Larry Liu An Economic Explanation for the Riots in Sweden Introduction What is going on in Sweden? Riots that started in Husby, a suburb north of the capital in Stockholm, spread to ten more suburbs. Cars were set on fire, and police were attacked by mostly angry, immigrant youth. It is unemployment and a lack of education among the young that are the proximate causes for the enormous riots that only recently subsided. In Husby, 60% of the residents were born outside of Sweden, and their unemployment rate is twice the national average. Youth unemployment is 23.6%, which is three times the unemployment rate for the country. (Magnusson and Carlstrom 2013). The issue of unemployment is compounded by the fact that a disproportionate share of the unemployed are foreign-born. The foreign-born Swedish unemployment rate is 16% compared to 6% for native-born Swedes (Pollard and O'Connor 2013). One study finds that after ten years of stay 27% of immigrant women and 23% of immigrant men remained unemployed, which is among the lowest rates of employment in Europe (Local 2012b). In this political turmoil, in a country that is considered to be not only among the wealthiest, but the most socially peaceful and egalitarian, two major explanations have been found that supposedly are the causes of the riots. I will state these two major explanations, and will offer reasons why they are not sufficient or not accurate to explain the riots. I will offer a third explanation in order to explain the riots. Immigration Policies One explanation is that the Swedish government made a mistake in implementing very liberal immigration and asylum laws, because most of the rioters were lowly qualified immigrants and asylum seekers1, who were unemployed and had no future. 15% of the Swedish population is now foreign-born (Pollard and O'Connor 2013). Illustration 1 on the left shows an increase in the absolute number of immigration, which had been continuously rising at least since the 1980s, approaching 100,000 in 2007. The solution offered by this group of nationalists is that Sweden should put in place tougher immigration laws, and only attract the well-educated and well-qualified people, who are in high demand in the labor market (Billström 2012; RT 2013). This had been the traditional approach of countries Illustration 1: Immigration to Sweden 1946-2007 like Canada and the US, and it supposedly works out better for 1 For the rest of the paper, I will use the terms 'immigrant' and 'refugee' interchangeably, because these two groups are linked so closely together, though it must emphasized that a significant share of Swedish intake of foreigners derives from an intake of refugees rather than immigrants. them.2 Many Swedish people, who are repelled by the high unemployment rate of immigrants and the lack of safety in their neighborhoods, are switching their political allegiance to the nationalist Sweden Democrats, who received nearly 6% of the vote in 2010 (Traynor 2010). According to a recent poll in November 2012, the Sweden Democrats would receive 11.2% of the vote (Local 2012a), indicating their increased popularity. Indeed, immigration has become a heated issue. In 2010, 19.1% of the Swedish population were of foreign descent.3 While labor force migration has played an important role in Sweden's immigration policy between the end of World War II and the early 1970s, there had been a sharp upturn in family reunification migration and refugees seeking asylum in Sweden. Sweden has a long tradition of granting asylum to people of the troubled parts of the world. Polish Jews fleeing antisemitism and Greeks fleeing dictatorship poured in during the late-1960s. Pro-Allende Chileans came in the 1970s. Kurdish nationalists entered in the 1980s. Somalis and Bosnians entered during the 1990s (Caldwell 2006). The most recent wave of refugees in the 2000s came from war-torn Iraq, Somalia, Ethiopia, and Afghanistan (SCB 2013b). Iraqis in Sweden number 125,000 people and are the second largest immigrant community (after the Finnish) (Gysin 2013). Sweden takes on a large proportion of the refugees. Iraqi citizens have claimed asylum in 89 different countries, but half of those claims went to Sweden. The city of Sodertalje alone, numbering 83,000 people, took on more refugees than Canada and the US combined (NBC News 2008). The social problems that this immigration and asylum policy have caused are enormous. Bergsjon, a small city close to Gothenburg, numbering 14,500 residents has a foreign-born population of about 70%, while 40% of the population is on welfare, and less than half are employed in the labor market (Caldwell 2006). In