I’m always seeking product differentiation from the Klen/Drum/Chait/Benen/Cohn blogs, and I know people count on this site to offer semi-informed commentary on Northern European politics so why not offer a comment or two on this weekend’s Swedish election? Sweden long had a multi-party system dominated by the Social Democratic party. But in recent years it’s shifted to something more like a two-party system as the four right-of-center parties forced a stable liberal/conservative coalition called The Alliance. In response, the Social Democrats formed a fact first with the Greens and then later with a far-left party. It hasn’t gotten nearly as much coverage as the rise of the populist anti-immigration right, but parties of the populist far left have also been on the rise in Europe and mainstream social democratic parties have generally declined to cooperate with them. An important exception is Norway where a red-red-green coalition has been governing the country successfully, and Social Democratic leader Mona Sahlin thought she could pull something similar off in Sweden.

Instead, Sweden blessed with a small open economy and a floating currency has had one of the mildest recessions in the developed world and seems to be galloping toward growth:

The result was essentially the worst result ever for the Social Democrats and the first re-election for a center-right Swedish government in many, many decades. But a far right party called the Sweden Democrats got into parliament for the first time and thereby caused the Alliance to lose its majority. Prime Minister Frederick Reinfeldt is trying to push the Greens to support his government and give him a working majority but they don’t seem to like this idea, even though they cooperate with liberal parties in some localities.

Minority governments are common in Swedish history, however, so there’s no reason to think Reinfeldt can’t simply proceed without the greens. What’s more, the Social Democrats are indicating that they have no intention of trying to topple the government. Sweden also has an unusually procedural rule (thanks to David Weman for pointing this out) that allows a minority government to pass a budget unless the opposition can muster a majority behind a single alternative proposal. That means an Alliance government can carry the day unless the leftwing opposition unites with the far-right, which isn’t going to happen.

This all has limited relevance to Americans, but I do think part of the lesson is simply that monetary stimulus can work. As the crisis hit, the SEK went down relative to the dollar and the Euro which bolstered growth and employment and when the situation stabilized the currency began to recover. This all seems pretty uncontroversial when it comes to small countries, but it’s possible for big countries to make this work too.

Sweden’s Pirate Party picked up a couple of seats in the European Parliament at the next election and seems to have come up with a clever gambit for trying to secure one or two for the national parliament:

Sweden’s political Piratpartiet (Pirate Party) and the operators of The Pirate Bay have always stressed their independence from each other, but they are now lashed tightly together—and could soon be much tighter. If Piratpartiet has its way, The Pirate Bay won’t be using secret servers anymore. The servers will be quite public and located… inside the Swedish Parliament. [...]

Piratpartiet knows this. In a new editorial published in Swedish newspaper Aftonbladet (English translation), the party says that it hopes to host the Bay from servers located within the Swedish Parliament to take advantage of parliamentary immunity. The plan relies on 1) The Pirate Bay agreeing to it and 2) Piratpartiet’s performance in the upcoming September elections.

Piratepartiet is best known for its work on basic copyright stuff regarding copying digital movie and music files, but the actually important part of their policy agenda concerns efforts to find a viable alternative to government-granted monopolies (i.e., patents) as a means of financing pharmaceutical research.

In most of the developed world, politics revolves around a central left-right axis of conflict that’s basically about how high taxes should be. In many European countries, however, the main parties are no longer very far apart on these issues. Consequently, the political scene is more open to parties focusing on different kinds of topics. That’s most prominently manifested itself via a series of anti-immigrant parties, but parties pushing for IP reform also fit the bill.

Via Brad DeLong, David Cameron teams up with Swedish Prime Minister Fredrik Reinfeldt to probably confuse people about fiscal policy in countries that aren’t Sweden:

Because Sweden has been living within its means it is one of the member states that has weathered the crisis best. In Britain, on the other hand, the new coalition government has inherited the largest budget deficit of any EU country.

Sort of. But as I’ve said before “My rule of thumb for thinking about the global recession is that whenever you hear claims that some country has weathered it unusually well because of Favored Policy Initiative A, you ought to first ask yourself if it’s not really just an exchange rate issue.”

And indeed we see that Sweden weathered the crisis in large part because its currency declined in value relative to major world currencies:

That’s not to say that Reinfeldt is totally wrong. Running responsible budgets during non-crisis times, as Sweden did, is far superior to the way George W. Bush governed the USA. And Sweden’s crisis-time policies have in fact succeeded for Sweden. It’s just that these are not policies that can be adopted across the board. And the main thing Swedish people should probably be congratulating themselves over is that they rejected the euro in 2003 thus avoiding getting sucked into the mire of the European Central Bank’s misguided tightfistedness.

I’ve developed this kind of lingering concern that the popularity of the Millenium Trilogy is going to lead people to believe that Sweden is some kind of international hotbed of oppressive anti-woman practices. The truth is closer to the reverse—Sweden is probably the most feminist-influenced country on earth, as witnessed by the existence of feminist bestselling popular fiction.

