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'The rural counties can compete with Stockholm'

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'The rural counties can compete with Stockholm'
08:18 CEST+02:00
While Stockholm has survived the financial crisis, some counties' economies contracted by up to 15 percent. But less populated regions can compete against the cities with business-friendly politics, cheap land, and high living standards, argues liberal commentator Nima Sanandaji.

Sweden is growing, but the regional disparities are significant. Looking back at the financial crisis, we can note that the nation's economy contracted by a full 5 percentage points in 2009 due to the global downturn. The regional equivalent to a gross domestic product in all Swedish countiesfell that year. Stockholm was the exception, which grew by 0.6 percent. In fact, the capital region has had positive economic development every single year since the mid-1990s.

The counties of Södermanland, Jönköping, Kronoberg, Kalmar and Värmland

did not do quite as well. During the crisis year of 2009, all of them experienced double digit falls in the regional equivalent of GDP. Norrbotten – the county spanning almost a quarter of Sweden's surface – fared the worst, with a contraction of more than 15 percent.

The disparities seem to be growing. Throughout the years of Prime Minister Göran Persson , Stockholm grew almost twice as fast as the average for other regions. Between 2006 and 2010, the latest year for which regional data is available, the rate was almost three times as high. Is the government then to blame? Perhaps it is. A more nuanced perspective, however, is that similar trends are visible around the world. We are living in a time where talented individuals, knowledge-intensive clusters, investments and tourists are all drawn to metropolitan areas.

In addition, Stockholm can benefit from viable local policies that promote free competition. The other two major cities, Gothenburg and Malmö, have for long been known for their "spirit of co-operation" between the business community and local politicians. These strong ties are not necessarily healthy. In effect, they limit free competition and in extreme cases paves the way for corruption scandals. Although Malmö and Gothenburg are not fully realizing their potential for growth, some of their neighboring municipalities such as Mölndal and Staffanstorp are promoting business friendly policies that lift regional development.

The three more urbanized regions in Sweden will account not only for most of the economic but also population growth in Sweden during the coming years. In the wider Stockholm area, the population is expected to rise from two to about three million until 2040. The populations in the counties of Skåne and Västra Götaland, which today count about 1.2 and 1.5 million residents respectively, will according to the same estimates increase by some half a million individuals each during the same time frame.

But what about the rest of the country? Is Sweden doomed to a development in which the regions with lower population density will wither, until only the unemployed and the old live there? There is much to say about the subject and little place for it in a column, but the brief answer is that regional development is possible even at a time such as this, when the demand for simple jobs is shrinking in a talent-intensive economy and when metropolitan areas have many advantages over less densely populated regions.

So how is it possible? The reason is simply that the rural counties still have one important comparative advantage: cheap land. They also have considerably lower living costs, which allows a high living standard for somewhat lower wages. An interesting exercise is to look up how much one million kroner buys in terms of housing in various parts of Sweden. A few square meters in central Stockholm can be traded in for a luxurious villa in other parts of the country.

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The US intellectual Joel Kotkin has written much about how sound policies can allow for less densely populated areas to compete in a time dominated by urban competition. By building and maintaining transport infrastructure and having a good business climate, less densely populated areas can grow through new industries, new tourism ventures, agriculture, mining, etc.

Today, obstacles such as building permits and environmental permits, which can take years to be granted by the local bureaucracies, stop much of the local development. Some municipalities with lacks of jobs are in fact skeptical to new "traditional" industries. Local rulings can therefore delay or stop this form of job growth, while the politicians dream about growing through knowledge-intensive service sector jobs – although such activities tend to be much better placed near urban centers.

The kind of "back-to-basics" growth that Kotkin promotes is happening also in Sweden. Norrbottenm for examplem rebounded in 2010, growing by more than 18 percent. The on-going mining boom has continued to prompt local growth. During 2013, the county is expected to experience one of the fastest increases in employment demand in the nation.

As the County Administrative Board in Norrbotten itself admits, however, parts of the region lack the transport infrastructure needed to take advantage of the economic opportunities presenting themselves. Building roads of course costs a lot, but less expensive would be to show political restraint on transport taxes, which lead to manufacturing and mining migrating away from Sweden to less environmentally friendly nations. Simplifying and speeding up the burdensome, risky and uncertain permitting process shouldn't affect public finances either.

I am sure others have other suggestions for how regional growth can be encouraged in Sweden. Some have ample reason to deliver a good response. The political future of at least Annie Lööf, the Enterprise Minister, is hinging on whether her Centre Party, once known as the party of choice of ruralites, can deliver the best measures for a growing countryside or not. In a time when even the Centre Party's political elite is increasingly urbanized, however, there is sadly little in-depth discussions relating to how development can be fostered outside of the larger cities.

Hopefully, the perspectives will change. Politics is, after all, not only to be tailor-made for urban hipsters.

Nima Sanandaji, a Swedish writer of Kurdish origin with a PhD in polymer technology. He has written numerous books and reports about subjects such as integration, entrepreneurship, and women's career opportunities. He is a regular contributor to The Local. One of his books, Från fattigdom till framgång ("From Poverty to Success") deals with the success story of Iranian integration in Sweden.

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