Rosengard, close to Malmo, 62.3% of all children grow up in poverty (Salonen 2012, 8), and 96.4% of all children of that city are of foreign background (ibid., 51). Caught up in the margins of society, a portion of the youth turns to criminal gangs and even Islamic groups. Native Swedes are repelled from these social problems and practice housing and school segregation (Heape 2008), which arguably produces poorer educational results among immigrant communities and more social exclusion (Szulkin and Jonsson 2007). Even when the government tries to integrate immigrants with job training schemes, a small percentage of those go on to find a job (Local 2013c). One reason why immigrants and refugees find it difficult to attain a job is because they are discriminated against by their employer and not likely to be hired with a foreign-sounding name (Carlsson and Rooth 2008; Attström 2007). Even when immigrants do attain jobs, their income is lower than the native Swedish population. The income of non-European immigrants is 36% lower than that of native-born Swedes (Economist 2013b). Even though the consensus in the government has been to keep a very liberal immigration and asylum policy, immigration minister Tobias Billstrom claims that Sweden's intake of immigrants is “not sustainable” (Scrutton and Johnson 2013). It is assumed that the riots can be explained by greater unemployment among especially immigrants, and that Sweden's loose immigration policies can then account for the greater violence. The question that arises is whether the riots can be exclusively linked to Sweden's immigration policies. The government has certainly raised the number of refugees and immigrants in Sweden, perhaps beyond what the country could reasonably bear. The crucial mistake of the Swedish government was to permit the entry of so many refugees without any regard to how they could be integrated into the labor market. This issue of foreigner unemployment became salient since the economic crisis of the 1990s, when the unemployment rate increased (Lemaître 2007). Asylum granted in large waves undermines any realistic chances for social integration. Swedes being overwhelmed by so many refugees and the poor conditions in these neighborhoods, often move out, leading to segregation in housing and education, 2 Not necessarily true, because immigrants to Canada since the 1980s have consistently done poorer than native Canadians. They have lower incomes even if their education level is better (Picot, Hou and Coulombe 2007). 3 Sweden.se. “Migration in Sweden.” http://www.sweden.se/eng/Home/Society/Migration/ compounding poverty, social exclusion and violence in the refugee-dominated neighborhoods (Gibney and Hansen 2005, 432). There is no doubt that if the Swedish government intends to counter the social tension in the immigrant communities, it needs to revamp its immigration policies and either reduce the number of refugees accepted to the country, or at least expand job training and job programs to those refugees to minimize their peripheral labor status. But I would also contend that immigration, while being a valid cause for the riots is not the only cause. The rising tide of immigrants and refugees largely coincides with neoliberal policies that had begun to be implemented since Sweden's economic crisis in the 1990s. The elevated unemployment rate and increased job insecurity has added more fuel to the social discontent of the marginalized immigrant communities. The claim about the changing economic framework, which immediately accounts for the higher unemployment rate (currently at 8.8%- Local 2013b) and the greater social discontent particularly in immigrant communities, will be elaborated on in the later paragraphs. High-Wage Policies The second explanation for the riots in the Swedish cities that is linked to the higher unemployment rate, blames the unemployment status of immigrants on the high-wage and extensive social protection policies for the existing workforce (Siebert 1997; Rothschild 2013; Segerfeldt 2013; Svanborg-Sjövall 2013). The OECD, for example, argues that strong employment protection granted to permanent employees would inhibit employers from hiring workers, and that high minimum wages aided by collective-bargaining agreements would lock out many people from employment (OECD 2011b). This argument has been the leading mantra of many mainstream economists (e.g. Kearl et al. 1979; Solberg and Gill 1996; Gallaway 2010). The prescription has been that if labor markets could be made more flexible, if workers can be fired more easily, if they would move around geographically, if there was no collective bargaining, Illustration 