accurate:
For a decade Sweden could plausibly claim to be Europe’s most successful economy. Anders Borg, the (formerly pony-tailed) centre-right finance minister since 2006, likes to trot out numbers for his time in office: GDP growth of 12.6%, a rise in gross disposable incomes of almost 20%, a budget moving into surplus and a public debt barely above 40% of GDP.
I have no idea where they get these numbers from. But I also do not see what is so impressive with them. A GDP growth of 12.6 percent in eight years is less than 1.5 percent per year if you factor in the compounded growth effect. According to Eurostat National Accounts data, GDP growth has averaged just over 1.3 percent per year since the center-right government won the 2006 election. Private consumption has increased a bit faster, but only at the expense of a doubled debt-to-income ratio for Swedish families. In 2000 the debt-to-income ratio was approximately 90 percent; ten years later it had doubled. (By comparison, the U.S. debt-to-income ratio topped out at 140 percent before the Great Recession began.) In my new book Industrial Poverty, which has an entire chapter on Sweden, I adjust consumption growth for a constant debt ratio. The result is a staggering loss of spending (you will have to buy the book to get the details…) which shows that the only reason why the Swedish economy has grown a bit faster than the EU average over the past decade is that Swedish families have accumulated a lot more debt.
In fact, from 2006 to 2012 household debt as share of GDP grew by 22 percent, faster than in two thirds of EU countries. By 2012 Swedish households are the seventh most indebted in the EU; an extrapolation of the 2006-2012 trend would place Sweden among the top five in 2013 (for which no complete data has been reported yet).
Debt-driven growth is not the way forward, especially since the debt drive is based on an out-of-control real estate market. Swedes have access to mortgage loans that only cost them interest payments, and the Swedish central bank has the most aggressive in the EU – after the ECB – in pushing more cash out into the economy. Long story short: there is nothing to brag about in the Swedish economy.
The only sector that is thriving in Sweden is the exports industry. They, on the other hand, are increasingly operating as an isolated sector from which little more than tax revenue trickle down.
The Economist again:
[The center-right government] has overturned Sweden’s old image as a high-tax, high-spending Socialist nirvana. Twenty years ago public spending took an eye-watering 68% of GDP; today the figure is heading to 50%. Although the tax burden remains high by international standards, top rates have been cut, as have corporate taxes. Taxes on gifts, inheritance, wealth and most property have been scrapped.
This is a bad case of statistical trickery. The reason why government spending reached two thirds of GDP in 1994 is that the country’s GDP had been contracting for three years at that time, that unemployment exceeded 15 percent and that there had been no major cuts in income security programs. During the three years that followed that 1994 figure government spending was cut by an equivalent of five percent of GDP. That would be $850 billion here in the United States. Later, the Swedish government laid off one fifth of the employees in its socialized health care system. Replacement ratios in income security systems were pushed down from 90 percent of your current income to 50 percent in the worst case and nowhere more than 80 percent. Student-to-teacher ratios grew in public schools and the number of hospital beds per 100,000 citizens was reduced to the lowest level in the European Union.
If you make such heavy spending cuts you will no doubt see a decline in the ratio of government spending to GDP.
On the tax side, the Economist perpetuates the mythology that Sweden has cut its top income tax rates. In 2013 the top rate was still 60 percent, a figure that anyone can find who is willing to examine Swedish tax tables. What has been cut is the tax burden at the lower end: Sweden now has its own version of the American Earned Income Tax Credit. However, its effect has been the same as the EITC, namely to increase the discouraging marginal effect in the income tax system. While it is cheaper to live on a low income, the price tag on a promotion or an education has risen significantly.
Ignoring reality on the ground in Sweden, the Economist is surprised that Swedish voters seem ready to hand government over to the green-socialist left. Needless to say, the magazine struggles to explain the predicted election outcome:
Although the polls have narrowed sharply in the closing days before the September 14th election, all the signs are that Swedes will toss out the centre-right alliance in favour of a centre-left government led by the Social Democrats. … Inequality has risen fast, as almost everywhere—but Swedes care about this more than most. Mr Reinfeldt boasts of the creation of 300,000 private-sector jobs, yet unemployment is stubbornly high at almost 8%, and far worse among immigrants and the young.
