Has the Swedish Left Lost Again?: The 2014 Electoral Implosion, Civilian Deindustrialization and the Swedish Dilemma
Sat 18th Oct 2014
One way to pay for the incorporation of new immigrants, improvements in the integ ration of old immigrants and expansionary growth encompassing non-immigrants is through tax spending to fund new social investments. Yet, now the Social Democratic Party (SDP) will be hostage to Right wing parties that will constrain the level of tax increases. The Moderate Party promised to increase taxes, partially to avoid electoral defeat. But even in losing the Respectable Right has power to block tax increases because neither the Left nor the Respectable Right has a majority of parliamentary seats. So the SDP has tried to gain Right allies and so will become dependent on them. Today, this outcome seems unavoidable until one realizes that the Left’s failure to offer alternatives helped lead to the SD. Some on the Left want to blame the Reinfeldt government for SD’s rise by making workers feel insecure or see the Right triggering Neoliberalism and a backlash (see: http://www.aftonbladet.se/kultur/kronikorer /linderborg/article19541080.ab). Even if that were true, why couldn’t the Left bloc make workers feel secure?
Another way to accommodate new immigrants and the integration system is through cutbacks to social welfare. SD claims that the Moderate party’s new immigration expansion plan would have led to such cutbacks. This contrast may help explain why the Moderate party lost 23 seats in the parliament and SD gained 29 seats. Cutting back social welfare has now become unpopular (see: http://www.reuters.com/article/2014/03/17/us-sweden-economy-insight-idUSBREA2G0KA20140317), but as noted expanding the welfare state dramatically will be difficult given future Left dependency on Right parties in the parliament.
A third way to make new investments is cutting back the expansion of the defense budget and converting some defense firm activity to civilian production. This would produce a peace dividend and make defense firms less dependent on tax revenues for their markets. This option was foreclosed by the further militarization of Saab Aerospace and the de facto arms exports industrial policy backed by SDP and the Respectable Right. In the past Sweden m anaged to provide an alternative foreign policy that stood above big power rivalry, but now the country is trying to participate in an arms race. The current path towards militarization is both a dead end, so policy must move beyond it. Yet, this option is thoroughly marginalized because the Social Democrats have failed to challenge informal pro-NATO alliance or the arms race bent of the Swedish media. The media discourse (particularly evident in television coverage) on Russia as a looming enemy has been accepted by almost all parties. Russian aggression is true enough, but is always exaggerated without nuance by the media and allies of Sweden’s military industrial complex.
The fighter plane decision was somewhat like George Bush’s wars which helped lock President Obama into a major budgetary commitment of billions of dollars. Now, Obama’s two terms as President are partially extensions of the Bush presidency. How much do 60 new Swedish military fighters represent? One new JAS Gripen fighter plane costs about $43 million according to one estimate (see: http://aviationweek.com/awin/new-gripen-aims-low-cost-high-capability ). If one multiplies this number by 60 you can get the size of a capital fund which the Social Democratic-respectable Right consensus have committed to the new military fighter spending budget. This amount is somewhere on the order of $2.58 billion U.S. dollars.
How can we interpret this figure? The Swedish migration authority recently requested an additional 48 billion crowns (or $6.9 billion) in addition to a “91 billion kronor budget for the next four years – to handle an upsurge in refugees, with an estimated 2,000 arriving per week mainly from Syria and Somalia,” reported the English on-line newspaper, The Local (see: http://www.thelocal.se/20140829/reinfeldtrefugee-focus-puts-immigration ). In other words, the new military fighter program could pay for 37% of the additional immigrant expansion plans. The new military fighter program could also create jobs for 45,853 immigrants based on a rough projection using a training program for immigrants which costs $6 5,500 per job created (see: http://blogs.worldbank.org/impactevaluations/helping-new-immigrants-find-work-a-policy-experiment-in-sweden ).
The military fighter program represents an opportunity cost to immigrants’ integration and the fight against unemployment. In August 2014 the total number of unemployed persons was 389,000 according to official Swedish government statistics (SCB ). In 2013, the total number of foreign born persons who were unemployed was 144,800 according to SCB. Yet, if the monies allocated for the military fighter program would be spent on these persons it would have helped solve about one third of the total immigrant unemployment problem (31.6%). Thus, the military fighter program represented a serious blow to any immigrant integration peace dividend. The two major champions of the program, the Social Democrats and the Moderate party, both lost ground to SD which has also supported military Keynesianism. Thus, SD embraces militarism which limits funds for integration and thereby perpetuates hostility to integration. In contrast, many academics decouple the study of “ethnicity” and integration from the stud y of “militarism” and demilitarization.
