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A Landslide Victory! The swedish No to the Euro

Sunday the 14th of September 2003 will be remembered as an important date in the political history of Europe. This was the day for the Swedish euro referendum. It was a landslide victory for the No Campaign. 55.9 % of the Swedes voted against Sweden joining the Economic and Monetary Union, EMU, and having the euro as its currency. Only 42.0 % voted yes. And with the unusually high turnout rate – more than 83 % – the democratic legitimicy of the result cannot be questioned

by Tony Johansson

Workers, women and the young against the political and economic elite

The president of the Swedish blue collour workers confederation (LO), Wanja Lundby Vedin – who, though her organisation stood neutral in the referendum, in fact was for joining the euro – admitted after the referendum that, ”the result in the referendum follows a clear class pattern. High income groups voted yes – low income groups voted no.” This is an important recognition. Among other things it shows that the political elite and among these the leaders of the workers movement is not representative in this very important question for those who once put them into power and which they should represent.

Let us compare some of the figures that the exit poll (VALU) showed with how the political elite acted.

• Among those who sympathized with the social democrats, 53 per cent voted no, while 45 per cent voted yes. Compare this to the fact that three out of four of the social democratic MP:s is in favour of Sweden joining the euro. According to another poll 70 per cent of the social democratic local and regional commissioner worked for the yes campaign, while only 3.5 per cent worked for the no campaign.

• Among members of the blue collour workers confederation (LO) 69 percent voted no, among unemployed two out of three. At the same time the president of LO was in favour of the euro (even though she claimed she was neuatral). The unions for metal workers, paper industry workers and industry workers were very active in the yes campaign.

• Among women 62 per cent voted no. Though the social democratic women´s organisation had an members refererenderum a couple of years ago, and 66 per cent of the members voted no, both the former and the newly elected chair person worked for the yes campaign.

• Among people in the age of 18-21 years 70 per cent voted no, and a poll made during the summer confirmed the same figueres for people younger than 18 years. But the Social democratic youth organization (SSU) said yes to the euro on its congress in august, and thereby confirmed the decision made by its congress in 2001.

When Tage Erlander – legendary socialdemocratic prime minister and party leader, during a period of 23 years (1946-69) – whithdrew he gave his successor – Olof Palme – one advice more important than any other. He said: ”Listen to the movement.” One could only have whished for, that this very simple advice would have been passed on to today´s leadership.

During the campaign most of the political and economic elite stood on the same side. Only three smaller parties – the green party, the center party and the left party – was on the no side. On the yes side former enemies lined up: the moderatates (a right wing party which includes concervatives as well as liberals and neoliberals), the Social democratic party, the Christian Democrats and the Liberals. Most of the financing of the yes side came from the Enterprisers organisation, Svenskt Näringsliv. The numbers differs, but the lowest figure mentioned, is that Svenskt Näringsliv spent at least 200 million Swedish Crones (SEK), but a more accurate and often mention figure is 500 millions. Then add the allmost 60 millions that the yes side recieved from the state, and the figure is 260-560 million SEK. Compare this to the total budget for the no side: 55 million SEK. We can then calculate that the relation was at least 4.7:1 and proberbly as high as 10.2:1. The lower figure means that the yes side spent more than twice as much per swedish voter, as the Bush campaign spent per american voter during the last president election campaign.

Disdainful losers

On the election night and the week after several representatives for the yes side tried to explain the result. Some of those – especially politicians in Stockholm and the editorial articles in conservative/liberal and Stockholm papers – showed real disdain against ordinary people and against the countryside, especially against the northern parts of Sweden. The former party leader of the Moderates, Ulf Adelsohn, said on the election night: ”Of course it will be a no, a clear no. With this people it cannot become anything else. They sit in Borlänge and wait for more welfare.” Richard Schwarts cried out, in the second biggest morning paper in Sweden: ”Who thought of the stupid idea to have referendum about the euro”; it was stupid because the question was a ”to complicated question to leave in the hands of direct democracy”, and he ends by writing about ”the stupid – and ignorant – underclass”.

Other explained the differences in opinion between the people and the political and economic elite by saying that it was a question of knowledge. The concequence of this line of arguing is that if the people had had the same knowledge as the political and economic elite, then it would have become a landslide victory for the yes campaign. Concequently, the conclusion follows, the yes side didn´t manage to communicate their arguments.

First of all, it is obvious that there exists very clear geographical differencies. In none of the six northern districts, did the yes side recieve more than 29.8 per cent. And in Stockholm 56.1 per cent voted yes. But a relatively small part of the swedish population lives in the countryside and in the northern part of Sweden. The yes side won two regions: Skåne (Southern part of Sweden) and Stockholm. But these two heavy populated regions also contains 869 809 no voters.Compare this to the fact that in the six northern district 674 796 people voted no. It should als be mentioned that the no side won the third heavy populated region - Västra Götaland (With Gothenburg as the main city). In these three regions a total of 1430 797 people voted no. This is 44 per cent of all no voters in Sweden.

