Should Japan Copy the Swedish Model?

Asahi Shimbun reports on its English web edition that Prime Minister Naoto Kan wants to tackle Japan's budget problems using the Swedish model, which combines high taxes and a broad social security net.

The newspaper writes that the Prime Minister "got advice from an economics professor who champions the Swedish example of a very high tax burden in exchange for social security benefits that allow retirees to live comfortably." It was on May 17 that the then Financie Minister Naoto Kan consulted Naohiko Jinno, a professor emeritus of economics at the University of Tokyo.

"Here's why I think we need to impose a heavier tax burden," Jinno said. "It would create a solid welfare system and a strong economy. Those two points will ensure that domestic consumption remains strong as people will be able to spend," said Jinno, who is the key member of the government's Tax Commission.

Naoto Kan became leader of the Democratic Party of Japan, and was chosen as Prime Minister by the Japanese parliament on June 4th, following the resignation of Yukio Hatoyama on June 3rd.

Asahi Shimbun writes:

"Economic theory, according to Kan, centers on the following: Japan has no time to waste in implementing fiscal reconstruction. To do that, tax increases are indispensable. But simply raising taxes will cool the economy. If the government uses the additional tax revenue to fund improved social security programs, gloom about the future will evaporate, and, as a result, people will start spending again. Based on this idea, if the government pumps money into medical services and nursing care, areas where demand is expected to grow sharply due to the aging population, economic growth will follow."

I don't know enough about Japan to say whether this is a good idea or not, but I like the concept of balancing the budget while at the same time providing people with something in exchange. Instead of cutting the deficicits so that the already rich can keep more of their wealth, the Prime Minister suggests strengthening people's sense of security could make them spend money.

Hans Sandberg

Noble Prize Winner Urges Obama to Act on Climate Change

I found this link at Andrew C. Revkin's New York Times blog.

"A recipient of the 1976 Nobel Prize in physics, Richter was a signatory on a letter from 34 Nobel laureates to Obama last year pushing for a big and sustained rise in the federal investment in energy research. (He told me he is unaware of any response from the White House.) He also has written “Beyond Smoke and Mirrors,” a cogent road map for facing the daunting long-term challenge of cutting emissions of greenhouse gases even as humanity’s growth spurt crests in the next few decades."

It's well worth listeing too.

BP’s Chairman Spoke, and (Mostly) Said the Right Thing

Chairman Carl-Henrik Svanberg, Tony Hayward, and other top BP executives met with President Barack Obama at the White House and he delivered. BP promised to do everything in their power to undo the damage they have wrought, and compensate those that have and will suffer economic losses due to the spill. BP’s commitment includes a $20 billion fund that will be managed by Kenneth Feinberg, who oversaw the payment of compensation to the victims of the 9/11 attacks.

President Barack Obama, who was immediately castigated by the insta-pundits, and even taken to task by New York Times in an editorial for his speech last night, today came out with full force and seemingly in full control.

When the top executives from BP exited the White House, they were met by a press corps out for blood, but the silent Swede, Carl-Henrik Svanberg, didn’t act the part he had been assigned. Commentators were looking for arrogance, European arrogance, and one CNBC commentator quipped “is that a smirk on his face,” but the smile on Svanberg’s face was not arrogance, but nerves. He felt the immense pressure, and his English was broken and he talked about the affected people in the Mexican Gulf region as the “small people” (probably a direct translation of the Swedish expression “småfolket” which means common people, the little guy vs. the big and powerful.) He was obviously not aware that “small people” in America refers to “little people” (dwarfs.) But this should be written off as an honest mistake. What was more important was that Svanberg could report that BP is doing the right thing, and that they had agreed to President Obama’s demands. They have also decided to cancel all further dividends for 2010, amounting to over $10 billion, money that can now be made available to the people in the Gulf region, rather than the shareholders.

Svanberg expressed full understanding for President Obama’s “frustration,” and asked the American people for forgiveness. When asked about mistakes and wrongdoings leading up to the disaster, he said that the board is investigating this.

For president Obama, the last two days has been a proof of strength, a show of a different kind if strength than the pundits like to see. Less swagger and more analysis and then action. It is politics for result, even if it doesn’t always look as good on TV as when a president dresses up in a military uniform and declares Mission Accomplished.

For BP and Chairman Svanberg, the meeting in Washington, DC., was the first step out of the pit it dug for itself.

