• Kick-start the economy with a large devaluation.
• Tighten the budget politics, to break inflation and to signal the end of the devaluation.
• Introduce various measures on the supply side (deregulation of the credit market, tax reforms, etc.) to unclog the bottlenecks and get the economy working better.

In brief, this planned combination of tough demand politics and liberalizing assistance politics - the "Third Way" - was what the textbook recommended.

Notwithstanding, reality was considerably more difficult than the textbook. I experienced an unexpected culture shock when I came from the School of Economics to the Ministry. It turns out that the obstacle to a rational economic strategy was not a lack of economic or theoretic competence by those who were responsible for the economic politics, but rather the difficulty of making politics of the theoretical knowledge. The problem was not that the Finance minister lacked competent economists (which is what the self-conscious but naïve young student had believed), but that the minister and his unquestionably competent economists failed to convince the rest of the government, the party, and the labor movement to see things in the same light. The political process was the bottleneck - not theoretical competence. I began to understand that economic politics was less about mastering the frontiers of research or of formulating them in theoretically perfect politics, and more about being able to implement, on a large scale, acceptable politics through negotiation, manipulation, and persuasion - in a never-ending struggle. In particular, this applies to a Social Democratic government whose electorate and ombudsmen hold fast to legends about their old champions Per Albin and Erlander, the "People's Home" (the SDP's name for the welfare state), and the battle over the general supplementary pension scheme (ATP), generations ago.

For this reason, the 1980s became a long, drawn-out battle between Feldt and his "boys" at the Ministry (dubbed by the media as the "MoF rightists") on one side and the unions and the Swedish Trade Union Confederation (LO), with party members as worried spectators on the other side. This struggle has been described by many (including Feldt, in his memoirs), so I will not repeat it here. Let it suffice to say that the imposed fiscal squeeze was inadequate and that our supply-side measures came too late. Our recipe never achieved its objective. The consequences were excessively slow growth in productivity and overly high inflation. As the growth effect of the devaluation ebbed away, inflationary effects took over.

The MoF gradually perceived that our politics would fail. This led to harder attacks against the traditionalism that obstructed the way. Those of us who made up the group of young economists surrounding the Finance minister often felt that we were his Roman Praetorian Guard, his assault force, whose task was to modernize, reorganize, and rationalize. In some ways, this was stimulating, but it also contributed toward a growing rift between us and other party factions. With some years' distance, I can more easily see how agitating and troublesome we must have seemed to many party members. Apart from Feldt, I was the most visible among the MoF rightists; a position that conveyed spit, scorn, praise, and bear hugs in an exhausting and sometimes worrisome mixture (see "Comments and critique").

Palme and the "1990's Group"

At the same time as my formal job description during this period put less emphasis on economics and more emphasis on politics, I found myself shifting toward a more outspoken rationalistic position. At the Stockholm School of Economics, I had been an economist among economists and saw my duty as that of making politics out of economic theories. Now I was an economist among politicians whose chief duty was that of grafting more rationalism into the political debate, into the rhetoric, into the programs, and hopefully into practical politics. Frenetically, I drafted budgets, financial plans and internal memos, weightier articles on a variety of topics, produced essays, drafted countless speeches for cabinet ministers, and held lectures at a furious pace. The theme was generally macroeconomic, but the scope broadened over time. So during the 1980s, I became more and more involved in environmental issues. My thesis was that economic growth and a good environment need not necessarily oppose each other, and that even the Social Democrats must introduce economic levers and measures into environmental politics. Today, this position is well-accepted. But in those days, it created havoc among fundamentalists.

My opportunities to influence increased as my stance became more political. In 1984, I moved from the Ministry of Finance to the Cabinet office, where I stayed for three years as the prime minister's (first Olof Palme and then Ingvar Carlsson) economic-political advisor and speechwriter.

It was a terrific experience for a yong political economist to be sit in the room next door to the man - Olof Palme - who to my generation personified Swedish politics. By this time, Palme was often tired and showed signs of burning out. But at times he flared up and revealed a glimpse of the dynamic power he had once been. At times like these, it was an almost unreal experience to toss suggestions, wording, and ideas around with him. There were a lot of speeches, articles, pamphlets, travel and lectures, and sleepless nights. For a few brief years, the carousel spun faster and faster. At one point there was even a hint at a political career of my own. Palme forbade me to move when, following the 1985 elections, Feldt offered me a position as Under-Secretary of state in the Ministry of Finance. Palme hinted that he had greater plans for me.