Challenges to the Integration Peace Dividend
There are several counter objections to this analysis which will now be considered. The first is that Russia is a threat and this requires a military buildup. One problem is that defeating a Russian invasion would require a more competent and comprehensive system for developing the army and defensive equipment for land forces, rather than using an expanded air force which would be defeated by the Russians. Another problem with this argument is that the elite Swedish media and most politicians view their very own military exercises aimed largely at the Russians and NATO’s eastward expansion as benign but Russian military exercises and moves against the Ukraine as hostile. This double standard is largely unchallenged and is the hegemonic answer to ever seriously questioning the military budget, save arguments made by the fringe peace movement and parties to the left of the Social Democrats. These further Left parties (the Left, the Greens and the Feminists) represented only about 16% of all voters in the recent parliamentary election. The elite Swedish media’s one-sided coverage of Russia’s incursions against the Ukraine largely helped limit the debate about foreign policy and NATO’s eastward expansion. This turn of events explains why the further Left won’t get anywhere unless they establish a more sophisticated alternative media presence and expose the bias of established media.
A discourse related to the conversion of defense firms might represent political suicide for any party that took that discussion too far unless several problems could be overcome. These problems include: the way elite Swedish media totally lacks any nuance in its reporting of Russian aggressions (placing a straightjacket on most anti-militarist discourse), the failure of economists and social scientists to offer any significant challenge to the military economy, and the general weakness of education about disarmament and militarism in Sweden. Swedish politicians talk about “new defense challenges,” one of which is obviously terrorism. Yet, some immigrant areas in Sweden and elsewhere in Europe are recruitment bases for ISIL (the Islamic State of Iraq and the Levant). Thus, you can see how cutting military programs and funding immigrant integration makes sense, yet militarism is held to be the solution to terrorism. Instead, at home and abroad militarism and terrorism are self-supporting. Please note: Luton was the site of a terrorist cell linked to the July 7, 2005 London bombings and also a major area of British deindustrialization.
The second potential critique is that the training program I identified earlier won’t really create a sufficient number of jobs because training in itself only affects the quality of labor supplied and not the demand for that labor. This is partially a valid argument until one recognizes the huge looming issue that is also totally excluded from Swedish discourse, except in the most superficial fashion. This is the need to generate (or at least support) more large firms in Sweden. As one industrial observer told me recently, “you don’t win Swedish elections by talking about large firms.” Instead, Left politicians talk about “innovation,” “small firms,” or ecological “non-growth.” The respectable Right offers firms tax breaks. Neither Right nor Left talks about industrial policy or creating new large firms as generators of thousands of jobs. What is also missing is how large firms function as procurement systems for the very small firms that are fetishized. A sensible industrial policy would promote large industrial enterprises, integration between communications and transportation sectors, and systems of locally anchoring production and jobs.
The need for an industrial policy is relevant to my considerations of the military fighter program. Why? In 2005, the Swedish military firm Saab Aerospace employed far more persons than the Danish civilian wind manufacturer Vestas. By 2007, the Danish firm exceeded Saab as a generator of employment. In 2005, Saab’s total revenue represented 60.0% of that of Vestas. By 2013, Saab only generated 42.9% of Vestas’s total revenues. In essence, Saab has been largely outclassed by Vestas as a wealth and employment generator. In the recent past Vestas became heavily indebted and saw its share price plummet. Nevertheless, by May of this year the company had turned itself around after restructuring operations (see: http://www.ft.com/intl/cms /s/0/bb41925c-d752-11e3-a47c-00144feabdc0.html?siteedition=uk#axzz3DTYE1hV1 ).
The established Right and Social Democrats see the defense industry as a jobs generator and the other Left parties have little to say about converting Saab to be more like Vestas. Yet, Saab tried to develop windmills in the post-Vietnam War era and failed. And one of the reasons why it failed was that the Swedish national wind agency got far less support from the Swedish government than did military procurement or civilian nuclear power procurement. More recently, the Saab automotive manufacturing company went bankrupt. Were the hundreds of thousands of persons who have voted for the further Left (non-SDP) parties mobilized to rescue these industrial assets? Was a coalition created linking such voters to trade unions and a system to promote green jobs and technology? No such connection was made, nor was a movement organized. This may have been the fault of the union, but I doubt they would have opposed the creation such a move ment. A few Left intellectuals, like Göran Greider, raised the argument about a green conversion option for the Saab automotive industrial complex, but nobody really listened. The Social Democrats in opposition made some suggestions, but did not organize a large scale movement.
The defense and nuclear power industries have been part of the core industrial portfolios of the Social Democratic Party and the respectable Right. One way for the Left to challenge this non-sustainable and militarist corporatism is by championing civilian industrial policies and conversion of defense firms. Investments in windmills and trains are widely discussed, industrial policy is not.
