Today both researchers and policy-makers agree that refugees and low-skilled migrants admitted to the European Union constitute a net cost and fiscal burden for the receiving societies. Whereas researchers draw this conclusion from a seemingly neutral accounting exercise – refugees contribute less in taxes than they receive in welfare assistance – politicians eagerly use this economics to justify increasingly restrictive asylum policies. The welfare state, they claim, simply cannot afford to absorb refugees. To be sure, politicians and researchers may judge low-earning and low-skilled labour migrants to be both useful and affordable, but only on the condition that their access to welfare provisions is restricted. Researchers conceive of this as the inherent trade-off between migration and the welfare state, also expressed as the "numbers versus rights trade-off".1 Put simply, a country either has high levels of immigration or it has a sustainable welfare state, but it cannot have both. Or, in a different scenario, it either admits many migrants whose access to the welfare state is restricted, or it admits very few migrants who all receive equal treatment in terms of welfare state access. Of course, given the household budget accounting involved, if a country admits many high-skilled, high-earning migrants, these will, in contrast, impact positively on the public purse.
In this article I will show that this consensual cost-perspective on migration builds on a flawed economic conception. Much of it is due to the heavy imprint of the orthodox "sound finance" doctrine on migration research and policy – the assumption that central governments face a budget constraint and solvency requirement much in same way as households, municipalities or businesses. As economists Huixin Bi and Eric Leeper establish, "like the household, the government must satisfy a budget constraint each period."2 In the Oxford Dictionary of Economics, moreover, the "budget constraint" is described as "[t]he limit to expenditure. For any economic agent, whether an individual, a firm, or a government, expenditure must stay within limits set by the ability to finance it".3 By shifting perspective to instead examine migration through the macroeconomic lens offered by Modern Monetary Theory (MMT), the article will not only demonstrate sound finance's detrimental impact on migration policy and research, including the doctrine's instrumental role in stoking the toxic debate on migration in the EU. It will also show why MMT offers the tools with which both migration research and migration policy could be modernized and put on a realistic footing.
Empirically, I bring these tools to bear on the case of Sweden, the country that, proportionally speaking, has received the most refugees in the EU. The specific focus is placed on the consequences of the large increase in government spending following the refuge reception in 2015. From the perspective of policy-makers' certainty about the fiscal unsustainability of large numbers of refugees and scholarship's assurances concerning refugees' negative fiscal impact, the Swedish situation in 2015 should provide the ultimate worst-case scenario. Sweden, one of the most comprehensive welfare states in the EU, admitted 163,000 asylum seekers in one year, the majority of whom were given permission to stay, which meant that they were incorporated into what orthodox economics already takes to be a bloated welfare state. In other words, all the conditions for a perfect storm were in place. By the same token, so were all the conditions for a perfect natural experiment to test the literature's assertions about fiscal burdens and trade-offs.
The Fiscal Burden of Migration
No one can have failed to take note of the public debate and political manoeuvring over the fiscal impact of migration, in general, and of refugee migration, in particular. "Objections to the perceived burden placed by immigrants on public finances," one scholar observes, "seem to motivate much popular opposition to immigration".4 "Is migration good for the economy?" is the title of an OECD paper that goes on to ask: "Benefit or burden – what's the reality".5 Under the title "Are migrants good for the host country's economy?" yet another scholar observes: "Indeed, the impact of migration on the host country's economy is possibly the most crucial question that policy-makers have to answer. Furthermore, it is a question that can drive changes in immigration policies as well as ignite fervent debates in the media and other forms of public discourse".6 Indeed, as a piece in The Economist reported, in October 2021 the Danish finance ministry released figures, purportedly showing that non-Western migrants and their offspring make up a net cost of 1.4 percent of GDP. Denmark's Social Democratic government has recently adopted a policy of "zero asylum seekers" and according to Torben Tranaes, professor at the Danish Centre for Social Research, it was this fiscal impact of non-Western migrants that "changed the Social Democrat's point of view".7