2: Hourly Labor Costs, 2012 and if there was no minimum wage, then a free labor market will be created, which will finally drive away the scourge of high unemployment. Sweden with 41.90 Euro per hour ($53.90) has the highest average wages in Europe (Local 2013a; also consider Illustration 2 above ), but it has an 8.8% unemployment rate (Local 2013b), which is higher than Germany's 6.8% (RTE News 2013). Since Germany does not have a minimum wage, allowing some workers in Germany to be paid as little as 55 cents an hour (Marsh and Hansen 2012), free-market economists are likely to proclaim that the job success of Germany is tied to the low wages that may be paid to workers, which produces an incentive for hiring.4 The argument of the economists is not sustainable. First, Germany's phenomenal low-wage sector has not continuously kept the unemployment rate low. Between 1997 and 2009, Sweden had a lower unemployment rate than Germany.5 Second, while overall wages in Sweden are high compared to other European 4 Wages in Germany have been held low relative to the productivity gains throughout the 2000s. Wages have not substantially increased since the 1990s. Consider Brenke (2009); Pop (2013) 5 Google Public Data. “Unemployment Rate- Seasonally Adjusted Data.” https://www.google.com/publicdata/explore? ds=z8o7pt6rd5uqa6_&met_y=unemployment_rate&hl=en&dl=en&idim=country:de:fr:uk#! countries, it has also been among the most productive. Sweden's labor productivity is 45 Euros per hour worked as of 2012, compared to Germany's 42.4 Euros.6 Higher productivity generally allow higher wages. Third, greater labor flexibility contributes nothing to reduced unemployment. A comparison between Sweden and Germany, generally regarded as having less flexible labor markets, with Great Britain, generally regarded as having very flexible labor markets, shows that Great Britain has a higher unemployment rate than the first two countries (Nickell 1997, 57). Therefore, there must be other factors besides wages that determine hiring. But aside from the European examples the important claim that needs to be examined is whether keeping wages low will stimulate employment. While it is true that if one employer cuts wages to sell its product cheaper and more competitively in the market, it will have rising demand with rising employment, it can not be true for the whole economy. If all the companies and all the states are slashing wages at the same time, such as would be the case during a recession, then the overall impact on the economy is depressive, because so much purchasing power is removed from the economy at the same time (Krugman 2009; Barone 2004, 112). In that case businesses, observing a drop in overall demand, have no incentive to invest their existing profits in expanded production and hiring, no matter how much they make in profits. This perhaps explains why Apple is so aggressively using its $145 billion cash pile to purchase its own shares rather than make new plant investments (Mead, Stillwell and Gangar 2013). Lower wages do not contribute to higher employment levels, but the opposite. If Sweden were to participate in the hunt for cheap wages, it would add fuel to the fire of lower living standards without an increase in employment. The social suffering a wage cut would induce in the country with the overall highest wage would also be so enormous that it might cause more social instability and unrest than what we currently see with the immigrant riots. Neoliberalism in Sweden Now that I have examined the two possible expanations for the riots in Sweden, I want to offer a third explanation. The riots are caused by the growing trend toward neoliberalization in Sweden, and the attendant abandonment of full employment, the reduced economic security of the working class, the expanding privatization of public goods, the increase in social and economic inequality and the expansion of temporary labor following the economic crisis of the 1990s.7 I will proceed by defining the term neoliberalism as it is applied in contemporary literature, then I will describe the peculiarities of the economic history of Sweden, with a special emphasis on the aftermath of the crisis in the 1990s, and will finally specify the content of neoliberal reforms in Sweden, linking the riots to these changes in the political-economic framework. Neoliberalism can be defined on a philosophical level as a set of political beliefs that “the only legitimate purpose of the state is to safeguard individual, especially commercial, liberty, as well as strong private property rights” (Thorsen and Lie 2006, 14). On a political level it can be