The number for job creation is flat wrong. According to Statistics Sweden, quarterly workforce data, a total of 227,000 jobs have been added to the Swedish economy from first quarter of 2007 to first quarter of 2014. Of those jobs, only 47 percent are full-time permanent positions. The rest are temporary, primarily low-wage service jobs. Furthermore, youth unemployment – which government has tried to manipulate down – persists around 25 percent, which is close to the EU average.
With all this in mind, there is no doubt that Sweden is better off today than it would have been under a left-wing government over the past eight years. The social democrats and their prospective coalition partners – the greens and an unapologetic communist party – have promised to raise a slew of taxes as soon as they get into office. Among the more controversial proposals is to return the payroll tax for young workers from its current rate of ten percent to the normal rate three times higher. It is difficult to estimate what the actual effect of this would be on the Swedish labor market, but the attempts made thus far point to 10-20,000 lost jobs for people between high-school age and 25.
Again, Sweden would be better off under the current Alliance government, but it is, frankly, not very difficult to provide better policy than socialists whose idea of growth and prosperity is a higher tax bill. What Sweden truly needs is a turn in the libertarian direction, with major reforms to dismantle the welfare state. Such reforms would start with privatization of the country’s anorectic health care system, proceed with a strengthened – and truly private – school choice system, then privatize the country’s costly and inefficient income security system, and top it all off with a major tax reform that would cut the current world’s-highest tax burden in half.
Such reforms, however, will have to wait until there are true libertarians in Sweden’s parliament. And that won’t happen over night.
Click on Page 7 about Sweden for an article on how Nazis in Sweden are consolidating and gaining strength. A scary story, but very important.
Recent unemployment data from Eurostat gives yet another grim picture of the European economic landscape. The EU Observer reports:
Over two-dozen regions throughout the Union have an unemployment rate twice the EU average. The data, published on Wednesday (16 April), by the EU’s statistical office Eurostat, says the jobless rate in 27 regions in 2013 was higher than 21.6 percent. Thirteen are found in Spain, 10 in Greece, three in the French Overseas Departments, and one in Italy. Five of the worst affected are found in Spain alone.
There is a strong relationship between unemployment and growth. In fact, over time the only way that the private sector can create jobs is if the economy as a whole is growing. With GDP growth at deplorable levels in the EU, there simply is no way for the economy to solve the unemployment problem.
The EU Observer again:
At 36.3 percent, Spain’s Andalucia tops the overall unemployment regional figures, followed closely by Ceuta, Melilla, Canarias, and Extremadura. Youth employment is worse. Young people are twice as likely to be unemployed, when compared to the average unemployment rate, in more than three quarters of all the EU’s 272 regions. Ceuta tops the list of youth unemployment with a 72.7 percentage, followed by Greece’s Dytiki Makedonia at 70.6 percent and Ipeiros at 67.0 percent.
These regions are nothing short of economic disaster zones. As I explain in the linked growth article above, there is very little economic value being created in the European economy that can translate into new jobs. At best, the unemployment situation is not getting worse – it is the herald of Europe’s new era of economic stagnation.
Back to the EU Observer:
The data also showed that over 47 percent of people without work have been unable to find a new job after a year. … Around 75 percent of the unemployed in Slovakia’s Vychodne Slovensko region are also unable to find a job after a year.
In fairness, as the EU Observer notes there are some islands in this sea of economic depression where conditions are a bit more normal:
At the other end of the spectrum are Germany, Austria and Sweden. At 2.6 percent, Germany’s Oberbayern region had the overall lowest unemployment rate. Both Freiburg in Germany and Salzburg in Austria tied at 2.9 percent. Oberbayern, along with Tubingen, also ranks as having the lowest youth unemployment rate at 4.4 percent with Freiburg coming in at a close second. Long-term jobless rates are the lowest in six Swedish regions, which includes Stockholm.
In January I explained that the German economy is on the downslope, with key GDP components gross exports and private consumption coming to a standstill last year.
As for Sweden, nationwide unemployment is a hair below eight percent, with youth unemployment at three times that rate. Recently there have been microscopic changes for the better, but that is coming to an abrupt end with the new fiscal policy plan that Treasury secretary Anders Borg announced back in February: tax hikes, tax hikes and tax hikes.
There is one more caveat with the low unemployment numbers in, primarily, Sweden. Government has a large share of the workforce on its payroll.
The Swedish Treasury secretary, Anders Borg, has been in office now for seven years. He is one of the longest lasting masters of government funds in the free world. I’ve had a lot of criticism for him over the years, but I also want to acknowledge that he has done some things right, at least given the circumstances.
