Andreas Hatzigeorgiou on Global Cities, Migration, and Stockholm's Economy

ALEX WOODSON: Welcome to the Carnegie New Leaders podcast. I'm Alex Woodson.

Today I am joined on the phone by Andreas Hatzigeorgiou, a Carnegie New Leader and the chief economist at the Stockholm Chamber of Commerce in Sweden. He was previously adviser to Sweden's minister for trade and Nordic cooperation and has also worked for the World Bank in Washington, D.C., and for Sweden's National Board of Trade. He received his Ph.D. in economics from Lund University in Sweden and obtained a Master's degree as a Fulbright Scholar from the Gerald R. Ford School of Public Policy at the University of Michigan, Ann Arbor.

Thanks for calling in from Sweden today, Andreas.

ANDREAS HATZIGEORGIOU: Thank you, Alex.

ALEX WOODSON: To start off, can you just give us an overview of your job at the Chamber of Commerce? What are some of the things that you are focused on day-to-day?

ANDREAS HATZIGEORGIOU: The Chamber of Commerce in Stockholm is the oldest and biggest business organization for the Swedish capital region, founded in 1902. It is quite an interesting organization because we differ a little bit from other chambers of commerce around the world. We have a very broad agenda, not just dealing with tax issues and stuff like that, but in fact we also have one of the world's largest arbitration institutes; we work on issues such as education, how to get programming in schools. So a very broad and exciting agenda, and also in a very exciting city. Stockholm is Europe's fastest-growing capital and is doing very well.

ALEX WOODSON: What kind of things are you focused on? What does a typical day for you look like at the Chamber of Commerce?

ANDREAS HATZIGEORGIOU: As chief economist, I oversee all our macroeconomic analyses. I am involved in all of our reports that we write on various issues, making sure that the analysis is correct and that we focus on the right things. Also I am representing the Chamber in various external events, basically pushing our policy agenda together with my team and the CEO of the Chamber.

ALEX WOODSON: We will get into some of those policy issues and talk about that a little bit more later.

But, first, how did you become interested in this field? Was this something that you were always interested in—economics, working for a city—or was there an event or a moment that really made you take an interest in this?

ANDREAS HATZIGEORGIOU: That is a very interesting question. I think, broadly speaking, economic policy and what drives growth and development has been one of my interests for a very long time. Going back to my childhood, I have family in both Sweden and Greece. I was born and raised in Sweden, a country that has been for a very long time one of the wealthiest countries in the world. At the same time, Greece is a European country but has lagged a little bit when it comes to growth and well-being. So issues pertaining to what drives growth and why some countries or some cities are rich while other cities or countries are poor have always interested me.

But, on the question of working for a city or within that context, that is sort of a new interest. Having been an adviser to Sweden's former trade minister, the perspective in my previous work was always focused on nations—what can we as a country do to improve our well-being or growth or help our businesses? But, working in that setting, I came to realize after a few years that cities are really the engines of growth, and urbanization is perhaps the most important driving force out there. So I became interested in working in a context which focused much more on cities. That is one reason why I started to look at organizations that work more on cities and urbanization issues.

ALEX WOODSON:As you just said, Stockholm is the fastest-growing capital in Europe. I was looking at the Chamber of Commerce website and it says, "Stockholm has become the second-most prolific tech hub in the world on a per capita basis, behind Silicon Valley." What are some of the reasons for this? It seems like people like to do business in Stockholm. What has led to that?

ANDREAS HATZIGEORGIOU: Yes, in per capita terms, you're right, we're after Silicon Valley. We see a lot of companies that are now global, successful companies in the tech arena are from Stockholm or Sweden, like Spotify; Skype was founded in Sweden; we have a number of other companies—Klarna and so forth.

I guess there are a lot of different reasons why Stockholm has become such a tech "unicorn" factory. I think that one reason might be that we very early on had a tremendous expansion of digital infrastructure. Internet is super-fast in Stockholm and all over the country. You can get broadband basically everywhere. Wi-fi was introduced early. So it was easy for young people to start getting into programming and developing apps and stuff like that.

