Conservative party leader, 2006: ”Sweden’s
new workers’ party”
Left Party protest against the EU, 2008:
”save the Swedish model!”
The Swedish model and its
future
EHG025, 2 December 2010
Erik Bengtsson
Today’s lecture
• I. The crisis of the model: criticisms from the Left and the
Right
• II. From crisis to role model again? The 21st century (cf.
Dölvik ”from bust to boom”)
• III. The Swedish model today: an assessment of its viability
Crisis
• Part 1: leftist offensive
• Part 2: (neo-)liberal wave
Radicalization of the left and the labour
movement, 1968-
Paris, May 1968
Wild strike in the Kiruna
mines, 1969-70: ”we are
not machines”
Vietnam
Cleaners’s strike,
1974-5
The labour movement’s offensive
• The issue of power and who determines what: ”the right to lead and
distribute work”
• 1972 Law on Board Representation
• 1974 LAS, Law on Employment Protection
• 1976 MBL, Law on Co-Determination
• 1976 – Wage earner funds
• The labour movement goes on the offensive. Insults and radicalizes the
employers’ organization SAF and the political center-right.
• Elvander: ”a radical attack on the essence of capitalism”
• Lundh (p. 131): ”Towards the end of the 1970s the employers began to feel
hard pressed by the radicalised trade union movement”
”With the wage earner funds we successively take over” – LO, 1978
”Wage earner funds are the beginning – socialism is the end”.
Demonstration against the wage earner fund proposal, 4 October
1983.
(neo)liberal wave, 1980-
Ronald Reagan: elected president in
1980
Margaret Thatcher: elected prime
minister 1979
• Employers’ offensive: SAF in the 1970s increasingly political
(neoliberal)
• 1980: large lock-out directed by SAF. SAF director Curt Nicolin: ”an
investment in the future”
• 1991: the employers’ organization (SAF) breaks with corporatism;
unilaterally draws back all its representatives from corporatist boards
- Explanations: 1) power/watered out corporatism (Rothstein, Bergström)
2) Ideology (Johansson)
- In response, the trade unions too have to draw back from those boards
Inflation and unemployment, Sweden 19762004
16.0
14.0
12.0
Lundberg’s fall
of the model
10.0
ECONOMIC
CRISIS!
8.0
Inflation
Arbetslöshet
A ”new
normal”
6.0
4.0
2.0
0.0
1976
-2.0
1980
1984
1988
1992
1996
2000
2004
Unemployment rate, 1956-2009
(source: OECD)
14
12
10
Sweden
8
USA
France
6
UK
Germany (former BRD)
4
The US ”jobs
miracle”
2
0
1956
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
GDP growth, year on year
(source: OECD)
10
8
6
4
Sweden
US
2
France
UK
Germany (with former BRD)
0
1955
-2
-4
-6
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
Employment rates, Sweden, euro area and
USA, 1997-2007
85
80
75
Sweden
70
USA
Euro Area
65
60
55
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
”The welfare league”
(”welfare” defined as PPP GDP/capita…)
•In 1970, Sweden was
the 4th richest country in
the world (GDP/capita)
The Economist, 2006:
•Fell in the ranking
during the 70s and 80s,
and this was the major
argument of the Swedish
neoliberals at the time
•Today: 10th place
•The diagram is taken
from ekonomifakta.se,
an
information/propaganda
site by the Swedish
Employers’
Confederation
I. Dynamics & contradictions
• More scattered unions; ”the conflict theory of inflation”:
different unions competing on who can get best wage increases
• (cf. Elvander, p. 128, LO’s ”monopoly position was lost”
II. From crisis to role model (again)?
• Compare the perspectives of Lundberg and Dölvik, thirteen years
separating their articles:
– Lundberg 1985: “the fall of the Swedish model”
– Dölvik 2008, p. 1: “Fifteen to twenty years ago, the Nordic countries – Denmark,
Finland, Iceland, Norway and Sweden – were hit by deep economic crises, underpinning
the view that the egalitarian Nordic labor regimes were neither competitive nor
sustainable in a globalized economy. Today, the picture has changed considerably with
the Nordic countries, like Phoenixes, rising to top international ranking lists of economic
efficiency and equality.”
II. Further examples of the Social
Democratic model re-evaluated in the
2000s
•
” Von Hayek was wrong. In strong and vibrant democracies, a generous social-welfare state is
not a road to serfdom but rather to fairness, economic equality and international
competitiveness.” – Jeffrey Sachs, economist, Scientific American 2006
•
”The Nordic and the Anglo-Saxon models are both efficient, but only the former manages to
combine equity and efficiency. The Continental and Mediterranean models are inefficient and
unsustainable; they must therefore be reformed.” – André Sapir, sociologist who researched
the European Social Models for the EU in 2003
•
“For much of Europe, the past decade has been depressing. Slow growth, high unemployment
and the burdens of rising public debt and falling competitiveness have renewed doubts about
the sustainability of the European “social model”, which is also starting to creak under the
weight of an ageing population. The youthful dynamism of America, and now of China and
India, seems to be leaving the decrepit old continent in the shade. Yet there has always been
one bright spot amid the gloom: Scandinavia. ” – The Economist, September 2006
•
”The most successful society the world has ever known” – The Guardian, 2005 (this
statement later much ridiculed!)
II.
• Dölvik: “The Nordic countries thus have recently been ranked among the
most globalized economies in the world and, according to prominent
international economists, the strong Nordic performance shows that wellregulated, egalitarian economies with sophisticated welfare systems are no
obstacle to thriving in the global economy. “
II.
• So, is the state going bankrupt any time soon?
From Eurostat
Yearbook 2009, p. 88
III. The Swedish model today: an
assessment of its viability
• As we have seen, when it comes to GDP, GDP growth, and
employment Sweden does fairly well in an international
comparison
• Critics of the model take two routes:
– That Sweden is doing OK again is because of liberalization/reforms
that made the Swedish model less Swedish (privatization, product
market deregulation) – cf. Dölvik (p. 8), ”The Nordic countries have
pursued significant supply-side liberalization of their economies in
recent decades”
– Sweden has, macroeconomics aside, problems left labour market-wise.
Generally they can be summed up as: an insider – outsider
problematic.
The insider – outsider model
• In the last lecture, I talked about Mancur Olson’s interest group theory
• The insider – outsider model is a relative of that one
• Lindbeck & Snower (1988): trade unions favour their own members at the
expense of others. Employers can’t replace the expensive insiders with
cheaper outsiders, since that would provoke the outsiders and lead to either
shirking, strikes etc or labour turnover (which in itself lowers productivity)
• An example: Sweden’s Law of Employment Protection (Lag om
Anställningsskydd, 1974) says that when an employer with more than ten
employees has to lay off employees, he/she must follow a list, following
how long each employee has been employed there, instead of just laying
off anyone. Critics say: this favours insiders – people who have worked at
the company for a long time – at the expense of people who have not (often
young employees)
III. Insider-outsider 1: long-term
unemployed
Insider – outsider 2: Immigrants’
labour market status
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or
br lgie
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Po ien
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ak
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ttl
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S v nd
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Lu
Insider – outsider 3: Youth
unemployment
Figures for 2007
25
20
15
10
5
0
Sweden fifth highest youth unemployment in Europe!