Mr. Borg came into office after the 2006 parliamentary election, and was very soon hurled into the Great Recession. I really don’t envy his job: Swedish law mandates that the government prioritizes a balanced budget, annually, above all other economic policy goals. This is an easy priority to comply with in good times, but once a recession strikes government revenue takes a nose dive. In the elaborate European welfare states, government spending increases precisely when revenue declines. In other words, government budgets are built to open major deficits in recessions.
Like all other Treasury secretaries in a similar situation, Mr. Borg chose to fight the deficit. Early on, his fiscal policy was clumsy and came with ill-conceived spending cuts. His budgets were poorly written, sometimes with outright embarrassing analytical flaws. Over time, though, things got better on the analytical side and Mr. Borg persisted in pushing for a Swedish version of the Earned Income Tax Credit. As I explain at length in a chapter in my book Ending the Welfare State, the EITC is an inefficient way of cutting people’s tax burdens, primarily because it creates very steep marginal tax effects for low-income families. That said, in a country that has a history of having the world’s highest taxes it is better to introduce an EITC of sorts than to do nothing.
In the last year or two Mr. Borg has taken yet another step toward a more comprehensive fiscal policy. He has cited Keynesian theory as the source of inspiration for his fiscal policy. Last year he emphasized, several times, the need for fiscal stimulus to get the Swedish economy going. He pointed to a further expansion of the Swedish EITC as an example.
Today Mr. Borg still abides by a crude, textbook version of the Keynesian-Neoclassical synthesis. He still wants to counter swings in the business cycle with active, stabilizing fiscal policy. There is nothing wrong in this, except for two things: Mr. Borg is still determined to defend the indefensible welfare state – and you would have to accept the fact that Sweden is now out of its recession and heading for some kind of macroeconomic over-heating.
Leaving the indefensibility of the welfare state aside for now, the notion that Sweden is in a growth period is of bigger interest than it might seem at first. In claiming that he sees a recovery in the economy, Mr. Borg echoes similar sentiments from Eurocrats in Brussels. But just as it is wrong to say that Greece is on a macroeconomic rebound, it is simply bizarre to say that Sweden is out of the recession.
Let us look at some data from Eurostat to see where Sweden really is today:
- The Swedish unemployment rate is currently reported by Swedish statistical agencies as 7.7 percent. According to Eurostat it has been at eight percent since 2010 with no real trend in either direction.
- Youth unemployment is also trendless. After topping out at 26.7 percent during the crisis it is now steady around 24 percent.
- GDP growth is equally unimpressive. In the third quarter of 2013 the Swedish economy grew by 0.7 percent over the same quarter in 2012. The average annual growth rate for the last four quarters is 0.8 percent.
These are not numbers that indicate any kind of over-heating in an economy. There is not even a hint of recovery here. Okun’s law says that an economy needs to grow at more than two percent per year to bring down unemployment; so far, the Swedish economy cannot even get to half that rate.
The only variable with any kind of positive trend is private consumption. In the third quarter of 2013 Swedish households increased their spending by 2.1 percent, adjusted for inflation, over the same quarter in 2012. This was the fifth quarter in a row with accelerating consumption growth, which could be taken as a sign of economic recovery. However, if we remove spending on housing from these numbers the average growth rate declines to approximately European average. The reason why we need to make this adjustment is that Swedish households are spending exceptional amounts on housing: there is practically no production of new homes, and population growth is among the highest in the industrialized world (due to large immigration from non-Western countries). As a result, Swedish households have been forced to basically mortgage the rest of their lives, with debt-to-disposable-income ratios in excess of 180 percent. By comparison, when the American housing bubble burst in 2008, the average U.S. household had a debt of 130 percent of their disposable income.
In short: what seems like a trend of recovery in Sweden’s private consumption is in reality a debt-driven housing spending spree. It cannot and will not bring the economy back to growth.
The saddest part of this is that Mr. Borg wants to quell an overheated economy that does not exist, by raising taxes. All that this will do is perpetuate the current situation with high unemployment, almost no growth – and dangerously indebted households. In fact, by raising taxes Mr. Borg could provoke an acute debt crisis: by taking more from the private sector he raises the likelihood that private disposable income will cease to grow in the next year or two. As this happens, the ratio of household debt to disposable income will rise again, but since it is now the denominator that is stagnating, the risk of bank panic is higher than if the numerator was accelerating.
