Neil Irwin has a nice piece in today’s WaPo comparing how Sweden did in the global recession compared with other advanced economies. Answer: a lot better.
The piece cites better fiscal and monetary policy (the former, more prepared for a downturn; the latter, a more aggressive policy stance); a deeper, more reactive safety net; flexible currency; and a more risk-averse banking system.
I wonder if there’s something else going on here too: Sweden’s more equal income distribution. Just a hypothesis, but it does seem that one of the things that’s weighed on American growth in recent decades is this phenomenon where more concentrated income growth translates into more narrowly based demand.
When most of the growth ends up in the top few percentiles of the income or wealth scale, Nordstrom’s does well at one end of the barbell economy and Walmart prospers at the other end. But there’s a gap in consumption, investment, and demand in general in the broad middle. And this dynamic could make it tougher for a recovery to take hold among the broad American middle class.
Questions like these about the relationship between growth and equity form an important and exciting new area of economic inquiry. Check out, e.g., the Center for Equitable Growth led by inequality scholar Emmanuel Saez at UC Berkeley.