De-risking as accumulation? Housing, finance and macroeconomic (mis)governance in Sweden’s growth model

Abstract

This paper explores the institutional mechanisms through which Sweden’s ‘balanced growth model’ generates and sustains such phenomenal private debt volumes, expounding a mode of economic governance which Sweden has exemplified for three decades: A de-risking-centred housing accumulation regime. Said regime provides a tacit safety net for broad strata of homeowners and investors, through a confluence of institutional, macro-regulatory, tax and welfare constellations which serve to steer excess savings–including pensions–towards the housing sector, while attempting to mitigate systemic credit risk and cushion demand shocks. While analogous tendencies exist elsewhere, Sweden represents a pioneer of de-risking modes of regulatory and macroeconomic governance which assisted in generating one of the most resilient periods of secular house-price and debt growth in recent European history. However, the long-run stability of this regime–which developed in a geopolitically benign era of expanding global trade flows and low inflation–has engendered inherently destabilizing vulnerabilities.