In short: Mr. Borg could provoke a meltdown on the Swedish real estate market.
Again, I applaud Mr. Borg for wanting to build his fiscal policy on an analytical foundation. His problem is that he does not give himself enough time to do the analysis (and he certainly does not have access to adequate brainpower at the Treasury Department in Stockholm…). A growth period in need of any kind of fiscal-policy moderation would look more like the Swedish economy in the 1980s when unemployment was at two percent.
Yes, two percent.
In a way, the fact that Mr. Borg does not want to wait for full employment before he takes to growth-quelling policy measures is an indication of how the past couple of decades have changed people’s perception of the macroeconomic normal. This is not just the case in Sweden, but in Europe in general.
We have to watch out here in the United States so we don’t fall for the same illusion.
I recently got pulled into a debate on Facebook over health reform, and encountered yet another American liberal who still thinks Sweden is the perfect role model for the United States. I offered him to help him emigrate to Sweden, including setting up job interviews, contacting the embassy for a work visa and finding a place to live. He dropped out of the conversation somewhere between the job interview and the embassy.
Today’s article is a tribute to him and all the people around the world how believe that Sweden is the epitome of a happy society where all social and economic problems are solved. The Local reports on the state of the socialized Swedish single-payer health care system:
One in ten Swedes now has private health insurance, often through their employers, with some recipients stating it makes business sense to be seen quickly rather than languish in national health care queues. More than half a million Swedes now have private health insurance, showed a new review from industry organization Swedish Insurance (Svensk Försäkring). In eight out of ten cases, the person’s employer had offered them the private insurance deal. “It’s quicker to get a colleague back to work if you have an operation in two weeks’ time rather than having to wait for a year,” privately insured Anna Norlander told Sveriges Radio on Friday. “It’s terrible that I, as a young person, don’t feel I can trust the health care system to take care of me.”
That would be the tax-funded, government-run health care system, the performance of which I have chronicled in my book Remaking America.
Back to The Local:
The insurance plan guarantees that she can see a specialist within four working days, and get a time for surgery, if needed, within 15. In December, the queues in the Swedish health care system pushed the country down a European ranking of healthcare. “Why can Albania operate its healthcare services with practically zero waiting times, and Sweden cannot?” the report authors from the Health Consumer Powerhouse (HCP) organization in Brussels asked
Ironically, the Albanian health care system beats the Swedish system because the Albanian government has failed on the health care front even more than the Swedish government has. Here is one description of it, from a source that generally seems to be reliable but which I have not explored in depth yet:
All citizens are entitled by law to equal access to healthcare. Healthcare is funded by the state and private practice is limited to a small niche sector. The state system is supposed to be funded through insurance contributions from those employed and their employers, but poverty in Albania is rife and few can afford to pay. The net result is that many people fail to get much needed medicine and medical care to treat their ailments. The failure to collect a substantial amount of contributions means that healthcare system is strongly reliant on charitable aid for medical supplies and drugs.
If this is a correct assessment of the problems in the Albanian system, the charitable contributions are what make the system work. An increased penetration of private initiatives helps circumvent rigid, centralized bureaucracies. While, again, I am not entirely sure of the source, the explanation of how the Albanian system apparently works has many resemblances to how Polish health care worked in the early post-Communist days. Since the Albanian system originally is of the same nature as the one Poland used to have, it is reasonable to assume that europe-cities.com got this one right.
Given that Albania’s health care works as described, it is startling to see how the Swedes continue to maintain their rigid single-payer system. The Local again:
Sweden aims to make sure people can see their general practitioner within one week, which the organization said was a modest goal in and of itself. “The target for maximum wait in Sweden to see your primary care doctor (no more than seven days) is underachieved only by Portugal, where the corresponding figure is 15 days,” the report stated. Health system wait times in Sweden were deemed so lengthy that they pulled Sweden down the European ranking despite the country having technically advanced healthcare at its disposal. “The Swedish score for technically excellent healthcare services is, as ever, dragged down by the seemingly never-ending story of access/waiting time problems,” the reported noted, underlining that the national efforts to guarantee patient care had not helped to cut the delays significantly.
