If you are ever fortunate to stay at a hotel in Sweden, look out for the breakfast buffet. Here you are likely to find a metal contraption with what looks like a bright blue toothpaste tube sticking out of it. When you turn the handle, it squeezes the tube, which squirts pale pink gunk onto your plate. This is Kalles Kaviar, a salt-sweet cod roe concoction that Swedes like to put on their eggs in the morning. It’s a bit like Marmite – you either love it or loathe it. Sweden is like Kalles Kaviar. People tend to have strong opinions about it.
Others have compared the country to a Rorschach test – that thing that psychologists do when they make you look at an ink blot and tell them what you see. The picture you discern in the random pattern supposedly reflects your personality. In other words, whenever you talk about Sweden, you are going to superimpose your outlook on the facts. On the left, people seem to think Sweden is the country of milk and honey, a gentle, democratic socialism that takes from the rich and gives to the poor to make a decent society for all. Then there are conservatives who treat Sweden as a cautionary tale, not just because regulation and welfare supposedly destroy the work ethic and drag down the economy, but because an open, caring society will inevitably be overrun by Muslim immigrants, with heaven knows what disastrous consequences. ‘What these groups see says more about them than about Sweden,’ says Johan Norberg, maker of a 2018 documentary about Sweden.
Both these sets of views are exaggerated, both sides are misinformed – I have attempted to enlighten both right and left; no doubt it will annoy both sides. In any case, I think we can draw some firm and undisputed conclusions from what we have learned about this country.
First, there is a new Swedish model. It is not particularly new, in the sense that it emerged from the economic wreckage of the 1990s and so has been around for a while. But it is new in the sense that most people’s opinions of it need updating. Also, the past two decades have served to demonstrate a basic characteristic of it: it is a shared creature of both left and right, created by political consensus. It is no longer true to say that the Swedish model is social democratic – keen-eyed business people and the conservative centre-right are happy to espouse its key features.
The new Swedish model is not the same as the 1970s version. Sweden has accepted fiscal discipline – a low inflation target, balanced budgets, limited deficits – partly imposed by membership of the EU, and partly a response to the perceived profligacy of the 1980s. The central bank has been independent of government since 1999. Large chunks of the public sector are now in private hands. Foreign companies can purchase Swedish businesses, even the big ones. Wealth and inheritance taxes have been scrapped, and rates of taxation are nothing out of the ordinary.
Swedish attitudes have changed, too. When asked what the Swedish model stood for in 2012, Swedes put tax-funded schools and welfare in first place, unsurprisingly – generous welfare is quintessentially Swedish. More unexpected was the answer that came in second place: ‘Everyone has the right to choose schools and healthcare centres.’ These sorts of choices were nowhere to be seen 40 years ago.
An important aspect of the new Swedish model is a continuation from the past – centralised wage bargaining, where the international competitiveness of Sweden’s main export industries sets the benchmark for all sectors. This in turn keeps the wage structure relatively flat and high, forcing industry to innovate or die. This aspect of the old 1960s model fell apart in the 1980s but was resurrected in the late ’90s. In turn, it depends upon a tradition of mutual trust forged in the 1930s, in which trade unions acquiesce in the need for constant upheaval and change, while employers take some responsibility for the consequences of restructuring for workers.
Another feature of the model is the apparent dominance of investors with a long-term view of business, hardwired into their outlook through the system of dual shares. Corporate power lies not with management but with shareholders who are obliged to take part in big, strategic decisions. Instead of anonymous investment funds or small investors focused on making a quick buck, there are strong owners with a name, a responsibility and a clear role. This approach is combined with a management style that emphasises consensus and involvement. It may be cumbersome at times, but it gives momentum to business decisions, and encourages initiative. These factors have helped a small country create some of the biggest names in global industry. In the second decade of the millennium, they also combined to create a very creative entrepreneurial environment.