Another key problem is that European Union policies have not encouraged national civilian industrial policy but rather European military industry integration and globalization. Swedish politicians also offer minimal resistance or alternatives to foreign enterprises buying up the Swedish defense industry, automobile manufacturers, pharmaceutical companies, truck manufacturers and the like. Here, the European Union policies are a major problem as is the intellectual implosion of any alternative, industrial policy discourse. While the Social Democrats correctly talk about industrial development and R&D programs, they have no comprehensive program for anchoring the resulting growth within the country (aside from simply supporting incumbent industrial sectors like the nuclear, defense and construction industries, the limits of which will be explained below).
A final objection is that failures to invest in the military budget will cost the economy jobs. In 2013, Saab Aerospace employed 14,140 persons and their total revenues were 23,750 million crowns. This means that the revenue per job in this part of the Swedish defense industry is 1,679,632 crowns per job. According to Saab’s annual report in 2013, 41% of its sales are to Sweden. That means the cost to the Swedish government per job created at Saab is about 688,649 crowns (about $96,000). If the average worker works fifteen years (a conservative estimate), these jobs cost $1.44 million. In contrast, an investment of about $70,000 can create a job for an immigrant. This means one Saab career could help create 20.6 jobs for immigrants. The Swedish government subsidy to Saab’s total workforce over fifteen years could help create jobs for 290,880 persons, i.e. twice the number of immigrant persons currently unemployed and 75% of the number of all persons unemployed. In sum, the Swedish government subsidy of one firm in the defense industry represents a huge opportunity cost against immigrant integration and integrating non-immigrants who (being unemployed) might support SD. Another source of capital to generate jobs is the hundreds of billio ns of dollars in Swedish bank profits, assuming these funds could be taxed somehow (see: http://www.riksbank.se/Documents/Rapporter/FSR/2014/FSR_1/ra p_fsr1_140604_updated_eng.pdf ). Shortly before the election Johan Ehrenberg, a leading radical critic in Sweden, explained that the Reinfeldt government reduced tax revenues by 980 billion crowns since 2007. This was the cumulative impact of losses in public sector revenues based on reductions in income taxes, corporate taxes and the value added tax (see: http://www.etc.se/ledare/flyktingkrisen-ar-a lliansens-syndabock-nodvandiga-skattehojningar ).
There are two further objections to my argument that need to be considered. First, each Saab defense job is subsidized 59% by arms exports. So, arms exports end up paying for these jobs. The problem is such exports come at an exceptionally high moral cost. More economically significant is that these jobs’ aircraft outputs also leave no means of production in place that could be a further means to generate wealth. Seymour Melman , the conversion scholar at Columbia University, noted this key difference between the value of what a tank or fighter aircraft could yield and the outputs generated by a machine tool or windmill. For that reason Melman cooperated with Inga Thorsson, the Swedish disarmament champion, to advance defense-to-civilian economic conversion planning in Sweden. In other words, the flow of wealth generated by products like machine tools and windmills could subsidize Saab workers in the same way arms exports could.
A second counter-argument is that an immigrant training program simply supplies a potentially trained worker and not a labor demand. Now, compare that to the wealth destroyed by producing military assets which provide no economic utility once produced. This relationship betw een the demand for labor and the supply of labor is very important for understanding the superficial aspects of the Left’s critique of the Right. Much of this critique is valid, but large chunks of the argument are totally superficial. Training programs need to be complemented by labor demand which can come from government, industrial or consumer purchases. The Moderate Party has used tax breaks and actual consumer purchases to help create lower skilled jobs for immigrants, the Left tends to favor the first option or projected demand from other sectors. All parties largely ignore the middle option when it comes to creating new larger firms (or expansion of incumbent large civilian firms) as employment engines. The expansion of incumbent large firms (not subject to domestic anchoring), however, risks rewarding companies that will later outsource production and jobs. Yet, industrial conversion of domestically-anchored military capacity can be a good way to generate spin-offs and large firm civilian growth. Saab Aerospace has highly competent and well-trained engineers, a portfolio of sophisticated technologies, and a locally-anchored (in Sweden) workforce and production capacity.
How Aborting Industrial Policy Constrains the Welfare State
During the election, the Social Democrats did call for a massive investment in railroads and other modernization programs. These in theory will create new, public markets which the Right’s tax break programs made difficult. Yet, who will actually support such developments? Experts on Sweden’s construction industry have pointed out that one source of immediate construction jobs will have to be foreign construction firms and foreign workers as there is a shortage of such workers (see: http://www.stockholmsbf.se/brist-pa-personal-hotar-byggbranschen__3526 ). The Social Democratic Party is hostile to such initiatives which they see as threatening domestic unions and workers. Byggnads, the construction union, argues that many guest workers “come to Sweden are exploited through low wages and slave-like conditions” (see: http://www.byggnads.se/Om-Byggnads/Press1/Johans-kronika/2014/Nyliberala-spoken-vill-stalla-arbetare-mot-arbetare/ ).
