”A few weeks after the significant fall of the Swedish crown in November 1992, the Riksbank initiated an investigation into what had happened. It would take almost a decade before the classified report was made public.”
Sven Grassman was a professor of economics and internationally recognized as an expert in international payment flows. Grassman was the chief secretary of the balance of payments investigation, and he clearly documented how the Swedish national debt had been exaggerated by 400% from 1977 onward. He also criticized economists who allowed themselves to be influenced by the business world through various paid assignments. It’s no surprise that Grassman was ignored and marginalized by both the media and his colleagues, and his then-boss, Assar Lindbäck, ensured he was transferred. He was audacious enough to speak the truth.
As early as 1973, Olof Palme gave a speech in which he explained that the forces that control economic power and public opinion also want to conquer political power.
Those who have thoroughly studied history know that this is true. Paradoxically, Palme himself would contribute to exactly this by recklessly allowing his finance minister and others to push through the deregulation of the market that drained Sweden of money, eroded the politicians’ power, caused thousands of bankruptcies, and left many people unemployed.
Feldt, Åsbrink, Dennis, and a group of officials, including Anders Sahlén, decided that the credit market should be deregulated. The trick was to do it without attracting attention. Therefore, the decision was kept outside the parliament and all forms of public disclosure.
Some debaters claimed it didn’t happen in secrecy, but Kjell-Olof Feldt openly admitted in an interview in 2004 in Dan Josefsson’s documentary ”Novemberrevolutionen” that the matter was kept within a small, secretive circle within the finance ministry. However, he couldn’t explain why.
Only five days before the deregulation was to come into effect, Feldt had a meeting with Palme, who seemed to be disinterested and said, ”Do as you wish; I don’t understand anything.”
Ingvar Karlsson, the then-vice prime minister, remarked, ”First of all, it’s strange that they’ve been working on this since the spring, and then five days before the decision is to be made, they inform the prime minister.”
About Palme’s reaction, he said, ”It could simply be because he thought if he’d been kept out of this process, it’s unreasonable that he could do much about it five days before the decision is made.”
Feldt had the audacity to claim that the decision was politically supported. It would be interesting to hear him explain how something that isn’t even known in either the parliament or the government can be politically supported.
Karlsson revealed, ”The government was informed on the same day the Riksbank made the decision, which is very strange.”
Lars Wohlin, who served as the head of the central bank during the conservative government from 1979 to 1982, talked about his reaction when he heard about the deregulation: ”On November 21, 1985, at one o’clock, I received the message that the Riksbank had removed all lending restrictions. I looked at my colleagues and wondered if the Riksbank really understood what it was doing.”
Wohlin explained in an interview that the central bank should NEVER be powerless: ”That makes it actually impossible to have a fixed exchange rate and remove credit control. That combination doesn’t work, and everyone was aware of that.”
But there were others who realized the dangers of what was happening. Leif Karlsson, political expert at the Ministry of Social Affairs, called the central bank to check the statistics on lending. When he realized what was happening, he wrote a letter to Åsbrink, questioning what they were doing at the central bank. Bengt Dennis then went on TV and explained that he didn’t see any problems with deregulation.
During the 1990s, several important changes in society were initiated, driven by the international neoliberal trends triggered by the global economy’s success. The public sector became increasingly questioned, and a wave of privatization started in healthcare, education, and social services. Many public properties were sold, and the purchase of tenant-owner apartments led to an economic redistribution in society, contributing to increased segregation. At the same time, the first of several economic crises occurred after the opening of national markets, shifting the focus to rationing within the public sector. Now, the dismantling of the welfare policies that had made Sweden renowned worldwide began.
During a meeting between representatives of the Ministry of Education and the academic world in 1992, State Secretary Bjarne Kirsebom presented the mechanisms that would govern the finances of universities in the future. Students would move through the system more quickly, and universities would be paid based on the number of graduates. The same would apply to postgraduate education. Kirsebom stated that universities and institutions – in a neoliberal spirit – would decide themselves how to admit students. What he did not realize was that the result probably would lead to a cultural revolution for the entire compulsory basic education. Because what says that grades are perceived as the best admission criterion? What if the school would start focusing on knowledge instead of grades? And what kind of complicated application system would be built for admitting new students? This was never realized because after the upcoming election, there was a change of power, and the new Minister of Education, Carl Tham, realized the consequences and closed the floodgates. In hindsight, one could perceive this meeting as a manifestation of the transition – ”The turning point” – from the old university’s perspective on knowledge to a focus on utility and control.