defined as “a theory of political economic practices that proposes that human well-being can best be advanced by liberating individual entrepreneurial freedoms and skills within an institutional framework characterized by strong private property rights, free markets and free trade” (Harvey 2005, 2).8 Following this ideology, the market mechanism should increasingly determine social relationships. Areas of social life that previously did not involve a market relationship, such as in ctype=l&strail=false&bcs=d&nselm=h&met_y=unemployment_rate&fdim_y=seasonality:sa&scale_y=lin&ind_y=false &rdim=country_group&idim=country:de:se&ifdim=country_group&hl=en_US&dl=en&ind=false 6 Eurostat, “Labor Productivity per Hour Worked.” http://epp.eurostat.ec.europa.eu/portal/page/portal/product_details/dataset?p_product_code=TSDEC310 7 This argument is also made by Schierup and Alund (2011). 8 For a more detailed discussion of neoliberalism and the general principles of liberalism, consider the works of Mises (1962); Hayek (1979); Nozick (1974). For a survey of the literature on neoliberalism, consider Centeno and Cohen (2012) the public education, public health care, or the social security system are increasingly brought into the market framework, partly by privatizations (ibid.). Long-standing job security, high benefits and high wages for workers are also reduced. Corporate profitability is restored and less of it taxed. Capital controls and regulations, a traditional Keynesian policy tool, are removed, allowing free movement of capital (Kotz 2002). Sweden has been rather a latecomer in the process of neoliberalization, but it has begun the process in the 1990s (Harvey 2005, 3). But how did Sweden get from one of the most social-democratic states to a not so social-democratic state? The context of the economic history of Sweden is relevant. Sweden developed from a largely agricultural economy into an industrial economy in the course of the 19th century. The country was unscathed from both world wars, and benefited from trading with the warring countries. Sweden participated in the Golden Age of Growth of the post-World War II era, when the European economies recovered from the war and grew very quickly (Schön 2010). The period of industrialization was also marked by an expansion of the social insurance schemes. Sweden implemented a universal pension insurance scheme in 1913, compulsory accident insurance in 1916 (Edebalk 2000), and universal health insurance in 1955 (Sainsbury 2012, 83). Another cornerstone of what is referred to as the Swedish Model is a commitment to full employment. Throughout most of the post-War period, the unemployment rate was relatively low at about 2%, while labor participation rate (with regard to females) was high thanks to active labor market policies (ibid., 84). Sweden was also among the most equal countries in the world. The country practiced a policy of wage compression between 1800 and 1970 to hold the wages of most workers on a similar level (Bergh 2011, 11). Decreasing inequality coincided with a strong labor movement. By the mid-20th century, 80% of the blue collar workers were covered by a union, and white-collar workers reached 80% coverage by the 1970s (Lundh 2002). The greatest push for relatively equal wages- regardless of worker productivity and the company's ability to pay- happened in the 1960s (Hibbs and Locking 2000). Wage compression led to soaring profits among the most productive industries (Schön 2010). The strong wage compression between 1958 and 1982 was the result of coordinated central bargaining, where wages were centrally negotiated across all industries (Bergh 2011, 13). Central wage bargaining followed the model of two economists, Gösta Rehn and Rudolf Meidner, who besides arguing for wage equality also argued that the government should pursue an interventionist macroeconomic policy (e.g. via capital controls) to maintain full employment, price stability and economic growth (Erixon 2008). Strong unions also helped the cause of the social democratic party. The Swedish Social Democratic Party consistenly received between 4055% of the votes in all elections between 1930 and 1990, making it among the most successful political parties in the Western democratic world (Therborn 1996). The height of social democratic power was the period between 1932 and 1976, when the party was continuously in power, and promoted their concept of folkshemmet, or “people's home”. The social democratic prime minister Per Albin Hansson (1932-1936, 1936-1946), the main architect of folkshemmet, had argued that Sweden should overcome the traditional class struggle via an equal society (Berkling 1982, 227-230; Tilton 1990, 126-127). One application of this ambitious agenda was the Million Homes Program, which had the objective to build one million housing units between 1965 and 1974 and which eliminated the housing shortage (Hall and Viden 2005). Rehn-Meidner's macroeconomic model that maintained full employment and economic growth on behalf of both workers and capitalists continued well into the 1970s (Erixon 2008). By the 1970s, the established class consensus between capitalists and workers fell apart. Industries such as steel, pulp and paper, shipbuilding and mechanical engineering ran into a crisis, facing greater global competition (Schön 2010). The Swedish shipbuilding industry that had received huge public subsidies built up an overcapacity (Ergungor 2013). Stagflation of the 1970s, which was caused by declining productivity growth and the oil supply shock from the OPEC countries, challenged the macroeconomic framework of government intervention on behalf of economic growth and rising wages (Ryner 1999, 41). Meidner's proposal to direct excess profits into a fund to create more jobs and raise workers' wages in 1976 was soundly rejected by capitalists (Berman 2006). Capitalists were emboldened to challenge the social contract with workers, because new computer technologies substituted capital for labor and because capital could be moved offshore (Ryner 1999, 41-42). One modern example of this shift in employer policy is Ericsson, which reduced its employees from 31,000 in 2001 to 18,000 in 2013 due to increased automation (Economist 2013a). Capitalists turning against central wage bargaining9 convinced the engineering and metal union in 1983 to negotiate a separate contract, which effectively dismantled central bargaining in favor of individual firm and sector bargaining (Pontusson and Swenson 1996; Hibbs and Locking 2000). Central bargaining was completely removed in 1992 (Ryner 1999, 59). The government responded to the economic changes with an expansion of the welfare state and high taxes on the working class, even using these tax revenues to subsidize capital investments (Steinmo 2001). However, this policy backfired, because capitalists facing huge wage cost increases became even more eager to move capital abroad. To prevent unemployment, the government stepped in and created many public-sector jobs, especially in the service sector (Whyman 2003, 104). These public workers demanded strong wage increases, which led to inflationary pressures (cf. Table 1 below). In order to remain competitive abroad and maintain full employment at home, the government continuously devalued the krona (Steinmo 2001; Ryner 1999, 56). Year Inflation rate (average per year in per cent) Year Inflation rate (average per year in per cent) 1970-75 7.8 1991-95 4.2 1976-80 10.5 1996-2000 0.5 1981-85 9 2001-05 1.5 1986-90 6.2 2006-12 1.6 Table 1: Inflation Rate Sweden, 1970-2012, Source: SCB The government's economic policy of the 1980s, was dominated by the attempt to control unemployment and inflation by restraining the wage demands of employees and devalue the currency to restore company profitability. It was hoped that greater profitability would increase GDP, and finance real wage increases without inflation, while keeping the unemployment rate low. However, rather than boosting the domestic economy and employee wages/employment, restored profitability induced Swedish firms to increase their investments outside the country, and it increased the deficit in the current account (Ryner 1999, 60). In 1985, the government deregulated the capital and money markets, and in 1989 it deregulated the foreign exchange market, and pledged to maintain restrictive monetary policies to restrain the previous wage increase and inflationary policy (ibid., 62; Lindvall 2006, 254). The unions went in strong opposition to the government policies and continued to push for a 'solidaristic wage policy'. Due to the now deregulated capital markets, Sweden subsequently suffered from enormous capital flight (cf. Table 2 next page). 