Katrin Bennhold in the New York Times takes a look at one aspect of this, the large number of Swedish dads who take time off to take care of the kids:

From trendy central Stockholm to this village in the rugged forest south of the Arctic Circle, 85 percent of Swedish fathers take parental leave. Those who don’t face questions from family, friends and colleagues. As other countries still tinker with maternity leave and women’s rights, Sweden may be a glimpse of the future. [...]

Swedish mothers still take more time off with children — almost four times as much. And some who thought they wanted their men to help raise baby now find themselves coveting more time at home.

But laws reserving at least two months of the generously paid, 13-month parental leave exclusively for fathers — a quota that could well double after the September election — have set off profound social change.

Walking around the United States you’re not necessarily actively conscious of how rare it is to see fathers alone taking care of young children (at least I’m not) but when I went to Stockholm I was quickly struck by how common it was there. In general Swedish family policy is driven by an interesting form of feminist natalism that’s pretty alien to American political culture, but the result is an unusually high female labor force participation rate and also an unusually high total fertility rate for a developed country.

I can’t see the United States doing anything like this, but countries like Germany and Italy might address some of their demographic problems through these kind of measures.

Price Fishback’s recent argument that social spending in the United States is actually higher than what you see in Sweden and Denmark attracted a lot of attention around the blogosphere. Lane Kenworthy, an excellent scholar of such questions, examines the issue and reveals that in most relevant ways it’s not true (although it is true in some other ways). Probably the most telling one is this:

Fishback tries to account for this, but as Kenworthy explains he gets it wrong:

In his paper, Fishback cites similar numbers from the OECD. He cautions, though, that “One advantage the poor Americans would have had in spending their disposable income is that they face consumption tax rates in the 4 to 7 percent range, while consumption taxes in the Nordic countries are above 20 percent.” Actually, consumption tax rates are incorporated in the purchasing power parities (PPPs) used to convert incomes to a common currency, so these income figures already adjust for differences in consumption taxes.

Two important things to further note about this. One is that as Fishback himself notes “[p]ublic services not counted in disposable income, like health care and education, likely are better for the very poor in the Nordic countries than in the United States.” The other is simply that Denmark and especially Sweden have per capita GDPs that are lower than America’s in PPP terms (Denmark I think is close at market exchange rate, and Sweden is lower either way). So for better or for worse, the Nordics are clearly putting a lot more effort into helping the poor. Conversely, America is doing much more than Denmark (and I think a bit more than Sweden) to help poor people born in foreign countries by letting them come live and work here, though again the Nordics have more foreign aid.

By Matthew Yglesias

China’s growth has been accompanied by some stark increases in inequality, but it seems noteworthy to me that one area in which the People’s Republic is a real laggard is the development of mega-rich individuals. For example, according to Forbes’ authoritative list the world’s top 100 richest individuals includes zero citizens of mainland China. The richest man in the country, Zong Qinghou, clocks in at number 103. Probably given Chinese growth and the continued economic weakness in the developed world he’ll be able to crack the top 100 soon. But his $7 billion fortune is dwarfed by other developing world tycoons like Carlos Slim (Mexico, $54 billion) Mukesh Ambani (India, $29 billion) or Eike Batista (Brazil, $27 billion).

Part of the issue here is the existence of Hong Kong as a separate jurisdiction which contains a number of mega-billionaires. But the basic reality is that China’s state-led model of economic growth has created huge increases in per capita income and led the PRC to surpass Japan as the #2 economy in the world without creating much in the way of really big really successful new firms. Instead China’s largest companies are basically controlled by the state.

As a bonus fun counterpoint fact, egalitarian Sweden has a wildly disproportionate number of mega-rich citizens. With only 9 million people and an overall GDP less than ten percent the size of China’s, Sweden boast two of the fifteen richest people on the planet—the heads of Ikea and H&M. That’s in part just a coincidence, but I also think it reflects the reality that high taxes and high public spending aside the modern-day Nordic countries actually have a very neoliberal underlying economic structure whereas China is very much the reverse.

Stockholm, Sweden (my photo, available under cc license)

The Atlantic has a new “The Future of the City” site edited by Conor Friedersdorf and it contains a Q&A with yours truly:

Q. You’ve observed before that Americans are curiously averse to seeing what policy solutions have succeeded in foreign countries. Is this true in urban affairs? What innovations have you seen abroad that are worth considering here in the United States?

Definitely. Many foreign countries don’t have the “only left-wing people live in the city” phenomenon discussed above. Consequently, places like Oslo and Stockholm have implemented congestion pricing schemes that many American metro areas could learn from. The Bush administration actually deserves credit for pushing this idea to a degree, which Michael Bloomberg tried to implement in NYC only to be stymied by the state legislature.

Once Friedersdorf sent me the link to our Q&A I saw the site for the first time and noted that it’s sponsored by IBM. IBM is, among other things, the main corporate creator/operator of the Stockholm congestion pricing scheme. So I think in the future IBM should be giving me large sums of money, right? As veteran readers will know, there’s actually nothing I like better than droning on endlessly about Scandinavian traffic management.