In the news media and media punditry, the message concerning migrants' ostensibly negative fiscal impact is also commonplace, and during the 2015–2016 refugee crisis it was amplified even further. In September 2015, the International Business Times fretted: "EU refugee crisis: how will European countries pay for the influx of thousands of people?".8 In an equally rhetorical style, a headline in The Atlantic queried "Can the welfare state survive the refugee crisis?", while another one in Die Welt claimed that the "Refugee crisis could cost [Germany] nearly one trillion euros".9 "Ballooning refugee costs threaten Germany's cherished budget goals", a Reuters headline noted. The article went on to inform readers that "[t]he unexpected cost of looking after a record influx of refugees in Germany could scupper Finance Minister Wolfgang Schäuble's cherished goal of achieving a balanced budget for the next five years".10 From 2015 and onwards, fiscal warnings about refugee costs from finance ministries, their economic experts and forecasting agencies thus went in tandem with ill-boding headlines about "Asylum costs: Germany's budgetary burden". Underneath the latter headline in Handelsblatt the introduction read: "A surging population of refugees in Germany could burst its balanced budget with billions of euros in added outlays."11 The sense that Germany's fiscal health was hinged on a drastic reduction in refugee numbers was growing, with Schäuble's then deputy, Jens Spahn, saying that "[m]oney for other things that we might want is simply not there".12
Given that Sweden, proportionally speaking, was the country in the EU that admitted by far the most asylum seekers in 2015 (and prior to that too), the situation in Sweden received a lot of attention in the news media. In a commentary in 2018, The Economist summarized the impact of refugee migration in Sweden:
Between 2013 and 2017 Sweden let in 353,000 refugees, equivalent to 3.5% of its population. It has failed woefully to integrate them. Red tape makes it hard for them to find jobs. […] Combined with large handouts, this means that refugees tend to drain the public purse. And this avoidable policy error has helped to poison Swedish politics. The Sweden Democrats (SD), an anti-immigrant party, warns that newcomers will bankrupt Sweden's welfare state.13
Around the same time, The Guardian reported that the "163,000 migrants" who arrived in Sweden in 2015 had been "magnifying popular concern about a welfare system many felt was already under strain". Sweden, the article claimed, already suffered from "[l]ong waits for operations, shortages of doctors and teachers and a police force that has had difficulties dealing with a spate of gangland shootings". These problems, the article concluded, "have all shaken faith in Sweden's prized model of generous welfare and inclusiveness".14
Since 2015, Sweden's Social Democrat-led governments have, for their part, been repeating the fiscal burden message ad infinitum. In the autumn of 2015 the Swedish finance minister, Magdalena Andersson, declared that the large refugee admission was "financially unsustainable" and would cause fiscal deficits for the coming years. "We will both have to reduce spending and borrow", she asserted in an interview in October 2015. "It's about cutting migration costs as well as looking into spending cuts in other areas. But we will also have to borrow money." The interview's introduction read as follows: "The big rise in costs for migration forces the government to make big spending cuts and a drastic increase in borrowing". The next sentence quotes the finance minister: "This is not sustainable". In November 2015, a typical headline in a major daily paper read: "The deficit is growing: government's expenditures sharply increase due to the growing number of refugees".16
During the election campaign in 2018 the Social Democrats depicted the newly arrived refugees as not being keen enough on learning the language, joining education and training programmes, finding work and thus contributing to the welfare of their new country. Whereas the prime minister, Stefan Löfven, spoke about refugees' "duty" to make themselves "employable" in the same breath as he promised to show organized crime the door, Magdalena Andersson, who is now the prime minister, said asylum seekers had better go somewhere else. Andersson, who took the most hawkish position, repeatedly declared migrant integration a failure and went as far as claiming that a restrictive asylum policy was a fiscal prerequisite for fighting child poverty in Sweden.17 Around the same time the Minster for Justice and Home Affairs asserted that a government summer programme that subsidised bus fares for high school students had been made possible and affordable only thanks to cuts in refugee spending: "If we had not tightened up our migration policy in 2015 there would have been no fiscal space left".18
The Real Benefits of Migration
