Scandinavian welfare regime in crisis Sweden

Aims of today’s session: Explore the distinguishing features of the Swedish Model Chart the period 1969 – 2010 Consider the model today

Esping-Andersen’s Social Democratic Regime High de-commodification –Ease of opting out of work Low stratification –Non-stratified access to welfare Social Democratic = Sweden?

The Swedish Model A large public sector Generous transfer systems Big unions and compressed wages Large private firms, big unions and big government Social Democratic hegemony Source: EKLUND, K (2001) ‘Gösta Rehn and the Swedish Model: Did we follow the Rehn-Meidner Model too little rather than too much?’, In Milner, H & Wadnsjö, E (eds) Gösta Rehn, the Swedish Model and Labour Market Policies. Ashgate, Aldershot.

Historical Epochs 1900 – 1920 –Shift from local to central administration 1920 – 1950 –Social Democrats consolidate power 1950 – 1980 –The ‘golden age’ 1990s – –Shift from rights to duties Source: CHRISTIANSEN, N.F. & MARKKOLA, P (2006) ‘Introduction’. In CHRISTIANSEN, N.F., PETERSEN, K, EDLING, N & HAAVE, P (eds) The Nordic Model of Welfare – a Historical Reappraisal. Museum Tusculanum Press, Copenhagen.

Swedish welfare state at its zenith (1978) 94% replacement ratio for sickness 93% for parental leave 77% for unemployment (payable after 5 days) 68% for single pensioners, 92% for married High social security costs –1965: 13.5% of GNP –1980: 32% of GNP High taxation –1961: 33.1% of GDP –1980: 49.7% of GDP Source: Rehn, G (1986) ‘The Wages of Success’ in Graubard, S (ed) Norden – The Passion for Equality, Norwegian University Press, Oslo

Radicalisation of the left followed by counter offensive from the right. Winter of 1969 – 1970 many wildcat strikes break out over Sweden Social Democrats respond with reform to Swedish Model –The strikes come to be seen as a crisis of legitimation within the model –The ‘solution’ is a move toward industrial democracy. A counter offensive from the right halts these developments and plays a part in the 1976 election

Bourgeois coalition SAP loose power in 1976 election – breaks 44 years of social democracy Bourgeois Government attempts mild reform –Kronor devalued (4 times: 1976 (twice), 1977, 1981) –VAT increased to 21% –Price freezes –Nationalisation of failing industries (lemon socialism) –Reduction in local authority funding leads to increased fees –Fees for certain medical services –Official unemployment remains relatively low Shift from rationalisation to nationalisation

Social Democrats back in power 1982: SAP re-elected on platform of ‘no social dismantling’ –Welfare expansion now seen as ‘irresponsible’ –Financial deregulation –Attempts at wage restraint / tax cut bargaining –Kronor devalued by 16% –Active labour market policy used to keep official unemployment low –Breakdown of centralised wage bargaining system –No privatisation/deregulation of social services 1980s: Low unemployment and inflation (at least early- mid ’80s)

Boom 1985 ‘November Revolution’ deregulates financial sector. Creates booming economy Very low unemployment (under 2%) Speculative housing boom and rising wage levels (10% per year plus 50% wage drift) fuel inflation

Bust Housing market bubble bursts in 1991 –Four banks need state bailouts Currency speculation on the Krona –Krona pegged against the Deutschmark –Interest rates hit 500% at one stage Substantial cuts in public spending and rises in interest rates to defend Krona Soaring unemployment –From 1.5% in 1990 to 8.2% in 1993 GDP falls 5% between 1990 – 1993 Largest downturn since the 1930s Krona floats in 1992 and is immediately depreciated by 20%

Sweden in the 1990s Pension reform Reduction in benefit levels Tightening of eligibility rules Higher charges for services Contracting out Training allowances cut Promotion of ‘flexibility’ Unemployment remains high for most of the decade (~8%)

Influence of the EU Joined 1 st January 1995 –52.3% voted in favour –Budget deficit limits constrain public expenditure –High proportion of Swedes are sceptical of EU –Watering down of alcohol policy –Fear over Snus Rejection of Euro, 2003 –56.1% voted against –Seen as a threat to welfare standards (compare with UK)

Sweden in the ’00s (&’10s) Economy stronger Some reversal of 1990’s reforms, but not back to standards of the 1970s Official unemployment still (relatively) high Increasing concern over migrants –Göteborg & Malmö most segregated cities in EU –Anti-immigration lobby ’correlates’ one million unemployed with one million immigrants 2006: Bourgeois coalition back in power (majority of 7 seats) –Promises of tax reform and halting of welfare dependency –Promotion of duties over rights 2010: Bourgeois coalition retains power (as minority government) –Social Democrats received their worst result since 1921 –Entry of nationalist / populist party into Riksdag

Final Thoughts The emergence of a 2/3 1/3 society –High unemployment / lack of inclusion –Growth focused upon major cities The emergence of far right politics –Mirrors experience in 1991 election –Snipers (Stockholm, 1991 & Malmö 2010) The legacy to two slumps –1930s – commitment to full employment –1990s – tolerance of high unemployment