Tino Sanandaji: Things are not going well for Sweden

  

Tino Sanandaji is a Kurdish-Swedish economist with a solid list of credentials including a PhD from University of Chicago. He has made a name for himself in Sweden by doing the unthinkable: Speaking the truth about the devastating financial impact of Sweden’s bizarre mass-immigration experiment. 

Unfortunately, most of his exquisite skewering of the official line on Sweden’s supposedly excellent financial health is in Swedish. That’s why I’m pleased to have been granted permission to translate his latest analysis, which may provide a bit of counterweight to the generally accepted, rose-tinted version being pushed in Europe and elsewhere. 

Things are not going well for Sweden

  

The Director General of the Employment Office recently warned that welfare funding requires a net immigration of about 100,000 per year going forward. Around the same time the new health budget was released. It is interesting to contrast the Employment Office’s image with how [Swedish Finance Minister] Magdalena Andersson’s own budget describes the Swedish economy.

Firstly, we note that instead of catching up with the native-born, the immigrants have lost further ground in terms of income:

“The position of the foreign-born in the income distribution has worsened between 1995 and 2013 (see Table 2.3). One reason for this is that the immigration structure has changed over time. From being almost totally dominated by labor migration, the refugee and family immigration has come to represent an increasing share of immigration since the 1990s.”

Another piece of exciting news is that migrants’ income mobility has fallen slightly, while other people’s income mobility has increased. Normally, lower incomes tend to have greater potential for income upward mobility. Instead of the higher mobility as the group has integrated immigrants income mobility decreased.

“The results suggest that the movement may have increased marginally for several groups over the period 1995-2013. For foreign-born, however, the mobility slightly lower during the latter part. The shift towards increased refugee immigration during the 2000s has probably contributed to this. The employment rate in this group is lower and the income development worse than average within the group of foreign-born.”

Economists measure the growth in prosperity with GDP per capita. A few months ago I pointed out that [former Finance Minister] Anders Borg had taken the unorthodox decision to simply not recognize the standard measure of GDP per capita in his budget. Data on per capita GDP can not be found in the government report for the period 2006-2014 that the Alliance [the allegedly conservative government coalition previously in power] went to the polls on. Ander Borg must have been ashamed to show that growth in per capita GDP between 2006-2014 was an unimpressive 0.3%. Measured from 2007, the growth was negative. Magdalena Andersson’s budget is to her virtue is not quite as disreputable that Anders Borgs, and GDP per capita is omce again displayed. 

“Per capita GDP is a measure of the economic standard of living that better illustrates how increased production is allocated on a per capita average. Despite some recovery after the financial crisis, GDP per capita was no higher in 2014 than in 2007.”

 

[Text above: The most common measure of economic growth is GDP growth. However, simple GDP growth over time is no guarantee that the citizens enjoy a higher standard of living. GDP growth also has to be related to the population growth. GDP per capita shows the production divided by the number of citizens and can thus be used to measure economic standard of living. 

The growth of GDP per capita has stagnated. 

Real GDP per capita increased by 1 percent on average per year from 1980 to 2007. In conjunction with the beginning to the financial crisis, when the GDP growth dipped considerably, the GDP per capita also fell (see graph 3.2). Despite some recovery, the GDP per capita was not higher 2014 than 2007, despite a GDP growth of 6 percent. By this measurement, the standard of living has not increased during this period.

Productivity is important for GDP per capita to increase

Long term, the productivity development is the determinant for the GDP growth and thus also GDP per capita. Then productivity is mostly determined by technological advances such as digitalization. The technological development is usually driven by investments, material as well as immaterial. Political decisions may impact the long term productivity levels, for example through taxation, the education system, research and patent laws.

The growth of GDP per capita usually move in tandem with productivity (see graph 3.3). The poor development of GDP per capita since 2007 is thus caused by weak productivity devlopment coupled with strong population growth. The increase in population has not been matched by an increase in hours worked.]

The world economic crisis is of course an important reason for the weak growth. But contrary to the often repeated claim that Sweden has the strongest economy in Europe, or even of all comparable countries, growth per capita below the OECD average. Half of the OECD countries grew faster per capita than Sweden.

Seven years of negative GDP growth is unparalleled in the Swedish post-war period. Likewise, there is no eight-year period with lower GDP growth than 2006-2014. It is a fascinating sign of our times that [former Prime Minister] Reinfeldt and Borg were allowed to portray the worst period in living memory as some sort of golden era of growth. After all, checking this is not more complicated than clicking on a table on the SCB website and see how real GDP inflation-adjusted prices has evolved.

  

An important explanation for the negative growth in GDP per capita is a disastrous development of productivity. The Spring budget states: “Productivity growth in business (calendar-adjusted) averaged 0.2 percent per year from 2007 to 2014.”

Again, there is no seven-year period with such weak productivity growth in the Swedish post-war period. Like the GDP per capita, overall productivity has been weaker in Sweden than the OECD average. The explanation for the per capita GDP being even worse than productivity per hour worked is that the recent population growth has not led to a proportional increase in hours worked:

“The weak growth in GDP per capita since 2007 thus depends on productivity has been weak, while population growth has been strong. Population growth has not been matched by an equal increase in the number of hours worked. “

Meanwhile, some good news in the budget is that refugee migration costs, er, investment in welfare funding continues to soar. Costs for initial reception of asylum seekers are recognized in the budget posts “Migration” and “Integration and Equality”. These asylum-related items increased from a historical level of around just under 10 billion per year to an estimated 49 billion in 2018.

By the way, don’t let yourselves be fooled by the name of the line “Integration and Equality”. Only about one percent of the cost are actually gender-related expenditures, while the rest consists of expenditure items such as municipal compensation and that in everyday language called “welfare”. A novelty in the budget is that the government intends to change the name of the category of “Equality and newly arrived immigrants establishment”.

