While Sweden has literally run out of room for new immigrants, which has meant that this year’s and last year’s numbers are very low, the 167 thousand refugees Sweden took in 2015 and in earlier years led to a fiscal stimulus for the national economy. In 2015 GDP grew by 3,2%.
It is counter intuitive to think that increased expenditure in the public sector means a better economy, but it is a truism that every euro spent by government is a euro earned by someone, and that someone spends it. The migrants themselves do not have the scope to save, to end up spending their benefits in the wider economy. This in turn leads to more optimism, and loosens investment doubts. Employment increases and tax takes go up. It’s a virtuous circle.
Refugees spend their little cash in shops, redistributing their income into the wider economy. The activity of the economy increases. Construction and administration leads to more employment, which increases taxation. A fiscal stimulus of this kind is, in part, what is behind the breathtaking GDP growth of Sweden in 2015 and 2016 when it was the best performing economy in Europe after Germany.
Sweden is the 17th country in the EU by population size, compared to Denmark who is the 25th country by the same metric, but Sweden is the 9th largest economy in the European Union. Things are going well for the country, and optimism is high. The expected period of high growth is expected to continue, but also to slow because the fiscal stimulus has gone with the much more restrictive immigration policies in place now.
The recognition on the right on basic economic factors is lacking, however. Even now there’s a debate among liberals and conservatives that the refugees are a pure source of expenditure. The idea that the state is like a household or a company is strong in Sweden, in part due to the historic Lutheran frugality in our culture that a century of egalitarianism and social democracy has not extinguished. In fact, the social democrats have, in much, adopted the Lutheran work ethic as well as the Lutheran “waste not, want not” philosophy as its own thing.
As the fiscal stimulus of the refugee policies of the past winds down, the economy is starting to show signs of a cool-down. It would be foolish to increase immigration simply to maintain the fiscal stimulus because a country of ten million can only receive so many at a time, but there should be thought given to how to maintain the stimulus with fewer refugees coming in.