Whither Swedish social democracy?

This article was published on the Guardian’s Comment is Free website on 20 September 2006.

The general election defeat of the Swedish social democrats may bring joy to Nordic liberals, but the centre-right government of Fredrik Reinfeldt will have a weak electoral mandate, the old regime has tight control of the civil service, and the defeated prime minister Göran Persson has said “We will never accept the right’s change of system.”.

Whatever praise social democratic commentators such as Polly Toynbee may heap upon the Swedish social model, the reality is somewhat different to their simplistic portrayal of it. Polly’s colleague Andrew Brown has it about right, and actually seems to know something about Sweden, which must surely help when writing about the country.

It’s perhaps worth outlining a few basic facts about the state of Swedish society.

Sweden’s economic growth rate may be relatively high, but its per capita GDP has been declining steadily over decades, and the recent spurt is largely rebound from a deep recession in the 1990s.

The official 5.7% unemployment figure is meaningless; the real figure is between 15% and 20%, and the discrepancy is due to workfare schemes, early retirement funded through social security taxes, and long-term sick leave. Sickness benefits account for around 15% of all public spending.

In Sweden there are many disincentives to work and the creation of new jobs. Large manufacturing enterprise does very well out of the highly corporatist tax and regulatory regime, and Sweden is a world leader when it comes to the management of very large companies. Smaller firms and the self-employed, however, face enormous problems.

Some 10% of Sweden’s population is foreign born, but the unemployment rate among immigrants is atrocious, and Sweden is failing miserably in integrating its minority communities. A prime example is Malmö, just across the Öresund bridge from the Danish capital Copenhagen. Social exclusion is a huge problem in Swedish cities, and it is destabilising the suburban social environment.

There is no official minimum wage in Sweden, but the intimate relationship between government and trade unions (which are more akin to guilds) leads in practice to informal minimum wage agreements operating within most employment sectors. Unions also dictate the terms of employment contracts.

Around 30% of all Swedish workers are employed by the state.

Education is actually in a fairly healthy state, and that is because the introduction of private schools, together with a universal and popular voucher system, has led to fresh ideas and diversity being introduced into what was once an extremely rigid state comprehensive system. Health has also been subject to a shake up, and private provision is expanding rapidly. Reforms in both these sectors were introduced by the centre-right government of Carl Bildt (1991-94) in the face of massive opposition from the social democrats.

Prime minister-elect Fredrik Reinfeldt and his colleagues will have their work cut out. Minor reforms of the tax and benefits systems may help, but the biggest problems with the Swedish economy are structural, and there is little of substance that the new government can do without dismantling the social democratic consensus. Without such radical change, the situation will continue to deteriorate.

Further reading:

“How the welfare state corrupted Sweden”. Whatever you think of Per Bylund’s anarcho-capitalism, this article is an excellent commentary the Swedish social-democratic mindset.

“The Swedish model: Admire the best, forget the rest” – a recent, informative and balanced feature from the Economist magazine.

“Swedish economy at high speed in 2006-2008” – an report on the state of the Swedish economy from the government’s own economic research agency (non-governmental health warning: it reads like a speech from Gordon Brown!).