"Those who are in debt
are not free
" is the rather comprehensive title of Göran Persson's own account of how he became "world champion in savings". It can also be read as the tale of how a Social Democratic prime minister earned the acclaim of international money brokers by liberating the nation from social democracy.

As the 20th century entered its final decade, Sweden was plunged into its most severe economic depression since the 1930s. The calamity was jubilantly greeted by critics of the general-welfare state who proclaimed that-- after a half-century of repeated, unfulfilled prophecies-- their dire warnings of fiscal folly had finally been confirmed.

But in point of fact, the economic crisis was almost entirely the result of policies that they, themselves, had urged and implemented. These included:

  • an underfinanced tax reform that drastically reduced revenues and ate a large hole in the national budget
  • a stubborn crusade against essentially non-existent inflation
  • a bizarre attempt to defend an indefensible fixed exchange rate with interest rates of up to 500 percent
  • deregulation of financial markets, resulting in a speculation bubble which led to the near-collapse of the banking system, with enormous subsequent costs to taxpayers and depositors.
Among these and related factors were several that led to a rapid decline in economic demand, as Swedes attempted to guard themselves against a situation of cradle-to-grave confusion and uncertainty. It is almost as though the country's political-economic elite had decided to provide negative proof of Keynesian theory by violating its precepts, thus producing the disastrous effects it predicts.

Unparalleled waste

In this, at least, they succeeded, and the outrageous price is still being paid-- almost entirely by ordinary citizens in the form of unemployment, sharp cuts in public services and social benefits, the deterioration of medical care and basic education, increasing poverty and class divisions, and much more. According to one as yet undisputed account, the net result has been, ”a human and economic waste without parallel in the entire history of Sweden”.

All of this is a logical outcome of the style of thought which in recent years has dominated the economies of nations and the world. Variously labelled neo-liberalism, monetarism, Reagan-Thatcherism et al., it is little more than an updated version of the laissez-faire capitalism which flourished among the economic elites of the 19th century and did so much to provoke the rise of communism.

Apart from its negative economic consequences, neo-liberalism has a clearly harmful influence on the general tone of the societies it infests. It lends itself to the glorification of power, followed inevitably by its abuse. Further, it is based on an elitist approach to human relations which tends to dismiss the problems of the poor and disadvantaged as self-inflicted and/or insoluble. Poverty is regarded as an edifying condition which encourages the lower orders to improve themselves-- despite a mountain of evidence to the contrary. The pernicious effects of neo-liberalism are quite easy to trace in Sweden, which until recently was governed by very different principles.

This does not mean that the streets have suddenly been filled with starving masses. The better part of the general-welfare system remains intact and, despite severe cutbacks during the 1990s, it continues to function so well as to demonstrate its basic soundness. In countries which lack such a system, the kind of economic disaster inflicted on Sweden by the neo-liberal policies of the 1990s would inevitably result in widespread human misery.

Weakened foundations

The Nordic model works, in other words. But the foundations upon which it rests have been steadily weakened, as evidenced by a reversal of the previous trend toward increasing socio-economic equality. Income gaps are widening, the problems of single mothers and their children are intensifying, conditions in the schools are deteriorating, etc. Particularly hard hit has been the public sector which, as previously noted, has played a central role in the financial independence of women.

Pressure to continue cutting taxes, and thereby to undermine the public sector, is unrelenting and has been intensified by Sweden's entry into the European Union. As the new century got underway, Prime Minister Göran Persson announced his ambition to further reduce taxes and public expenditures, confirming that the Social Democratic leadership has reduced its ambitions with regard to socio-economic equality-- the fundamental goal which happens to be the principal reason for any Social Democratic party's existence.

This oddly self-destructive behaviour has naturally raised the question as to whether the main objective of the current leadership is to put the party out of business. A more plausible explanation is that, having exhausted its inherited capital with a series of disastrous blunders, the current management is now desperately trying to flog a different assortment of political wares under the same old trademark. But the voters are not buying, most likely because they have figured out that the genuine article-- honest neo-liberalism-- has long been on offer elsewhere at the same outrageous price.