Economics and politics - comment and analysis

The politics and the economics of the Scandinavian countries. Part 1: the Swedish political landscape

Introduction

This is the first article of a series on the political systems and the economies of Scandinavia. The three Nordic countries provide a fascinating contrast: Sweden is a member of the EU, but it is not in the euro zone. Finland, on the other hand, is a EU member and uses the euro. Finally, Norway is not a EU member and it is not in the euro zone. How do each of these countries perform? How are social democracy and the social welfare states evolving in Scandinavia? What are the main characteristics of each of these economies? What are the economic, political and social effects of being in the EU and the euro zone or not? What are the direct and the indirect effects of European economic governance on the three countries? What are the consequences of the dysfunctional euro zone which is failing to return to growth on a country like Sweden? These are important questions.

The series start with an overview of the political system in Sweden. It is loosely chronological – which problems occurred when and why, how were they dealt with by whom, what have the consequences been for Swedish society, the economy and the political system and how is the Swedish economy and the political system functioning today? I will concentrate on two political families – the social democrats, who transformed Sweden into a model welfare state, and the extreme right Swedish democrats, which grew out of some far right fringe groups, but have been gaining support as a party since 1998 and currently poll nationally at between 20 and 23 % of the vote.

The Swedish political landscape: an overview

Sweden has been a paradigmatic success story for many decades. Its social welfare state was considered to be the very best in the world. Throughout the 20th century, Swedish foreign policy was based on the principle of non-alignment in peacetime (notwithstanding its de facto collaboration within NATO) and neutrality in wartime. Sweden is very active in international peace efforts and in development, especially through the United Nations. It is also the highest ranked country in the Climate Change Performance Index. Sweden has a remarkable history of strong political involvement through its popular movements, the most notable are the trade unions and the women’s movement. Election turnout has always been extremely high. Although it has declined in recent decades – it is now around 82 percent – it is very high in international comparisons.

Sweden is most famous for its system of social welfare. Welfare was defined as financial security in the case of illness, old age or unemployment. Sweden’s entire population has equal access to the public health care services. The Swedish health care system is publicly funded, primarily through taxes levied by county councils and municipalities. Health care providers of the public system are generally owned by the county councils, although managing of hospitals is increasingly taken over by private companies. There are monetary supports for children, students, home workers and home takers, housing benefits, benefits for ill and disabled people, for unemployment (limited to 60 weeks), pensions and benefits for anyone who cannot get a reasonable standard of living.

In The Three Worlds of Welfare CapitalismGøsta Esping-Andersen identified three subtypes of welfare states: the social-democratic welfare state model (based on the principle of universalism, citizen autonomy, egalitarianism as a policy goal and ‘politics against the market’), the christian-democratic welfare state (dominated by social insurance but permitting a high degree of social stratification) and the liberal model (based on market dominance, private provision and means testing). The Scandinavian countries have always been exemplary examples of the first, social democratic, type of welfare state – more so than the Rhineland model (Germany, France and Belgium). The liberal model is exemplified by countries such as Canada, Japan, Australia and the US. Esping-Andersen ranked Sweden as “the most purely social-democratic country in the world” on the basis of his decommodification index (and the US as the most liberal).

Other scholars have classified welfare regimes using outcomes such as inequality, poverty rates and response to different social risks. Benjamin Radcliff has argued that the universality and generosity of the welfare state (i.e. the extent of decommodification) is the single most important societal-level structural factor affecting the quality of human life, based on the analysis of time serial data across both the industrial democracies and the American States. He maintains that the welfare state improves life for everyone, regardless of social class (as do similar institutions, such as pro-worker labour market regulations and strong labour unions). More recently, Wilkinson (see here) and Wilkinson and Pickett (see here) have reached very similar conclusions.

Researchers have found very little correlation between economic performance and social expenditure. They also see little evidence that social expenditures contribute to losses in productivity. Nor have social expenses contributed significantly to public debt. According to the OECD, social expenditures in its 34 member countries rose steadily between 1980 and 2007, but the increase in costs was almost completely offset by GDP growth. In 1980, the OECD averaged social expenditures equal to 16 percent of GDP. In 2007, just before the financial crisis, they had risen to 19 percent – a manageable increase. This is very important, because the Right has been stating the contrary for decades. That data contradict their argument has not stopped them from steadily gaining political influence. Unfortunately, this evolution took place in Sweden also.