There is a very good reason for this. The “efforts” to reduce waiting lists have primarily been concentrated on passing bills in the national legislature that basically says “you have the right to health care, and if you don’t get health care before you die of your illness, then you really have the right to health care.” In addition to such decisive, world-changing legislative action, there has been a whisking-around of existing health care funding. One day more money is use to treat heart patients, another day it is removed from there and allocated to treat children with cancer. Etc.
This is the of one of the world’s most rigid, most socialized health care systems. Not only do cancer patients often have to wait more than 100 days for treatment, but nobody keeps track of all those who die waiting. There are indirect measures of the wait-list mortality rate, but so far I have not found any comprehensive, internationally established measurements. Regardless, when opportunity arises I will return to this issue even if it is concentrated to Sweden. A high mortality rate among patients waiting for treatment in a socialized system is a clear indicator of an ideological choice: the principle of single payer is put above the life and wellness of the individual patient.
The liberal welfare-state paradise is crumbling. My Fox New York has yet another glimpse of the destruction under way:
Swedish police detained 28 people Sunday after a group of neo-Nazis attacked an anti-Nazism demonstration in a Stockholm suburb by hurling bottles, torches and firecrackers. Two people were hospitalized and a policeman was injured in the back after being hit by a heavy object, police spokesman Sven-Erik Olsson said. Olsson said around 200 people participated in the planned, peaceful demonstration in the suburb of Karrtorp when they were attacked by a smaller group of about 40.
The “smaller group” consisted entirely of members of an openly Nazi group called Swedish Resistance Movement. It is a dangerous, militant organization that does not shy away from violence. On the contrary, they have demonstrated on many occasions that they are not only ready to use violence but also train for violence-based tactics. On previous occasions when they have resorted to violence, it has been at their own public rallies, in response to provocations from radical leftists, and their response has always been well coordinated and intimidating.
However, this is the first time they have actively sought out their opponents’ public event and launched an attack. My Fox NY again:
Those detained are suspected of rioting and various assault charges. The demonstration was organized by a local citizen group as a protest against increased neo-Nazi campaigning in the area. Video footage published by state broadcaster SVT showed families with baby carriages escaping the scene as firecrackers exploded in the middle of the crowd and people were heard screaming. Later, the crowd moved toward the attackers chanting anti-Nazism slogans and forcing them to retreat. A neo-Nazi group called the Swedish Resistance Movement claimed responsibility for the attack on its website.
Europe is, as we know, stuck in an economic crisis that is increasingly looking like a permanent crisis – a new normal. On top of that, there are more and more signs of deeper social disintegration, including rising tensions between Europeans and immigrants. Contrary to common sense, many political leaders in Europe are actively promoting high levels of immigration in the midst of a deep economic crisis. While there is a growing resistance to these policies in many countries, there is one place where immigration is basically spinning out of control, namely Sweden.
Over the past decade immigration levels in Sweden have hovered around 50-60,000 per year, and that counts only the inflow of people of workforce age. For most of the past ten years immigration has exceeded the number of new jobs created in the economy, leaving us with one important clue as to why Sweden currently has a youth unemployment rate of 26 percent (as reported by Eurostat). This is ten percentage points higher than, e.g., the United States.
As a libertarian I am strongly in favor of cross-border migration – it is an essential part of individual and economic freedom. However, when governments restrict, regulate and interfere with the economy to the extent they do in Europe, it becomes socially and economically problematic to allow people to move as they please. The most acute problem is the massive system of entitlements provided by welfare states in Europe: when there are no jobs to come look for (as evidenced by the high unemployment rates and paltry job-creation numbers from across the EU) immigrants come for entitlements.
From an economics viewpoint this is entirely rational: if you can live better on work-free income in country X than on income from work in country Y, then why would you choose to remain in country Y? However, this reasoning excludes the broader consequences of immigration based on entitlements. Since people do not have to work to live, their incentives to integrate and assimilate with the prevailing culture are weak. This paves the way for parallel-culture societies where the norm systems of minorities become just as established as the norm systems of the majority culture. It is inevitable that this leads to conflicts and clashes.
Such conflicts would be manageable if immigration levels were reasonable. But it is virtually self evident that immigration levels such as Sweden is currently experiencing are exacerbating conflicts; imagine 50-60,000 workforce-aged immigrants coming to New Jersey each year, bringing just as many family members; imagine there were no jobs for them and that most of them ended up living on welfare. Imagine this going on year in and year out for a decade.
It would inevitably create socially explosive tensions between various groups of Jerseyites.
