Social Democratic Underemployment

by Nima Sanandaji
by Nima Sanandaji

The European social democrats have clearly failed in what they define as their number one objective: low unemployment. High taxes, inflexible labor markets and generous welfare benefits have created massive unemployment in countries such as France, Germany and Sweden.

In Sweden, the main government response has been to hide and deny the problem. The official unemployment figures are only about a fourth of true unemployment, which ranges between 20–25 percent. Although Sweden has one of the least racist people in Europe, only about half of the emigrants from Africa and Asia are active in the working market – and this statistics includes government "activity programs", which are simply one of the methods used to mask unemployment figures.

The problems persist as social democratic politicians see big government as the solution to all problems. In a recent speech, the Swedish Prime Minister, Göran Persson, promised that thousands of new jobs would be created in Sweden. This would be accomplished by having young people help the elderly shovel snow, hang up curtains and cut the lawn. Don´t worry, government will pay the bill, so it won’t cost us anything.

Granted, this proposal is one of the most ambitious to come from Swedish social democrats in years. There is enough snow in Sweden during the long winter month to keep thousand of youngsters employed. And when the snow is gone, it will only take a couple of weeks until the lawn starts growing. Any Soviet bureaucrat would be impressed by the innovative ideas coming from Swedish socialists.

However, one might question the very idea that the expansion of the public sector is a viable strategy to reduce unemployment. When jobs are created in the private sector this occurs as thousands of different corporate leaders look at their organizations and ask themselves how their organization could benefit by hiring additional staff. When the private sector hires people, they do so in order to create a greater economic good.

Government creates jobs by almost the opposite logics. The decisions are taken centrally by officials who want to increase the popularity of the ruling party. The public sector is rarely productive and these jobs are sustained by taxes from the private sector. Few would regard government services worth paying for, but we are all forced to do so through taxation.

The social democrats in Sweden cannot go on for ever expanding the size of government. Perhaps even they are aware of this, but the short-term interest in artificially reducing unemployment seems more important than what is good for the country.

European social democrats have given up on implementing a successful economic policy; they are simply out of ideas. What remains is the knowledge that votes can be bought by government spending, particularly among a population that are dependent on big government.

September 14, 2005

Nima Sanandaji [send him mail] president of the Swedish think tank Captus and the editor of Captus Journal. He has been admitted to graduate studies in biochemistry at the University of Cambridge.

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