9 The decentralization in wage bargaining and the attendant shift in the Swedish political economy is discussed in Pontusson and Swensson (1996). Year Current Account Balance (in billion US$) Year Current Account Balance (in billion US$) 1980 -4.322 1996 9.63 1981 -2.852 1997 10.326 1982 -3.442 1998 9.693 1983 -0.747 1999 10.633 1984 0.708 2000 10.273 1985 -1.085 2001 11.401 1986 0.046 2002 11.779 1987 -0.015 2003 21.953 1988 -0.562 2004 23.732 1989 -3.106 2005 25.073 1990 -6.242 2006 33.609 1991 -4.711 2007 42.764 1992 -7.371 2008 42.193 1993 -2.594 2009 28.435 1994 2.364 2010 29.007 1995 8.426 Table 2: Sweden's Current Acccount Balance 1980-2010; Source: Indexmundi Foreign direct investment as percentage of business investment of Swedish companies increased from 10% in 1985 to 28% in 1989 (Whyman 2003, 96). Rising wage demands and capital flight led to further inflationary pressures, reaching a high of 10.5% in 1990 (SCB 2013a). The government responded with cuts to the marginal income tax rate to 50% in 1991, explaining greater inequality (Steinmo 2001, 13). In its pursuit of low inflation targets, the government also abandoned its commitment to full employment (Lindvall 2006, 253). The repeal of capital controls led to a real estate bubble during the late 1980s and early 1990s. It collapsed with a major recession in 1991. The GDP decreased by 5% between 199193 (Westerlund 2008). Troubled banks were bailed out by the government, costing the taxpayers 2% of GDP (Englund 1999); greater unemployment compensation and the tax cuts in a recessionary environment increased the national debt from 45% in 1989 to 100 % in 1994 (Ryner 1999, 64). Sweden experienced a banking, currency and fiscal crisis at the same time (Jonung 2011). During the recession, the Illustration 3: Sweden Unemployment Rate 1976unemployment rate increased from 1.75% in 2010 1990 to 8.2% in 1993 (Westerlund 2008), and has stayed above the historical rates thereafter since the government essentially abandoned full employment (cf. Illustration 3 above). With its dedication to reduce inflation and allow unemployment rates to rise, the government had abandoned the Keynesian economic framework in favor of neoliberal orthodoxy (Whyman 2003, 98).10 In the 1990s, neoliberal policies were expanded. Another round of currency devaluation boosted the export sector, whose share of the GDP increased from 29.8% in 1990 to 51.3% in 2006. Following the speculative attacks on the krona, the Swedish government floated the currency in November 1992 (Jonung 2011). The government also embarked on austerity measures to reduce the debt that had been incurred as a result of helping out the banks and fighting the recession. The social democratic government cut 134 billion krona in spending in 1994. The social programs were not spared. A pension reform reduced pension payouts and tied the plans to the stock market, i.e. defined contribution plans (Westerlund 2008). Benefits critical to immigrants such as social assistance, family benefits, pensions and housing allowances were cut, though some of the cuts were restored by 1998 (Sainsbury 2012, 88). Social security spending as percentage of GDP declined from 16.5% in 1980 to 15.4% in 2006. At the same time taxes have been reduced. The state income tax was reduced from 7.92% of GDP in 1990 to 2.14% in 2005 (Ankarloo 2009, 37-40). Sweden reduced public spending from 67% of GDP in 1993 to 49% of GDP in 2013. The top marginal tax rate was reduced from 84% in 1983 to 57% in 2013. In 2013, the Swedish government cut the corporate-tax rate from 26.3% to 22%. The public debt is consolidated from 70% of GDP during the height of the recession in 1993 to 37% in 2010 (Economist 2013c). The current account deficit turned into a surplus, and reached $29 billion in 2010.11 The government deregulated and privatized the energy, telecom and postal services (Westerlund 2008). The privatizations resulted in a loss of public-sector jobs. Public sector employment declined from 423,000 in 1985 to 240,000 in 1996 (Ergungor 2013), affirming that the government would not be the employer of last resort to maintain full employment. The central government's control over the education system was transferred to municipalities (Lindvall 2006, 266). Housing policy was dismantled with the shutdown of the housing ministry in the early 1990s (ibid. 267). Health care has become increasingly privatized. 250 privately-run but publicly-funded clinics operate in the country, representing 24% of the country's health centers. That's up from 146 private clinics representing 14% of overall health centres in 2000. In addition, the country has 9 fully private, fee-forservice hospitals that operate parallel to the public system (Mason 2008). One fifth of the elderly care is in the hands of private venture capitalists (Olsson 2013). 