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 85of 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
• Swedens 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 70s)
• 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 80s and 90s 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 contd

• BUT.
• Signs of decreasing extractive capacity
• 1990 freeze on local government tax increases
• Tax reform implemented in 199091 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 26in 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 36.4of the
  vote, signifying the lowest support levels since
  1920s.

12
Challenges to the State in the Future?

• Political Stability
• The 1990s 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.
• 95Somali 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 contd

• 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"