  

Post 8: Migration

Post 13: Integration and Equality

In Magdalena Andersson’s budget proposal six months ago, the estimated costs of asylum reception between the years 2015-2018 was set to 153 billion SEK. In the spring budget, costs have been revised upwards and is now estimated to end up at 172 billion from 2015 to 2018.

While on the topic, we may note the just-concluded intense defense funding negotiations. Fredrik Reinfeldt often pointed out that we live in a more uncertain environment than we have in a long time, and consequently underfunded the Swedish defense. Now the defense appropriations have increased by 10.2 billion over five years, ie about 2 billion per year. The upward revision alone for the costs of asylum reception the past six months is twice as large as the increase in funding for the repository to 2020.

The past few years have been the worst Sweden experienced in the postwar period in term of productivity and growth of GDP per capita. This has coincided with the fastest immigration in Sweden’s history. This does not prove itself to record immigration caused the poor economic development, post hoc ergo propter hoc. It is possible to indirectly deduce that immigration is probably only a contributing explanation for the poor growth. Other explanations include the crisis in the business environment, weak export growth and a restrictive monetary policy related to unhealthy signs in the housing market. Time will tell whether a more expansionary monetary policy and the recovery of economic activity will lift GDP growth again.

It is also important to know how bad things have actually turned in Sweden. One reason is that variations on the myth that Sweden has the strongest economy in Europe is used to argue that the immigration policy can’t have any negative economic consequences.

One example is the member of parliament Fredrik Schulte of New Moderates [formerly the ruling party led by Fredrik Reinfeldt]. In an article four months ago he wrote: “Sweden has since 2006 had the strongest economic growth among comparable countries. Excepting commodity-driven economies such as Norway and Australia, we’ve had among the strongest growth rate and the highest productivity. Similarly, we have among the highest employment growth (and the highest employment rate in the EU), had a significant reduction of societal exclusion, increased resources for the welfare and as one of few countries have reduced our debt. Sweden has not only performed better than comparable countries, but is also a richer and more prosperous country than we were eight years ago – also in relation to the population increase. Whether this is independent of, thanks to, or in spite of immigration is the subject of discussion, but there is no doubt that Sweden is one of the world’s most welcoming countries, and also the most successful.”

The image of reality as the New Moderates are using to defend its immigration policy is mostly untethered fantasy. For example, Shulte speaking of “high productivity” among comparable countries despite the pathetically low productivity increase of 0.2% and below the OECD average.

The Employment Office report is similarly based on the idea that integration is significantly improved. The Employment Office withholds that the increase in employment in the already modest 2 percent, in practice corresponds with more people simply being put into labor market policy measures. The Employment Office are not talking about and perhaps are not even aware of the already soaring income gap between immigrants and native-born. Welfare and public services are financed with real revenue and taxes, not more politically created measures to occupy people.

Arguing that “we will be more people working,” or that Sweden will “have more taxpayers” by population growth does not increase wealth. The reason is taught at secondary school level: The wealth of nations is not determined by the size of their population, but by its average productivity. Sweden has in recent years experienced a large increase in population, a phenomenon that many developing countries are well familiar with. Instead of focusing on increasing productivity, the Alliance put its efforts into increasing the population; something they pretended was synonymous with “growth”. Having Bangladesh and Nigeria as role models in economic policy did not, however, make Sweden a richer country.

As I said, recent years have been the worst Sweden ever experienced in the postwar period in terms of growth in prosperity and productivity. This did not stand in the way of the concocted image of the Reinfeldt years as some sort of golden age of economic growth. Instead of examining the rulers’ claims, the journalists helped to uncritically spread the Alliance fantasies all the way into the 2014 election. For example, as far as I know, not a single journalist asked Anders Borg why the state budget no longer used the standard measure of GDP per capita.

Magdalena Andersson however, has no interest in hiding Reinfeldt and Borg’s fiasco, which meant that the Treasury has again started to report GDP per capita. Nevertheless, there are still many who stubbornly cling to the image that things are going well for Sweden. Anyone with skills sufficient enough to click on a link to SCB or OECD have long been able to reveal that it is not true that Sweden would have the best growth and strongest economy. Yet the myth was repeated as a mantra in an echo chamber, because everyone else also repeated it. “It is known” that Dothrakis would have said.

Many journalists and politicians seem to sincerely believe that recent years has been characterized by rapid growth in GDP per capita and productivity. One possible explanation is that the Swedish government finances fared better than many continental countries after the 1990s crisis, primarily due to the consolidation of public finances. It is possible journalists confuse the public debt with what had happened to the economy at large. Another explanation may be that those in leadership positions tend to be high earners and have seen their incomes grow. All this is somewhat humorous and would be easy to mock. That these delusions survived in the debate also shows that many rulers themselves are ill informed and do not know what they are doing. Sweden has embarked on a radical migration experiment that no other developed state has ever done, and it appears they have done so blindly.

Tino Sanandaji

Editor’s notes in [brackets]. Also note that these numbers and much more is publicly available at ekonomifakta.se and scb.se for verification for anyone interested to read more.

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8 thoughts on “Tino Sanandaji: Things are not going well for Sweden

  1. What makes all this really crazy is that there is no money at all for the old people who build the country, hospitals, schools, army… Anything! But the rulers have decided that migration is the one thing that has UNLIMITED funds. Why??

    Liked by 1 person

      • Sweden is increasingly becoming an argument against democracy, similar to how the mentally ill are prevented from having scissors because they just hurt themselves with them.

        Liked by 1 person

      • You see, there’s math and there’s political correct math.
        According to political correct math everything is hunky-dory in Sweden.
        Brighten up man you’re gonna be rich!

        Like

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