Hans Sandberg

A Silent Swede Goes To Washington

There is a Swedish proverb that says "Tala är silver, tiga är guld" (tr. "speech is silver, silence is gold"). Waiting for BP's chairman Carl-Henric Svanberg to adress the BP oil disaster, one could get the impression that we here have a man stuck in his nordic roots, bound by the Law of Jante, or simply unwilling to join the public chatter, prefering to just let the company dig and drill itself out of the mess. But the Swede who has been called to the White House by President Barack Obama is not the silent type.

James Savage, a writer at the English-language Swedish newspaper The Local draws a quick portrait of Carl-Henric Svanberg, who became a BP director in Septemnber and took over as chairman of BP in Janruary 2010:

But in Sweden, where he was CEO of telecom equipment vendor Ericsson, Svanberg has been the country's most high-profile company leader of the past decade. For observers of his career, this makes his handling of the crisis rather puzzling. He is widely viewed as one of the Sweden’s most able business leaders and best communicators. His reputation in the US and the UK for being media-shy and unforthcoming is lightyears away from how he is perceived at home:

“He is very communicative, verbal and charismatic,” says Torbjörn Carlbom, telecoms reporter at Swedish business weekly Veckans Affärer.

“This is why the Swedish media are very puzzled by the way he is coming across in the current crisis at BP.”

Margareta Pagano, a commentator for the British paper The Independent asked in a caustic piece on June 6th How far do we have to drill to find BP's chairman?

Where is Carl-Henric Svanberg hiding? And, more pertinently, why is he hiding? The Swedish chairman of BP is proving every bit as mysterious as one of the characters out of a Stieg Larsson novel, while his chief executive, Tony Hayward, is being crucified by the world's press as the demon destroying America's coastline. Svanberg has made only one public statement since disaster struck just over a month ago in the Gulf of Mexico, throwing both BP and the future of deepwater drilling into jeopardy.

If Carl-Henric Svanberg, who is actually quite comfortable speaking to politicians, is going to survive his upcoming meeting at the White House, he will have to pull out all the stops and convince President Barack Obama and the American public that BP really, really, will do the right thing.

At moments like this, silence is not gold, but outright dangerous.

Hans Sandberg

"Just Say No" Is Not Much Of An Answer To the Oil Spill

Thomas Friedman takes the environment seriously, and he is usually a sharp commentator, although his flair for storytelling often rests on simplistic assumptions like in his latest column where he comments on the BP-made disaster in the Mexican Gulf. (This Time Is Different) In it he quotes his pal Mark Mykleby, who has written a letter to the editor for The Beaufort Gazette in South Carolina.

"It is the best reaction I’ve seen to the BP oil spill — and also the best advice to President Obama on exactly whom to kick you know where."

Well, let's listen to this piece of advice:

"This isn’t BP’s or Transocean’s fault. It’s not the government’s fault. It’s my fault."

Which of course is true in the sense that we are living in a democracy, and we have voted for politicians that made the oil spill possible. We should acknowledge our collective responsibility for letting BP, Haliburton and Transocean drill at 5,000 feet without knowing what they were doing besides drilling, and without having any plans for what to do if things go wrong. But what can we learn from that?

"It’s what we do as individuals that count," Friedman's friend writes, writing off both the left and the right in the next sentence with an equanimity that sounds nice, but is about as clever as trying to solve the drug problem with "Just Say No!"

"Government regulation will not solve this problem," Mykleby writes, but the fact is that government regulation could have prevented the oil spill. But the American public has followed Reagan's anti-government, anti-regulation ideology for too long, and we are now beginning to pay a terrible price for that. Just look at those birds, and all those families whose livellyhood is being wiped out by the oil. Mykleby concludes:

"Here’s the bottom line: If we want to end our oil addiction, we, as citizens, need to pony up: bike to work, plant a garden, do something."

Do something? Like... Just Say No to oil?

Biking is great, but we also need to tax oil - an idea I believe Friedman has supported in the past - and have the government invest in new energy technology and a radical shift in our transportation system. America rejected public, collective transportation, which was incredibly good for the auto industry, and led to a growth pattern that made it very hard to live and work without a car.

Even such a simple thing as taking the bike to work will in most cases require political decisions and changes in city planning. Countries like Denmark and Sweden have shown what you can achieve by redesigning cities to make it easier for people to take the bike to work, but this was not a moral, individualistic choice, but a collectivistic political choice. You need government to make it possible for the individueal to Just Say No.

Nice and pretty doesn't cut it when we are dealing with big, social and structural problems, like energy independence, energy efficiency and sustainability.