Businessman George Soros, American pension funds, and other players speculated heavily against the Swedish crown, and the free fall accelerated. Lars Jonung, an economist and advisor to Carl Bildt from 1992 to 1994, wrote in an article in Dagens Nyheter in 2008 about the crisis that: ”The triggering factor in the process was the deregulation of the financial market.”
A few weeks after the significant fall of the Swedish crown in November 1992, the Riksbank initiated an investigation into what had happened. It would take almost a decade before the classified report was made public.
The report showed, among other things, that during the crisis, the Swedish Riksbank deviated from its usual method of defending the crown through interest rate hikes and instead switched to direct interventions in the foreign exchange market. This change in strategy allowed foreign and domestic speculators to speculate against the crown. The report stated:
”The initial rounds of outflows came from domestic investors. Once the process had started, foreign investors joined, probably because they believed that the domestic players had made a correct assessment of the situation.”
The last wave of selling the Swedish crown started in November. It was believed that the Riksbank’s ability to maintain a fixed exchange rate against the precursor to the euro, the ecu, was in doubt. Companies wanted to eliminate the risk by acquiring other currencies in case the value of the crown fell, which happened on November 19.
When Bildt and his government won the election in 1991, they and the Social Democrats were so in agreement that they jointly developed crisis packages and allowed interest rates to rise to 500% in an attempt to save the fixed exchange rate from imminent collapse.
In September 1992, the British pound fell, which should have been a warning sign not to free the crown. If the British pound, which had a larger reserve than Sweden, couldn’t withstand the currency storm, it was unlikely that the crown would either. By devaluing the currency, increasing taxes, and implementing other measures that suppressed real wages at the expense of profits, the plan was to create favorable conditions for the export industry in the hope that it would act as an engine for the entire economy. The export industry did improve, but the rest of the economy stagnated.
The Bildt government continued to pursue neoliberal policies and pushed Sweden into the largest economic depression in modern history.
Mass unemployment and nearly 100,000 corporate bankruptcies. Carl Bildt has admitted in hindsight that it was the desire to qualify for the future Economic and Monetary Union (EMU) that led to the excessive defense of the crown. He later, in publications such as The Arab Times, boasted about his role as the head of the government during the Swedish crisis of 1991-1994. Tomas Fischer, a financier, commented in the October issue of Fokus in 2008:
”Since the crisis was mainly caused by Carl Bildt’s stubborn refusal to abandon the fixed exchange rate of the crown, the arsonist now proudly parades his skills as the chief of the fire department.”
In a report from the Democracy Inquiry with the title: ”What Happened to Sweden’s Economy?” Torsten Sverrenius, a journalist and author with a specialty in economics and economic history, stated that it was a scandal that Swedish real wages for full-time work had remained almost unchanged since 1975, while the export industry, banks, and shareholders made larger profits than in nearly all other countries. He believed that such a policy couldn’t have been implemented if citizens had been aware of what was happening. He described how a small but influential group of Swedish politicians and economists pursued fundamentally flawed economic policies, which were later promoted by uncritical journalists.
Through a clever PR campaign, the public and various politicians were convinced that the cause of the chaos was the welfare state and that the best solution was neoliberal reforms. Politicians used the opportunity to explain that Sweden had to join the EU to avoid faring worse. And the trick worked. The foundation for dismantling the Swedish welfare system had been laid, and a previously clear opposition to EU membership for Sweden was transformed into a victory for EU supporters.
Now, self-determination would gradually be abandoned and handed over to the bureaucrats in the future ”United States of Europe,” a dream for centralizing power-mongers but a nightmare for ordinary citizens.
Or, as Sven Rydenfelt, also known as the first Swedish neoliberal, put it: ”The dream of the EU is the dream of a centrally controlled collectivist superstate in which free nations will be integrated. During the slightly more than a third of a century that the EU has existed, it has enacted laws at such a pace that there are now 12,000 pages of legal text, which means detailed regulation of most areas of life.”
Ironically, it was precisely the neoliberal shock therapy that had paved the way for Sweden’s EU membership.
The Swedish Coup