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Don't Fear the Swedish Model
Fredrik Sandberg, Scanpix / AP Photo
Bo Lundgren, Sweden’s minister for fiscal and financial affairs, stared down a financial crisis in the 1990s and lived to tell the tale. In a Daily Beast interview, he says the US could learn a thing or two from his famed solution.
In happier times the words "Swedish model," were more likely to be found in a Budweiser ad than a Wall Street Journal op-ed. But with the financial sector in ruins, a debate over whether to follow Sweden's lead and nationalize America's weakest banks has given the phrase an ominous new context.
At one point last month Sweden's plan was approaching consensus opinion, with conservatives like Sen. Lindsey Graham and former Fed Chairman Alan Greenspan finding common ground with liberal economists like Paul Krugman. President Obama countered that the US had many more banks than Sweden and a profoundly different culture. And with the announcement Monday of the administration’s plan to buy up toxic assets using a combination of public and private investment, the dreams of a Swedish solution in America are being put to rest.
"From the market liberal's perspective, don't be afraid of Sweden being a socialist example because in this respect we are not," Lundgren said.
Before today’s news, The Daily Beast called Bo Lundgren, who, as minister for fiscal and financial affairs, conceived and implemented the famed "Swedish model" in the 1990s. Lundgren said the American fears of a Swedish planet are largely misguided.
"I'm a market liberal. My party that I used to lead, the Moderate Party, is the conservative party in Sweden and the parallel to the Republican Party in America," Lundgren said. "When I nationalized the banks, it wasn't because I wanted to: It was crisis management. Their owners had been wiped out, the banks were black holes, they had no equity left, and there was no alternative but to take them over."
He added that foreign observers often confuse Sweden's socialized income distribution and government services with its privatized business environment, leading to inaccurate claims that their government is fundamentally different than other free-market economies. One example of Sweden's privatization chops: The government is refusing to bail out the famed car company Saab this week, as officials say they don't think running an auto manufacturer is within the state's job description.
"From the market liberal's perspective, don't be afraid of Sweden being a socialist example because in this respect we are not," he said. "Governments shouldn't interfere in business life other than to build the legal framework within which our businesses have to work. They should otherwise leave businesses alone and that's what we mainly do."
The Obama administration's initial plans have fallen short, Lundgren said, because they failed to reassure investors that the banking system was genuinely backed by the government and private sector.
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workonit
The bipartisan part won't happen, because the Republicans are betting on recovery efforts to fail. We'll see in coming weeks if they are above outright saboutage.
MrsMurgatroyd
It sounds like socialism and it is socialism but the truth is that our country is headed that way. In fact it is. The Republicans can fight it but in this Global World there is no other way.
I liked this article. Sounds like a good idea to nationalize the banks and insurance companies. Is Health care for everyone not socialism? I believe in the US and its constitution and its laws. But we need health care, economic stability and education plus jobs for our people. Obama is learning and probably the hard way but my bet is he will succeed. There is a little immaturity there but he will grow into the job. Expect white hair in just a few years.. Republicans get on the train.
dumdums
The approach relies, in large part, on the market. Unfortunately, these are the same institutions that created the problem. The issue is this: as the Fact Sheet Treasury released describing the PPIP Program notes,
"the financial system is still working against economic recovery." (No kidding.) As we noted in April, 2008:
"With the development of toxic (derivative and subprime lending) financial products, the relationship between investment banks and the economy has turned parasitic."
Further, the solution outlined by the Administration relies heavily on the assumption that "these assets create uncertainty around the balance sheets of.. financial institutions." This is a false assumption: the behaviour of financial managers created the uncertainty. While we are not "in despair", as is, apparently, Paul Krugman, we recognize that any "solutions" that do not explicitly address the ethics and behaviour issues are, well, problematic.
See: http://twisri.blogspot.com/2009/03/public-private-investment-program-ppip.h tml
skoda31
why would the Republicans vote ye on obamas plans? pelosi already showed that she will pass them with or with out Republicans? the dems can pass whatever they want without the right on their side the only reason they want them on their side is so both parties can take the blame when it does fail.
whats wrong with a party finally standing up for what they believe and trying to be fiscally responsible? or whats wrong with a party disagreeing with the right solution and voting against a bill they feel is bad for the county?
and how would Republcans saboutage the plans obama has set through while sitting in washington dc?
you are just trying to put blame on the minority so that the dems dont look that bad when everything blows up and we have double digit inflantion or worse.
Ritarita
Except
Geithner knows
The Swedish model is too small.
And bipartisan sheen
Can't pretend to happen
Because success means
The end
Of Republican ideology
As we know it.
@skoda31
Your damned
House is burning down
And all you can
Think about
Is paying the light bill
On time
Fiscal responsibility
Would have been really great
If only you'd
Thought of if
Eight years ago.
You're late to the party
And obviously you were late
Getting to
Econ 101 too.
TotalRecall9
If only we had socialism, it would be easier to fix this mess. But Congress and the White House are trying to protect rich investors and big companies. Instead of replacing the healthcare system, they are doing a patchwork so it doesn't harm insurance companies. The USA really doesn't have a capitalist system or a democracy, but a plutocracy system. Some change Obama promised!
Genni2002
It isn't a bad system in Sweden and I know about it very well having lived in Norway for 7 years (they follow Sweden like its shadow!). The U.S. is doing just the same thing socialism does but as TotalRecall9 says, just for the rich. People who actually work get squat in the U.S.A (a system that I can also talk about having been raised in and worked in a technical field most of my adult life). But no, for the heart and soul it is considered to be welfare.
Operative word 'work', by the way! Guess they don't know the meaning of the word in the finance sector?
lovestooread
Restore confidence, Yes of course. Get lending for infrastructure. Due some obvious little things for market growth.
More to follow so devastating ,whats next? No major move, because whats next?
Really you must start calling Obama President Obama. Really!
That too is an in road to confidence.He is earning his pay check!
Thank you.
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