The Swedish welfare state

Sweden, once of Europe’s poorest countries, transformed itself in the post World War II decades into an affluent, egalitarian full employment welfare state, with a strong commitment for women’s equality. Income differences narrowed dramatically and poverty was nearly eliminated. Labour-management cooperation, high union density and social democratic political dominance were the norms. A strong commitment to the welfare state and jobs for all cut across political party lines. Going against the European trend until the 1990s, unemployment averaged barely 2 percent in Sweden. Three percent was political suicide (see here).

In the early 1990s, Sweden was hit by the worst economic slump since the 1930s, with 3 years of falling output, the rebirth of mass unemployment and a ballooning budget deficit. Draconian cuts and rule changes in income benefits and services were implemented by the conservatives and continued under the social democrats. What had gone wrong? Conservatives and neoliberals claim that the welfare state had become unsustainable and that its cost had sent the budget deficit soaring (see here). As I said, this was untrue. As Professor Helen Ginsburg notes, even immediately before the outbreak of the crisis in 1991, Sweden had full employment, a healthy welfare state and a hefty budget surplus. Ginsburg sees the background therefore somewhere else: in the growing power of Swedish business, pressures from globalization and the race to join the European Union, with its requirements for low budget deficits and inflation but none for low unemployment (see here). As elsewhere, the emphasis shifted towards ‘free’ markets, deregulation, and privatization. The national government increasingly thrust responsibility for health and social services onto local government with lesser means, thereby presenting cuts as a ‘necessity.’ A sweeping tax reform favoured the rich and cut deeply into government revenues. Financial deregulation sparked a wildly speculative real estate boom and a related near collapse of the banking system (two of Sweden’s major banks were nationalised). There was also a stubborn, futile and costly defense of an overvalued SEK (the Swedish Krona) that pushed interest rates to 500 percent and was instrumental in turning an international recession into a full-fledged depression in Sweden. The priority of full employment policies was abandoned.

The re-occurrence of mass unemployment in the 1990s was an enormous upset in a country which, at one time, defined itself by its social democratic ethos. The crisis was worsened and prolonged by an austerity program (implemented by the Right) that depressed demand and cut deeply into public sector jobs and thus directly affected the availability and quality of social services (see here). In 1994, after a three-year rule by a conservative-led coalition, the social democrats returned and were strongly driven to meet the criteria for admission to the EU’s monetary union (in 1996, Sweden said No in a referendum to join the EMU – see below). In the 1990s, official unemployment hovered around 8 percent for five straight years. Participation in the labour force as well as the proportion and number of people employed and the number of public sector jobs fell (see here and here).

Today, Sweden has a self-imposed 2 percent of budget surplus rule – this is even more restrictive than the EU governance goals. It has had self-imposed expenditure caps on the budget since 1997. These caps hold down spending, even when there are surpluses. In addition, EU countries must not only adhere to budget deficit limits set by Brussels, but they must also include expenditures by local governments in their national calculations. An important consequence is that since 2000 Stockholm has imposed balanced budget requirements on local governments, and expenditures for health, social services and education have been held down.

After the economic upturn in the late 1990s, benefit levels for many income security programs were adjusted upward, but seldom to the levels prevailing at the beginning of the 1990s. Rule changes remained and restrictions increased again in recent years. While the general trend has been to restore some cuts made in the 1990s, restorations have been uneven. Two groups in particular have been losing out the most: the unemployed and the elderly.

Sweden was once a world leader in providing economic security for its elderly. The core pension income security program has been fundamentally changed. The previous, extremely popular, system is being replaced by an entirely new, far more complicated and market oriented one, that strips people of economic security and serves to thwart previous concepts of social solidarity. Ginsberg cynically notes that even according to the Swedish government’s own assessment, the new system will increase income inequality among pensioners (see here). The main argument for the reform, which was also accepted by the social democrats, was that changes were necessary because the old system would not be sustainable for baby boomers. Again, the data do not support this view. Some of Sweden’s leading actuaries, including the President of the Swedish Society of Actuaries, evaluated the old system positively: it was cost-effective and sustainable. According to the critics, the issues were political and ideological. The crucial reform demanded a full-fledged debate; instead the plan was agreed behind closed doors. The social democrats started to lose votes – and in Sweden this meant their hegemonic political position – from the moment they started to adopt policies that social democrats should oppose.

