Sweden's Saab story, and ours

By Derek Thompson

Finally, some tough talk on car companies: "When I see that (our nation's car company) has been running at a loss for so many years it would be irresponsible for me to stand here and say, sure, we are going to use the taxpayers' money in this way. I don't think I was elected to do that."

Oh wait, that's not a free market rogue in the Obama administration. That's the industry minister of Sweden -- Sweden! -- on allowing auto maker Saab to persue "reorganization," or their version of Chapter 11 bankruptcy, this morning in the New York Times. What's Adam Smith doing in Scandinavia?

First, this isn't your father's (or older brother's) Sweden, anymore. After years of strong economic growth without increased employment, Sweden's Social Democratic Party was swept from power in the 2006 national elections, and a coalition of center-right officials filled the gap. So what you're hearing isn't the re-education of Swedish socialism - it's a completely new government.

Second, this isn't necessarily a blow to Swedish nationalism because Saab isn't entirely of Swedish nationality, anymore. General Motors bought a 50% stake in 1990 and proceeded to "reinvent" (GM-speak for "ruin") the product, leading to truly dismal 2007 and 2008 sales.
 
In other words, GM Americanized Sweden's car company to increase profits, and now we've Swedenized our economy to bail it out. A world without walls!

This raises a larger point. As recently as this morning, GM bondholders expressed grave doubts about the company's ability to stay afloat despite more than $13 billion of loans. As the AIG bonus fiasco showed, the American's public's appetite for outrage is never sated, and if it begins to view federal loans to Detroit like paper shoveled into an inferno, we'll see more people siding with Swedish government, and even more running from what was, until, recently, the Swedish model.

This article available online at:

http://www.theatlantic.com/business/archive/2009/03/swedens-saab-story-and-ours/1729/