500,000 Swedes are using private health insurance as of 2011 (Guibourg 2011). Profit-driven health services, benefiting shareholders and venture-capital firms, have increased inequities in the supply of primary health services, as rural and poor areas are losing access to care. Health promotion and disease prevention are avoided due to their lack of profitability. The total price of care at the privatized St Göran hospital was twice as high as compared to a public hospital in Stockholm. Private firms operating these health care facilities are hiding hundreds of millions of euros in tax shelters abroad (Dahlgren 2012).12 The government also undertook school privatizations. In 1992, Sweden implemented a voucher-type plan where municipalities would provide the same funding per pupil to either public schools or independent (private) schools. There were few restrictions for independent schools, and religious or for-profit schools were eligible to participate. At the beginning only about 2 percent of students chose 10 Fighting inflation to the detriment of full employment had been the leading mantra of neoliberals, which promptly succeeded with the high-interest rate policy of the late-1970s and 1980s by US Federal Reserve chairman, Paul Volcker (Hickel 2012). 11 Indexmundi. “Sweden's Current Account Balance.” http://www.indexmundi.com/sweden/current_account_balance.html 12 For a further assessment of the privatization of the Swedish health care system consider Anell, Glenngård and Merkur (2012). independent schools. However, starting with the early 2000s, independent school enrollments have expanded rapidly. By 2011-12 nearly a quarter of elementary and secondary students were in independent schools. Half of all students in the upper secondary schools in Stockholm were attending private schools at public expense (Ravitch 2013). Even though students' freedom of choice13 has increased, Sweden's education system has lost the highest rank in terms of educational equality (Tse 2010). Six private companies operate the private schools. The largest called Academia, which is owned by venture capital firm EQT, has over 100 schools and made record profits of $29 million in 2010. At the same time, Sweden is falling behind in the PISA tests (Olsson 2013). The PISA reading score of Swedish students dropped from 516 in 2000 to 497 in 2009, in mathematics from 510 to 494, and in science from 512 to 495 (Levin 2013). All these neoliberal reforms by the government have increased inequality. Sweden now has the fastest rising rate of inequality among OECD countries, even though it is still among the most equal countries. Income inequality in Sweden since 1979 has increased at the same rate as in the US (Gottschalk 1997). Inequality rose by one third between 1985 and the late 2000s, but with a GINI coefficient of 0.26, that is still lower than the OECD average of 0.31, Sweden remains relatively equal (cf. Illustration 4 below). Illustration 4: Sweden Income Inequality, Source: OECD The richest 1% increased their income share from 4% to 7%. Income tax and cash transfers to reduce inequality have been reduced. Transfer as share of household income dropped from 27% in 1995 to 16% in 2008 (OECD 2011a). Inequality growth has largely been driven by an increase in capital earnings among the wealthiest Swedes (Roine and Waldenström 2008). The richest 1% of Swedes hold an estimated 25-40% of the total wealth, much of it inherited (Sanandaji 2013). The inheritance tax was abolished in 2005. Since the mid-1980s, income from savings, private pensions or rentals, jumped 10% for the richest fifth of the population while falling by 1% for the poorest 20 percent. Sweden has the second-biggest rise in number of people at-risk of poverty after Bulgaria (Shanley 2012). Though with 16.1% of people at-risk of poverty, Sweden is still well below the European average of 24.2% (Eurostat 13 Freedom of choice and the voucher-system have been advocated by Milton Friedman (Friedman and Friedman 1980). 2013).The neoliberal reforms have also increased insecurity among the Swedish working class. Youth unemployment in Sweden is 26% as of 2009, one of the highest in the EU 15 (Ungdomsstyrelsens skrifter 2009, 25). While 8.8% of the population are currently unemployed, 30% of all unemployed people belong to the long-term unemployed. Government policies to raise unemployment benefit contributions, and abolish tax rebates for union workers, has led to a decline in unionization rates from 85% in 1993 to 70% in 2011 (Olsson 2013). Weaker union strength coincides with an increase in temporary work. By the early 1990s, workers on fixed-term contracts made up 10% of all employees, by the end of the decade they made up 16% (Holmlund and Storrie 2002). As of 2011, 16.5% of all Swedish employees were considered temporary (cf. Illustration 5 below). Illustration 5: Proportion of Employees with a Contract of Limited Duration 2011 Irregular migrants that make up about 25,000 to 35,000 people are engaged in precarious work, which is characterized by employment insecurity, poor