One observer familiar with the trade union point of view argued that if there was a dramatic increase in Swedish construction, “there would probably be a shortage of skilled labor to match demand.” Yet, this informant explained to me: “More can be done to increase the supply [of skilled construction workers] in Sweden. One example is that there are lots of young people who have vocational training so they can become building workers, but they don’t get enough on-site training to get a certificate as skilled workers. Here, the larger construction companies should be doing more.” As the European Union has an open labor market, any companies or individual workers from other EU countries can compete for construction jobs in Sweden. In larger infrastructure projects, non-Swedish companies often tender for part of the projects and some are involved as subcontractors. A view that unions have taken is “that foreign workers/companies are welcome, but that Swedish collective agreements should apply for work in Sweden.” If a new Social Democratic government takes power, it’s expected that they would “tighten up legislation to prevent any social dumping in working conditions.” In sum, if companies don’t do more, then expect a large part of the jobs dividend to leak out. If legislation is tightened and can be accepted by EU authorities, there might be a way around this problem, yet even with on-site training delays will lead to some jobs leakages to foreign-based workers or firms. The delays can come from waiting for training to be completed (although some work can be done during training) or the time between approval of a training program and its organization, recruitment and vetting of candidates, etc.
Another problem is that the Green Party and others seeking to get jobs out of rail sectors have somewhat fetishized or simplified the issue. What happens after railroads are built? Will Sweden simply be left with just another service industry? The problem is not that the railroads won’t help in the fight against global warming or spur productivity-enhancing investment. Rather, the problem is how to get the most out of such Green investments.
Consider the history of Sweden’s Miljonprogrammet , an initiative in the 1960s and 1970s to build hundreds of thousands of apartments to address a critical housing shortage. This huge construction program was financed in part by pensions and the wealt h generated by Sweden’s postwar industrial export boom. The housing program was also a kind of Fordist production on the cheap as a 2010 analysis showed that about 80% of these buildings needed serious rehabilitation (see: http://www.svd.se/naringsliv/miljardrustning-miljonprogrammet-maste-renoveras_5186815.svd ). The dependency of the construction sector on the industrial sector (witnessed today the Chinese boom in the former tied to the later) and the costs of rehabilitating existing housing each point to the need for some kind of new growth engine. Taxing the finance sector could certainly play an important way to generate housing.
Very much like their. American counterparts, advocates of a Green New Deal often decouple green technology development from any coherent discussion of how to integrate rail construction with indigenous development. On the one hand, SDP talk about R&D investment is too vague. On the other hand, Green Party discussion about having limited growth mitigates against the necessary industrial coupling. Some people in these parties don’t explain how to promote the industrial expansion necessary for accompanying investments in wind power and rail systems. The Green Party does address the problem of sustainable development, which is a step in the right direction.
A way to link industrial development, construction investments, and job creation that are sustainable economically and environmentally is to expand a locally-anchored industrial system that can flexibly sell products in multiple markets. Anchoring can occur by means of agglomeration (firm-to-firm local linkages), worker ownership (so that workers can block the closure of a plant by absentee owners), the enhanced productivity of capital (so automation generates economic surplus to reinvest in training and skills development), and learning by doing or specialized know-how (such that skills are unique and can’t easily be relocated) in multiple spheres and product lines (see: http://www.amazon.com/After-Capitalism-Managerialism-Workplace-Democracy/dp/0679418598 and http://www.ilo.org/wcmsp5/groups/public/@ed_dialogue/@actrav/documents/publication/wcms_153352.pdf ).
Through an anchoring system tied to firms capabl e of entering a diversity of markets, public state investments in railroads and wind power support (and the like) would help expand capacities that could later be used to enter private, non-governmental markets. In this way, government spending could help leverage capacities for future non-governmental projects. One way to promote such a diversified system would be to create some kind of domestically anchored industrial variant of the South Korean firm Rotem , the German giant Siemens or the U.S. General Electric. Such companies make windmills, trains, and other products, i.e. a green multi-divisional, multi-product firm with diverse kinds of customers. Sweden has pieces of these kind of firms, but has no industrial policy coordination system necessary for a long term strategy. Instead, Sweden has seen Right-wing governments buying coal plants and Social Democratic governments propping up the military sector. If Sweden does not grow, it won’t be able to sustain its immigration policies much longer. If it grows by non-sustainable and militarist means, that will help fragment the Left bloc. If the Left bloc embraces a Green New Deal and can’t properly execute it, it will lose power.