Swedish lessons? Interpreting the recent elections

It is difficult to conceive that those responsible for the crisis, implementing measures that created the crisis, are the answer to it. Yet they’ll have us believe these are the lessons from the Swedish elections. Is this so, asks Francisco Louçã

A little over a week ago, the Swedish elections produced a slim majority for a coalition between social democrats and other forces of the centre, after eight years of right-wing government. The winning coalition is now trying to form a government, but lacks votes and seeks a partnership with right-wing parties, having refused an alliance with any sector of the left. This game was naively hailed in Portugal, but the financial press, led by the Financial Times, understood it better, by recording the facts. Does this provide a good example for the Portuguese, who so much need to open a door to new solutions
to its current economic and social crisis?

In fact, the first interesting question is why the political colour of the government changed. The economy of Sweden has been a case of stability: since 2006, GDP grew by 12.6%, it is close to a budget surplus and sovereign debt is around 40% (let us remember that Sweden has its own currency and is not in the euro). Few countries in Europe have these indicators and few could produce such an economic record.

But these figures conceal a stark reality: growth was achieved with a marked shift of income (it is the OECD country where inequality has widened most since 1990) and the budget was a result of painful cuts in public services. The most obvious is education. School results in Sweden have deteriorated rapidly, (according to PISA rankings used to measure student results in OECD countries) as a fifth of the students are now in private schools, but public accounts improved because parents are paying more for the education of their children.

After all, it became a business. The privatization of nursing homes has also become a subject of scandal when recently they discovered evidence of mismanagement. In both cases, the education and protection of the elderly, polls show the vast majority of the population is hostile to these right-wing policies.

Thus, one lesson is related to political alternation in Sweden. The alternation [between two parties] is the cornerstone of European political regimes and where it works, the system is stable (but it is failing in Spain and France and this is one of the great problems of the future of the European Union). So, in Portugal at least, its better not to take any Swedish lessons, because we’ve followed this path in Portugal and the history of the country these last 40 years is a mess.

The second lesson is that economic solutions must be assessed on their actual social effects. In the Swedish case, the conservative government of Fredrik Reinfeldt reduced taxes from 2007, by about 140 billion kroner (€ 15 billion). The financial system benefitted most (note that in Portugal there was only tax cuts on profits, but taxes on labour increased), and the impact was such that Sweden now has a lower tax burden than in France (44.5% of GDP to 46%), contrary to what happened during the previous century. However, neither this reduction of business taxes nor better a budget position achieved with cuts convinced the voters.

Not only were they not convinced they demanded something else: according to a poll before the elections, 67% of Swedes accepted higher taxes since they paid for better services (82% among left voters, and 50% among those on the right). Thus, the elections turned around the dispute between two different propososals for tax increases.

The right proposed to suppress tax deductions on retirement savings, increase taxes on alcohol and tobacco and to increase social security payments for the employees of banking and insurance. On the other hand, the Social Democrat Stefan Lofven promised a tax increase of 40 billion kroner (approximately EUR 29 billion) through a bank levy, an increase in VAT, the abolition of the previous reduction of employer social security levies for young people, but also a guarantee of lower taxes for pensioners, paid for with a tax increase on the income of those who earn more than the equivalent of 6,500 euros [a month].

The lesson from this seems to me: to choose between different parties’ budgetary and tax policies, it is better to force the candidates to be specific. To decide on the criteria that the Swedes were able to use.

Finally, there was no difference between the two coalitions on fiscal orthodoxy and even in the concept of public services. The Economist says, emphatically, that the finance minister of the new government actually “wants to move into budget surplus faster” than the right and has no desire to reduce the weight of the private sector in education.

What this orthodoxy means in terms of the new government we’ll have to see, but what we know is that Swedish social democracy today is rejecting the moderately redistributive approach of the former Social Democrat PM Olaf Palme and is gradually adopting neo-liberal policies, a process it has pledged to continue. Policies that are friendly to corporations and the finance sector.

So maybe it’s best not to imitate the Swedes, because after all it was these policies that have brought us down. It is difficult to conceive that those responsible for the crisis, implementing measures that created the crisis, are the answer. But this is not a Swedish lesson, its really a Portuguese* lesson.

Francisco Louçã is leader of Portugal’s Left Bloc and an academic

* Mr Louçã was addressing a Portuguese audience, but I am sure he would agree that the reader could substitute Portugal for any number of European countries, particularly in the Continent’s Troika-dominated south [Translator’s note]

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Translation by Revolting Europe