Tag Archives: Sweden

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The World Economic Forum today released its annual Global Competitiveness Report. The report makes for interesting reading. While Switzerland and Singapore hold on to the number 1 and 2 positions respectively, the United States fell from fifth to seventh place. … Continue reading

Smaller Government, Bigger Government: The Grass is Always Greener

James Kwak at The Baseline Scenario has a great discussion of income inequality in the United States today.  Citing a short paper by Michael Norton and Dan Ariely, Kwak breaks down the actual, estimated, and preferred income distribution as stated by respondents to the survey conducted by Norton and Ariely. According to the results, Americans perceive income inequality in the United States to be far more equal than it actually is, and desire it to be more equal still (see figure below). As Kwak summarizes, Americans want to be more like Sweden.

Actual, Perceived, and Preferred Level of Wealth Distribution inthe United States.

Actual, Perceived, and Preferred Level of Wealth Distribution inthe United States.

Ironically, however, developing the level of distributional equality that exists in Sweden is predicated on paying higher marginal taxes and accepting a much greater level of government involvement in the economy, two things that recent developments in American politics suggest are not on the front burner.

There’s another irony, however; one captured by Jon Stewart’s “Mob Swap” proposal last week. Across Europe, governments have been engaged in efforts to reign in the welfare state, to introduce a greater efficiency and reduce government debt burdens. These moves have provoked protests across Europe. Last week alone, 100,000 people took to the streets of Belgium to protest cuts in government spending, millions took part in protests in France challenging a proposal to increase the retirement age, and workers shut down the London underground. Meanwhile, Americans are protesting against expanded government programs, including the Troubled Asset Recovery Program (TARP) and the Obama health insurance reforms. The grass, it appears, is always greener!

Five Stories You Might Have Missed

Recent data about the U.S. economy indicates that the current crisis is worse than economists had believed. On Wednesday, the government announced that initial jobless claims spiked unexpectedly, reaching the highest levels since 1982. About 667,000 people made initial claims fro the week ending February 21, sending the total number of unemployed people in the United States over the 5 million mark for the first time in the country’s history. The official unemployment rate stood at 7.6 percent, the highest level since 1992. Consumer sentiment also fell to record lows in February, as housing prices fell precipitously. Housing prices declined 18.5 percent over 2008, and have declined 26.7 percent from the peaks of July, 2006.  Although the Federal Reserve is forecasting an economic contraction of 0.5-1.3 percent this year with an unemployment rate of between 8.5 and 8.8 percent, many economists are offering more dire predictions, calling this the worst downturn in U.S. post-World War II historyThe U.S. economy shrank by an annualized 6.2 percent in the fourth quarter of 2008 (its worst performance since the recession of 1982).

And now for five important stories outside the ongoing economic crisis:

1. On Friday, President Barack Obama announced a plan that would see the majority of U.S. forces withdrawn from Iraq by August 2010.  Obama’s plan was greatly coolly by anti-war Democrats, who were disappointed that the plan did not accelerate the drawdown in forces. Congressional Republicans appeared more supportive of the president’s plan.

2. The Bangladeshi army has reaffirmed its support for the government of Prime Minister Sheikh Hasina after an attempted mutiny by paramilitary forces was put down earlier this week. On Wednesday, a paramilitary force of border guards—the Bangladeshi Rifles—mutinied over a pay dispute, but violence quickly spread throughout the Bangladeshi capital, Dhaka. The government was able to reassert control over the region as members of the Bangladeshi Rifles surrendered. At least fifty people are believed dead in the fighting, and the whereabouts of 168 officers who were in the building where the mutiny began are still unaccounted for. The discovery of a mass grave in the building has led to speculation that the number of dead will rise. 

3. Tobias Billström, who is slated to become president of the European Union when Sweden takes over the position from the Czech Republic in July, has indicated that immigration reform will be on the agenda. Immigration and asylum have long been controversial issues in European politics, as countries have vastly different policies. But E.U. member states have been hesitant to transfer responsibility for coordinating policy to Brussels. Billström has suggested that the European Court of Justice in Luxembourg would have final discretion over asylum cases.

4. The new power-sharing government in Zimbabwe appears to be making good progress in addressing the economic meltdown in the country. According to the African Development Bank, Zimbabwe has made an impressive start on addressing the problems it faces. The ADB has called on Zimbabwe to make progress on repaying its external debt as a precondition for securing more outside assistance. The new Prime Minister, Morgan Tsvangarai, has said that Zimbabwe urgently needs $5 billion in foreign assistance to repair the economy. Meanwhile, the power sharing agreement itself appears to be at risk, as President Robert Mugabe’s party has been accused of creating its own parallel government, effectively attempting to bypass the power-sharing agreement. Further, members of the opposition party remained jailed, and the push for land reform has intensified.

5. In an attempt to address growing concerns of farmers over poor forecasts, the government of Argentina has agreed to increase protectionist measures, including waiving some export tariffs and granting subsidies to small producers. Longstanding drought conditions in the country have led to declining yields, and farmers are forecasting the worst harvest in forty years. The crisis has exposed deep political divides in Argentina, resulting in a weakening in the ruling alliance and the resignation of four senators and two deputies over policy differences.