Thursday, May 9, 2013

Sweden and the Euro: Logos-driven people vs. Pathos-driven establishment

When the common European currency was launched, Milton Friedman predicted with eerie foresight: “Sooner or later, when the global economy hits a real bump, Europe’s internal contradictions will tear it apart.”

In 2003, Sweden held a referendum on the issue of joining the EMU. The Swedish elite on both the left and the right virtually uniformly supported joining. The Economist at the time described the referendum as “the people versus the establishment.”


Due to a guerrilla campaign and with a help of a number of independent minded economist (most prominently Lars Wohlin and Nils Lundgren), the people defeated the establishment, saving Sweden from the Eurozone meltdown. Sweden is performing better than the Eurozone countries economically. Key economic indicators from the OECD:

GDP Growth 2008-2012:
Sweden: +4%
Eurozone: -1%

Unemployment rate 2012:
Sweden: 8.0%
Eurozone: 11.4%

Government finances 2011:
Sweden: +0.1% (small surplus)
Eurozone: -4.1% (large deficit)


Increase in Debt as a share of GDP 2008-2012:
Sweden: -0.6 percentage points (reduction of debt)
Eurozone +20.4 percentage points (large increase of debt)


Debt as a share of GDP 2012:
Sweden: 38.2%
Eurozone: 90.6%


The Swedish pubic
have soured further regarding the Euro as they watch the European economy burn down around us every night on the new. Here is a graph of public opinion:


What is interesting is the reaction of Swedish establishment. Despite the disastrous consequences of the Currency Union, the elites by and large still support Sweden joining the Euro! Parties currently representing 75% of the seats in parliament officially still support Sweden joining the Euro (S, M, FP, KD). Strikingly, no Swedish political party has changed its position on the Euro following the Eurozone economic meltdown.

Opposition to the Euro is still portrayed as “populism”. Sweden’s Europe-minister Birgitta Ohlsson describes opposition to the Euro as driven by “fear”. Political scientists Sören Holmberg argues that opposition to the EU among the public is due to Swedes being ”opportunistic” and temporarily laying guilt (“skuld”) for the bad times the on the EU.  

Opportunistic means selfishly taking advantage of circumstances and exploiting others. But who is exploiting whom? Sweden has always been a net contributor to the EU, paying in far in excess of what we get back.

This leads to the interesting question, of the definition of “populism” is. The definition of populism cannot simply be the view of the populous as contrasted with the view of the elite, regardless of who is right. I interpret populism as irrational views held by the public as contrasted with more scientific views held by the elite. The self-image of elites is that they have enlightened views, while the public is driven by dark and irrational emotions such as fear of The Other. The role of the elite is therefore to make decisions against the wishes of the masses, and to use its influence in academia and media to gradually alter populist views.


In the case of the Euro however, the Swedish political elite is ill-informed and wrong and the Swedish public right. The main experts on the subject, academic macroeconomists, largely side with the Euro-skeptic “populists”.  

David Frum writes: “Twenty years ago the leaders of Europe agreed on a bold step: a new currency called the euro. They promised that the euro would improve life for everybody—and denounced all opposition as ignorant, xenophobic, and backward. Their words gained extra plausibility because many of the opponents of the euro really were ignorant, xenophobic, and backward. Yet the backward critics were right, and the enlightened proponents were wrong.”

Indeed, the public is more fact-driven than the emotional elites. In 2003 the public sided with the economiss such as Milton Friedman who argued that a common Currency was not good for the economy. The European elites by contrast were driven by more romantic arguments, such as the myth that without the European Union western Europe would have been engulfed in war. After witnessing that the Euro-experiment failed, the Swedish public become more negative inclined towards the Euro. Occam’s razor is that voters have become more skeptical toward the Euro as a result of the economic meltdown caused by the Euro, a reasonable and legitimate conclusion. 


In order to undermine Euroscepticism, the media instead describes these rational cost-benefit concerns in a moralistic, emotional language. Critics are is described as driven by “fear” and “populism” and “scapegoating” (“skuldbelägger”) the EU. The purpose of using loaded terms such as
“skuld” is to manipulate the reader by adding sinister a normative dimension to factual statements. 


In contrast to the public, the Swedish political parties did not change their conclusions based on new information regarding the economic performance of the Euro. They have the same view about joining the Euro in 2013 as they did in 2003, new data be damned. Why did facts not change elite conclusions? Because their conclusions were not based on facts in the first place, they were based on emotional sentiment. The philosophy of Birgitta Ohlsson can best be summarized as “EU good, Sweden bad”.

The aim of the Swedish establishment is increasingly to move public discourse away from logic and facts and Logos (where they will lose the debate) and to emotions and morality and Pathos (where the public can more easily be manipulated). This is not being enlightened, it’s the exact opposite.

19 comments:

  1. The politicians in Sweden seem to me to be largely a class of their own, starting their careers in the party youth leagues and moving on upwards toward power. That being the case, they are quite often very ideologically driven and, as often pointed out, isolated from "the common public". While a question might be completely obvious to the public, it might not be to party members whose eyes are clouded by ideology and views all questions in terms of "this-party-ideology vs that-party-ideology". They don't serve the public, they serve their parties.

