the construction con: constructing a construction crisis

The housing minister from Kristdemokraterna recently invited several industry players to a round table discussion on the crisis in new housing construction. Construction has fallen by half in just one year. I truly hope they had a nice fika, because this is probably all action we will see from the government. This is because the construction industry's crisis is entirely due to the deliberately pursued economic policy from the government via the Riksbank.

The problem is inflation, which has been alarmingly high due to a weak Swedish krona, foreign electricity (gas) prices and high prices in international shipping. The unwillingness of politicians to address these problems forces the Riksbank to act, and interest rate increases are the Riksbank's only weapon. Now, when the price in electricity and shipping is back to normal, studies from the ECB show the inflation is lingering due to companies raising their profit margins instead of lowering prices is . Unfortunately, the Riksbank interest rate weapon fails to get its teeth into those things causing the inflation, making the remaining argument for raising interest rates very weak.

The only way the Riksbank's contuined interest rate increases can reduce inflation today is by slowing down the economy and thereby making us all a little poorer. The idea is that companies will be forced to lower their prices when we can no longer afford to buy their goods and services. This is an extremely painful and ineffective way to lower inflation, and it is not entirely certain that it will even work. A more people-friendly approach could have been to regulate the pricing of energy as in Spain and Portugal or putting a price cap on food like in France. And in practice, as every economist knows, the first thing that happens when interest rates are raised is that construction decreases and unemployment in the construction sector increases.

The construction industry is thus sacrificed in a conscious economic policy that leads to poorer citizens, more expensive and fewer buildings and fired architects. But every cloud has a silver lining. Since the construction industry accounts for 20% of Sweden's greenhouse emissions, we can hopefully see a reduction in emissions from the sector in the coming years. Maybe this is the only way to hit the breaks on our concrete and steel-loving industry, and we architects must in any case retrain ourselves as restorers, remodelers and self-builders.