In Sweden, life expectancy at birth in 2003 is 82.4 years for women and 77.9 for men. Infant mortality in Sweden is the second lowest among 30 OECD countries, second only to Iceland. While 16 percent of those 65 and over and 38 percent of those over 80 were receiving home care at the beginning of the 1980s, by 2000, those percentages had been halved. Since the early 1990s, Swedish municipalities have been responsible for providing these services, assuming the care of people who were once cared for in county-run nursing homes. Since the 1980s, senior citizens’ need for care has increasingly been re-interpreted from a public to a private issue with the consequence that, today, their need for certain services, in particular those related to housework, are no longer regarded to be a public responsibility but a private matter that the elderly will have to solve, either by buying the services on the market, or, by asking relatives for help and assistance (see here). The main problem connected with this privatization is that as the state withdraws its responsibility, women, in their role of wives, daughters or daughters-in-laws have been forced to step in as informal and unpaid providers of care (see here, here and here).

In conclusion, Sweden has not dismantled its welfare state – far from it – but many changes have been made, sometimes in perilous ways (especially labour market activation, the conditionality of unemployment benefits (now limited to 60 weeks), care for the elderly and macroeconomic policies aiming at full employment, the real bedrock of the welfare state). Family benefits (the hallmark of the Swedish welfare state, providing parents with the possibility to combine work, education and family life), child allowance (an important anti-poverty measure), child care, housing allowance (important, given the high cost of renting in the cities) are responsible for reducing disparities in disposable income among different family types. Almost half of the average disposable income for single parent families comes from government transfers. This public benefit structure is largely responsible for preventing mass poverty among this vulnerable part of the Swedish population. The Swedish welfare state survived the crisis years of the 1990s and the neoliberal onslaught – unemployment decreased and some benefit cuts have been restored. Notwithstanding the political rhetoric, there is no question of full employment in Sweden at the moment. Income inequality has been growing for many years. It is still modest by international standards, but not when compared to Sweden’s own post-war record. Inequalities of other kinds are also increasing (see also here).

Europe’s role

Sweden joined the European Union in 1995, together with Finland and Austria. Membership of the EU remains a hot issue, especially now, when the global financial and economic crisis has revealed the existence of fundamental dysfunctions in the workings of the EU and the EMU. The various measures taken in the EU since the onslaught of the crisis have served to strengthen the rules of economic governance and increase the stability of financial markets. Over the years, the EU has strengthened its rules of economic governance. It introduced a number of initiatives: the European Semester; the so-called Six- and Two-packs; the Euro Plus Pact and the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (the so-called fiscal compact). Measures for stabilising the financial markets include the European Stability Mechanism (ESM) and work is being done towards establishing a banking union. The Six-pack aims to strengthen the Stability and Growth Pact (SGP). It has four purposes: 1. to strengthen the rules of the SGP; 2. to strengthen the euro countries’ observance of these rules; 3. to introduce a new macroeconomic imbalance procedure; and 4. to strengthen the Member States’ budgetary frameworks. The SGP also elucidates the excessive deficit procedure (see here).

The new macroeconomic imbalance procedure is based on an early warning mechanism which is based on a scoreboard of macroeconomic indicators. National budgetary policies must be carried out according to certain EU provisions. The Treaty on Stability, Coordination and Governance implies that rules for the structural deficit should be introduced into national legislations. The structural deficit may not exceed 0.5 per cent of GDP. In cases of larger deficits, an automatic correction mechanism should kick in. The Two-pack introduces an early warning system for the budgets of the euro countries. It also introduces enhanced surveillance of public finances in the euro zone Member States. The Two-pack aims to militate against the build-up of excessive deficits in the euro countries and to make sure that “instability” in one Member States “does not spread” to other Member States (see here).

Since Sweden is not in the euro, the direct effect from the economic governance packages is small. This is also true with regard to the ESM, which is reserved for euro countries only. Sweden is directly affected in the short term by the directives and regulations currently being negotiated on capital requirements, deposit guarantee schemes and bank recovery and resolution. It is very difficult to ascertain the extent to which Sweden will be affected in the longer term by the construction of a banking union. The economic effects of Sweden not using the euro and the effects of the euro zone crisis on Sweden will be dealt in a follow-up article.

There is not the slightest doubt that the Swedish economy would benefit from a return to growth in the EU, but this is impossible as long as the problem of German wage moderation is not being dealt with and as long as the euro follows the fateful course of austerity and labour market reforms. Since export is essential for the Swedish economy, these effects are without any doubt substantial (see here).

