Since everyone seems to be talking about nationalization and pointing to Sweden as a model for the future, one should ask whether Sweden actually nationalized anything. No one is talking about outright Hugo Chavez-style expropriation here. The only nationalization I see is what was done in the case of AIG and we know where that led.

I certainly believe the knee-jerk reaction against the ‘N’ word, as Barry Ritholtz calls it, is overwrought and have suggested we dub it pre-privatization. After all, didn’t the word recession come into existence for similar reasons — fear of the ‘D’ word depression.

Back in August, I pointed to Sweden as a model as well. You can read the post, “The Swedish banking crisis response – a model for the future?.” But, the Peterson Institute also has a fine post by Anders Aslund on what really happened in Sweden and it was not nationalization.

Here’s a bit of what he had to say:

It is looking like Saab is toast. This comes from Dagens Nyheter, a Swedish daily (note: I originally saw this covered in the Austrian daily Kurier):

Here is yet another post from early last year which presages all of the problems we are seeing today. As I have often written, the fake recovery is just an attempt to paper over these problems. It won’t work. Where Ireland, Switzerland, Austria or the Baltics were front and center in February 2009, Greece, Spain and Portugal are now. But don’t think those other problems have gone away. As with Northern Rock, Bear Stearns and Lehman Brothers, contagion spreads to the weakest link – which either passes the test (usually with external aid) or collapses. And then it’s on to the next weakest link. That’s how crises work. This one is no different.

After Iceland collapsed and went into Depression, there were a number of reports in the press regarding countries with outsized financial sectors. The worry was that the collapse of Iceland was not an isolated incident, but rather a harbinger of things to come for smaller countries with large financial sectors. I wrote a post in November called “Iceland: a cautionary tale for small nations” which pointed to a number of countries that I considered vulnerable including Austria, Denmark, Ireland, Sweden and Switzerland. Even the United Kingdom has been a concern.

General Motors, struggling under the weight of a mountain of debt, is finding it difficult to raise cash. For one, the U.S. automaker is finding no buyers for its Swedish Saab unit, according to Swedish Daily “Dagens Nyheter.”

Nevertheless, GM executives are putting on a brave face with the news media. In fact, I found an article in another newspaper, the Australian daily “Sydney Morning Herald” claiming the opposite under the title, “No problems in finding Saab buyers: GM.”

Yesterday, I mentioned an article I caught in the German newspaper Die Welt which outlined the desire for VW and Daimler Benz to receive bailouts in response to the state aid being offered to American car makers. I warned that a competitve bailout situation was underway. Now, this competition has spread to Sweden, where the Swedish government has introduced a bailout package for its auto makers Saab and Volvo.

Gillian Tett makes a good point in today’s FT about the clear benefits of a systemic solution to crisis. Where the UK policy makers were bumbling along until today, they have taken the problem firmly in hand, finally recognizing the systemic risk. Tett sees this sensible policy as one hearkening back to the Swedish solution last decade. The U.S. would do well to take notice.

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Marshall Auerback here. Ed has had a few posts on the Swedish bailout plan with which I agree. I think the main political argument (made by Bo Lundgren in yesterday’s NY Times) is that you have ZERO political legitimacy unless everybody is perceived to be making sacrifices and getting some long term benefit [...]

Update Mar 2009: There is a pernicious little piece of historical revisionism going around that the Lehman bankuptcy did not matter. I am reposting this as a retort.

Note the piece by James Suriowiecki which induced me to re-post:

In the past few days, though, a new meme has started circulating through the economics blogosphere, suggesting that Lehman’s failure actually did not wreak the havoc that everyone who lived through last September thought it did. This argument, which was floated by the well-respected macroeconomist Willem Buiter on Friday, is based on a paper from last November by the Stanford economist John Taylor, which purports to show (pdf) that the credit markets actually did not react all that badly to Lehman going under and that the crisis was really the product of market uncertainty about the effects of government action.

Below is the original post from 16 Sep 2008.

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This weekend I am at my wife’s family reunion so I haven’t have a lot of time for blogging. But, I caught an interesting article in Swedish daily Dagens Nyheter, which cites an IMF study which claims that property values in Sweden are even more overvalued than they are in the US. [...]