However, there is one more ingredient to the Swedish immigration problem. According to several leaks from the government agency responsible for immigration, up to 90 percent of immigrants have no papers as they get to the Swedish border.
Yes, up to 90 percent. Despite this, the vast majority are given residence status. Currently every Syrian – or, rather, every person who claims to be from Syria – who can make it to Sweden is given permanent residence status!
This unimaginably naive, not to say reckless, immigration policy is a recipe for enormous social tensions, conflicts and confrontations. The lack of background checks opens the Swedish borders to criminals, terrorists and people who are no longer wanted in their own countries. Needless to say, this builds up to a destructive situation that threatens the very survival of Sweden as a country. A recent report in Dispatch International offers a great insight into this enormous problem:
In 1975 the Swedish parliament unanimously decided to turn homogenous Sweden into a multicultural society. Thirty-eight years on the dramatic consequences have become apparent. Whereas the population has grown by 16.2 percent, violent crime has gone up by 320 percent.
A note of caution. The spike in crime began before the current levels of immigration. The deep, destructive economic crisis in the ’90s brought with it a surge in various types of crime. As immigration accelerated after the turn of the Millennium, there was yet another rise in crime rates.
In other words, not all of Sweden’s crime problem has to do with immigration, but the relation that DI points to is definitely present in the statistics. And the situation is getting worse as anonymous immigration continues from, e.g., war-torn Syria – yet Swedish authorities are doing their best to ignore or even deny the problem:
Every week we read in the mainstream media about murders, robberies, rapes and other serious crimes. Nevertheless criminologists insist that there is no increase in crime. In fact, they maintain that it is subsiding. But from the homepage of the Council for Crime Prevention (Brottsförebyggande Rådet, Brå) you can generate your own statistics on the number of reported crimes. Interestingly, the statistics start in 1975. If one looks at the whole period from 1975 to 2012, a completely different picture emerges than the one we are usually presented with. It turns out that the criminologists are lying and that the number of violent crimes has not only increased but completely exploded. But Brå doesn’t feel like discussing these figures.
You got this right. The government agency in charge of researching crime, the Council for Crime Prevention, is actively participating in a campaign to blur, sometimes outright distort, crime statistics. I have myself interacted with officials of the council, with the exact same experience as DI reports:
Statistician Anton Fernström tells Dispatch International that it is not enough to look at the statistics; they must be ”interpreted”. One must compare the number of reported crimes to what people answer when asked by the National Survey of [Safety] (Nationella Trygghetsundersökningen, NTU) what crimes they have been exposed to and in addition consider that people’s propensity for reporting crime has gone up.
The last point is actually a staple of the council’s “research”. Every time they get a chance to, they claim that the reason why crime rates are as high as they are in Sweden is that Swedes, for some reason, have started reporting crimes in droves over the past 6-8 years. Yet there is not a shred of evidence – not a single research paper or opinion poll or any other piece of information – that crime reporting has gone up in Sweden. On the contrary, with major cuts in police presence and interaction with the public, it is entirely plausible that crime reporting has fallen.
Anyone prone to rely on common sense would ask at this point why on God’s green Earth a government agency in a supposedly democratic country would resort to such recklessly deceptive behavior. The frustrating problem is that there is no other explanation than a long tradition of government culture, uniquely Swedish in many ways, that has been fostered by three generations of politicians and bureaucrats. In a way, you could think of it as Sweden trying to live up to an un-attainable self image.
But the fact remains that however one ”interprets” the figures, the number of reported crimes has increased dramatically. … If we assume that the statistic actually reflects a real increase, we must ask why. Have Swedes in general become extremely more violent and criminal or have immigrants brought with them a violent and criminal culture? The latest survey of crime among Swedes and immigrants (from 2005) shows a general overrepresentation of people born outside the country by 2.5. The number is even higher when one looks at serious crime: Concerning deadly violence, the overrepresentation was 4.2 and the same was true for attempted murder or manslaughter. For rape or attempted rape, it was as high as 5.0.
As troubling as these numbers are, there is no denying the grave message they convey. A country simply cannot permit more immigration than it can assimilate – and you certainly do not allow immigration levels that add 1-1.5 percent to your workforce every year when there are no jobs. It does not matter if you are a dedicated libertarian, as I am, and thus for the free mobility of people – your principles cannot change the fact that immigration that piles onto unemployment is socially and economically destructive.