With Magdalena Andersson being appointed Sweden's new prime minster late in 2021, her new government has signalled an even harsher and, some say, Danish-leaning asylum policy, aiming to decrease the already historically low number of asylum seekers even further – all for the much-publicised purpose of protecting the fiscal sustainability of the welfare state. But the claim that refugees are a fiscal burden on the Swedish welfare state is guided by a fundamental misconception. Just think of The Guardian's reporting on Sweden above, where refugee migration is said to impact negatively on an already strained welfare state that struggles with backlogs and staff shortages in the health-care system. What the British newspaper fails to consider is the fact that without migration the backlogs and staff shortages would have been much more acute. As an in-depth OECD study on the matter found, the share of foreign-born medical doctors in Sweden stood at 30.5 percent in 2015/16, up from 23 percent in 2000/2001.19 This is one of the largest proportions in the world. Iraqi and Romanian doctors make up two of the largest groups within the cohort of foreign-born doctors in Sweden. At Sweden's largest hospital, Sahlgrenska University Hospital in Gothenburg, 35 percent of the doctors, 18 percent of the nurses, 28 percent of the assistant nurses and 30 percent of the biomedical analysts are foreign born.20 In the Stockholm region, 34 percent of the medical doctors are foreign born, and since 2015 it is the group from countries outside of Europe that has increased the most. Meanwhile, 52 percent of the nurses in the Stockholm region are of foreign background; and around half of the assistant nurses, dental nurses and dental hygienists have foreign background.21 Moreover, close to 30 percent nationally, and about 55 percent in the Stockholm region, of those working in the Swedish elderly care are foreign-born, of whom the overwhelming majority have a refugee background.22 As one Swedish regional newspaper heading put it a few years ago: "Without immigration elderly care falls apart". 23
The important role played by migrants in the care and healthcare sectors is of course not unique to Sweden but predominate in scores of EU countries. As the pandemic hit the EU in March 2020, the issue of essential workers or key workers – not least those in health care and food production – was elevated on the agenda. Suddenly, those low-skilled migrants depicted as fiscal burdens by policymakers, the news media and scholars appeared as the pillars of society they actually are. "The overarching picture", one study concluded,
is that of a migrant workforce that acts as an integral part in keeping basic and necessary functions of European societies working amidst periods of forced closure. It is worth stressing how, among migrants, the low skilled workers are especially over-represented in a number of key occupations that are vital in the fight against COVID-19, underscoring their often neglected value within European economies.24
The figures are extremely revealing. While 30 percent of native Germans make up key workers, the figure for EU-mobile and extra-EU migrants in Germany is 35 percent. As Fasani and Mazza's paper also reveals, discrepancies "are even larger in countries such as Italy (31% for natives versus 43% for EU-mobile and 40% for Extra-EU workers) or Sweden (38% for natives, 43% for EU-mobile and 48% for extra-EU citizens)."25
In 2018, 60 percent of all cleaners in Sweden were foreign-born. The same was the case for 51 percent of bus and tram drivers; 49 percent of taxi drivers; 68 percent of maids, nannies and related personnel; 42 percent of restaurant and kitchen assistants; 49 percent of machine operators in laundering; 44 of machine operators in meat and fish processing; the list goes on.26 Although it consistently refuses to mention these facts in the public debate, in a report from 2018 even the Swedish government concedes as much: "Without the foreign-born women and men, the elderly care would face significant problems in fulfilling its task."27
Again, this is the reality, and the numbers are there for everybody to see. Yet this reality persistently fails to register in national and European debates on refugee and low-skilled labour migration. The seriousness of this deliberate omission cannot be overemphasized. The very people who, proportionally speaking, do more to sustain key welfare functions are said to make the same welfare functions fiscally unsustainable. Instead of broadcasting the real benefits that refugees and labour migrants bring to EU countries and, from there, enact policy to improve migrants' often precarious situation, the political establishment has done the opposite. It has made sure to soak and trap the EU in a toxic debate in which refugees and migrants who earn "below average" are said to "drain the public purse", as put by The Economist above.
The Poverty of Research
Given this state of affairs, the need for sound science becomes even more pressing. It is needed to correct and respond to the false political and media refrains concerning the "fiscal burden" posed by low-earning migrants and refugees. But, as already noted, such scholarly work on migration is very hard to find. At best, we find research that bases itself on the same sound finance premises as the one arriving at the trade-off conclusion, but that, instead of costs, finds fiscal benefits from migration. This conclusion rarely applies to low-earning migrants though, and never to (the initially) non-earning refugee migrants. This is a serious lacuna, to say the least. When it comes to the growing problems of racism and fascism in the EU, we can at least spot a growing scholarly literature that cautions, confronts and seeks empirically and theoretically to explain the phenomena. But the fact that the political establishment in the EU takes refugee reception and welfare state sustainability to be incompatible has failed to attract much research at all – that is, research into whether the question of a migration-welfare trade-off is a valid starting point to begin with. Instead, we have seen the trade-off literature grow even further.