The European Commission has tried to influence the Swedish wage setting mechanisms through several proposals. A large set of recommendations came 2012 in the Commission’s recommendations to the Council (see here for the document). The EU proposals challenge the Swedish model in which wage setting is negotiated between the social partners. The European Commission’s Annual Growth Survey for 2011 and 2012 called for a review of wage setting mechanisms in the member countries in order to “improve” the macroeconomic imbalances in the euro area. The country specific recommendations urged Sweden to focus on effective and active labour market measures, encourage greater flexibility in wages and revise some aspects of employment protection. Understandably, the recommendations met strong criticism from the main trade unions. The unions argued that these recommendations threaten the Swedish system of the social parties’ autonomy. The Commission’s involvement in national wage setting was considered unacceptable. Wage setting in Sweden is a result of wage negotiations through collective bargaining. When the European Union introduced the Six Pack, the Swedish trade unions argued that the new European rules could lead to increased control of wage formation by the state and hence undermine the Swedish model. The trade unions formulated the correct argument that the economic crisis in the European region led to a growing interest in wage setting issues in the EU, as a way to control the macroeconomic environment (see here and here).

Unsurprisingly, the Right is proud of the economic accomplishments, calling it the result of a series of innovative regulations. According to them, the ceiling on government expenditures (introduced in 1996) and the ‘surplus goal’ (överskottsmålet) for the government budget accomplished that debt does not accumulate, that it is not passed on to future generations and that Sweden is in the top league of fiscally responsible countries in Europe. Today, they say, Sweden’s economy is highly competitive and successful. The World Economic Forum ranks Sweden the sixth most competitive country in the world. Sweden is also the sixth easiest country in the world to trade with, according to the World Bank. In addition to maintaining competitiveness in goods and manufacturing, growth in modern service sectors such as information and communication technology has been strong in Sweden. Although Stockholm is the hub of Swedish economic activity, it is far from being the only successful region. In fact, wealth in Sweden is more evenly distributed across regions than anywhere else in the EU. Remarkably, Sweden is the only EU country where each region has a higher GDP per capita than the EU average (see here and here).

The figures do not support this rosy ideological picture. In November 2016, unemployment (smoothed and seasonally adjusted) stood at 6.8% – a far cry from the old goal of full (or 2%) employment. In the third quarter of 2016, Swedish GDP, change in volume, adjusted for working days (see definitions here) was 2.8 % higher compared to the third quarter of 2015; GDP change in volume (seasonally adjusted) was up 0.5% compared to the previous quarter (key figures from the Swedish statistical office can be found here). As for ‘business activities,’ new orders in industry in November 2016 stood at 100.2 (index 2010 = 100), a decline with 3.1% compared to November 2015 (see here). The industrial production index was 98.5 in November 2016 (index 2010 =  100), a ‘rise’ with 0.5% compared to November 2015. As for trade in goods and services, the index of service production stood at 122 in November 2016 (index 2010 = 100), this is a rise of 3.7% compared to November 2015. The trade balance – the centre piece of economic policy – is negative: the balance of net trade of goods in November 2016 was – 1.1 billion SEK (10 SEK is ca. 1 euro), as the import of goods in November 2016 was 114.5 bn SEK, a rise of 8.5% compared to November 2015, while the export of goods was good for 113.4 bn SEK, a rise of 13.1% compared to November 2015 (see here). It is very clear that evaluations depend on the ones who evaluate it. In the 1990s, 8% unemployment was considered a major scandal which led to a crisis of the political system. In 2016, the political class considers 6.8% unemployment a triumph.