The lack of jobs in Sweden, combined with unchecked identities allowing droves of criminals into the country, could explain the troubling trend of a rising share of immigrants:
These figures don’t tell us much about immigrants’ share of criminals. But numbers from Statistics Denmark for 2011 indicate that two-thirds of those arraigned in court were of foreign extraction – and that the percentage had been going up for the previous five years. For juvenile delinquents, 15-17 years, it was even worse. In this category three-quarters had a foreign background with a clear overrepresentation by second-generation immigrants from non-Western countries.
DI also mentions Sweden’s horrifying rape statistics, pointing to the internationally well established fact that Sweden is one of the world’s worst countries when it comes to sexual violence against women. The article concludes:
Based on Brå’s own statistics, one cannot avoid the conclusion that Sweden has become much more violent and dangerous than before parliament decided to transform us into a multicultural society.
Again, this trend started during the economic crisis of the ’90s, before the mass immigration that Dispatch International refers to. However, the large waves of immigrants correlate well with the second surge in crime in the 2000s; one statistic often mentioned at the time was that the number of violent crime victims at the ERs in big cities increased by 75-90 percent from 2000 to 2010. The geographic proliferation of no-go areas is also very disturbing – when I grew up in Sweden back in the ’70s the phenomenon was unknown. It slowly emerged during the ’90s: from 1991 to 1993 I lived in the housing project of Rinkeby in north-west Stockholm; only five years later the place was de facto a no-go zone for ethnic Swedes, especially those who did not live there. Today I would risk my life if I went there.
Today, Sweden surpasses the United States in almost every violent crime category. The only reason why there seems to be a higher murder rate in the United States is prosecutorial: Swedish law enforcement authorities are much more prone to prosecute at a lower level – manslaughter or lower – or even drop charges, than their U.S. peers.
I would warn anyone considering a visit to Sweden to be cautious and careful where you go, and when, in the same way as people were in pre-Giuliani New York or in London, Sao Paulo or any other big city in the world that is or has been plagued by high crime rates. The difference is that in Sweden, this is no longer a trend isolated to the big cities. It is relentlessly spreading to all corners of the country.
Every time I bring up the decline of Sweden with my libertarian American friends, they smile and say that there are no problems in Sweden because they just visited the posh, upscale shopping malls in downtown Stockholm and everything was so nice and quiet and clean. And besides, they say, their American cell phone worked on the commuter train to the airport, so Sweden is very modern and advanced and sophisticated.
Little do they know – because they don’t want to know – that 4-5 subway stops away from the fancy-pants hotels, art galleries and restaurants in downtown Stockholm, cars are being burned, rescue workers are being stoned by rioting thugs, schools are set on fire, police stations firebombed and mass transit suspends service because bus drivers fear for their lives driving through those neighborhoods.
I don’t think anyone would judge New York, let alone America, by taking a walk from Battery Park to Fulton Street on Manhattan, yet that is basically how superficially America’s libertarian intellectual elite “analyzes” Sweden.
At the end of the day it really does not matter how America’s libertarian pundits view Sweden. What really matters is how politically influential people decide to use the terrifying experience of Sweden’s slow-progressing collapse to save their own countries from going down the same path. But it would help, of course, if all friends of freedom would open their eyes to reality as it unfolds around them. We need all hands on deck to restore individual and economic freedom.
I recently reported on the riots that for more than a week engulfed Stockholm’s rundown, over-crowded, crime-ridden housing projects. I have also reported on the escalating, politically motivated violence that is now becoming a credible threat to the very democratic form of government in Sweden. I have also explained how the large, costly Swedish welfare state attracts tens of thousands of welfare immigrants every year, immigrants who flock to the housing projects and raise their children in virtual isolation from the rest of Swedish society.
Not to mention that the Swedish state is de facto capitulating before an onslaught of serious organized crime.
Today I will let two other Swedish voices present their views of the terrifying decline of our native country. Unlike me, they still live there and are trying to do what they can to delay the inevitable. First, here is a report from the blogger Cavatus, whom I have known for a few years now as an astute yet often restrained observer of Swedish politics and public policy – when Cavatus speaks up, it is for very compelling reasons:
Sweden has disgraced itself internationally because of the riots last week. But don’t believe that it all has ceased by now. Every night there are cars on fire and other subversive mischief in the immigration suburbs. In the wake of the first riots, in all 70 [housing projects] have been struck so far by the consequences of Sweden’s downright failured immigration policy.
