CHARACTERISTICS OF THE SOCIAL MARKET: SWEDEN

Sweden is one of a group of nations with some similar characteristics located in the North of Europe. Some of its features are also shared by countries in South East Asia.

Sweden is a prosperous country. Maybe its most noticeable feature is the fact that wealth, and more specifically earnings are relatively evenly spread through the population – in particular there are less poor people or socially excluded groups than in the US. Another feature is a general disapproval of lavish displays of wealth. People often live in economically mixed communities, and in some Nordic countries wealthy citizens often do their own shopping and look after their own children and homes. However, there are recent trends towards more unequal spreads of wealth and social segregation. This inequality is less marked when it comes to earnings. The education system is state-supported, there are few elite private schools, so Swedes from all social strata tend to be educated together, and educational attainment is little affected by income or social class.

Trust and Social Capital

Sweden is culturally cohesive, and there is a relatively high level of trust in others. This has been described as leading to the incidence of high “social capital”, meaning that there is willingness to collaborate with others and give up some measure of self-interest for the good of fellow citizens and the wider society. The strong culture is underpinned by a relatively large range of national festivals and celebrations. National flags are regarded as a strong symbol of common identity.

Whilst a strong and quite uniform culture is a source of strength, underpinning a way of life that affects everything in society; Sweden has experienced considerable difficulties in assimilating immigrants from different cultures. The extent of problems with immigrants is affected by many factors – the size of the immigrant population, whether immigrants are concentrated or dispersed and the strength of resistance to assimilating new cultural norms being some.

Like many other countries, the growth of extreme right wing and racist parties has been an issue for Sweden – but not to the same extent as elsewhere.

It can be stated that cultural uniformity is a source of strength and a burden at the same time, depending often on the extent of immigration and how it has been managed.

Co-determination and collaboration

Swedish political life is based on the idea of collaboration and co-determination, so whilst there are conventional political parties, the ideological differences between them are relatively minor by comparison with some other countries. This is probably explained by a general consensus across the population about certain key values like social responsibility, a duty towards others and a dislike of noticeable inequality. It also means that coalition governments are the norm.

But the most marked feature of the political dynamics is co-determination involving different stakeholders and interests. This system of institutional collaboration differentiates Sweden from many other democratic countries. The institutions that determine national political policy and practice include Trade Unions, employers’ organisations, and local government working closely with national government. So, no matter which political party is in power, they are prevented from trending to extremes by the overall national consensus and particularly by the well-entrenched collaborative frameworks. One indication of how this works is the relatively high incidence of trade union membership, because people know that their unions have a responsible part to play in forming national policy.

It seems that collaborative frameworks enable Sweden to avoid the suspicion of government that seems to afflict some other countries, because people understand that government is not solely responsible for policy, and that their interests are represented through their affiliations to employers, unions and local government.

Another effect of a collaborative culture is relatively high engagement of the populace in politics and public life at national and local levels.

The same principles of collaboration and co-determination are also to be found in industry. The workforce and their unions are involved in the determination of strategy and of course, conditions of employment. Co-determination tends to be enshrined in an institutional framework, requiring extensive consultation in strategic decision taking. In some cases, employees and local government are represented on company boards. In the case of Germany, there are executive and supervisory boards, with wide representation of stakeholder interests at the supervisory level. The German system was designed after World War Two by British and American representatives, some of whom seem to have believed that such a system would make German industry less competitive. The opposite has proved to be true!

Economy

Sweden has a strong and balanced economy. No one sector dominates the economic scene. Universities produce high quality research, technology is strongly supported, but there is also a vibrant service sector, often based on community enterprise. The economy is relatively open and not protectionist. Exports are strong, as is foreign investment and investment in infrastructure. The banking sector is expected to behave as a responsible contributor to society. If hard decisions about the economy need to be made, it seems that the co-determination system can actually makes the process easier and less conflictual than in some other countries.

Social Security

Maybe the most striking features of Sweden are the social security and social welfare systems. There is strong agreement about the need to support less fortunate people, or those who have fallen on hard times. The welfare system strongly features involvement of less fortunate people in working to improve their chances through education and skills development. People are not allowed to languish on social security. The result tends to be relatively low levels of long term unemployment and alienation from the workplace.

Relatively high personal taxes are generally regarded as a fair contribution to maintaining a healthy society, although business taxes are quite competitive by international standards

Effects of the national approach to social security and social programmes can be seen in:

• Relatively high levels of educational attainment
• Good levels of public health for relatively modest expenditure
• Low crime rates
• The existence of a skilled and flexible workforce

One quite surprising side effect of the social security system is the relatively high levels of entrepreneurship and new enterprise formation. It is believed that having a security framework actually increases the propensity of people to take risks, rather than reducing it.

