The Bright Coast

Progressive Thoughts from San Diego Alums on Law, Politics, and Culture

Looking to our Nordic Friends… for economic help?

Posted by progressivethink on September 23, 2008

One thing I think I can never understand is the reluctance of our government to look at foreign models that would be applicable to our internal problems.  I would think it would make only perfect sense to look to a country (or countries) who had gone through a similar situation, applied a solution and had concrete results.  In all manner of disciplines from scientific research, corporation R&D and architecture; professionals apply their own twist on the ideas of others. Why not do the same in government?

Americans seem unable to force themselves to look to the achievements of others, applying the successful aspects, while learning from the mistakes that were made.  For example, in regard to healthcare, I’m sure there are many countries we could learn from when determining the most effective way to implement an all encompassing healthcare plan for our citizens.  We could look at the successful elements, implement those, and seek solutions to the elements that have not worked so well.  This same approach is also applicable to the current economic crisis in our country.  I’m not sure people understand the severity of what we face here.  Without a bailout of these rotten mortgage assets by the government, the financial system worldwide would steadily slide, financial firms falling like dominoes into bankruptcy and failure.  The government has stepped up quickly (although arguably they could have moved more quickly) to stop a collapse of our economy which would be on the level of the Great Depression.

Now, since we’ve established the necessity of having the government bail out these assets from the banks, we also need to make sure the taxpayers suffer as little loss, and take as little of the risk as possible.  Hmm, where could we look to a model in this situation?  Surely something similar has not happened before?  Obviously we should just make up a plan from scratch, maybe throw in some clauses in the bill that will attempt to limit some CEO from receiving a golden parachute.  Well, the answer is there is a model, a similar western country (albeit with a functioning comprehensive healthcare system for all, and one of the happiest populations in the world).  That country is Sweden!

Yes, Sweden, one of our Nordic friends, has previously undergone a similar financial crisis (although admittedly on a smaller scale) in the early 1990s.  Their banks became insolvent after rampant property investment… sound familiar?  The country did not just bail out the bad debts of the bank, they forced the banks to give them equity in the bank, which made the government an owner.  As a result this may have hurt the shareholders, but this gave the government and hence the taxpayers, a better chance of getting paid off.  Shareholders took the risk of investing, and should pay the price, not the taxpayers.  After the takeover, as the distressed assets were sold, the taxpayers were paid with the profits.  Additionally, the government received further income from the sale of its shares on the market later on.  As a result, the bailout ended up costing the government almost 0% of its GDP.

Just another example where the Congress should not be so shortsighted, and beholden to financial companies.  These companies made the mistake, they should pay the price for the taxpayers to bail them out.  Throwing in some barriers to golden parachutes wouldn’t hurt either.  Hopefully, the Congress will look to our Swedish friends to help protect the American taxpayer.

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One Response to “Looking to our Nordic Friends… for economic help?”

  1. Bill said

    Here’s another way we could follow Sweden’s lead…
    http://news.xinhuanet.com/english/2008-09/09/content_9866063.htm

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