Part I should to be read first.Argument 2: The blockade is good for Sweden:
Let’s imagine for a moment that these pesky Latvians have successfully taken over a large segment of the Swedish building sector by constantly underbidding on wages. What would happen? It would cost less to build a house. More houses would get built. More houses would be on the market. It would become cheaper to buy or rent a house.
These savings would apply to all Swedes who consume housing. The money saved can be put to productive use, or consumed, and a multiplier effect guarantees that Sweden as a whole gets richer. The average Swede is better off if the price of housing goes down.
It follows that the average Swede won’t be better off if the blockade is successful and Latvians are kept from competing. Then why isn’t there a groundswell of support by average Swedes for the Latvians, purely for selfish reasons?
I can think of a couple of reasons. Maybe everyone believes in “ordning och reda,” loosely translated into orderliness, a system intended to mitigate market effects on wages, so that over time no one particular labor group comes to be at a comparative wage disadvantage, even if new disruptive technologies (computers) or changing political realities (the common market) would warrant such relative wage discrepancies, over time.
In other words, the average Swede might prefer to avoid income discrepancies over time by keeping wages rigid, rather than by allowing wages to fluctuate according to the market but then using tax revenues to redistribute income or retrain workers that are losing out. They might trust ordning och reda over a market-based mechanism because they believe it benefits them individually, even though they accept it produces less wealth for Sweden as a whole.
Or maybe Swedes are nationalists, and prefer to over-pay their compatriots for a job that foreigners will do for less. I doubt it, though.
My own favorite theory (that I just made up) is that when it comes to the housing market, there is an asymmetry in the way in which the interests of producers and consumers are defended. While those who supply the labor that goes into the production of housing are well represented by Byggnad, those that consume the eventual product are not; there is no association of house buyers and renters (that I am aware of), because if there were, they’d be demanding to know why there is such a long waiting list for affordable housing in Stockholm for everyone except LO leaders, and why the Latvians can’t come over to solve the problem, as they are clearly itching to do.
Stefan: this is too simplistic and you know it. First, the unemployed Swedish building workers wont be able to “consume housing” or other things which becomes a negative item in your calculation. Second, unemployment benefits would have to increase, probably financed by those that in your scenario would enjoy less expensive housing. So what the net gain or loss would be is not easy to say in advance.
You would be more right if the labor market wasn’t so rigid as it is and if economic policy were allowed to use income redistribution measures. But since the latter is not possible in todays post-Thatcherite society the former becomes a necessity. Of course, that is not sustainable over the long run but we cannot blame those that would stand to be the early losers in the restructuring process when they try to defend themselves through their unions.
Bengt, you’re jumping the gun. Your answers are coming in part III, where I argue against the idea that what’s good for Latvian construction workers is bad for the Swedes they compete with.
The question in this post is only about what is best for Sweden in the aggregate. I don’t deny that if you loosen wage rigidities, relative incomes will fluctuate, and that as a result some Swedes are worse off, if they do nothing and if the government does nothing. But I’m not advocating a do-nothing approach. I’m certainly not prescribing long-term unemployment. Stay tuned.
Generally speaking, Swedes are very nationalistic and proud. For instance, ask any Swede and they’ll tell you that Sweden makes the best product type X, where X can be basically anything.
We’re quite proud of ourselves, sometimes because we have good reason to be, and sometimes for no good reason. Take strawberries, for instance, Swedish strawberries are the best. Take dairy products, Swedish ones are the best. And, meat. We’re quite proud of our education system too, and our health system, and our welfare system. I could go on.
Certainly, dairy products and strawberries are completely unrelated to house building, but Swedes seem to generally believe that a Swedish person will do a better job of basically anything than anyone in any of the Baltic or Eastern European countries.
Meanwhile, Swedes are generally speaking very Politically Correct as well, so while they might not speak the words, actions speak louder.
Tomas, then what puzzles me is why wouldn’t Swedes allow Latvians to work more cheaply, if the product of their labor is supposedly inferior? In other words, why can’t you employ cheap Latvians if you want a second-rate house?
Another reason Swedes don’t rally to the defense of Latvian house builders: Sweden is Rawlsian. Which says a lot really, about the sweetly old-fashioned nature of the Swedish social contract. I’m not sure what’s left of Rawls these days after a series of aggressive critiques from a whole bunch of people, including, um, Rawls.
Lets assume the introduction of cheap Latvians into Swedish society has to follow the Second Principle of Justice: You can only have Latvians working here at lower wages if the socio-economic ripples this causes “benefit all of society, especially its most disadvantaged members.” The more inclusive response would be to say that it is the Latvians who are automatically the most disadvantaged members of society, so of course they should be allowed to come over and get a wage hike in the process. Another response would be to point out that although Swedish construction workers are faced with lower wages if these Latvians come over, this increase in economic and social inequality “benefits all of society, especially its most disadvantaged members” through lower house prices.
But I really think none of this makes a difference to whether free trade is good, as we all know free trade between two selfish actors/societies results in benefits to both, irrespective of who has absolute advantages. The end result is more utility all round than what you would get if you limited trade because of socially exclusive interpretations of Rawlsian concerns. Some of this extra utility could then be spent on Rawlsian pursuits, should an elected government so choose.
I meant the comparison much more generally. Swedes–and I’m trusting your analysis here–seem to want to prevent any one person falling below a level of income the average citizen would think appropriate if they were in a similar situation. That’s exactly what you’d get from Rawls’s blindfold test, once you rely on his assumption that citizens build social contracts as if they were society’s weakest member.
I think you were arguing with me. Not sure why. I agree with you. Free Trade Good. Rawls Not So Good Anymore, Even Rawls Thinks So.
No I wasn’t arguing with you. Just thinking aloud about where a Rawlsian analysis might take this. He’s more recent than I thought, BTW.
Hey!
What about organizing latvian labour in Sweden like this!
http://www.algonet.se/~hogman/slstat.htm
It’s a bit ol’fashioned, I know. But the potatoe-idea is still brilliant.
Is that like indentured peasants? If so, is the point you’re trying to make that Latvians currently are living in worse conditions than that back home? Because otherwise I don’t understand why they would choose the terms they are being offered to work in Sweden. It’s not like they are being coerced or anything.
Actually, my point is that there will always be a strong gutreaction amongst swedish socialdemocrats and the swedish workingclass towards anything that even has a remote smell of creating a cadre of underpaid guestworkers.
The union in swedish socialdemocratic history is more than anything a broad social project, closely linked to political ideas about social engineering. In its early years fighting the institutionalized class-control-system as its primary enemy.
All this sentiments are also reflected in the highly infected “pigdebatt”. And, I’m afraid – because of the strong emotions the debate evokes – It just wont happen.
I hope.