Sweden as a Strong State

1. Sweden as a Strong State The Successes and Failures of the Corporatist Strategy By: April Thomas

2. Sweden as a Corporatist State • Displays democratic coporatism that evolved around the World War Two period • Democratic Corporatism defined: “The voluntary, cooperative regulation of conflicts over economic and social issues through highly structured relationships between business, trade unions and the state, augmented by political parties”. • Roots of corporatist bargaining can be seen as far back as 1938 when the Saltsjobaden Agreement solidified a truce between the business community, the labour movement and the government. This agreement paved the way for labor peace and later for the centralization of collective bargaining at the national level.

3. The Elements of Corporatism • It has three distinguishing traits: • Promotes an ideology of social partnership that is expressed the national level. Attempts to mitigate class conflict between business and labor by integrating diverging conceptions of group interest with those of public interest • Has a relatively centralized and concentrated system of interest groups. ‘Peak Associations’ where power concentrated at the top over a large, compliant base • unions organized 85%of the workforce • Relies on voluntary and informal coordination of of conflicting policy objectives between interest groups, state bureaucracies, and political parties. Preferences in different sectors of policy are traded off one against another

4. The Golden Age of CorporatismWhy did it work? • OBJECTIVE: full employment and social equality • Sweden’s strong dependence on competitive exports meant it needed a policy of wage restraint to achieve this • workers doing same work were to be paid the same wages regardless of the firm's profitability, size, or location • The trade-offs: • unions accepted this restraint on the condition that members could be guaranteed employment • business accepted gov restrictions to keep exports competitive • socialist gov adjusted economic policies for employment and equity • Collective bargaining worked because all three groups, unions, employers and the government, were highly centralised and well organised • In the 42 years between 1950 and 1991, Sweden's level of unemployment exceeded 3% only three times

5. Corporatism as a Political Stabilizer • Sweden is known for having had the longest period of social democratic rule anywhere. The Social Democratic Party had an unbroken run in office from 1932 to 1976. It returned to power in 1982 until the 1991 election, only to regain power in the 1994 election and keep it in the 1998 election. • The state combined its economic preferences with social provisions in order to prevent political uprisings • Cooperation fostered through constant negotiations among main actors made for low-voltage politics • High levels of economic equity made for a quiescent society • At the beginning of the 1980s, Sweden had the most egalitarian wage structure in Western Europe. Public expenditures reached a peak of 55% of the gross domestic product

6. How Does Negotiation and Compensation Display State Preferences? • Welfare policies appear to answer to societal call but underlying state purpose is strong • State looking to reap benefits of stimulated economic activity • Grants to business to increase the scope of opportunities for private initiative in the domestic economy • Welfare benefits in the form of supplementary income maintenance given in order to modify intl market outcomes by stimulating domestic economy (about 23% GDP in the mid 70’s) • Use of active labor market policies, such as retraining programs and mobility grants, rather than unemployment insurance in order to revive declining regions

7. The 80’s and 90’s: Corporatist Breakdown? • Full employment meant a strong growth in demand but the had been no improvement in productivity; economy overheated and inflation rose greatly • System collective bargaining broke down and government action regardless of interest group opinion • Signs of increased regulatory capacity of the state • prohibition on strikes, number of restrictive measures such as wage freeze, and rent freeze • Reduction of inflation rate to take full precedence over employment • The state would no longer accommodate economic disturbances, neither by devaluations nor by public expenditure.

8. Breakdown cont’d • BUT…. • Signs of decreasing extractive capacity • 1990 freeze on local government tax increases • Tax reform implemented in 1990–91 intended to stimulate work and savings. It included cutting tax rates on income and introducing more uniform taxation of capital. • While percentage of gov consumption of GDP remains high (about 26%in 1996), rate fell gradually by about 0.2% annually between 1990-1996

9. The National Debt1975-1997 (in mkr)

10. Unemployment LevelsIn 1990, unemployment stood at 1.5%…..

11. The State of the State Today • On the Upside • unemployment down to 5%, from 1997 high of 8% • inflation has been capped, standing at 2% • seeing slow but steady economic growth • On the Downside • Government paying the price of switch to neoliberal austerity. In the 1998 election, the Social Democratic Party gained only 36.4%of the vote, signifying the lowest support levels since 1920’s.

12. Challenges to the State in the Future? • Political Stability • The 1990’s have seen the rise of extreme right-wing parties across Western Europe. Will Sweden find its own Heider? • Already a growing backlash against immigrant ‘abuse’ of social benefits. • 95%Somali refugees and 65% Bosnian refugees unemployed • National Sovereignty • Sweden is on the road to full integration with the EU. (The referendum on EMU to occur in 2002) • Membership will entail giving up significant autonomy in given areas (I.e. monetary policy) to supranational institutions such as the European Parliament and the European Central Bank

13. Challenges cont’d • Economic Policy Control • increasing capital mobility on world markets will make it more difficult to control internal economy • Given the increasingly international orientation of business firms, Swedish capital today is much less dependent upon Swedish labour and domestic policies that were oriented toward boosting domestic consumer purchasing power. • "Sweden needs Swedish companies but Swedish companies do not need Sweden"