His plans never materialized. Just a few months later Olof Palme was dead, and I found myself being reinstated at the Ministry of Finance. But this interim was brief. In 1989-90, I was secretary of the Labor movement's "1990's Group," which was assigned to draft the party's and LO's agenda for the 1990s. The group was impressive - former Minister of Justice Anna-Greta Leijon chaired it, and the members included Finance minister Feldt, LO Chairman Malm, and party Secretary Toresson. Although no one ever said so openly, the group's main assignment was to get the Ministry of Finance and LO's leadership (which at that time were locked in a bitter fight) to talk to and understand each other. The group's secretaries included LO economist, Dan Andersson, and myself.

Looking back, our agenda for the 1990s leaves an odd impression. It shows a movement somewhat drowsily reaching out after a new task, after having suddenly perceived that the old agenda - that of building up of the Welfare State - no longer represented the future. This attitude of reaching out, searching - groping - permeates the entire program. The book's weakest section is the one on economic politics. We did not foresee the deep crisis or the challenges that awaited us in the 90s. But the sections on renewal of the public sector and environmental policies were relatively progressive (for their time). The best part of the report is the introduction, which raised important, relevant issues concerning the role and delimitation of politics as they relate to the private sphere. Although it contains its share of empty phrases, which were introduced as the result of horse-trading and outside pressure, the report is still worth reading, because it expresses a serious and thoughtful stance toward the great issues of the day - in complete contrast to the usual Social Democratic self-assurance. Carl Bildt has called this section "Klas Eklund's mid-life crisis," which I consider a major compliment...

The world falls apart

The party's uncertainty concerned a fundamental plan: What is our next big project? What happens to the historic compromise between capitalism and communism if one of these systems collapses? The uncertainty was also concrete: How should we deal with current issues? The MoF rightists had warned what would happen, and now it was happening: Overheating and the inability to check wage formation sparked inflation that greatly outpaced that outside Sweden. The consequences were capital outflow and rising interest rates, which had to be combated with unpopular economic tightness. The major tax reform of the time only worsened matters over the short term, because it pushed up real interest rates for borrowers and made people of the party deeply downhearted - for decades they had been taught that a reduction of the marginal tax rate was a reactionary, "bourgeois" idea. The internal party conflict intensified between 1989 and 1990. The 1990's Group failed to calm the commotion. Instead, its open questioning indicated that the party did not have the answers. The "War of Roses" grew more ruthless.

For my part, I was becoming worn out. For nearly a decade, I had lived a non-stop life of economic politics, writing, propagating, and instructing in the need for long-term stability, low inflation, sound state finances, and effective markets. But the infected party conflict, which raged throughout the latter part of the 1980s, made it more difficult than ever to hold a serious debate. I experienced - in part brought on by myself, since I had deliberately maintained such a high profile - that it was open season on me as a person and that labels were more important that content. That is, by labeling me "right wing," my opponents could dismiss the debate without having to give ear to my argument.

An example, which received a lot of attention at the time: During 1988-89, I was the secretary in the Nordic Social Democratic group of economists (SAMAK), whose members included the ministers of Finance from the Nordic countries. We wrote several thought-provoking essays. For example, we drafted a report on the renewal of the public sector. Today, this report seems quite harmless: it anticipated most of what was to come and what is now commonplace. The report proposed that governments concentrate on the most important assignments, advocated competitive bidding and procurement from the private sector in several areas, and accepted the concept of private entrepreneurs - provided that quality control was good. But these proposals were loathed by traditionalists. The report was never discussed in a real debate. Instead, this "secret" and "disgusting" report was rendered ineffectual through leaking select parts of it to the press (I cannot prove it, but I am convinced that this was done by LO managers) and by naming me, "Feldt's torpedo," the "right winger" Eklund, as the lone author. The report was discredited and condemned in unison in party media without even having been read by those who judged it.