The critique of the Swedish unions and civic society 

The critique of the Swedish unions was of course fully justified. The web of rules that the EU Commission and the Council, with the compliance of the parliament, have set up over time have the goal of cementing austerity in the euro zone and beyond. The deficit rules have to be respected, literally at all cost – though there are no rules sanctioning the accumulation of surpluses. If the EU follows up on its own mechanisms, the ‘excessive deficit procedure’ can ultimately result in a fine of billions of euro – up to 0.5% of GDP (see here). The Commission has recently somewhat relaxed its rules, but that does not mean that a change in policy has taken place. It just shows that the European leaders fear the political fall-out of their destructive policies. The problem does not lie solely in recent economic governance. The 1992 Treaty of Maastricht, which led the basis for the euro, specifies maximum and minimum targets for the public budget balance, inflation and public debt. Governments are instructed to not have public sector deficits of more than three percent of GDP. The treaty does not specify an upper limit, the implication being that a surplus can never be too large. As Heiner Flassbeck has argued on numerous occasions, this is absolutely irrational: any surplus will always be someone else’s deficit. If some countries (or one in particular – Germany) accumulate enormous surpluses, the deficits of others will rise above the 3% rule. When this happens, the countries can do nothing else than to implement austerity. These “reforms,” in turn, stifle growth and end up increasing the budget deficit. There have been no exceptions to this. The more austerity, the more meagre growth turned out to be and the more the budget deficit increased. Flassbeck has shown in his cyclical analyses that, of all the countries in the North, the Netherlands and Finland, the two other major champions of austerity, do worse than the other countries (see for example, here). This is not a coincidence. It is a matter of cause and effect.

There is nothing in Maastricht about counter-cyclical government interventions. On the contrary, the debt rule enshrined in the Maastricht Treaty makes fiscal stimulus policies practically impossible. Another, but of course related point, concerns the trade imbalances within the EU. In 2010 the German current account surplus was 5.5% of GDP, now up to 8.3%. Such persistent current account surpluses of that magnitude are de facto mercantilism. The system cannot work without sanctions for countries exceeding a surplus guideline (see here).

Other fundamental criticism can be formulated against Maastricht. As Weeks explains, the benefits of a capitalist economy come from its dynamism, the continuous reallocation of resources in response to technical change and shifts in consumer preferences. These allocations occur through price adjustments. The 2% inflation target is in practice deflationary, achieved by suppressing price adjustments that are essential to economic growth. But the most obvious blunder of all in Maastricht is the rule that the public debt should not exceed 60% of GDP (see here). Where does this nonsensical figure come from? There is no scientific basis for this or any other such figure (such as the one from Reinhart and Rogoff). The scientific foundation of austerity has been wrong from day one.

European economic governance makes no macroeconomic, or indeed, political or social, sense, but this has not stopped the Commission from hardening its rules. The ‘excessive deficit procedure’ was given more teeth with the so-called ‘Six-Pack’ of 2011 (see here). In 2013, the recommendations of the European Semester became binding. Countries had to implement the economic governance packages. If a member state is under the deficit procedure, it has the obligation to accept an ‘Economic Partnership Programme’ that includes structural reforms. If the implementation of the program is unsatisfactory, the Commission has the power to apply sanctions in the amount of billions of euro (see here and here for a recent OECD appraisal of potential sanctions).

The European Semester is not the only way in which the EU is pushing down wages (see here). The Macroeconomic Imbalance Procedure (MIP), which was implemented soon after the euro crisis exploded, allows the Commission to monitor the economic development of the member states. The key indicator is the evolution of unit labour costs. If wages do not adjust downwards, the Commission has the power to impose fines.

The Six pack did not change anything about the asymmetry of Maastricht – deficits cannot be excessive, but surpluses are not a problem. The Six Pack adds another nonsensical rule to European economic governance: a lower limit of a structural deficit of 0.5% of GDP (1.0% of GDP for member states with a debt ratio significantly below 60% of GDP). But the key concept of a ‘structural deficit’ is theoretical nonsense. It ignores all cyclical effects and defines normal capacity as the level of output at which the rate of unemployment implies stable inflation. Weeks commented that “The EC bureaucrats reveal their ideology by taking inflation not output or unemployment as the measure of economic health” (see here). This has been the case for a long as the EU or, previously, the EC, existed: the fight against unemployment has never been a priority. Who wants to live in an area that is being governed so badly and so undemocratically? Not the Swedes. They said No in a referendum on becoming a member of the euro zone. Voter turnout was high, as always in Sweden, it was 82.6%. 55.9% of the voters were against, 42.0% were in favour in joining the euro zone (see here). This does of course not mean that the Swedish economy does not suffer from the dysfunctional economic state of the euro zone.

Let me end this article by giving a short overview of two political families – the social democrats who made Sweden into a model state and the extreme right wing Swedish democrats which are gaining influence by the day.

