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The Mundus Brief is our summary of the main Swedish news stories over the past month.
The Transport Agency IT Scandal
The IT scandal is one of the biggest lapses of judgement of public administration in a decade. Last month we observed that the scandal appeared to have been cauterised by PM Stefan Löfven’s sacking of 2 ministers, but had the possibility to return to claim more scalps. As it turned out, Löfven succeeded in diverting public attention, but not focus of the opposition. In August, it was confirmed that the trail of evidence lead all the way to the PM’s office, with his own State Secretary, Emma Lennartsson, resigning, having mislead the public about when she learned of the security risks and not having done anything about it. The Alliance parties and the Sweden Democrats are suspicious that everyone around the Prime Minster could have known of the problems from the beginning of 2016, but that Löfven remained unaware until January, 2017. The Committee on the Constitution (KU) has begun its investigation and if it finds that Löfven knew more, earlier than he says he did, this would likely cost him his job.
An important part of Mundus’s mission is to provide our readers with a deeper explanation of how and why things happen within Sweden. There are a number of possible explanations for what is happening within the government. A prominent anti-corruption expert, argued in Swedish news outlets that the scandal demonstrated a leadership crisis within the government, saying that she could not “understand how the information managed to evade reaching the Prime Minister,” and that it must be ”completely chaotic” in the Government Offices. One alternative explanation is that the issue surfaces a very typical modus operandi in Swedish business and political circles. Recently we attended a seminar on Swedish culture, where the speaker – one of Sweden’s leading experts in culture – explained that Swedes use the same word (ansvar) for both responsibility and accountability. This linguistic detail fits Sweden’s non-hierarchical organisations, where everyone is tasked to work together. Individuals try to make things better, for the common good, but as “everything is everyone’s responsibility”, if a problem is too big, or too hard to solve there might be no personal sense of ensuring that the matter is dealt with. Based upon our experiences, Mundus finds it a theoretically credible explanation that ministers knew about the affair for months without taking the responsibility to intervene, e.g. to inform the PM. Once the unfortunate facts became public, it was clear that for the government to function, accountability needed to be made clear. Löfven has done that by sacking his Minister for Home Affairs, Anders Ygeman (S), and the Minister for Infrastructure, Anna Johansson (S). But by then suggesting Ygeman as chief whip for the Social Democrats in the Riksdag, he is also saying that he does not attribute any significant failing to Ygeman, and also maintains confidence in him.
The IT scandal has obviously made a big impact on the government, claiming the heads of two ministers, plus the PM’s own State Secretary and the Director General of the Transport Agency. But arguably, these changes are less consequential for Sweden’s future than what is happening on the opposition benches. Most notably, in August, we saw the resignation of Moderate Party leader, Anna Kinberg Batra, known as AKB. Her position has been in doubt for many months, due to the disastrous slump in support for the party in opinion polls. With a number of branches calling publicly for her resignation, AKB resigned on August 25, and the party declared that a new leader would be elected on October 1. But, as AKB declared at the press conference to announce her resignation, the Moderate Party’s problems went much deeper than her role as leader. This includes how the Moderate Party should respond to the role of the Sweden Democrats (SD), and whether the Alliance parties should cooperate with the SD. In raising this possibility, AKB fractured opinions, not only within the Alliance, but also the Moderate party. Ulf Kristersson, her likely successor, was part of AKBs decision-making circle, and has therefore sanctioned the decision to talk to the SD, which the liberal wing of the party deplores. Kristersson is not that popular among M voters (voters want the former Prime- and Foreign Minister Carl Bildt) and therefore it is possible that another candidate might emerge if the party thinks that it can be more united with someone else at the top.
Talks do not go far enough, according to Jimmie Åkesson, the SD’s leader. He wants to split the Alliance, and take power in a three-party coalition with the Moderates and Christian Democrats. According to Åkesson,” The Sweden Democrats will be the leading force”. The ramifications of this possibility should not be underestimated, especially for foreign professionals working in Sweden. Although the SD has cleaned up their act from their neo-Nazi roots, they are still an anti-immigrant party, which could threaten the plans of many individuals in the tech sector, and even the growth of the tech heavy economy itself, which relies on foreign talent, if the SD forms part of the government next year. You can read more on Åkesson in the June edition of the Monthly Policy Review.
Set against this context, the struggle for the leadership of the Liberal Party pales into insignificance. Jan Björklund, the current leader, has already succeeded in attracting support of several branches but Birgitta Ohlsson still has her sights on taking over the wheel of the Liberals at the party conference in November.
Once again, Swedish newspapers were full of stories about refugees. During August, Swedish media reported that 80% of ‘refugee children’ were found to be older than 18 years, when subjected to age tests. The Swedish state is in the midst of process asylum applications. With many applications being rejected, leading to deportations, asylum seekers are appealing in record numbers and protesting and demonstrating in public areas.
The issue will remain controversial for the foreseeable future, along many dimensions. The Moderates want to strip jihadists of their citizenship and the Alliance wants to lower wage costs for employing refugees, an idea which the government rejects.
Is the economy a runaway train?
That the Swedish economy is doing well is no longer news. As we noted last month, the economic data has been looking good for quite some time, and August brought further good news. Inflation was finally up to 2.2%, and is now in the Riksbank’s target zone for the first time in 7 years. In Mundus Weekly we reported that the government and NIER, a forecaster, both predicted several years of growth ahead, and the Finance Minister declared a war chest worth SEK 40 billion to be spent on social initiatives, such as the police, defence and environment.
But SEB is concerned that while the economy looks good on paper, in reality it is “driverless”, and everyone is fighting in the front seat over who should be driving. SEB’s biggest concern is the risk of overheating, particularly with the Finance Minister wanting to spend on social initiatives at that the same time that the Riksbank has highly pro-growth policy settings. With this in mind we profile the forthcoming change at the top of the Riksbank, with Stefan Ingves due to retire at the end of the year in the September edition of the Monthly Policy Review.
If the economy were to overheat and the Riksbank needed to respond by raising interest rates this would have a drastic effect on house prices, which are widely thought to be in bubble territory. But for every economist that sees a bubble there are many times the number of individuals that have to deal with the reality of a lack of housing in Stockholm. The queue for an official first hand tenancy contract on an apartment in Stockholm has now increased from 10 to 11 years. How did it get to this crazy stage?
Last but not least: Sweden’s most powerful financial families
“The most powerful person in Sweden is neither the prime minister nor any opinion maker or scientist… The most powerful person is the owner. And the owner is named Wallenberg.” Sweden is owned by a single family to a much greater extent than any other country in the world. Not even China or the US has seen the dominance of a single family like in Sweden. Read our analysis of Sweden’s Top 15 families to understand just how they dominate the society around you (for subscribers only, log-in required).