The swedish model and its future
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The Swedish model and its future. Left Party protest against the EU, 2008: ”save the Swedish model!”. Conservative party leader, 2006: ”Sweden’s new workers’ party”. EHG025, 2 December 2010 Erik Bengtsson. Today’s lecture. I. The crisis of the model: criticisms from the Left and the Right

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The swedish model and its future

The Swedish model and its future

Left Party protest against the EU, 2008: ”save the Swedish model!”

Conservative party leader, 2006: ”Sweden’s new workers’ party”

EHG025, 2 December 2010

Erik Bengtsson


Today s lecture

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

Crisis

  • Part 1: leftist offensive

  • Part 2: (neo-)liberal wave


Radicalization of the left and the labour movement 1968

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 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”


The swedish model and its future

”With the wage earner funds we successively take over” – LO, 1978


The swedish model and its future

”Wage earner funds are the beginning – socialism is the end”. Demonstration against the wage earner fund proposal, 4 October 1983.


Neo liberal wave 1980

(neo)liberal wave, 1980-

Ronald Reagan: elected president in 1980

Margaret Thatcher: elected prime minister 1979


The swedish model and its future

  • 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


The swedish model and its future

Lundberg’s fall of the model

ECONOMIC CRISIS!

A ”new normal”


The swedish model and its future

The US ”jobsmiracle”


The welfare league welfare defined as ppp gdp capita

”The welfare league”(”welfare” defined as PPP GDP/capita…)

  • In 1970, Sweden was the 4th richest country in the world (GDP/capita)

  • 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

The Economist, 2006:


I dynamics contradictions

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

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

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!)


The swedish model and its future

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 well-regulated, egalitarian economies with sophisticated welfare systems are no obstacle to thriving in the global economy. “


The swedish model and its future

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

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

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

III. Insider-outsider 1: long-term unemployed


Insider outsider 2 immigrants labour market status

Insider – outsider 2: Immigrants’ labour market status


Insider outsider 3 youth unemployment

Insider – outsider 3: Youth unemployment

Figures for 2007

Sweden fifth highest youth unemployment in Europe!


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