Social Democracy

The Social Democrats are the oldest and largest political party in Sweden. It is in power at the moment, in a minority coalition with the Green party. Current party leader Stefan Löfven has been Prime Minister of Sweden since 2014. The party supports social welfare provision paid for by progressive taxation. The party supports a social corporatist economy involving the institutionalization of a social partnership system between capital and labour economic interest groups, with government oversight to resolve disputes between the two factions. Currently, the Social Democratic Party has about 100,000 members. It has been the largest party in the Riksdag since 1917.

The Swedish Social Democratic Party had its “golden age” during the mid-1930s and mid-1980s when, in half of all general elections, they got between 44.6% and 46.2% of the votes, making it one of the most successful political parties in history. In the 2006 general election, the Social Democratic Party received the smallest share of votes (34.99%) ever in a general election. The party lost support among pensioners, blue-collar trade unionists and citizen with non-Nordic backgrounds.

Up to the 1980s, when neoliberalism began to provide an “alternative,” aggressively pro-capitalist model for ensuring social quiescence, the party was able to secure capital’s co-operation by convincing capital that it shared the goals of increasing economic growth and reducing social friction. Neoclassical economists have been firmly nudging the Social Democratic Party into capitulating to most of capital’s traditional preferences.

The Social Democratic Party is generally recognized as the main architect of the social welfare state, progressive taxationfair trade and low-unemployment policies. Sweden emerged sound from the Great Depression with a brief, successful “Keynesianism-before Keynes.”  The Rehn-Meidner model, called after two economists working for the the blue-collar union federation in the 1940s, 1950s and 1960s, created the centralized system of wage bargaining that aimed to both set wages at a “just” level and promote business efficiency and productivity. With the pre-1983 cooperation of capital and labour federations that bargained independently of the state, the state determined that wages would be higher than the market would set in firms that were inefficient or uncompetitive and lower than the market would set in firms that were highly productive and competitive. Workers were compensated with state-sponsored retraining and relocating and the state reformed wages with the goal of providing “equal pay for equal work.” It kept incomes consistently rising, while taxing progressively and pooling social wealth to deliver services through local governments. These policies brought prosperity and social progress to Sweden and made its fully justified reputation as one of the most advanced nations, with one of the best quality of life in the world. In the 1980s, however, the Rehn-Meidner system came under attack and was abandoned (see also here).

The demise of the Rehn-Meidner model

The Rehn-Meidner model allowed capitalists owning very productive and efficient firms to retain excess profits at the expense of the firms’ workers, thus exacerbating inequality, workers in these firms began to agitate for a share of the profits in the 1970s. At the same time, women working in the state sector began to assert pressure for better wages. Meidner established a study committee that came up with a proposal in 1976 that entailed transferring the excess profits into investment funds controlled by the workers in the efficient firms. The intention was that firms would create further employment and pay more workers higher wages, rather than increasing the wealth of company owners and managers. As a result, the capitalists blew up the so-called general ‘class compromise’ that had been established in 1938.

The 1980s were a very turbulent time in Sweden that initiated the decline of social democratic hegemony. In the 1980s, pillars of Swedish industry – wood pulp, paper production, steel – were massively restructured. Shipbuilding was discontinued. In 1986, one of the Social Democratic Party’s strongest champions of egalitarianism and democracy, Olof Palme, was assassinated. Swedish capital was increasingly moving investment into other European countries and progressive taxation and pro-egalitarian redistribution became economic heresy.  With the capitalist confederation’s defection from the 1938 Saltsjöbaden Agreement and Swedish capital investing in other European countries rather than Sweden, as well as the global rise of neoliberal political-economic hegemony, the Social Democratic Party backed away from the progressive Meidner reform.

A leading proponent of capital’s cause at the time, Social Democrat Finance Minister Kjell-Olof Feldt reminisced in an interview, “The negative inheritance I received from my predecessor (…) was a strongly progressive tax system with high marginal taxes. This was supposed to bring about a just and equal society. But I eventually came to the opinion that it simply didn’t work out that way. Progressive taxes created instead a society of wranglers, cheaters, peculiar manipulations, false ambitions and new injustices. It took me at least a decade to get a part of the party to see this.”

This is exactly what the Right has been saying for decades and it is of course not true. The social democrats have been losing votes ever since.

The economic crisis in the 1990s has been widely cited in the conservative press worldwide as a social democratic failure, but it is essential to note not only did profit rates begin to fall worldwide after the 1960s (certainly not the fault of social democracy) while this period saw the fateful neoliberal ascendance in social democratic ideology and policies.

