Re: Sweden -- A few reactions on the N.Y. Times article

[larson@xxxxxx (S R Larsson)]

First of all, let me say that as I read the NYT article I got a feeling of
hopelessness. Intellectually I have already left Sweden (I've been working
in Denmark for two years now) but since I still have my family there I am
still forced to face the tragedy of Sweden every week. I see all the
concrete effects of two decades of anti-keynesianism escalating into pure
fiscal madness. One would hope that foreign media were sensible enough to
start asking the right questions at some point. But the NYT article gave no
reason to hope for this.

I have written before on this list about the intellectual climate in
Sweden. I worked for three years at the department of economics at
Stockholm University, and during those years I got a pretty good inside
view of how the effects of the 1979 intellectual coup d'état were nursed by
Assar Lindbeck and his staff. Much of what Per says about the libertarian
over-representation at the IIES is true, but I think one has to remember
how grad students at IIES end up being libertarian. (This is actually a key
issue in understanding how Sweden became what it is today.)

The problem is not that the very small minority of dedicated libertarians
outrun all competition for the salaried grad student positions at IIES. The
problem is that mainstream economics unintendedly can open for
libertarianism as a moral conclusion in the minds of students.
Irresponsible professors can easily give students the impression that
libertarian solutions are the only reasonable solutions to economic
problems. In a country of pluralism, open public debate, intellectual
diversity in academia etc, the libertarian potential in mainstream
economics is curbed by the pressure from alternative ideologies and
paradigms. But in a country where the political opposition competes with
the incumbent government over who is the most fiscally prudent of the
bunch, things turn out to be a bit different. Students of economics refer
to the media debate over financial markets, taxes, government spending,
unemployment and exchange rates when they try to understand the use and
meaning of economics. If that world outside the classrooms is
unrestrictedly conservative, if the media consumer is drenched with
"Spending money, like eating people, is wrong" (although this time they're
dead serious about it...) from the morning paper to the late night TV news,
seven days a week, then she has to have one hell of an integrity not to
become a libertarian while taking economics.

I chose to write my dissertation in Denmark. Per is now going to the US to
do it. Neither of us found any place in the academic system in Sweden. I've
tried the questions I'm working with on former friends now working high up
in the Swedish government administration or at universities in Sweden. They
all dismiss them as unscientific, uneconomical or simply unintelligible.
There is not one, I daresay, not one graduate student of economics in
Sweden who would even think of working with the problems I address - or,
not to forget, the issues into which Per has been digging so well over the
past few years. One has to remember that these students later become
professors, big-shots in the central bank or finance ministry or the
brivate banking industry. They get to set the intellectual agenda, to
define what's economics and what's whacked. They get to define fiscal
policy and the daily conditions of living for millions of people. They're
all deeply convinced that the only sort of fiscal policy that can be
tolerated is as far from keynesianism as Big Bang is from us. (At best
these people regard keynesianism as an interesting piece of the history of
economic thought - something one can chat about with trustworthy colleagues
in the lounge after a nice dinner.)

Before I conclude, I must comment upon the ethnical remarks in the NYT
article. It is hinted that one of the problems with Sweden today is ethnic
diversity. As an answer I would like to point at two things: a) out of one
million (not 800 000) immigrants of first and second generation in Sweden,
half are from neighboring Nordic countries, predominantly Finland, which as
I see it is not a contribution to ethnic diversity; b) Denmark shows at
least the same ethnic diversity as Sweden, but the economic downturn here
ended several years ago and the Danish economy is in better shape than it
has been over the last 25 years. So the ethnic remarks in the NYT article
(though disguised) are yet another sign of the insufficient research behind
the article that Per labelled "crap journalism".

Wrapping up, then: Together with Per I've been trying to predict the
economic and political development in Sweden throughout the '90s. The
accuracy of our predictions is remarkably high ('cause we're keynesians!)
but we've often been wrong about the timing. It seems to be that when all
the three power centers of a country - the legislative (government), the
economic (private businesses, in our case Wallenberg) and the intellectual
(academic economics) - pull in the same direction, namely towards the abyss
of austerity, then the process tends to slide faster than one can really
imagine in advance. We should remember thgat nevr in post-war history has
there been such a full-scale experiment of reversed keynesianism as in
Sweden.

My current view is, sadly, that there is nothing we can do about Sweden.
The process of social and economic disintegration has gone too far, the
budget cutbacks have been to severe, and the damage done to the labor
market is so serious, that only an international intervention can prevent
that country from a socio-economic meltdown within a few years. (All it
takes is another round of 5+% of GDP in reduced demand via tax hikes and
plunges in government spending.) When I tell politicians and academics in
Sweden that this is indeed what I think awaits them, I'm dismissed as a
funny oddball. Sometimes I wish I were...


/srl


-----
Sven Robert Larsson
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