Please note what Cavatus is reporting. The week of eye-catching riots did not end. The destruction, which included but was not limited to attacks on shopping centers, police stations, child care institutions, schools and mass transit (including an arson attack on a commuter train station), did not end when media turned their cameras elsewhere. They scaled down but continued and have in fact spread to more cities than Stockholm, Gothenburg, Malmo, Uppsala, Linkoping and Orebro, those hit during the first week.
High-intensity social unrest has been replaced by a low-intensity outpour of anti-social behavior.
Where does this anti-social behavior come from? As I explained in my article on welfare immigration, it is never a good idea for a society to import large numbers of people from culturally, socially and economically very distant countries, put them on welfare and expect them to assimilate into your cultural and social traditions. When unemployment is high – as it has been in Sweden for a good two decades now – and welfare benefits are endless; when the immigrants rarely have more than a few years of elementary education (many who come to Sweden only report two years of Koran school) the stage is set for social disintegration rather than integration.
Despite this alarming problem unfolding under their very noses, the Swedish political establishment fail to see what is going on. Cavatus gives a very telling example:
A politician, member of one of the ruling parties (Olle Engström in Borås), had a letter to the editor published yesterday in the newspaper Borås Tidning, in which he rejected the uncontrolled immigration policy and dreaded that Sweden shortly would fall into a religious civil war if nothing is done, like Lebanon and such countries.
Here is what this long-time politically active, elected official said (my translation – click here for google translation):
In Sweden, we have since the 1950s and ’60s opened our country to hundreds of thousands of people from other countries who have fled from oppression, unemployment, war and starvation, who have been given a new homestead here.
Yes, this guy does put on equal footing escaping from war and “escaping” from unemployment. Typical Swede… But let’s continue to listen to him – it does get interesting:
Over the past week we have read in the papers about the ramifications of overly optimistic and unrestricted immigreation to Sweden. Society [referring to government] is losing control over the situation. Today, vandals and rioters are subjecting our entire social structure to enormous pressure which, over time, can have very serious consequences. As a citizen and politician I mourn today over what is happening. … Those who instigated and participated in these riots don’t understand what profound damage their so called pastime has done to the efforts to build bridges of understanding and empathy between people from different cultural backgrounds. … Where is Sweden heading? I see before me a Sweden that in 20-30 years has totally lost control over the situation, with frightening consequences.
Dear Mr. Engstrom – that is going to happen in much less time than that, perhaps as little as 2-3 years.
Terrorism, violence and crime will increase in Sweden. and maybe we might also, down the road, see a full-scale civil war between religious groups, similar to what has been and is happening in Lebanon, Iraq, Nigeria and other places.
A local elected official, long-time member of the ruling Moderate party, fear for the future of his country. The day after his letter to the editor was published, the former mayor of his hometown, Boras, wrote a rebuttal claiming that Mr. Engstrom was completely wrong on all accounts. Anyone familiar with Swedish political culture can immediately identify this rebuttal as an official declaration from the Moderate party that Mr. Engstrom is no longer a member. He was expelled for speaking up against mass immigration and for voicing his concern regarding the social and economic future of his country.
Today, he was excluded from his party, Moderaterna (“the Moderates”). A fellow party member had today a letter to the editor published in the same newspaper, where he maintained that “it is not the immigration that gives frightening consquences for the society; it is the blind criticism without nuances of it”. I mention this just to show you how completely impossible it is to talk about the quantity of immigrants that Sweden can embrace and the results of the quantities received so far. So despite nationwide riots, we are still not allowed or able to talk about it, unless we want to be labelled racists, foremost by the media and the journalists. This is, in fact, an indication of Sweden’s severe predicament.
Cavatus is absolutely right. In Sweden today it is akin to political suicide to speak up about the riots and their relation to the very large immigration that has taken place, especially during the past decade. But it is in fact worse than that: as my article on political violence explained, critics of immigration are targeted by violent political mobs, their homes and other property being attacked and they themselves being victims of harassment and even assault.
This video gives a glimpse of what is happening (the man interviewed is chairman of the National Democrats, a party with a nationalist agenda that I do not support – nevertheless, the commentary of the interview is worth taking seriously):
For a more in-depth commentary and an interview with brave journalist Ingrid Carlqvist, take a look at this video.
As the Lebanization of Sweden progresses, we will hear more from there. Stay tuned.