(her majesty's publick domaine photougraphe or something)

Tyler Cowen says spending cuts will be necessary in the UK and asks “what is the U.S. ‘progressive’ take on this question. Is it admitted that spending cuts are necessary?”

According to the Guardian when Labour took over in 1997, total public spending in the UK was something like 38.2 percent of GDP. That slowly-but-steadily rose over time until it stood at 43.3 percent of GDP in the 2008-2009 budget. I wouldn’t say that cuts from that level are “necessary” but it’s generally advisable for countries to have political coalitions alternate in power and after more than a decade of center-left spending hikes some center-right spending cuts could play a useful role in clearing out dead wood and such. Alternatively, a responsible center-left government could shut down bad programs of its own accord while perhaps continuing to boost overall spending. Then the crisis budget of 2009-2010 pushed public spending up to 48 percent of GDP (or probably more likely, the decline in GDP pushed the public share up).

That seems advisable as a crisis measure. The Tory-proposed austerity budget would have been a disaster. But 48 percent is at the very Scandinavian Bleeding Edge of what we’ve seen in terms of a sustainably-sized public sector and I think it’s perfectly reasonable to fear that one’s country can’t pull it off. So while I doubt cuts are strictly speaking necessary, they’re probably advisable once GDP is growing (which I believe was Gordon Brown’s position) which I believe is currently the case. The good news for Britain is that even in coalition mode it’s relatively easy for a UK government to act decisively.

Meanwhile at the moment both Denmark and Sweden are in the hands of center-right governments, but that’s likely to change in the near future. It will be interesting to see if one of those countries attempts to devise an economically and politically sustainable approach to getting over fifty percent.

(cc photo by Lars Ploughman)

David Brooks has a Moynihanish column in which he says people overrate policy and underestimate the role of culture in determining outcomes. “The influence of politics and policy,” he writes “is usually swamped by the influence of culture, ethnicity, psychology and a dozen other factors.” In the course of making the case he writes:

If you combine the influence of ethnicity and region, you get astounding lifestyle gaps. The average Asian-American in New Jersey lives an amazing 26 years longer and is 11 times more likely to have a graduate degree than the average American Indian in South Dakota.

Brad DeLong replies:

If you wanted to find a stupider example to try to support the claim that “differences in policy really do not matter very much” than comparing American Indians in South Dakota and Asian-Americans in New Jersey, I suppose you probably could.

But it would take a really long time to find one, and you would have to work really hard to do so.

I think that’s an unfair reading of Brooks’ point. Consider his example of the kind of policies that do make a difference later in the column:

Therefore, the first rule of policy-making should be, don’t promulgate a policy that will destroy social bonds. If you take tribes of people, exile them from their homelands and ship them to strange, arid lands, you’re going to produce bad outcomes for generations.

I’m not certain that’s the right analysis of poor outcomes among South Dakotan Native Americans, but it seems like a credible account.

My problem with Brooks’ argument is something else. He notes that Asians do well not only in rich states like New Jersey, but also in economically distressed areas. But obviously Asians living in South Korea and Japan (or New Jersey) do much better than Asians living in North Korea. That’s policy. Chinese people living in San Francisco or Hong King or Singapore do much better than Chinese people living in Jiangxi. That’s policy. And the China disparity is much smaller in 2010 than it was in 1980, which is also policy.

Brooks counters by noting that Swedish-Americans and people in Sweden have similar outcomes, which he characterizes as “two groups with similar historical backgrounds living in entirely different political systems.” I think the real lesson here is that Sweden and the US (especially the parts of the US where Swedes tended to settle) actually don’t have entirely different political systems. North Korea and South Korea have entirely different political systems. Sweden and Zimbabwe have entirely different political systems. The United States and Uzbekistan have entirely different political systems. The United States and Sweden are both stable democracies with market economies, substantial welfare states, and relatively low levels of public corruption. I think the real lesson of Brooks’ story is that the policy differences between stable market/welfare democracies are not that large and especially that controversies about tax levels are overblown in terms of their consequences.

My rule of thumb for thinking about the global recession is that whenever you hear claims that some country has weathered it unusually well because of Favored Policy Initiative A, you ought to first ask yourself if it’s not really just an exchange rate issue. That seems to be the story of Israel’s relatively mild recession and I don’t think any effort to explain a country’s successs—especially a small country—that doesn’t take this into account isn’t very credible.

For example, Casey Mulligan seems to think that tax cuts and reductions in the size of the social safety net explain why Sweden’s unemployment rate hasn’t increased as much as Denmark’s. A different theory would note that though Denmark and Sweden are both small, open economies with generally high taxes and generous social expenditures, Sweden’s currency floats whereas the Danish Kroner is pegged to the euro. Consequently, the outbreak of the recession was associated with a substantial reduction in the price of the Swedish Kroner relative to the DKK/euro, the dollar, or the yen:

I think this is about what you need to know about it. Running a small, open economy with a floating currency has some problems. Among other things, events totally outside your control can throw your economy into recession. But it does leave you with a convenient way to adjust to the recession via devaluation. I think that’s about all that’s really happening here.