Second, it is also disdainful to put forward the argument that the no voters is ignorant and the wise choice is yes. To claim that is not only to deny that people can understand complicated matters and that they can make rational choice, but also if you take this stand, then you have in a way taken the same stand as Richard Schwartz, quaoted above, even if you have given the argument a more respectable disguise. The conslusion of the argument is that the lower income the more ignorant.

A rational Choice

The Social Democratic no organisation argued during and after the campaign, that the ”class – voting” is rational. It has nothing to do with any claimed lack of knowledge. It´s rational for workers, women, low income groups etc to vote no. This is due to who runs the biggest risk. It is the social groups that runs the biggest risk by Sweden joining the EMU, who voted no. A Swedish euro membership threatens to create mass unemployment and in the long run EMU can force EU to develop a common fiscal policy and therby a centralized social policy. This would threaten the swedish welfare model. And those who would lose most if this happens is workers and especially women and other low income groups.

When the monetary policy becomes centralized, controlled from Frankfurt and depending on the average development in the whole euro zone, then it becomes more difficult for one member state to regulate its conjuncture. The floating Swedish crona and its exchange rate functions as a shock absorber. In times of prosperity the currency appreciates and thereby counteract that the economy becomes overheated, and in times of recession the currency depreciates and thereby counteract that the economy goes into a crise. A flexible exchange rate – which is an important part in the foundation of classical keynsianism – stabilize the labour market and is important for avoiding mass unemployment.

Also the common interest rate is destabilizing. The nominal interest rate is set after the average expected future inflation rate, and the goal of the European Central Bank is to stabilize the average inflation in the range of 0-2 per cent per year. But the only case this common interest rate for every member country is as good as having its own interest rate, is when every member country have exactly the same expected future inflation rate as the whole euro zone´s average expected future inflation rate. This can theoretically happen, but in the real world it will not. In the real world Ireland is in prosperity at the same time as Germany is in recession. Ireland would need a higher nominal interest rate and Germany would need a lower nominal interest rate. It is not possible to please them both. And the consquece is that while Germany is going into a depression, Ireland becomes overheated, with a very high inflation rate, which in the long run threatens to undermine Ireland´s competetiveness. In fact I would not be surprised if Ireland a couple of years from now goes into a recession like the one Sweden had in the beginning of the 90´s, with the difference that the Irish will not have a national currency that can depreciate.

If we to this add another dimension – real interest rates – it becomes clear that the common nominal interest rate, not only makes it difficult for member states to regulate its conjuncture, but is destabilizing for the whole euro economy. The real interest rate is the nominal interest rate minus the inflation rate. As a rule of thumb the inflation rate is the highest in prosperity and the lowest in recession. This means that the member countries that is in recession – for example Germany – has the highest real interest rate, while the member countries that is in prosperity has the lowest, perhaps even negative, real interest rates – for example Ireland. It should be the other way around. This destabilize the economy, labour markets and the public economy, and makes it very hard to combat mass unemployment.

It is not a coincidence that those groups that have the most exposed position in the labour market to a very high extent voted no. This was a rational choice. These groups can not afford to take the risk of high unemployment and deterioration of the welfare system.

The Future of Europe

One can raise the objection that these problems also can be observed in every country. One part of a country can be in recession at same time as the rest of the country is in prosperity. This is true, but in ordinary states we usually have well integrated labour markets with a high degree of internal migration. This works as a kind of shock observer. People move and seek jobs in other parts of the country. But as important as this is that ordinary states has a central budget, and by the tax- and welfare system resources is redistributed. Put in a simple way money is transfered autamatically from the parts of a country that is better of to the parts that have problems.

If the Euro zone is to function well, this have to be created. Labour migration between member states have to be created. If people wants to move this is not a problem, but if people don´t want to leave their home countries it is a very big social problem. And a common fiscal policy have to be created, and if this are to work autamitically it means that we also have to centralize taxes and welfare policy. From a Swedish point of view this is not an attractive development. The swedish tax- and welfare system, has created the lowest income differences in the world and a society with the highest degree of gender equality in the world. Swedish worker´s movement would happily export this system, but we will never gamble about it.

It is a logic step that a common currency creates a common fiscal policy. But it is not only a logic step, it is also the lesson that history teaches us. There exists no other example of a monetary union that not also is a fiscal union. Therefore the monetary union should be looked upon as one of several building stones in the creation of the United States of Europe. The new constitution transfer more power to the european parliment, more questions will be decided by majority votes in the council, it lays the ground for a more centralized common foreign policy and migration policy. At the same time the militarization of the union accelarates.

The former frensh president, Francois Mitterand, once said that the European project is like riding a bike, you have to keep moving, otherwise you´ll fall off. I believe this in fact is wrong, and this way of looking upon Europe threatens cooperation in Europe and democracy in the member states. But at the same time I am aware of that this is the way that the political and economic elite looks upon the European project. Therefore the Swedish referendum is an important landmark. The swedish people said no – no more. We will not jeopardize the welfare and our independence and existence as a democracy. Let´s hope that the decesion of the people of Sweden will influence the future of Europe, in a way that EU starts moving away from the path that leads to the United states of Europé.

Tony Johansson was the campaign director for Social democrats against EMU, and is now studying economic history and economics at Lund University.

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