When thoroughly examining the sizeable literature on the "fiscal impact of migration", however, this lacuna is easily explained.28 As mentioned above, when the neoclassical sound finance paradigm is applied, as it is – knowingly or unknowingly – by all the contributors to the literature, the central government is conceived of as roughly analogous to a household. This assumption applies universally, independent of the smorgasbord of different monetary regimes that any given central government may adopt. This means that everyone whose tax payments fall below average is considered a fiscal burden. These inhabitants are said to receive more in government welfare spending than they pay in.
From the perspective of research into the "fiscal impact of migration" this is just a fact, so research cannot be held accountable for being complicit in stoking the sentiment that refugee reception and low-earning migrants jeopardize the welfare state and that, consequently, refugee prevention constitutes a prerequisite for the fiscal viability of the welfare state. As one expert in the field puts it: "The lower the skills and earnings of migrants in the host country, the greater will be the strictly economic case for restricting some of their welfare rights in order to minimize the fiscal costs for existing residents."29 The "strictly economic" serves to indicate that the issue at hand is neither grounded nor decided within the realm of political choice. Rather, objective economic laws of fiscal sustainability are said to constrain what is politically feasible.
According to world-renowned economist Branko Milanovic, "[t]he arrival of migrants threatens to diminish or dilute the premium enjoyed by citizens of rich countries, which includes not only financial aspects, but also good health and education services." Admitting low-earning migrants therefore "requires withholding some civic rights", Milanovic asserts.30 "We can debate the sharpness of the trade-off, but cannot deny its existence."31 In Milanovic's quest to figure out ways to "pay for increased migration", such withholding of rights to migrants – or "discriminatory treatment", as he terms it – are both necessary and beneficial to all.33 Migrants, Milanovic (2016b) suggests, "could also be made to pay higher taxes since they are the largest net beneficiaries of migration".34
Finally, another representative scholarly view, published in the International Organization of Migration's (IOM) journal International Migration, states that:
The refugees represent a fiscal burden for the host countries at least short and medium term. Under these conditions refugee migration is unable to help to alleviate the aging related fiscal burden of the host societies, on the contrary, it contributes to its worsening. Thus, when the majority thinks that refugees represent a fiscal burden (they "take out more from the public purse than they pay in"), they are not wrong this time. It is not possible to argue against this with solid empirical evidence. Naturally, the moral (and legal) obligation argument for accepting the refugees is still valid but it couldn't be underpinned with further economic reasoning. The moral obligations and the economic benefit are in conflict here.35
As communicated in the quote, "the majority [is] not wrong this time", implying that, although majorities may be wrong most of the time, on the issue of refugees they are not. Here, the majority opinion agrees with science. The political parties on the extreme right have always had this piece of "economic science" tattooed into their party programmes and flagship slogans. Here is an instance when Europe's extreme right cannot be dismissed as populists or as being guilty of simplifying complex issues. As asserted in the quote, the factuality of refugees constituting a "fiscal burden" "is not possible to argue against […] with solid empirical evidence". And since a fiscal burden, per definition, is synonymous with something very negative in the public debate, we should not be surprised if politicians and the public take those making up the burden – i.e. the refugees – to be undesirable too.
In response to this, the proponents of the cost perspective simply say that to mask or hide the truth about refugee migration – or any other migration deemed costly – goes against the scientific ethos and that it would make for an even worse place to begin integration. Many would add that tampering with the truth will only aid the anti-immigration populists – a particularly common retort from mainstream politicians and scholars who want to mark their distance from the extreme right. Since so few challenge the basic principles and maths of the cost perspective, it has gained an air of unassailable truth. But those who claim that they side with accuracy in order to avoid playing into the hands of the anti-immigration right do something even worse than allowing the cost assumption to stand unchallenged. They give it new life and credibility by insisting it be acknowledged in advance. It is like starting a discussion about equal pay by insisting that we acknowledge that women are a fiscal burden on men because women pay less in taxes – and that trying to diminish or hide this "fact" only plays into the hands of the sexists.