Some might think that the cultural uniformity and systems of collaboration may make Sweden self-satisfied and complacent. Visitors from some other countries sometimes remark that Nordland is a boringly conformist society with an excessive respect for rules and regulations, but this is not experienced as a problem by most citizens, and indeed seems not to have impeded the maintenance of a rich and varied cultural life. However some Swedish colleagues have observed that universal state provision of social services has inhibited the growth of voluntarism and social enterprise, a strong feature in Britain. They point out that authorities and trade unions discourage individuals from starting social purpose enterprises on the ground that they will take work from public employees.

Swedes travel extensively to other countries, learn foreign languages to an unusual degree and make a significant contribution to international bodies and aid programmes.

The “Nordic Model”- salient characterisrics

Sweden is an archetypal Nordic country, so the Nordic Model is strongly relevant.

“Eindhorn and Logue* characterise the so-called 'Nordic' model as that in which:

• An active and interventionist state,
• Provides universal transfer payments to support the elderly, disabled, unemployed and families with numerous children and low market incomes,
• Provides universal social services for health, education, childcare, services for the elderly and the like,
• Uses national policy to achieve high rates of labour force participation and highl employment on the national level, via both macro-economic and sectoral policies,
• Integrates major interest groups in making and implementing national policies (rather than the capture of the state structure by a single group of interests, or state capture of the interests’ organisations),
• Possesses a strong civil society with encompassing and democratic organisation of interests, but particularly the strong organisation of those otherwise weakest in capitalist society - family farmers and urban workers,
• Is underpinned by a set of values around empiricism and social trust; in particular solidarity and reciprocal responsibility are crucial concepts in the development of public policy

* Economic and social security in Scandinavia. Einhorn and Logue, University of Massachusetts. March 2006.”

Social Market Capitalism and Economic Resilience

As with the US, Sweden has been affected by the 2008 collapse of the global banking system, but to a much lesser degree.

Several studies indicate that Nordic model countries are more resilient and resistant to financial shocks than Free Market equivalents.

*“The Nordic countries – Denmark, Finland, Iceland, Norway and Sweden – are champions of free trade and open markets. And for a good reason; they see international specialisation within a global framework as a means of raising productivity and income. Much of the Nordic socio-economic model can be interpreted as aiming at collective risk sharing with a view to fostering acceptance of open markets, new technologies and the need for change.

In a broad sense the model includes a set of labour market organisations, with an important role for negotiations, a comprehensive safety net and a high rate of publicly supported investment in human capital. Embracing globalisation and sharing risk are mutually reinforcing planks of the Nordic Model, as discussed in Andersen et al. (2007)”.

“One crucial factor is that some Scandinavian countries received an early inoculation against the kind of boom and bust that has derailed larger and apparently more robust economies, which are still floundering since the US-led housing crash and subsequent financial crisis. Of the Nordic countries, Iceland alone suffered severely from the 2007 crash, but the Icelandic economy has recovered strongly as a result of a national consensus to take drastic action to restore stability. The Icelandic premier and some senior bankers at the time of the crash were prosecuted for negligence.

The Nordics were in a position to pursue fiscal expansion in the crisis because these countries were – in contrast to the US and almost all other EU countries –running sizeable budget surpluses in the preceding decade. The government debt level of the Nordics is only half of the OECD on average and they continue to borrow at very favourable terms. Given their track record, there is reason to believe that the Nordics will continue to be countries with relatively sound public finances, retaining the scope for fiscal policy to be used when needed.

Most importantly, the Nordic model itself contributes to resilience. The comprehensive safety net, one of the attributes of the Nordic model, has proved to be robust also in times of crisis. The entitlements are not tied to the fate of individual companies or particular markets, and risks are widely shared in the society. While forest plants are shutting down in Finland and car manufacturing is sharply contracting in Sweden, the governments are firmly rejecting requests for support of ailing industries. Still, there are no crowds protesting in the streets, largely because flexible work arrangements, based both on general and company-specific agreements between businesses and labour, alleviate a rise in unemployment. Structural change is enhanced by the employment protection legislation, which is more liberal than in most other EU countries. A well-educated labour force, another of the attributes of the Nordic model, facilitates adjustment by making it easier to upgrade skills through additional training.

Provided that governments continue to be able to take the decisions needed to safeguard competitiveness and the sustainability of public finances, the Nordic model can be both robust and resilient. The Nordic model with its welfare state, labour market institutions and high rate of investment in human capital, is not the source of the current problems. On the contrary, the Nordic model, properly implemented, can be part of the solution.”

Summary

The Nordic model of social market democracy, based on collaboration between national government and institutions representing industry, labour and local government, has enabled those countries to resist the strength of global finance and harness resources for the good of society as a whole. But there are emerging trends towards more inequality of wealth and social segregation – these are particularly marked in relation to immigrant communities. Despite vigorous attempts by government to assist integration of immigrants, there are signs of a growing right wing backlash against them.

Nevertheless Sweden remains relatively culturally cohesive enjoying high levels of social capital. The results are impressive, spanning economic performance, communal wellbeing, public health, low crime and good educational standards.