In fact, the single most common profession in Stockholm nowadays is actually computer programming. I think that is, of course, as a result of the path that Stockholm has been taking during the past few years.

ALEX WOODSON: What are some of the other industries that Stockholm is known for and that you work with a lot?

ANDREAS HATZIGEORGIOU: In addition to tech and Internet content providers (ICP), we have a very strong clean-tech sector. Life sciences are pretty strong as well. Stockholm is also very strong in financial technology. We are just behind London when it comes to number of investments into financial technology. Those are a few other areas where we are quite strong.

But, having said that, it is not like we can afford, I think, to sit back and relax. Looking at new tech hubs, we see that they are developing very fast, both in the United States and elsewhere. Cities like Austin and Pittsburgh and other places are really developing and growing fast when it comes to tech. So we need to stay ahead, and that's one of the things that we are working on to make happen—for instance, to get programming on the school schedule, so to have programming as part of the national education strategy.

ALEX WOODSON: What are some other strategies to make sure that Stockholm stays a leader in the tech field?

ANDREAS HATZIGEORGIOU: I think immigration is really important because the labor shortage in the ICP area is quite substantial. For instance, we see that ICP companies, tech companies, that want to hire programmers actually have a hard time finding the right type of labor to fulfill their needs. What we see, and what I think needs to be done, is that we need to be much better in attracting global talent and talent from other areas of the country as well.

We have been a little bit better in doing that over the past few years, so now I think Indian programmers are coming to the country and helping in that regard. But we need to be a lot better in attracting talent because we are competing in a global marketplace. When we want to find programmers or good people in that field, we are competing with Silicon Valley and other places, so we need to step up our game, definitely.

ALEX WOODSON: You are talking about immigration. Sweden has been a big player in another immigration story, which is the refugee crisis. I was reading a Washington Post article from October that said that Sweden is expected to bring 150,000 asylum seekers this year, twice as many as last year, which is a huge number for a country with a population of less than 10 million.

I know this isn't your area of expertise exactly, but how has this affected your work at the Chamber of Commerce?

ANDREAS HATZIGEORGIOU: The refugee crisis is indeed something that affects all of us living in Sweden. It is true that we have welcomed a large number of refugees. The number mentioned in that article has actually been exceeded, so this year 165,000 refugees have come to Sweden. For a country with 10 million inhabitants, that is a huge number, and we've actually seen that the system basically was about to collapse because of the large inflow of refugees.

We have been accepting many refugees over many years, in fact, not only recently from Syria. Before, from Iraq, for instance, Sweden accepted as many refugees, or perhaps more, than the whole of the United States. We have been very open. But now the politicians and policymakers have realized that we cannot continue on this road because we basically don't have housing for everyone.

What we have said from the Chamber is we also need to utilize the human capital and the resources that come with all the refugees, trying to tie together the potential to fill labor shortages where we see them in the Stockholm and Swedish labor market. For instance, speaking of programming, I think we can try to find people among the refugees that can be educated in that field or that have the training already to become programmers and help the growing tech community in Stockholm.

ALEX WOODSON: Switching gears a little bit, you are also leading the cooperation between the Stockholm Chamber of Commerce and the Brookings Institution's Global Cities Initiative. Can you tell us a little bit about this initiative and how you are working with them and what Stockholm and the Chamber of Commerce are doing in relation to that?

ANDREAS HATZIGEORGIOU: The Global Cities Initiative is a co-project between the Brookings Institution in Washington, DC, and JPMorgan Chase. It is a really interesting project, I think, because it tries to help cities become more global—to trade more, to promote international investment, simply to become more competitive through openness.

Stockholm has since 2015 been invited in this project, and we have worked together with the Brookings Institution to benchmark the competitiveness of Stockholm, to identify challenges, and to see where we can learn from other cities that are comparable with Stockholm in order to become more competitive. What we have done is that we have reached out to cities like San Diego and Portland and other cities in the United States—and elsewhere also for that matter—to share experiences and simply learn from each other. I think this is an excellent project for all participating parties.