Modern Monetary Theory
In employing the descriptive macroeconomic framework provided by Modern Monetary Theory (MMT),36 we can explain further why the cost perspective builds on a flawed economic conception. I have already stressed that the orthodox "sound finance" economics mistakes state spending for being analogous to household spending. Here, spending amounts to little more than a cost, in the same way that a household looks at its outlays. Therefore, the money spent on refugees would have to be made up for through tax hikes, "risky" borrowing or by removing funds from other areas, such as welfare benefits intended for needy citizens.
For countries that issue their own fiat currencies, however, none of this applies. Since the central government is the monopoly issuer of the currency, it follows, both in logical and in concrete terms, that it necessarily has to spend or lend the currency (via the banking system) into existence before it can collect it back in taxes. If this was not the case, there would be no money to pay taxes with and the banks would have no central bank reserves to buy government bonds with. Such governments are thus the exact opposite of municipalities, business and households, all of which have to collect, earn or borrow the money before they can spend it; they are mere users of money, not issuers. By the same token, deficits and debts denominated in the fiat currency issued by such governments are not something risky or bad, but just another way of expressing that there are surpluses and financial savings elsewhere in the economy, such as in the domestic private and household sector, which is a good thing. As Tymoigne clarifies, "fiscal deficits are a boost to the saving level of the domestic private sector"; they "sustain national income by injecting more income in the economy than they remove through taxes, which improves the liquidity and solvency of other sectors".37
As MMT explains, therefore, currency-issuing governments are not revenue-constrained. This means that taxes collected by the central government are not used to fund government spending as they are when collected by currency-using bodies such as municipalities or constituent states in federations. Central government taxes fulfil other indispensable functions and purposes. By constantly removing a large chunk of money – and thus spending power – from the private sector, taxes work as a powerful anti-inflationary measure while at the same time moving real resources from the private to the public sector. Taxes also work as an instrument regulating income and wealth distribution, and they are used to promote or discourage various industrial practices and individual behaviours. And there are, of course, other purposes that central government taxes can be made to fulfil – but revenue for spending and saving for future spending do not form part of them.
Likewise, such governments do not have to borrow their own currency in order to spend. As MMT demonstrates, the real purpose of bond sales in a sovereign currency is not fiscal (for financing purposes) but monetary. They are carried out to enable the central bank to hit its overnight interest rate target (the interest banks pay when borrowing reserves from each other overnight).38
To be sure, all countries that issue their own currencies still impose unnecessary and politically invented fiscal frameworks, including balanced budget rules, debt brakes and spending ceilings. One of the most common rules stipulates that governments must "borrow" and thus sell bonds to the private sector when it lacks the funds or deposits at the central bank to match the spending. But, again, currency-issuing governments do not need to borrow the currency whose issuing it monopolizes. In fact, as Mitchell and Fazi (2017: 184, emphasis in original) reveal, such governments "could run fiscal deficits without issuing debt at all: the central bank could simply credit the relevant bank accounts to facilitate the spending requirements of the treasury, regardless of whether the fiscal position is deficit or surplus". Another option would be for the finance department to sell debt directly to the central bank, a procedure that is also prohibited by most countries. But, even when currency-issuing governments sell bonds to the private sector, these bonds can be "sold" only on the premise that the government first provides the central bank reserves with which banks purchase the bonds. Again, a government "must spend (or lend) its currency before it can receive it back either in payment of taxes or in purchase of its debt".39 Hence, when currency-issuing governments create fiscal frameworks that require bond sales to the private sector, or banks – instead of no sales or sales directly to the central bank, as mentioned above – the banks pay for this by using the reserves that they have in their accounts at the central bank. And bank reserves can only be created by the central government (i.e. the treasury and the central bank); and they are created in three ways: (1) when the government spends; (2) when the central bank lends bank reserves to banks; and (3) when the central bank purchases bonds from banks.40
Interestingly, with the March 2020 suspension of the Stability and Growth Pact's budget rules and the ECB's adoption of the Pandemic Emergency Purchase Program, also governments in the eurozone – including Greece and Italy – have been able to spend freely, without any risk of "running out of money".41 When then ECB president Mario Draghi stated, in July 2012, that the ECB was "ready to do whatever it takes to preserve the eurozone" – by purchasing government debt on the secondary market – the basis for today's free spending in the eurozone was established. But although the "whatever it takes" initiative demonstrated the fiat quality of the euro, it still had to co-exist with an even more rigid adherence to sound finance orthodoxy and perpetual austerity. With Covid-19 hitting in March 2020, this fundamentally changed; all of the fiscal austerity strings that formerly had been attached to the ECB's bond purchasing were now cut. As of July 2021, the ECB had bought up all the debt that had been issued by the governments since March 2020. At that point in time the ECB owned 42 percent of all the outstanding government debt in the eurozone.42 With rules preventing the ECB from buying the debt directly from the member state treasuries, the debt has been bought on the secondary bond market; yet, in the end, this procedure ends up being equivalent to treasuries selling the bonds directly to the ECB.43
As MMT also demonstrates – and as the unprecedented pandemic-spending corroborates – money spent never disappears, and this, of course, applies to all monetary systems everywhere. This is so because all central government spending, by definition, must end up somewhere and hence be collected by someone.44 Spending by the central government is thus synonymous with income in the non-central government sector – as such, spending always equals income. Or, as Wray puts it: "Aggregate spending creates aggregate income."45 In the scholarly literature on the fiscal impact of migration as well as in fiscal policymaking, this irrefutable fact goes unnoticed.
