Election leads to Swedish deadlock

By Michael Roberts and Heiko Khoo
0 Comment(s)Print E-mail China.org.cn, September 14, 2018
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Prime Minister of Sweden Stefan Lofven (R) and his wife Ulla Lofven walk out Prime Minister's House to cast their votes in Stockholm, Sweden, Sept. 9, 2018. Polling stations opened in Sweden on Sunday morning as the country headed for an election that looks set to turn the nationalist Sweden Democrat Party into political kingmakers. [Photo/Xinhua]

Sweden was the poster child of the "mixed economy" – a social democratic state where capitalism provided welfare, equality, and decent working and living conditions. However, the recent general election seems to symbolize an end to all that.

The Social Democrats remain the largest party, with just over 28 percent of the vote, its lowest share since 1908, while the main pro-business party, the so-called Moderates, fell to 19.7 percent. These parties have enjoyed power for decades. 

The big shock is the "Swedish Democrats," an anti-immigrant party with neo-Nazi roots, polling 17.7 percent. Smaller parties of the center-right and the left also gained – the Left party, for example, securing 8 percent. In the new parliament, the Swedish Democrats hold the balance of power.

Sweden's "third way" was supposed to differ from both free market capitalism and socialism. However, the significant gains won by the labor movement during the 20th century, long ago went into reverse. 

In addition, to this day, Swedish engineering and manufacturing companies remain the property of a handful of families. Like other capitalist economies, the policies of neoliberalism – a reversion to free markets, low taxation for corporations and the rich, cuts in real wages and the welfare state, rising inequality etc. – had become the norms from the mid-1990s.

The main reason for this was that the profitability of Swedish capital fell sharply from the mid-1960s to the mid-1990s. After a credit boom that went bust, and a major banking crisis, Sweden's famed manufacturing sector took a massive hit. 

The Social Democrats and Moderates then adopted policies to boost the profit rate for capital at the expense of the welfare state and public services.

Inequality has been rising fastest of all the advanced capitalist economies, although Sweden is still less unequal than America or the U.K. In 2012, the average income of the top 10 percent income earners was 6.3 times higher than that of the bottom 10 percent. This is up from a ratio of around 5.75 to 1 in 2007 and around 4 to 1 during much of the 1990s. 

Sweden's richest 1 percent of earners saw their share of total pre-tax income nearly double, from 4 percent in 1980 to 7 percent in 2012. Tax reforms in the 1990s cut the tax burden for wealthier households, while welfare benefits for the poor were slashed.

Sweden is no longer an epitome of State provision. Indeed, it is now a world leader in having its State-funded public services supplied by the private sector. About one-third of all Swedish secondary schools are so-called "free schools," mostly run by for-profit companies. 

In the process, Swedish schools slipped from the top of the international ratings to a mediocre level. Some 40 percent of primary healthcare providers are privately-owned, where public provision has been outsourced to the detriment of quality.

Swedish capitalism, similar to Germany, did better than most capitalist economies after 2008. However, the rate of economic growth has slowed in recent, a trend that worsened following the international financial crisis of 2008. 

As in Germany, many jobs are now "precarious" and low-paid, particularly in small towns. There have also been significant public spending cuts for hospitals, schools, housing, pensions and transport.

A massive housing boom driven by low interest rates and easy credit benefited the middle and upper classes, while the working class and immigrants have struggled to find decent housing. 

Stockholm now has the second most inflated housing market in the world, while the banking sector booms. The assets of Swedish banks are equal to four times national GDP, second only to Switzerland.  

Real GDP growth seems strong at over 3 percent a year. However, if you strip out the impact of extra immigrant labor, real GDP growth per capita is much lower, being less than 1 percent in 2017. According to the Swedish National Institute of Economic Research, real per capita growth is predicted to average just 1 percent up to 2026.

Although Sweden's growth remains faster than most of Europe, it is highly dependent on world trade. It has been driven by a credit-fuelled consumer boom, as in the 1980s, as well as from the extra value created by immigrant labor.

The rise of the Swedish Democrats follows the pattern in Germany, France, Italy, Denmark and other EU countries, as well as with Brexit in the U.K. and the emergence of a Trump presidency in America. As capitalism has experienced a series of crises, the question of immigration has been elevated to the top of the political agenda. 

Over 600,000 immigrants from the Middle East have entered Sweden since the Syrian/Iraq disasters. Measured as new arrivals per head of population, it is greater than other European countries, and this has put pressure on public services, already suffering from neo-liberal measures. 

Many immigrants are young, single men. They have helped capitalist enterprises and the State sector to overcome an acute labor shortage in the unskilled category. 

In recent years, small towns in Sweden have experienced low wages and poor services; then, they faced a migrant influx. This created an ideal breeding ground for the Swedish Democrats' poisonous message of "Sweden for the Swedes." 

One thing is clear; the crisis of capitalism is producing similar processes in one country after another. 

Heiko Khoo is a columnist with China.org.cn. For more information please visit:http://china.org.cn/opinion/heikokhoo.htm

Michael Roberts is a London based Marxist economist. He published the "The Great Recession" in 2008 and "Essays on Inequality" in 2014

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.

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