Quick Hit: Sweden’s Populist Election

Swedish voters head to the polls Sunday and, because it is 2018, fears over euroskeptic populists performing well are running high. In recent weeks, polls have shown the far-right Swedish Democrats poised to take up to a fifth of the vote—the second-highest share of any party—buoyed largely by fears over migration. If these polls hold, this would be the Swedish Democrats' best showing ever, given they only managed to enter parliament in 2010 and took 13% of the popular vote in 2014, netting them 49 of parliament’s 349 seats.

Now, there are lots of reasons to think this election isn’t very consequential to markets. One, Sweden isn’t in the eurozone, so this vote doesn’t threaten the common currency whatsoever. Two, even if the Swedish Democrats take the largest share (which they are not projected to do!), they would have to form a coalition with some other, establishment party in order to govern. Those parties have uniformly disavowed such an arrangement. It is a lot like Holland last year, when folks feared Geert Wilders' gaining power despite him standing little chance to actually govern. (And that was before his party performed about as well as the Baltimore Orioles have this season, though at least the Orioles seem to be losing on purpose. To our knowledge, tanking has little value in politics). 

Three, there is ample evidence globally suggesting populist parties tend to moderate once in office. Consider: Italy’s populist coalition was widely feared to be at odds with Brussels over budgetary matters. Yet the League/Five Star government has spent early September making nice, including unveiling budget deficit plans well within eurozone standards. Mexican President-elect Andrés Manuel López Obrador (AMLO) was widely feared a protectionist destined to jeopardize NAFTA talks and overturn the opening of Mexico’s oil industry to foreign firms. Yet already, almost three months before he takes office, AMLO’s administration participated in fruitful NAFTA talks with the US. Friday, he announced foreign firms’ participation in revitalizing Mexico’s oil industry will continue. And then there is Greece, where leftist-firebrand-turned-privatizer-in-chief Alexis Tsipras just negotiated a bailout exit that enshrines austerity for the foreseeable future. The lesson: Populism, in its 2018 form, seems like it is more sound than substance.