Real Resources, Financial Resources
What may be an even more serious error on part of scholars and policymakers is that they fail to understand why it is absolutely necessary to distinguish between real resources, such as labour, and financial resources. Reflecting this failure, researchers cannot grasp the value and indispensability of the labour carried out by those low-income essential workers with migrant background discussed above. Instead, they conceive of these workers as fiscal burdens. Their tax contributions fall below average and so they are said to receive more in government welfare spending than they pay in. By always being in the red, so to speak, these workers will neither be able to redeem the costs for their initial stay in the country during which they did not work. Of course, if refugees work as doctors, they will be able to offset such alleged costs, and they may also be able to offset additional costs, such as their children's schooling. But, if they work in elderly care, food production or cleaning, they remain perpetual net costs. According to this logic, then, Sweden would have been better off without the cleaners and elderly care nurses who came as refugees.
As I explained above, the real resource contribution from the foreign-born nationals to the Swedish society has been nothing less than astounding.46 The fact that Sweden is the only country in the EU (and beyond) that has not seen an increase in the median age over the last decade illustrates this.47 With fewer Swedish-born workers joining the labour force than leaving it, the entire addition of working age people in Sweden has, since 2008, consisted of the foreign born. Between 2010 and 2017 the number of working age (16–64) Swedish-born people dropped by over 150,000 while the number of working age foreign-born grew by some 360,000 people (SPES 2018). This growth will pick up even more until 2025, when the foreign-born share of the working age population is set to hit 27 percent, as compared to 18 percent in 2010. The figures for 2017 demonstrates this well. Here, the labour market added 94,000 jobs, of which 75,000, or 80 percent, went to foreign-born workers.48
Crucial, too, is that refugees in Sweden have disproportionately ended up in smaller, rural municipalities. Many of these municipalities appreciate refugees as vital in making local communities liveable again, helping to fill vacancies and to reverse a decades-long vicious spiral of depopulation, declining local tax revenue and welfare service retrenchment. Thanks to refugee reception, municipalities that were closing schools are now opening them and building new ones instead.
The Fiscal Impact
Concerning fiscal policy, the Swedish central government increased spending massively to manage the reception of 163,000 refugees. The government made sure to inform the public that the spending was a necessary evil that would impact negatively on the Swedish economy, welfare and fiscal health. In addition, practically all economic expertise warned in unison of economic and financial damage, urging the government to trim spending and introduce austerity measures to avoid deficits and debt accumulation.
When it comes to deficits and debt, it needs mention that the government and the entire economic expertise tasked with monitoring Sweden's fiscal policy, including the European Commission, did not present the forecasts regarding the refugees' negative fiscal impact as forecasts. Rather, that refugee spending would cause deficits and hence necessitate borrowing, tax hikes and budget cuts were continuously rendered as foregone conclusions.50 Yet, it was the exact opposite that occurred. Instead of the big and bad deficits that the expertise had guaranteed would transpire, the consolidated government sector would run big surpluses in all the years between 2016 and 2018, as well as a small surplus in 2015.51 From 2015 to 2017 Sweden paused its sound fiscal framework in order to deal with a serious situation that required a drastic increase in spending. The surplus target and the "pay as you go" rule were temporarily suspended. Although all stakeholders argued otherwise, the drastic government increases in spending and public consumption did what they often do: they stimulated aggregate demand, investment and employment. In 2016 alone public consumption rose by 3.6 percent,52 a development not seen since the 1970s.53 The economy grew and tax revenue surged so much that successive surpluses were created, which is something that may happen, albeit not necessarily.
