Sweden struggles on prosperity ladder

Comment |  Despite good prospects for surviving the finance crisis, Sweden is slipping in the so-called prosperity rankings. One reason is the wrong choice of crisis cure.

The OECD compiles an annual index of member states’ purchasing power-adjusted GNP per capita relative to the OECD average.

The so-called prosperity rankings are an index showing the value of production as well as how much purchasing power that gives inhabitants relative to the OECD average. This not only shows the value of production but also includes adjustments in prices for different commodity groups and therefore the value of consumption.

There is a general view that Sweden got through the finance crisis much better than comparable countries. But new OECD figures indicate that Sweden’s purchasing power-adjusted GDP per capita relative to the OECD average has dropped.

Eleven percent above the average in 2007, Sweden slipped to 9 percent over in 2008 and to 7 percent over in 2009. So Sweden dips from a shared ninth place in 2007 to eleventh in 2008 and 2009 among the 30 OECD member countries.

Sweden has slipped despite being better equipped in many respects to meet the international finance crisis. But in Sweden, crisis measures were aimed chiefly at propping up employment and supporting local and regional government. At the same time, the leftwing opposition has been promising hefty tax rises.

In several countries that got through better, greater unity has existed for crisis measures that partly bolster the willingness and ability of business to invest, and partly bring forward planned public investments, providing short-term stimulus and strengthening public finance in the long term.

After being fourth in the OECD prosperity ranking in 1970, Sweden has slowly slid towards the OCED average, following years of low growth in the 1970s and ‘80s and a serious banking crisis in the 1990s. Despite good economic development since the mid-1990s, Sweden has not been able to regain the high ranking it enjoyed in 1970 — the long-term goal of Swedish Enterprise. Admittedly, the OECD figures are preliminary and may change, but in recent years, final adjustments have rarely affected Sweden’s ranking.

Victor Snellman