ALEX WOODSON: Taking the example of San Diego, what can San Diego learn from Stockholm?

ANDREAS HATZIGEORGIOU: San Diego and Stockholm have a lot in common—not the weather, of course; we wish we could have some San Diego weather in Stockholm. But we are two cities of roughly the same size, and both of our cities have high ambitions when it comes to life sciences, for instance. San Diego has done a lot of good things when it comes to infrastructure and public-private partnerships and trying to tie together the business community with their academic community. We have a lot to learn from them.

They have expressed also that they want to learn more from Stockholm. They have been in Stockholm and visited us and looked at our start-up community. I think that we can definitely further our relations.

ALEX WOODSON: Are there any other specific projects that you would like to highlight from this initiative?

ANDREAS HATZIGEORGIOU: I think the latest addition to the Global Cities Initiative is Paris. The Global Cities Initiative originally only included U.S. cities, but after London and Stockholm were invited, now Paris is also joining. I think that Paris in France is an interesting example because they are facing challenges when it comes to growth, for instance, because they are lagging behind other global cities.

I was recently in Paris, and they have expressed interest in looking at Stockholm as an example of a city that has moved from back in the day a static sort of approach to policy—very egalitarian, but also not very dynamic. We have managed through our transformation to become much more dynamic, much more flexible, and global-minded, but still keeping our egalitarian way of life. We have been able to keep the labor market very inclusive and keep high levels of social protection while increasing our competitiveness. I think that is a feature that a lot of cities, not the least Paris, are interested in.

ALEX WOODSON: As I mentioned in the introduction, you also spent some time in Michigan. You received a Master's degree from the University of Michigan at Ann Arbor, which is pretty close to Detroit. When you talk about cities in the United States, Detroit is the prime example of a city that was on top of the world a few decades ago and now has really fallen on tough times.

I know you may not have spent a lot of time in Detroit, but you definitely spent a lot of time in Michigan, and I know you spent time in other U.S. cities. What is your impression of these cities in the United States that are not doing so great? What do you think they can do to get back to where they were? And I know you also have some ideas about some other European cities that are in a similar situation.

ANDREAS HATZIGEORGIOU: It was very interesting to spend time in Michigan. I lived in Seattle for a year before moving to Michigan, and Seattle and Stockholm are very similar in many respects—high-tech, tremendous growth going on, new start-ups being founded—and then moving to Michigan, where, not the least, Detroit and Flint were sort of deteriorating, and that was an interesting contrast. It was a very useful contrast in the academic studies of what makes growth happen.

I think one common denominator among cities that have been before great, then deteriorated, and then being able to bounce back is that they have all been open to reinventing themselves. I think Pittsburgh is a good example of that; Seattle also in many ways. I think the openness and willingness to reinvent itself and not simply trying to be nostalgic and going back and continuing to only focus on industries that used to be successful in the past is a key to success, I believe.

In Europe, we see the same thing here, where countries really need to reinvent themselves and cities that need to reinvent themselves. The cities that manage to do that are the ones that are becoming successful. Specifically, I'm thinking of course of the countries that have been ridden by the sovereign debt crisis since 2010, like Greece for instance. These countries really need to reinvent themselves in order to not become simply a beautiful museum and something that you look at for historical purposes.

ALEX WOODSON: You mentioned Pittsburgh a couple of times, I think, as a city that you were working with in the Global Cities Initiative. Is that correct?

ANDREAS HATZIGEORGIOU: Yes. I visited Pittsburgh, and I think that city is doing a lot of interesting things. They have great universities. Carnegie Mellon, of course, is doing a lot in programming, sustainable development, and urban planning and design that I think is really interesting and very important as a driver for a city's success.

