September 18, 2006
The Swedish model gets a facelift
What is it about the Swedish model that has always so fascinated journalists? Let us admit that many discussions of the subject involve a certain childish delight in double entendre. But there is clearly more to it than that. Reaction around the world to the Swedish election results - and the ousting of the Social Democratic government of Goran Persson, after ten years in office - has focussed on the sustainability of the Swedish economic and social model. Ever since the 1960s, Sweden has been used as a symbol for those who argue that there is a third way between capitalism and socialism. Swedish-style social democracy seems able to combine high taxes and a lavish welfare state with a thriving private sector - think of Ikea and Ericsson. The modishness of the Swedish model has waxed and waned a bit. It (she?) lost some of her gloss in the early 1990s, following an economic crisis. But in recent years, there has been a growing fascination in the rest of Europe with the “Nordic model”. At a time when Germany, France and Italy have been struggling with high unemployment and low growth, the Nordic countries seemed to be proving that the “European social model” is alive and well and living in Scandinavia. I use the words “Scandinavia” and “Nordic” advisedly - because Finland and Denmark have arguably come in for even more international attention than Sweden. Denmark is widely admired for its “active labour market measures” - which have proved very effective in getting the unemployed back to work. Finland regularly comes top in world competitiveness surveys and is regarded as having a model educational system and high-tech sector (Nokia and all that.) But Sweden is still the big boy of Scandinavia - the largest country, the former imperial power, and the nation that has done most to articulate the idea that it represents a distinctive social model. What is more, the defeat of the Persson government clearly centred around an argument about the sustainability of the Swedish social system. The centre-right alliance led by Fredrik Reinfeldt, which won the election, campaigned against high taxes and high hidden unemployment among the young. It also stressed the growing burden of the welfare state in an ageing society - a challenge that the whole of Europe is going to have to face up to soon. A recent Wall Street Journal article by Johnny Munkhammar, director of a free-market think-tank in Sweden, gives a flavour of their critique. This being Sweden, we are not talking about a full-scale counter-revolution. Mr Reinfeldt’s party are, after all, called the Moderates. But equally one shouldn’t under-estimate the significance of a party winning an election in Sweden on a platform that promises tax cuts and privatisation. There are also people in Sweden who will want to go for really radical free-market reforms. The small band of Swedish libertarians and free-marketeers are often strikingly bold in their arguments - perhaps because they feel so embattled in a society where the state is so large and so overbearing. Mr Munkhammer, for example, makes clear he regards the electoral promises of Mr Reinfeldt as only a first step. If Sweden’s free marketers gain in influence, things could really get interesting.
