Download Sweden as a Strong State

Sweden as a Strong State
The Successes and Failures of
the Corporatist Strategy
By: April Thomas
Sweden as a Corporatist State
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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.
The Elements of Corporatism
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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
The Golden Age of Corporatism
Why did it work?
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OBJECTIVE: full employment and social equality
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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
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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
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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
Corporatism as a Political Stabilizer
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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
How Does Negotiation and Compensation
Display State Preferences?
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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
The 80’s and 90’s: Corporatist
Breakdown?
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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.
Breakdown cont’d
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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
The National Debt
1975-1997 (in mkr)
Unemployment Levels
In 1990, unemployment stood at 1.5%…..
The State of the State Today
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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
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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.
Challenges to the State in the Future?
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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
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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
Challenges cont’d
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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"