working conditions and low pay (Jonsson and Nyberg 2009, 5-7). Following the 2008 economic downturn, there had been a small recovery in the Swedish economy, but as of 2012, 65,000 workers were dismissed due to redundancies (Johansson and Eriksson 2013). It is in the context of the greater economic insecurity following a wave of neoliberal policies coupled with an increase in asylum seekers and immigration, and their attendant neglect, that the riots have become likely. Discussion and Conclusion Despite this lengthy description linking neoliberal policy reforms with the riots, some people might argue that neoliberal reforms are not only restricted to Sweden, but are happening all across the world, especially in the other European countries. Despite the increase in inequality, Sweden still has the overall highest standard of living, and the level of inequality is still lower than in other industrialized countries, i.e. there is no economic reason for rioting. Since neoliberal policies are implemented across Europe, and riots are only taking place in Sweden, these neoliberal policies can not possibly have caused the riots. My counter-argument would be that riots are, of course, taking place in other countries, such as in France or Britain, which are also linked to angry immigrants and neoliberal policies. Secondly, and more importantly, the angry immigrants would be more likely to be angry in an economic environment that is hostile to them. It is certainly true that cultural arguments, such as ethnic discrimination in hiring and social relationships or even the unwillingness of the immigrants to undergo education and job training, contribute to the greater unemployment of immigrants. In fact, immigrants have been pushed into low-wage jobs (Schierup and Ålund 2011, 50). But if the condition of full employment held, as it did until the early 1990s (and especially in the post war decades between the 1950s to 1970s, when migrant workers were sought after to quell the labor shortages), the attendant labor shortages would have required Swedish firms to absorb the unemployed refugees in the labor market. On the other hand, in an environment where Swedish capitalists can shift their investments abroad and where unemployment is rising, the cards are stacked against the cultural outsiders, i.e. the immigrants and refugees, because the insiders, the native Swedes, will likely protect their own jobs before they involve immigrants. My objective, therefore, is not to prove that the high level of refugee intake has nothing to do with the riots. The discussion at the beginning quite clearly shows that having a large number of discontented refugees, who are socially excluded by segregation and unemployment, is a driver of riots, and that a more restrictive asylum policy would have prevented some of the tensions in the cities of Sweden. On the other hand, my discussion has also shown that long-run neoliberal policies have likely exacerbated the social problems, as a scarcity of jobs inevitably pit the lowest group of society, the refugees, against the rest of society. 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Figures Illustration 1 “Immigration to Sweden” Dewey, Caitlin. 2013. “Five Charts That Help Explain Sweden's Youth Riots.” Washington Post, May 24. http://www.washingtonpost.com/blogs/worldviews/wp/2013/05/24/five-charts-that-helpexplain-swedens-youth-riots/ Illustration 2: “Hourly Labor Costs, 2012.” Eurostat. http://epp.eurostat.ec.europa.eu/statistics_explained/index.php? title=File:Figure6_Hourly_labour_cost,_2012.png&filetimestamp=20130410082715 Illustration 3: “Unemployment Rate Sweden: 1976-2010.” Marron, Donald. 2013. “After 20Years, Sweden's Labor Market Still Has Not Recovered.” Donald Marron Blog, March 8. http://dmarron.com/2013/03/08/after-20-years-swedens-labor-marketstill-hasnt-recovered/ Illustration 4 “Sweden Income Inequality.” Dewey, Caitlin. 2013. “Five Charts That Help Explain Sweden's Youth Riots.” Washington Post, May 24. http://www.washingtonpost.com/blogs/worldviews/wp/2013/05/24/five-charts-that-helpexplain-swedens-youth-riots/ Illustration 5 “Proportion of Employees with a Contract of Limited Duration, 2011.” Eurostat.http://epp.eurostat.ec.europa.eu/statistics_explained/images/2/2e/Proportion_of_employees_wi th_a_contract_of_limited_duration%2C_age_group_15-64%2C_2011_ %28%25_of_total_employees%29.png Table 1 “Sweden Current Account Balance 1980-2010” Indexmundi. http://www.indexmundi.com/sweden/current_account_balance.html Table 2 “Inflation Rate Sweden 1970-2012.” (Values are based on author's own calculations.) 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