Can fiscal austerity be expansionary in present-day Europe? The lessons from Sweden

Welfare Capitalism in Post-Industrial Times: Trilemma or Power Over Rents?

“…One possible avenue for future research to consider would be foregone Kaldor-Verdoorn effects, arising from inadequate and/or volatile expansion of aggregate demand, which was deemed crucial in some Scandinavian wage-formation models (Faxén, Odhner & Spånt, 1989). It is well known that macroeconomic policy in the Eurozone has prioritised price stability over growth, and lower productivity growth may have been a price to pay for this (Storm & Nastepaad, 2013), and some research suggests that growth and employment rates could have been higher in contemporary Sweden through more optimal demand-side policies (Erixon, 2015). This applies to a lesser extent to the United States.…”

Who Undermines the Welfare State? Austerity-Dogmatism and the U-Turn in Swedish Asylum Policy

“…The view that the high degree of immigration may have a positive effect on the Swedish economy seems to be confirmed by the work of Swedish economist Lennart Erixon (2015). Erixon estimated that the increased labour supply through refugee migration has contributed considerably to the high GDP growth in Sweden in the aftermath of the 2007-08 crisis.…”

“…Sweden experienced an immediate drop in GDP growth during 2008 and 2009 in the aftermath of the global financial crisis, but fully recovered from the downturn more quickly than other EU countries without endangering public finances as well as managing to keep the government debt-to-GDP ratio at a comparatively low level of about 40 percent (Erixon, 2015;Stenfors, 2016). The Swedish government's handling of the crisis was unanimously praised by international financial institutions and the country came to be held up as some sort of role model for the other EU member-states.…”

“…The policy U-turn marked a dramatic change in international and domestic perceptions of Sweden as a welcoming country for asylum seekers and refugees. The re-alignment of Swedish asylum policy with that of the rest of the EU mirrored the consolidation of a cross-party consensus around the view of refugee migration as a potential threat for the Swedish welfare state, even in in the context of the fast economic growth that the country experienced after the 2007-08 global downturn (Erixon, 2015). Indeed, the risk of a trade-off between refugee reception and the welfare state's sustainability was first evoked by Reinfeldt's "open-your-hearts" speech, but soon became deployed as an argument for justifying the radical shift in asylum policy implemented by the redgreen government.…”

Measuring Sustainability: Benefits and Pitfalls of Fiscal Sustainability Indicators

“…Third, criticism has been articulated about fiscal austerity measures having positive or expansionist effects on economic growth (Erixon, 2013) or having played any positive role in past financial crises. 15 'We speak of 'reform' here because it has become the general terminological currency (…) But the translation of fiscal pressures into specific institutional changes owes much to the new mainstream of economic thinking and lobbying about the need for welfare state retrenchment and the merits of privatisation (Arza & Kohli, 2007).…”