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  2. My belief is that a common currency cannot work without a common tax system and an integrated economy. This basically means for the Euro to be stable EU needs to become a fully federal state. I voted yes in the referendum because I saw the common currency as a step on the way to a federal state and thought this was a good idea.

    I have later realized that the larger the population of a country, the less democratic the government becomes and the more problems there are. Since I no longer support a federal state in Europe I also no longer support the Euro.

    However, I think that many politicians still believe that a federal state is a good thing as it would reduce the influence of the ignorant people, and thus it is logical that they still support the Euro. We have seen many debate articles claiming that the only way to save the Euro and Europe as a whole is to transfer more power to the EU. And they are probably correct that to save the Euro we have to move the power from the nations to the EU, at the same time reducing the influence of the people and thus moving forward on the road to their final goal. Never waste a good crisis.

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    Replies
    1. I enjoyed your response to the post. What is always funny is often times it is the ignorant that make things work whereas the 'elite' and 'well educated' simply get themselves into a mess ( I am times in the category of ignorant and other times in the category of 'well educated' there are benefits to both categories )

      Unfortunately when you decide to govern other peoples affairs it rarely works out well for you or them. I believe the best solution is attempt to teach as correct principles as you can and then allow people to govern themselves.

      Delete
  3. Overall a good post. Birgitta Ohlsson is a silly person who doesn't really know anything substantial about anything that demands thinking and analysis. For instance, the same person embarrassed herself while talking about extremism and terrorism together with the ridiculous "expert" on "racism", Lisa Bjurwald, earlier this year.

    More generally, it is a sort of quandary to know if people representing the Swedish establishment really are stupid or just pretending to be so in order to appear good in the eyes of other goodists. It often seems more like pseudo-pathos rather than sincere ethical feelings. A dilemma that Plato discusses in "The lesser Hippias" and worth considering. In one sense, the likes of Ohlsson should be regarded as rational and Logos oriented, since they benefit as individuals from pretending.

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  4. Thnx Tino!!

    Pls keep on on your path!

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  5. As a person living in the USA, I not only do not understand how anyone in Sweden could advocate joining the Euro zone, I cannot even understand how Greeks, Portuguese, Spanish and Italians can advocate staying in the Euro zone? I would like for someone form one of those countries to explain it to me.

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    Replies
    1. Its because it is based on ideology, not rational thought. People in Europe, especially in the big cities are big government types. They want to believe in socialism, but that has proven to be a failure so many times they have agreed to a more moderate approach.

      However, they still want bug government. They believe the government can solve all our problems. That is why they want a world government. They think a world government can solve all the problems in the world such as world hunger.

      EU is a step in the right direction, hence they love it. They don't want to believe anything is wrong with it and the only solutions possible is further integration. These people also think they are very intelligent, and everyone who disagrees with them are dumb or evil. Hence, they attack everyone who disagree with them.

      Another reason is being scared. Few Swedish people want to join, but few Finish people want to leave the euro. People are scared of the consequences of leaving.

      Delete
  6. Hope this is not too off topic, but since you quote David Frum on the Euro, and this blog occasionally deals with the economics of immigration, I like to make you aware of an article he wrote six years ago about his change of mind on immigration.
    It happened while working for the Wall Street Journal, covering the economic life of the middle class.
    “I also began to learn that you could hardly name a social problem without discovering that immigration was aggravating it to the point of unsolvability.
    Health insurance? Immigrants accounted for about one-quarter of the uninsured in the early 1990s, and about one-third of the increase in the uninsured population at that time.
    Social spending? The Urban Institute estimated in 1994 that educating the children of illegal aliens cost the State of California almost $1.5 billion per year.
    Wage pressure on the less-skilled? The wages of less-skilled Americans had come under ferocious pressure since 1970. How could you even begin to think about this issue without recognizing the huge immigration-driven increase in the supply of unskilled labor over the same period?
    Competitiveness? How could the U.S. remain the world's most productive nation while simultaneously remixing its population to increase dramatically the proportion of poorly educated people within it?"

    http://www.aei.org/article/26324

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  7. http://www.expressen.se/nyheter/goran-persson-fortsatter-tro-pa-euron/

    Former Priminister Göran Persson argues for Sweden joining the EMU. His economic arguments is nonsense, he claims that the strong German strong economy is due to the EURO and that joining the EURO would magically save the Swedish pulp industry. Persson also suggests that it is racist for Sweden not to want to join the EMU "do we think we are better than everyone else".

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  8. Interesting post! Greek economy has been one of the quickest growing areas in the Eurozone through 2000 to 2007; GDP grew in an annual charge of 4.2% during this time.However, Gross domestic product growth stumbled on an abrupt halt in early this year after the country borrowed large amounts from other Western european government banks. It was after determined that this Greek federal government was not precisely reporting the country’s official financial crisis.

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