There were many such knives in the back as the traditionalists felt the squeeze of reality. Those who did not dare to spit on Feldt spat all the more vehemently on me. I felt degraded and began longing for a more intellectual environment. A divorce and the many feelings of personal failure that accompany such ordeals compounded my thoughts. One late night at the end of 1989, I sat, disappointed and tired, and drafted a letter of resignation to Kjell-Olof Feldt. He replied that he understood, but that he wanted me to stay yet a while longer. "Let's stick it out together," he said.

As it turns out, I didn't stay very long. When the "Third Way" finally collapsed, culminating in a government crisis in the winter of 1990, Feldt resigned in protest against regulatory and income politics, and I was free to follow him.

Productivity Commission and ESO

I enjoyed being able to relax and lick my wounds after eight self-consuming years. I even fulfilled a boyhood dream. I totally broke from my role as economist and wrote a detective novel (with Karl G. Sjödin) about murder, blood, and insider trading at the Ministry of Finance. The book was eventually made into a film and aired as a TV series. Finding expression in this way for some of my frustrations was fun and therapeutic (the media had a hey-day trying to identify the novel's villains). But my repose was short-lived. Allan Larsson succeeded Feldt as Finance minister. Consequently, Larsson left his post as chairman of the newly appointed Productivity Commission. And that same spring, I took over the job. In doing so, I received the intellectual challenge I had longed for.

The Productivity Commission was a large government-sponsored investigation - consisting of company executives, economists, psychologists, and so on - whose assignment was to determine:
1. Why did the Swedish economy have such slow growth during the 1980s?
2. What can be done to remedy it?

The scope was gigantic, comprising industrial organization, macroeconomics, wage systems, currency policy, taxes - you name it. I was able to resuscitate my old research on industrial organization and transition, which got me all fired up again - on all cylinders. This was an important assignment on a significant topic; moreover, it was a personal honor to lead such a comprehensive endeavor. We resolved that our investigation would be different from other, generally tedious public investigations that usually end up collecting dust. The investigative period would be shorter ("no one listens to a productivity commission that works slowly"). But we would nevertheless raise our ambition level, drafting several reports (which we financed - completely without precedence and probably by breaking the rules - by soliciting sponsors). We would conduct field studies (which were enabled through help from the Swedish Academy of Engineering Sciences, IVA, and the Fund for Improving Working Life). Moreover, the final report would break with tradition by actually being worthy of reading (new fonts, colored lines and squares, executive summary, etc.). I was employed full-time as a working chairman - probably the first such case in the history of these kinds of investigative bodies.

These were two intensive years. But the results were good. Ten volumes with 46 expert reports, a debate anthology, and a thick (and attractive!) main report, which I wrote practically non-stop and without sleep over a period of two months. We wanted to present the report immediately after the elections of 1991, because that is precisely when one can achieve maximum influence; while the new government still is formulating its strategy (at least, I had learned that during my years in the MoF!).

In my opinion, the Productivity Commission's conclusions - that the transformation pressure must increase and the driving forces for renewal and improvement must be fortified - still stand in full. This holds true throughout most of the analysis, for example that:

• The devaluation politics were costly over the long-term, because they derailed the forces of transition and, by showering companies with "free profits," distorted the incentive system.
• Tough product and market regulations inhibited growth in productivity in many industries.
• Wage formation and tax systems had not promoted savings and more productive work.

The report, which was part investigation part textbook, sold better than any previous government-sponsored report, received several awards, and had a definite impact on economic politics - it also helped me get back on my feet after having burned out on politics. But the report was soon outplayed by the deep economic crisis of 1991-1993, but that is another story.

At about the same time, I become chairman of ESO, the expert group for studies of public economy. ESO was a committee under the Ministry of Finance whose task was to study topics that could contribute toward improving efficiency in the public economy. I had been a member of ESO during the 1980s, and now, I was succeeding Daniel Tarschys as chairman. The work was fun and intellectually challenging. It enabled me to acquire knowledge in several areas while being outwardly provocative and getting results internally - through direct contact with the Ministry of Finance. During these years, ESO played a not-so-insignificant role. For instance, in restructuring the budget process, and in terms of how the social security system is viewed. When I finally left ESO in 1998, I had been involved either as a member or as its chairman for 15 years, which must be some kind of a Swedish record. The Productivity Commission and ESO constituted my return as an economist - this time on more stable, intellectual footing. Following my years as a political economist in the Chancery, I had now begun a new career as an expert and professional economist without party-political overtones.

