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‘Swedes need to save to tackle wealth disparity’

Uneven wealth distribution in Sweden can be put down in part to a lack of safe assets among individual Swedes, says liberal commentator Nima Sanandaji, who argues that politicians should encourage people to engage in investments to fight the disparity.

French economist Thomas Piketty has gained significant attention for his new book Capital In The Twenty-First Century, recently translated into English after its original publication in French last year. The focus of the book is the issue of economic inequality. One of the main points is that wealth tends to be much more unevenly distributed than incomes. 
 
Piketty fears that capital amassed during previous generations will grow faster than the economy as a whole, so that a small handful of families end up owning much of the wealth. If this happens, the French economist argues, "the past devours the future".
 
Much of our knowledge about wealth distribution comes from recent academic studies. And their results are quite shocking. One of the more ambitious studies of wealth distribution has shown that Sweden has the most uneven wealth distribution amongst the seven countries for which data exist. Why is it that Sweden, which has long had an equal distribution of incomes, has an unusually unequal distribution of wealth?
 
The explanation lies in the fact that many Swedish households have limited or no privately held safe nets.
 
A report by the Swedish Taxpayers' Association (Skattebetalarna) from 2009 showed that around 30 percent of Swedish households had negative, or zero, assets. Another roughly 20 percent of households had asset levels that corresponded to around one month's salary for a normal household. The low level of household savings in Sweden has likely resulted from a situation where families have relied on the public sector to provide an all-inclusive safety net. However, it never hurts to have some savings in addition to public insurance systems.
 
Encouraging private savings amongst the broader public is one way to combat inequality. Society can in many ways benefit from a situation where ordinary people control a significant share of the capital. The ability to rely on your own savings, or borrow from friends, for example, increases the possibilities of realizing a business venture. And in the long-run even moderate investments can give a healthy contribution to the family budget.
 
There are ways for politicians to encourage savings among the broader public. Legislation could for example allow young people to deduct taxes from the first nest egg they save for investments in the stock market, in their first home or in their first business. The first step should be to open up a debate about how a more egalitarian capital ownership can be fostered. 
 
After all, much of the rise of income inequality in the world is driven by the fact that those with high incomes invest much of their money, and gain long-term incomes from this investment. Shouldn't a political response be to encourage broader groups to engage in investments?
 
Nima Sanandaji is a regular op-ed contributor to The Local. His latest book is called “Renaissance for Reforms”, co-authored with Stefan Fölster.

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ABB

Swedish engineering giant ABB to quit Russia over Ukraine

Swedish-Swiss engineering giant ABB said on Thursday it will quit Russia as a result of the war in Ukraine and the related international sanctions against Moscow.

Swedish engineering giant ABB to quit Russia over Ukraine

Russia accounts for only one or two percent of ABB’s overall annual turnover and the decision to pull out will have an estimated financial impact in the second quarter of around $57 million, the group calculated.

“ABB has decided to exit the Russian market due to the ongoing war in Ukraine and impact of related international sanctions,” the group said in a statement.

Russia accounts for only one or two percent of ABB’s overall annual sales and the decision to pull out will have an estimated financial impact in the second quarter of around $57 million, the group calculated.

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A large number of major western companies have pulled out of Russia since Moscow invaded its pro-Western neighbour on February 24.

“When the war broke out, ABB stopped taking new orders in Russia,” the group said.

At the same time, it said it continued to fulfill “a small number of existing contractual obligations with local customers, in compliance with applicable sanctions.”

Most of ABB’s dedicated Russian workforce has been on leave since March “and the company will do its best to support them as it realigns its operations in a controlled manner,” it said.

ABB has about 750 people in Russia and two production sites in the country located in the Moscow region and Lipetsk, as well as several service centres.

Separately, the group said that its net profit fell by 50 percent to $379 million in the second quarter, largely as a result of one-off charges, but also the cost of withdrawing from Russia.

Sales, on the other hand, grew by six percent to $7.2 billion in the period from April to June, ABB said.

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