But, as MMT explains, this is not important; what is important is not the fiscal balance at the end of the year but the overall balance and real health of the economy and society. Despite the fact that politicians, experts and scholars have squandered years – and still do – on trying to figure out ways to get out of the non-existent and, in any case, non-dangerous fiscal hole allegedly dug by refugee spending, very little thinking has been done with regard to the latter balance. Meanwhile, the wider political, academic and public debate has also continued to deem refugees a cost, even after their own trusted method for judging costs and benefits – i.e. the orthodox household method for measuring fiscal impacts – has proved them wrong.
Important, too, is that while Sweden's central government, its economic experts and the media worried about the refugee spending's negative impact on the future fiscal balance, many rural and de-populating municipalities away from Stockholm were busy welcoming this expenditure as income. Thanks to the refugee spending by the central government, 2016 ended up being one of the best fiscal years ever for Swedish local governments, with practically all of the country's 290 municipalities running surpluses.54
The central government spending to the municipalities financed the reception of refugees and their initial integration. In and of itself this increased public consumption enormously; and it stimulated investment and employment, which boosted overall economic growth. But since much more money was transferred than was needed for the immediate refugee concerns, municipalities were able to attend to other things too, such as welfare needs, schools and infrastructure. Besides impacting positively on the health of welfare services, in many municipalities refugee funds also enabled municipalities to invest, save and pay down debt.55
The admission of refugees – that is, real resources – together with the generous addition of financial resources from the central government thus proved to be a hugely virtuous combination for scores of depopulating municipalities in Sweden.56 With this we also see the nullification of what scholars and centrally located politicians claim to be an inescapable and indisputable trade-off between refugee spending and welfare spending. Right before our eyes, then, Sweden had built a real-world model – however reluctantly – that was capable of receiving large numbers of refuges while at the same time investing in welfare. Instead of the misconceived trade-off between migration and welfare, or the alleged choice that has to be made between welfare spending and refugee reception, the Swedish case demonstrated that it is exactly the other way round. Spending on the refugees, the non-citizen newcomers, became a way of rediscovering the viability of welfare for all. But instead of discussing its real effects and applicability as a model for the EU as a whole, the Swedish model has since been discarded and deemed fiscally unsustainable.
Conclusion: Human Rights Are Not an Economic Sacrifice
When politicians sound the alarm over refugee costs, claiming that these threaten the fiscal sustainability of the welfare state, they can point to research in support of their claims. But most of the time they do not have to cite research. The notion that there is a trade-off between refugee migration and the welfare state is simply common sense in the public debate. The debate is not whether this is actually accurate; everybody agrees that refugees involve costs for taxpayers. The debate is, rather, whether these costs are deemed affordable or not. It is clear who is winning this debate in terms of policy outcomes; asylum policy is becoming increasingly restrictive and the residence and social rights for those refugees who still manage to enter the European Union are being curtailed. No EU member state wants to share the "refugee burden".
But it is a strange debate, because the losing side, or those defending refugee rights, almost always contend that human rights never should be allowed to be subjected to cost–benefit analyses. Given that no one is questioning the assumption that refugee reception indeed constitutes a cost, this position is understandable. Under these circumstances, human rights proponents will always lose a cost–benefit debate over refugee reception. But as I have shown throughout this article, refugee reception is not costly. Rather, it amounts to a beneficial addition of real resources, as illustrated in the Swedish reality above. The government spending on refugees, for its part, will do what government spending always does: it will end up as income in other sectors of the economy – that is, as income for municipalities, businesses and others involved and employed in the management of refugee reception and integration. Those advocating human rights, therefore, do not have to concede the mistaken orthodox assumption that refugees are costly. Nor do they have to think of "the economy" as the enemy. Receiving refugees in the EU is not an economic or fiscal sacrifice. In admitting and investing in refugees – that is, real resources – societies in Sweden and the EU benefit. But let me be clear: I am not saying that Sweden or the EU should admit refugees because it benefits Sweden and the EU. Sweden and the EU should admit refugees to defend and uphold human rights.