I’m not impressed by Anders Borg. The Swedish finance minister has been heralded internationally by luminaries such as The Economist and Financial Times for posting strong GDP growth and maintaining high levels of employment since the Alliance took office. This view is a sham.
The financial crisis, which coincided with the right-wing electoral victory of 2008, has benefited the Swedish economy more than any other in the developed world due to reforms to the banking sector made two decades ago. Meanwhile, employment and welfare statistics have been fiddled.
Borg is famed for his arduous weight sessions in the Riksdag gym, where he grunts and groans for all to hear. Yes, he is that guy at the gym, you know the one with the ponytail looking at himself in the mirror, making lots of noise while pumping iron.
There's nothing wrong with this in principle, except that under his watch Sweden has a deflationary economy. Not to mention the fastest growing rate of inequality in the OECD, and we shouldn’t forget the unparalleled youth and migrant unemployment rates (otherwise known as the people who fund the generous pension and welfare systems).
What about the housing bubble? Record levels of household debt? Maybe this is why he grunts so loud, although a change in policy would be a lot more helpful. All these trends have taken off since the Moderates began to control the economy.
The privatization of housing and the transport network is a classic example of the failure of Borgonomics. They provide a nice short-term income boost for the annual accounts while reducing operational costs. Good work Anders. What happens later though?
Anyone can run a profitable line from Stockholm to Gothenburg, but a service from Boden to Kiruna…good luck with that. Rail privatizations consistently fail because a national network, particularly in a country with such low population density as Sweden, is not profitable and private competition reduces state income on the most popular routes.
This incompetence follows on from the policy of the Carl Bildt government of the early 1990s when the Arlanda Express contracts were sold for peanuts until 2040. Private profits, subsidized by the taxpayer of course. Borg, however, rarely uses the Arlanda Express as the taxpayer has kindly spent around 1 million kronor ($152,000) on having the government airplane drop him off at Skavsta so he can have a shorter drive home after meetings.
Most damaging of all his economic mismanagement has been the approach to housing policy. The great sell-off, at rock bottom prices, of public housing will scar the economy for decades. Maybe had Borg lived in the real world, instead of a student apartment, before he became an unelected minister, his decisions would have been better informed.
Housing inflation was already a problem when the Alliance took office. The solution was not to then flood the market with public housing far below the real market value. Speculation has taken off, property prices have risen to new highs, and of course private debt has soared.
A housing bubble together with record levels of private debt, coupled with a deflationary economy isn't a good combination. Selling off public housing when people under the age of 25 are over 400 percent more likely to be unemployed than their older counterparts, is a bad idea. Allowing the kronor to inflate by over 10 percent vis à vis major currencies and your main trade partners, when much of your economic stability comes from manufacturing and exports, is not very helpful either.
Now the Riksbank finds itself in a bind. Raising interest rates would help to cool the market and make speculation less profitable, but that would likely make the unemployment crisis even worse. Lowering rates will punish savers and keep the bubble growing. Throw in the deflationary crisis and the costs of Borg’s austerity politics will take a long time to pay off.
Borg has presented the Swedish economy as booming, arguing that liberalization has been beneficial for employment and the GDP. In reality it’s more like the competitive body builder which he may have been more suited for. All oiled up and high on steroids the impression is of a glistening economy which has outperformed much of the EU during his reign.
The problem with juicing yourself up though is that it’s not good for your health in the long run, and because of the Borg agenda the next global crisis will hit Sweden a lot harder than 2008 did.
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Christian Tsangarides is a commentator on Swedish affairs and former lobbyist on EU fisheries policy. Follow him on Twitter here.