Chief economist

In 1992, I moved to Sweden Post (the Postal Service), as director of the Postal College and chief economist. The Post was an important and large public service organization, with a long and honorable history, but challenged by strong forces. New communications technology made it necessary to streamline, slim down, and rationalize old, traditional operations - while at the same time introducing new communication technology and organizational methods. In a way, the assignment reminded me of what I had written in more general terms while I was at the MoF and during the productivity investigation. But this time, the assignment concerned very concrete operations - the handling of letters and packages - instead of general politics.

Postmaster General Ulf Dahlsten vigorously urged the renewal work. It was an eventful time: The Postal giro system was made a bank, and the Post itself was turned into a corporation. I was in charge of training executive managers and was able to learn the first lessons on how the financial markets actually work. It was stimulating to work in such a large, national organization. Regardless of where you went in the nation, you could rest assured that people had views and opinions about the Post. The demand for training in the Swedish economy, financial markets and productivity efforts was immeasurable - a wonderful time for someone with ambitions to become a national pedagogue. Ulf was also kind enough to allow me to continue my own education. So in 1992 (in the middle of the currency crisis), I was able to participate in the SNS macroeconomic team (a group of distinguished economists that every year writes a much-discussed review of Swedish economic performance); that year, the SNS team was one of the first groups to take a stance on the effects of the transition to a floating exchange rate, just during the deep currency crisis. My work included writing an analysis of the long-term effects of the budget deficit, which later become a book. I was also able to continue writing about environmental politics.

Nonetheless‹happy as I was happy at Sweden Post, I couldn't say no when Björn Svedberg (S-E-Banken's CEO with whom I had become acquainted while working with the Productivity Commission) asked me if I would fill the vacancy for chief economist at the bank in 1994. SEB was northern Europe's largest currency bank, with a highly developed network of contacts with large Swedish corporations and the international market. For someone wanting to grow and develop his competence, and who was moreover curious about private trade and industry, this represented a golden opportunity. I started at SEB in the summer of 1994 - and in so doing, sat in the chair once occupied by Dahmén, my former professor.

Global finance markets

With that, the nature of my work also changed. I had experienced a culture shock a decade before when I moved from academia into the world of politics - and realized that politics was more about rhetoric, negotiation, and getting commitments than economic theory. Now, I was in for a new culture shock, having landed in top management in business - and realizing what it means to work in an environment with greater expertise, tougher requirements, and demands for speed as well as immediate, unmerciful market valuations. These demands were much, much tougher than I had imagined. It took me a few years to learn what I should have known from the start about how markets work and the international economy.

As chief economist, I am responsible for the bank's macroeconomic analysis of the world: Which way are interest and exchange rates headed? What is happening in economic politics? How do these politics affect our customers' decisions, our own decisions, and business? Analyses made by the bank's economists attempt to answer these questions and deal with just about anything that seems currently relevant. This includes the long-term development of real interest rates, the government's attitude toward the EMU, and projections concerning the oil prices. We make our own economic forecasts and ongoing analyses of interest and exchange rates.

What I do today is much less normative/political and far more descriptive/positive. My work includes political assessments - not to forward a view but to determine which decisions will be made and what consequences they will have. In short, my assignment is to predict future developments - not to tell the Ministry of Finance or the Central Bank what they ought to do. Our analyses are important, because political decisions greatly influence the financial markets. The analyses are presented in different ways to different target groups.

The bank's management and its customers should not have to worry that my statements might be tinted by party-political motives. So when speaking for the bank, I must avoid giving political advice and recommendations. Obviously, I have political opinions, and I still write an occasional essay or debate book - provided I make it clear that I am speaking for myself and not for anyone else. In recent years, I have produced a few such works, for example, on the EMU and on Swedish taxes. I have also answered questions from the Swedish Social Democratic Party's program commission concerning my views (rather acid) on the party programme.

