On the micro-level, Sweden is one of the least corrupt countries in the world. Officials do not take bribes, and politicians typically do not give jobs to their relatives.
However, what many outsiders (and for that matter many naïve Swedes) don’t realize is that there is a large degree of macro-corruption in corporatist Sweden. Perhaps the most important example of this is the role of labor unions in elections.
In a free society people should of course be able to organize themselves. However, unions in Sweden are not operating in a free institutional context. They have been granted extraordinary power by law.
• By law they negotiate wages for everyone, not only for union members.
• They control the unemployment insurance system. Since non-union members risk being discriminated against, and since almost every worker needs unemployment insurance, this forces many Swedish workers to become members.
• In Sweden if an employer needs to lay off workers, he or she does not decide which worker to keep. Regulation dictates that they have to go by job tenure, firing first those who were hired first. However, the Unions have the power to circumvent this law, and pick who gets to stay and who gets fired. As expected they use this power to benefit their members. As a result if you don’t join the Union you are much more likely to be fired, should the plant need to downsize.
Partially because of these biases, a very large proportion of workers belong to a labor union.
And here the fun starts. The union of workers (LO) and the Social Democratic party are for all intents and purposes the same organization. The head of LO sits in the top deciding organ of Social Democracy. The LO has at least stopped collectively enrolling its members as members in the Social Democratic party, as of 1987.
In the 2006 election according to this election survey 52% of LO-members voted Social Democrat. Another 13% voted for the Greens and the former communist party.
Yet, despite the fact that many of its members are not Social Democrats, the LO each year uses member fees to donate massive amounts of money and services to the Social Democrats.
For a hard-hitting example of how legally induced union membership converts into political muscle, here is a charming poster from this election (widely distributed), with the face of the minister of industry upside down, with the word "Superstupid" (roughly) superimposed.
According to Liberal party member and economics professor Carl Hamilton, the LO donates almost 90 million kronor (PPP adjusted $10 million) in cash and advertising money and about 550 million kronor ($60 million) in free labor to the Social Democrats.
A note about the free labor: According to Swedish labor market regulations, private firms are forced to treat much of the political efforts of Union activists as being part of regular work. Therefore when union activists are campaigning for the Social Democrats they are being paid for this by the private sector.
The support from the unions alone amounts to 7.8 dollars per Swede this election.
In contrast President Obama’s entire record campaign raised through voluntary donations cost only 2.2 dollars per American!
Of course, the presidential campaign is far from the entire cost of the American elections. However we should keep in mind that in addition to the LO money the Swedish state and local counties give the parties about $40 per Swede per election cycle, from which the Social Democrats receive I believe about one third.
Another bizarre source of funding is that the Social Democrats have a de facto monopoly among the political parties when it comes to lotteries, giving them another $4-5 per Swede per election.
As part of corporatism Swedish industry funds several free-market think tanks. However they do not engage in election campaigning. And of course the Unions also fund their own think tanks.
Because of the leftist intellectual climate and because of status quo bias, the corrupt legal advantages given to the Unions used to fund the Social Democrats are accepted as normal in Sweden. People are not generally aware of the financial advantage of the left, assuming that since the Social Democratic voters earn less than the center-right voters that they Social Democrats as a party are also the poor underdogs.
Therefore what the Swedish media is currently concerned about is that the center-right Moderate party in 2009 received $200.000 in private donations, and that they are not disclosing the name of the donors (which in fairness, they probably should).
I personally think the Swedish type of macro-corruption is worse for politics than the Southern-European type of corruption where bureaucrats take bribes and help their friends.
Money is not everything, of course, and their ill-gotten financial advantage will probably not save the left in this electoral cycle. However it is wrong in principle and on average in each election biases the results a few percentage points in favor of the left.
Another consequence is also that LO:s political power rests on the labor market regulations that force people to join the Unions, hence they defend them tooth and nail (using the money of their opponents). Maybe there are other good reasons for the unions to support these laws, maybe not. But because of the political self-interest involved, we can never be sure of their motives. Since their entire power structure rests on these laws, the unions can be sure to defend the status quo regardless of the impact on the welfare of the workers.
There is also a moral aspect to this. LO donates 100% of their funds to the Social Democrats, even though only 50-60% of their members typically vote for them. If you are a classically liberal worker, not only will you be essentially forced because of regulations to join the Union, you will be forced to donate money to your political opponents. This is simply not democratic, and it is not consistent with the spirit of a fair and free society.
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