ALEX WOODSON: One thing that we've noticed in the United States, and I've also noticed in the United Kingdom, is that there is a big divide between the cities and the rural areas. You saw that with the election in the United States; you saw that with Brexit in the United Kingdom. Does the same kind of dynamic exist in Sweden? Is Stockholm kind of an island in Sweden, or is the country more together in some ways?

ANDREAS HATZIGEORGIOU: Yes, that rural-urban divide is present in Sweden as well, unfortunately. Something important that we can learn from the U.S. election and the election in the United Kingdom that resulted in Brexit is really to tackle this rural-urban divide because if we don't, I think that we are going to see a lot of things happening that we don't want to see happen—the smaller places in the rural areas revolting more or less against a development that they haven't signed on to.

When it comes to the housing market, for instance, we need to figure out in Stockholm a way for people living in the rural areas of the country to have an opportunity to move to Stockholm and other cities, because today it is very, very difficult. A huge bottleneck when it comes to talent attraction and opportunities for people from other parts of the country to move to Stockholm is the housing market. We do not have a well-functioning housing market.

Basically it is impossible to rent an apartment in this city, which is very much different from the United States, where it is easier—if you have a job, you can move to a city. It might be very expensive or you might have to live very far from the city center, but in most cases you can find an apartment to rent. That is not the case in Stockholm. We have an overregulated housing market, and that makes it impossible for people from other parts of the country to move into Stockholm without going into heavy debt and actually being forced to buy a place.

ALEX WOODSON: What are some of the things that you are looking at to try to alleviate this situation?

ANDREAS HATZIGEORGIOU: You need to do a lot of things. You need to build more, of course. Sweden is a country with a lot of regulation, and some of that regulation can be simplified, especially when it comes to the rental market. We have very strict rent controls that made sense perhaps in the past, but today we see that these regulations and these rent controls have basically killed the market for rented apartments. That is something that needs to be fixed.

We also have issues with the ways people can stop construction in Sweden quite easily, in fact. So if a city wants to build on new land, people can protest and actually stop new construction, and that is an important impediment to solving the housing crisis. I call the situation that we have today a "crisis."

ALEX WOODSON: As a last question, as we're ending 2016 and heading into 2017, is there anything that is coming up that is new for you in 2017, or are you just continuing with all these projects that we've been talking about?

ANDREAS HATZIGEORGIOU: I think that we need to keep looking out for the "black swan." Looking at 2016, very few people expected the Brits to vote themselves out of the European Union, and this is going to have negative impacts on Stockholm and Sweden. The United Kingdom is Stockholm's number-one export market and the United Kingdom is Sweden's most important and closest ally in the European Union when it comes to a number of different issues. So this is going to have an impact for 2017 in ways that I think we haven't really figured out yet. And the Brits haven't even started to negotiate over the divorce yet, so that is something that we need to keep an eye on.

The result of the U.S. election is something that is probably going to affect us also. The United States is our most important market outside of Europe. We have 1,200 companies present in the United States. Sweden is the biggest foreign direct investor in the United States per capita. So our ties are very strong. What will happen with trade policy once the new administration takes over is something that is going to affect us, I believe, as well.

On top of that, in 2017 we have elections in Germany and France. We will see what's happening with the Italian financial turmoil—I don't think we have seen the end of that yet.

As we speak, the International Monetary Fund, the European Commission, and the Greek government have started a new quarrel over last year's crisis package. So, in 2017, if these things happen all at once, we might have a perfect storm that we need to be prepared for.

ALEX WOODSON: That is a lot to think about for 2017, definitely a lot to keep us all busy. Maybe we can do this again in a few months once a few of these things play out.

ANDREAS HATZIGEORGIOU: Absolutely. That would be great.

ALEX WOODSON: Thanks a lot for calling in. This has really been a terrific conversation.

ANDREAS HATZIGEORGIOU: Thank you.

ALEX WOODSON: This has been the Carnegie New Leaders podcast. My name is Alex Woodson, and I have been speaking with Andreas Hatzigeorgiou. You can find us on carnegiecouncil.org or on iTunes. Thanks for listening.