Everything looks small around Göran (pronounced Yerran) Persson. He is six feet tall, but also broad, built more like a boxer than a politician. Perched on a functional chair in a bland office at JKL, the PR company he joined after leaving politics, he seems too big for the room, while the coffee cups appear Lilliputian. As a government minister in the late 1980s, finance minister from 1994 to 1996, and then prime minister for the next ten years, his time in office straddles the collapse of the old Swedish model so disliked by Jacob Wallenberg, and the rise of the new one, which Persson did much to usher in. His domineering leadership helped push through unpopular reforms that played a large role in restoring the country’s finances.
Surprisingly, therefore, for a prime minister of the left, he agrees with Wallenberg – in the years before the watershed of the 1990s, Sweden stacked up some major problems. ‘We had a period in the 1970s and ’80s when everyone got everything they wanted. There were two coalitions in parliament – one for higher spending, one for tax cuts. They worked together to destroy the public finances. It was a very destructive period. It ended in a collapse, we had to restart it.’
Strong unions were as much to blame for the crisis as anyone else, Persson admits. In fact, they were even ‘part of the destruction of the Swedish system.’ But they are a pillar of the model once again: ‘We have given the trade unions a special role to play, and we still do, and it works. If you follow the process of wage formation, it is extremely disciplined in Sweden. We have had this as a successful concept for the past 20 years.’
In the mid-1990s, Persson went to Wall Street as Sweden’s finance minister to borrow money to cover a huge hole in the public finances. The visit was traumatic, he recalls. He had to explain to bankers why Sweden had such generous unemployment insurance, why it had such high costs in the primary school system. ‘To go there and do that, and realise that, if I didn’t have an answer they would not lend me the money, and if they didn’t lend me money I wouldn’t be able to finance the welfare society – it was a terrible experience,’ he says. ‘So for me it was easy to say to Swedes: we must get rid of these deficits as quickly as possible. Strong public finances are extremely important if you want to maintain the model.’
The result was a series of big reforms: pensions, wages, the public sector, welfare, taxes. ‘We did everything at the same time – we used the crisis. There is nothing as productive as a good crisis; we really demonstrated this during those years. We realised that if we don’t do this we will not be able to defend the Swedish model. The model is not for free, we need to work to pay for it, and to work we need to export, and to export we need to be competitive. Without competitiveness, there is no Swedish model. Without the Swedish model, there is no competitiveness.’
The Swedish model itself, says Persson, helped save the Swedish model. Because of ‘a relatively fair distribution of income’ in the country, combined with the assumption that everyone has the right to a good education, good healthcare and a good pension paid for by taxes, people bought into the idea that big reforms were necessary – there was a sense of all being in the same boat, and everyone standing to lose if nothing was done. All the same, Persson’s government felt it had to increase taxes quite dramatically for the better off. ‘They had to pay, and they paid. We had very high taxes for a couple of years. We survived and we started to cut taxes after that.’ The Social Democrats were paid politically for this in 2002 with re-election, he says – people could see it was working. But to be able to convince them that it was necessary, the government needed to show that there was a fair distribution of the burdens. ‘That was important,’ Persson continues. ‘Then you are back to the fundamentals of the Swedish model, which is also an idea of fair distribution, not just of the burdens but of the results we create together.’ The result is that Sweden still combines redistribution with a relatively large public sector, paid for by taxes.
In turn, redistribution has more broadly positive effects on the economy. A good education for all is not just fair, Persson says, but is also essential for Sweden to be competitive. ‘We need children and we take care of them, it is even better if they are healthy and well educated – that is the basic idea of the Swedish welfare society. It is more economically relevant now than ever before, because of the demographic situation. We cannot afford to lose anyone. Once we had a surplus of young people – we don’t have that any more, even if we are in a better situation than others.’
Like other industrialised societies, Sweden’s population is ageing rapidly, creating greater demands on the welfare state, with fewer taxpayers to foot the bill. Hence, in Persson’s view, the importance of maintaining a high birth rate, which in turn strengthens the economic case for family-friendly polices: ‘We need to support young families, to make it possible to combine a good education and a professional career with the responsibility for two or three kids.’
Look at the universities, he adds, where women students do particularly well. ‘If when they graduate we tell them, “Sorry, now you have to choose: either become a mother or a professional”, then we can be sure that many will become professionals and de-prioritise family life. And we know if that happens we will be in an extremely difficult situation, because a society without children is a society that will end up in stagnation.’ Persson sees greater economic advantages in encouraging women to combine families and careers: societies with children have a bigger domestic market and an orientation on the future, not the past. This is part of his explanation of the Trump phenomenon in the United States: older people looking backwards to a return of something that used to be, ‘making America great again’, instead of looking ahead. This attitude also means searching for someone to blame, creating the potential for dangerous political priorities.
‘Family-friendly policies are thus a tremendous asset,’ Persson says. The future will demonstrate that gender equality is the right way to go, too. ‘It’s not only about women, it’s about us all – it is not driven by gender, it is driven by modernity, by young adults trying to create a better life for their families. They are all more equally engaged in it than we were, not because they have to, but because they want to.’
If it isn’t obvious already, Persson is bullish about the prospects for this relatively egalitarian, welfare-oriented economy that sees its people as assets, puts them to work, taxes them, and reinvests in their comfort and development, reinforcing the virtuous circle because people see they get something in return. This future-oriented attitude fosters an interest in modernity, an openness to new technologies, new methods and trends. ‘It is modern, it is relevant, it is rational. If you had asked me ten years ago, I would have been much clearer that there is a threat to the model from our Conservative and Liberal parties. But that was based on the global neoliberal wave. I think the neoliberal wave has come to an end, it doesn’t offer any answers to today’s problems.’
On the contrary, where countries still try to practise neoliberal polices – encouraging unbridled free-market economics in all spheres – they often result in populist responses, Persson argues: ‘Ten years ago it was a threat, I don’t think they would dare to go for it now. We have had so many good years that the political confrontation is not as sharp as before. People take the model for granted, more or less.’
Sweden’s openness should include its attitude to immigration, Persson says, but not the ‘naive policy’ of opening its doors to everyone. ‘You cannot have our model and then tell everyone you are welcome to come here, because our model demands that you take part in the workforce. If you do so, then you are more than welcome. The model works perfectly as long as immigrants work – then we can maintain it.’ The big group of immigrants that have arrived in the past ten years are a problem, he says. Will it mean dismantling the model by cutting wages to create more jobs? ‘I don’t think there is support for that. We need to find new measures to do it, with the help of creating public jobs.’
Where the system is failing, he hints, is with its treatment of the elderly – the ones who built the Swedish model. ‘The pension system has one minor problem – the pensions are too low. We have to solve that. But we can afford to have that discussion now.’ Unless a solution is found, Persson says, the shared assumption that ‘we are all in this together’ will be undermined, weakening the unwritten agreement between government and the governed that if you pay into the system, it will pay out for you.