'Stockholm Syndrome': Why is the U.S. Afraid of Sweden?

STOCKHOLM, Sweden, April 27, 2009 — -- The worldwide financial crisis has been an eye-opener in many ways. But to a Swede, it has been a big surprise to realize just how stigmatized Sweden seems to be in the United States these days.

In response to the U.S. government taking partial ownership of the auto industry, the banks and insurance companies, several U.S. conservative TV commentators have lately worried that the United States is turning into "socialist Sweden".

In response, liberal comedian Jon Stewart of "The Daily Show" ran a report last week called "The Stockholm Syndrome," making fun of Americans' black-and-white view of the Nordic country's famous welfare system.

But the significance of this Swedish taboo and the Cold War mind-set many Americans seem to be stuck in dawned on me recently as I was about to interview Paul Volcker, former chief of the U.S. Federal Reserve and chairman of President Obama's Economic Recovery Advisory Board.

"Whatever you do, don't mention Sweden," cautioned Clarence Schwab, who runs C. Schwab LLC, an investment company in New York.

"Sadly, the first thing most Americans think of is socialism, and that is still a very sensitive issue here."

As a half-American, half-Swede, Schwab should have some insight. Schwab not only brings Swedish, green cutting-edge technology to the United States, he has tried to figure out what the United States could learn from Sweden's bank crisis in the early 1990, partly from his uncle, Nobel Foundation Chairman Marcus Storch, who was a member of Sweden's financial rescue commission at the time.

Simply put, the Swedish center-right government acted swiftly, boldly and with democratic support as it made temporary takeovers of insolvent banks to sort out their bad debts. It took about three years until they had become "healthy," at which point the state's shares were sold off without a loss.

The goal was never to gain permanent control of the banks, but to save them and the banking system. The risk and responsibility were mainly carried by the banks and their shareholders, rather than by taxpayers.