Social democratic neoliberal measures, such as depressing and deregulating the currency to prop up Swedish exports during the economic restructuring transition, dropping corporate taxation and taxation on high income-earners, and switching from anti-unemployment policies to anti-inflationary policies were exacerbated by international  recession, unchecked currency speculation and the centre-right government led by Carl Bildt (1991–1994), creating the fiscal crisis of the early 1990s.When the Social Democrats returned to power in 1994, they responded to this crisis by stabilizing the currenc and by reducing the welfare state and privatising public services and goods. As a result, they lost more votes.

Luckily, many of the aspects of the social-democratic welfare state continued to function at a high level, due in no small part to the high rate of unionization in Sweden, the independence of unions in wage-setting, and the exemplary competency of the feminized public sector workforce as well as widespread public support. At the turn of the twenty-first century, the average quality of life, after government transfers, is high, inequality is low (the Gini coefficient is .28) and social mobility is high (compared to the affluent Anglo-American and Central European countries).

The political cost, however, has been enormous. Stefan Löfven led the Social Democratic Party into the 2014 European Parliament election which resulted in the party’s worst electoral results at national level since universal suffrage was introduced in 1921. He then led the party into the 2014 general election which resulted in the party’s second worst election result to the Riksdag since universal suffrage was introduced in 1921. As in practically all other European countries, parties situated at the left of the social democrats grew somewhat. Unfortunately, the extreme right has been gained the most from the political transformation.

The Swedish Democrats

The far-right SD was founded in 1998. The party describes itself as social conservative, nationalist and anti-immigration (see here and here). The party gained wide notability after the 2006 general election, when it achieved electoral success in municipal and county council elections, especially in the south. Currently, polls give the Swedish Democrats between 20 and 23% of the vote. In the 2014 general election, the SD got 12.9% and won 49 seats in the Riksdag, a 14% share of the seats. With a vote share of 22.16% in the constituency of Scania County North & East, Sweden Democrats out-polled one of the two major parties for the first time in one of the 29 constituencies where parliamentary seats are distributed. The SD remains isolated in the Riksdag because the other parties refuse to cooperate with them.

The party had its roots in Swedish fascism and was a part of the white supremacy movement; initially, it was characterized by right-wing extremism. The party’s first auditor, Gustaf Ekström, was a Waffen-SS veteran and had been a member of the national socialist party Svensk Socialistisk Samling in the 1940s. Early on, the party sought international connections with the National Democratic Party of Germany, the American National Association for the Advancement of White People (founded by David Duke) and publications like the Nazi Nation Europa. But the SD could not grow with such profile and therefore moderation set in. From 1995 onwards the party’s new leader, Mikael Jansson strove to make the party more respectable. During the 1990s, the party became more influenced by the French National Front, the Freedom Party of Austria and the Danish People’s Party. SD received economic support for the 1998 election from the French National Front. In 2001 the most extreme faction was expelled from the party. During the 2000s, Jimmie Åkesson (party leader since 2005) continued and expanded the moderation policy. In 2003 the party declared the Universal Declaration of Human Rights to be a cornerstone of its policies. If you want your human rights respected, you know who to contact.

The SD is not a laughing stock. Since 2014, the SD is Sweden’s third-largest party. Amid media coverage regarding the high immigration figures and the European migrant crisis, the Sweden Democrats soared in all opinion polls during the summer of 2015, with a little over a quarter of the vote. This was the first time in 100 years that any party other than the Social Democrats and the Moderates had topped official opinion polls.

The Swedish Democrats believe that current Swedish immigration and integration policies have been a failure. They argue that there have been rising antagonistic tensions between various population groups and that immigration has caused social and economic strains on the country and threatened social cohesion. In a 2008 survey, a significant minority of 39% of all Swedes thought that there were “too many foreigners in the country,” and in 2007 a survey showed that 49% of all Swedes wanted to restrict the number of asylum-seekers. In recent years SD has tried to approach the immigration policy of the Danish People’s Party, which from 2001 to 2011 provided parliamentary support for the former Danish liberal/conservative government in return for a tightening of immigration policies and stricter naturalization laws. The Sweden Democrats reject joining the Economic and Monetary Union of the European Union and want to renegotiate Swedish membership in the European Union. At a time of European economic governance dysfunction and Brexit, there is little doubt that this position will bring the party further electoral gain and that this will make things worse than they already are.