Guess what country has just said a big, fat resounding “no” to industry bailouts? Sweden, that’s right, Sweden. The land of the big state, socialism, and social democracy. My colleague Charlotta Mellander writes:
It’s interesting how differently the financial crisis is being met by governmental authorities in North America and Scandinavia. With Saab on the brink of bankruptcy, GM – which owns Saab – turns to the Swedish state asking for support, approximately in the same manner in the US. And the Swedish government says – NO. No tax money will be spend on saving the car industry. The message is that if a company can’t make it on its own then tax money shouldn’t be to bail it out. I must say I’m kind of surprised – but in a positive way. I didn’t think they’d have the courage to say no to such an “institution.”
Here’s a report from Sweden’s The Local:
The Swedish government said on Wednesday it would not intervene to take over Saab. Enterprise Minister Maud Olofsson slammed Saab’s US owner General Motors for “abandoning” the struggling Swedish car maker. General Motors has warned that the unit would go under without official help. “Voters picked me because they wanted nursery schools, police and nurses, and not to buy loss-making car factories,” Enterprise and Energy Minister Maud Olofsson told Swedish public radio.
Can we get her to be our new Commerce Secretary?
February 20th, 2009 at 5:12 pm
I’m a sad Saab enthusiast. I hope that this doesn’t end production, although I’m glad that, perhaps, GM will no longer be in charge.
February 21st, 2009 at 10:42 am
I wonder if their attitude on this is actually thanks in part to the strength of their social safety net. I.e. jobs could be lost, but they already have the welfare, health care, and retraining systems in place to cushion that job loss. The incremental costs to those social programs could be a lot less than the money needed to keep Saab going.
February 21st, 2009 at 8:06 pm
Also they maybe able to take the hit of Saab failing more easily than the U.S. can with the big 3 all going at once.
February 22nd, 2009 at 5:05 am
It is remarkable that the “Lummerland” Sweden is strict on economic theory and political economy. Not intervening is a sign of very clear views on the function of business and the economy in general. The argument of job losses in the short term is unconvincing as failing organizations need to be eliminated to give way for new concepts. The tax payers money is better invested into the people loosing their jobs than into bad management.
Nonetheless, I would contribute financially to any fund investing into Saab …
February 22nd, 2009 at 7:47 am
I think the lesson was learned 1970-80 when billions was put into saving the Swedish shipbuilding industry without any success.
As Maud Olofsson, Enterprise Minister said: “why should the Swedish government be a better car manufacturer then the world’s biggest car company.”
February 22nd, 2009 at 8:51 am
I agree with you, Christer. The Swedish government has been there before, tried it — and learnt the lesson. Industry bail outs simply don’t work in the long run.
February 22nd, 2009 at 9:49 pm
I only wish that Canada had been as courageous. Just because the US is attempting to use bailouts does not mean that the same is the correct course of action for us.
Hopefully in the wake of Sweden’s decision, other countries will be able to follow suit.
February 23rd, 2009 at 6:40 am
Would it be possible to argue that this is rather a sign that the Swedish government isn’t in such cahoots with big business as the US and the UK governments, rather than an illustration of how the US and UK don’t really have a coherent take on the Neo-Liberalism that they otherwise espouse? Or both?
February 23rd, 2009 at 9:00 am
I think is logic that if Saab is now owned by GM, Swedish people don’t have to care about it so much.
February 24th, 2009 at 1:10 pm
The US government has been subsidizing the automotive industry, especially the big 3, for decades. The highway system itself is a massive subsidy to the auto industry. Keeping fuel efficiency standards low was a subsidy as it allowed them not to change. Limiting foreign-built cars from being sold is a form of subsidy.
The US auto industry has been cottled and protected for decades, making it so hard to say “no” now.
In Sweden, without this long history of subsidizing GM, it’s easier to say no.
February 25th, 2009 at 2:41 am
Even if Saab formally is owned by GM, most people very much consider this to be a Swedish firm, and my guess is that Saab to most Swedes is like Ford for an American. And,it is still the same job loss. But as Christer pointed out above, we went through the same issues by the end of the 1970s with the shipbuilding industry. It got huge governmental financial support, money completely lost. So, I assume the decision not to give financial support to Saab/GM is a result from this earlier failure.
February 25th, 2009 at 6:19 am
btw. they helped Volvo (Ford)…
http://www.motorauthority.com/sweden-promises-445-million-in-loan-guarantees-to-volvo.html