Tuesday, June 20, 2006

More On Swedish "Success" Hoax

Johnny Munkhammar and Tino Sanandaji presented yesterday a report (In Swedish), exposing the lies from Swedish Social Democrats and others about the alleged Swedish success, with regards to growth, employment and unemployment in general and employment and unemployment for immigrants.

With regards to growth, they point out like I did that it is misleading to use 1994 as a base year since Sweden then was just starting to recover from the by far deepest recession since the 1930s, and so there was a very strong cyclical element in the economic growth in the mid-1990s. Moreover, they also point out as I that even with that base year growth was only about average after you adjust for terms of trade which is important for reasons explained here. Most EU countries have (until the recent surge in the price of imported oil) in fact seen their terms of trade improve, whereas Sweden have seen its worsen significantly.

The most relevant comparison would be one where one included the recession of the early 1990s, and not just the cyclical recovery that followed after it, and then you can see that Sweden have actually performed even worse than the average of the old EU countries. Another alternative base year, 1999 (which exclude both the recession and recovery of the 1990s), show roughly the same result.

The one slightly unsatisfactory part about the section of growth is their account of the much stronger growth that seems to occur this year, where they write that it is an open question as to whether this will be the beginning of a new trajectory of higher growth or a single year of cyclical boom caused by fiscal stimulus remains unclear. While the small tax cut certainly have helped somewhat, it is not by itself sufficent to significantly lift either the long-term structural or short-term cyclical growth of the Swedish economy. Instead, the main reason for the higher growth this year is monetary stimulus, with interest rates being lowered a year ago to an all time low of 1.5%, something which set into motion a surge in money supply and bank lending growth even higher than in the Euro-zone (that saying a lot). Moreover, by weakening the exchange rate of the krona, it also temporarily stimulated exports. While interest rates have started to rise again now, it have not done so faster than in the Euro-zone and so monetary policy is still even more stimulative/inflationary than in the Euro-zone.

The section about job growth show a similar theme, with the Social Democrats disingenously using 1994 or 1995 as a base year. Using more relevant base years like 1985 or 1990 shows that employment have fallen significantly relative to population (and in the latter year even before adjusting for population growth).

The section about unemployment reiterates what I have previously written about how the Social Democrats have misleadingly hidden unemployment in various programs designed to hide unemployment. They argue based on their estimate of how many of early retiress etc. which are truly sick that true unemployment is 17%. That (which they acknowledge) however probably understates true unemployment as it based on very conservative estimates (for example they assume that none of early retirees in 1991 could work) on how big a proportion of early retirees and people on sick leave could work. Using a more reasonable methodology, which would argue that all who are not severely disabled could work with something, you would rather get the 20-25% which I refered to in "Does Sweden Defy Economic Logic?".

They also rightly point out that it is not reasonable to compare -as Swedish Social Democrats often do- the people in Sweden who are payed not to work with stay at home mothers, which due to feminism have become rare in Sweden but is still common in other countries. Even if you adhere to the feminist belief that stay at home moms are reprehensible collaborators with the patriarchial enemy, it must be acknowledged that women who take care of their own children are working just as much as women who take care of other people's children.

Regarding the issue of immigrant unemployment they make the same points that I made here.Namely, that the claim by Agency of Integration boss Andreas Carlgren that Sweden have a relatively high level of immigrant unemployment reflects first of all that immigrant employment levels is exaggerated in official statistics for the same reasons mentioned above as to why overall employment levels are exaggerated and secondly that this number includes a high proportion (higher than in most other countries) of Western immigrants. For non-Western immigrants, true unemployment is catastrophically high, at more than 50% for many immigrant groups like Somalis.

Finally, they mention the uselessness of "competitiveness index" which gives Sweden a high ranking.

Overall , apart from the interpretation of this year's Swedish growth number, the report is very good. It remains to be seen whether or not journalists and opposition politicians will use it to stop accepting the constant lying by Pär Nuder and other Social Democrats.


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