Another major difference, compared with my previous work, is the strong international orientation. Because the financial markets are strongly integrated, and the bank has operations in most parts of the world, an important part of my work deals with assessing the international economy. I travel frequently, in particular, to the US and Asia. I do so, in part, to meet clients and also to learn more about different economies. This extensive travel and work in a globally active corporation has given me new vigor as an economist and analyst. I have gained new insights into how the world is interconnected, how different cultures and economies function, and how insignificant Sweden is in the global economy.

I analyze how the international markets influence the bank's customers, and I try to shed light on what globalization means to economic politics in the national state. I have written a long list of articles and held countless speeches on this subject.

My job involves a fast pace, long working hours and extensive travel. But it is intellectually stimulating. The world is developing at a high speed, and the questions I am expected to analyze and find answers to change: "What is happening in Russia and Brazil?" "How does new information technology affect different markets and industries?" "How will the EMU work and when will Sweden become a member?" "What is happening on Wall Street?" The chief economist in a large bank such as SEB is expected to master all kinds of topics, from Japanese mortgage bonds to a Finance minister's spiritual life.

Rather a pedagogue than a politician

It is a dizzying and frightening task, but fun. And while few people accept economists' numerical forecasts at face value - everyone knows that the world moves too fast and in unpredictable ways - the demand for scenarios, guides, alarm bells, and persons with whom to exchange ideas seems to be growing without end, in particular as relates to the global economy. One reason, of course, is that more and more people are saving in mutual funds and buying overseas stocks, and have therefore a direct personal interest in keeping up on international developments.

For my part, I enjoy filling the role of sounding board, analyst, and advisor. I am no longer on a fiery crusade to save the world, as I was in my youth. I don't believe we can print theoretical blueprints for a better world where everyone is forced into his or her place according to some abstract matrix. I am satisfied to analyze and report my views and possibly advice. If people won't listen - tough shit. Especially for them.

At times I get the itch to reenter the political debate - particularly when national restriction and lack of understanding for globalization express themselves in blocking traditionalism. There is much to say on this point: Party politicians and interest organizations in Sweden have understood all too little just how radically Sweden is going to change due to globalization and the open economy. Too few people realize how we must accept the forces of globalization and how important it is to try to exploit these forces to advance prosperity. The same can be said of new technology. Information technology's great leap forward conveys an enormous transformation of commerce, goods and services, living arrangements, working life, transportation, attitudes, and values. Economic policy-making is faced with new challenges - which few elder politicians have understood. Again, as relates to this topic, I feel a growing desire to debate, urge, and once again be the enfant terrible.

As can be seen, since becoming a bank economist, I have occasionally given way to the temptation to enter the public debate. I believe that with my background in politics and commerce I can provide knowledge and insight on how the modern, industrialized economy works. More than once the joy of debate has stirred up thoughts of once again actively involving myself in politics. But each time this happens I back down. When I think of how awful I felt at the end of the 1980s, of how burned-out I had become because of the political debate, I quickly return to my senses.

At long last, I see that I am a lousy politician - at least if "politics is to nag," as Olof Palme used to say in private. I love to teach, hold lectures, and write articles and books. I get a kick out of seeing people enthused by what I have written. I feel elated when, after a lecture, a listener thanks me because he or she has finally understood a principle that no one else succeeded in explaining. I am proud of my textbook in basic economics. But I grow impatient at party-political debates. I get furious with people who knowingly support a bad cause to protect special interests or positions of power. I am quickly fed up with horse-trading and rhetoric.

Persons who use labels might call it elitism - a characteristic that may be visible since my early days in the Left and during the MoF rightist era. They might even be right. But I no longer fear labels of this kind. The most important conclusion I have drawn is that I would rather be a pedagogue than a politician. Preferably a pedagogue with the opportunity to influence change.

That explains this Web site. It contains a considerable amount of material from previous political and economic debates. In that sense, its focus is on the past. In time, I hope it will have greater focus on the future. This Web site is meant to be a meeting place for information and debates on important current and future economic-political issues, not the least of which are globalization and new technology. A prerequisite is that readers, students, and persons surfing the Internet write, send mail, share their views, ask questions, and infuse life into the guest book. If my desires are fulfilled and this Web site in some way or other can kindle at least a few people's economic-political interest and broaden their knowledge, then the educator in me will be satisfied.

So! This manifesto is now complete, and I switch off my word processor this cold and windy May 1st.



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