The model has made it a priority to help women combine work with having a family. To weaken the tendency for women to take on a double burden of domestic and professional work, it has used carrots and sticks to encourage men to share the burden of childcare. Starting in the 1960s from a need to fill a gaping hole in the workforce, Swedish family policy was also driven by the notion that sex discrimination is economically inefficient. Today it has acquired a further justification, with governments of left and right espousing feminism as part of a wider ambition to be a beacon for humanitarianism and human rights.
This has also fostered an openness to asylum and immigration, though this is being tested by the most recent influx of refugees from various man-made catastrophes. The model has gained a reputation for being environmentally conscious, and aspects of Swedish capitalism would appear to lend themselves to the vision, ambition and organisation necessary to effect a green transformation of industry and society. But it is too early to say whether the country’s latest mission to become carbon neutral by 2045 is more than a green gloss on a problem that requires more fundamental change.
The term ‘model’ is a retrospective construction, and there is a tendency to see it as an empty bottle into which you can pour any wine of your choice; far from being fixed, you can project whatever you want onto it. According to this view, the Swedish model is little more than good branding. Based on the evidence gathered here, I would beg to differ. Yes, the Swedish model is undoubtedly a good brand name and, yes, here are different interpretations of what is fundamental to it. But there is something more substantial here, aspects of an economy that are real and effable and distinct. The fact that important features of the model fell apart in the 1980s and were pieced back together again helps us to see their significance in sharper outline today.
As an economy, Sweden looks much more like the rest of the world today than it did back then. And yet it is different. If it wasn’t different, it wouldn’t provoke such passionate views for and against. Moreover, this model has been championed in Sweden by both centre-left and centre-right governments during the past two decades – there is plenty of room for debate over emphasis and direction, but there is agreement over the underlying parameters.
So what can we learn from it? Here comes the Rorschach test.
Sweden is living proof that regulated capitalism can generate effective and sustainable economic growth, and that the state can play a useful role. This is a society that, on the one hand, adheres to the principles of a market economy, including competition, free trade, openness and innovation. On the other, it does not suffer from a naive belief that markets are self-regulatory and that politics should be all about deregulation, tax cuts and paring back the state. It is based on an understanding that, in order to create human welfare as well as growth, the market economy needs an extensive public system of regulation.
The Swedish experience suggests that workplace hierarchies can be damaging to a modern business, and that to be productive, people need to feel they have a voice. Democracy in Western societies too often ends at the office entrance or the factory gate. How much endless energy is wasted on maintaining workplace hierarchies? How much creative potential is thrown away by crushing employees’ motivation and initiative? Industrial democracy is an essential part of a modern economy. Trade unions are part of the solution, not the problem.
Restructuring, crisis, creative destruction – these are integral parts of capitalist enterprise. Unemployment is too often seen by governments as a policy tool for controlling wages, rather than a blight on society and a criminal waste of human potential. Sweden has hit on a means of dealing with layoffs in a more sensible, humane and far-sighted way through its transition system. This is a joint creation of unions and employers, based on the cast-iron certainty that things can get worse as well as better, so let’s prepare for when they get worse. How much effort is wasted fighting to keep jobs because losing them will be a catastrophe for the employees concerned? How much time, money and motivation is wasted getting rid of employees, when a cyclical upturn in a year or two will see the business short of staff? Sweden’s solution deserves international attention.
This leads to another lesson – it pays not be obsessed with short-term personal interest in business. The entire history of capitalism tells us this, and yet still the world walked into the financial crash of 2008, causing untold misery to millions, because the instruments used by its main financial institutions were all about short-term greed rather than long-term need. I don’t think Sweden has found a solution to this. Levels of household debt are much too high, and the housing market has bubble-like features. But anything that encourages long-term thinking, such as Sweden’s business ownership structure, deserves to be studied.
Why do governments make it so hard for families with children? The economics of childcare needs to change radically in Britain and the United States, at the very least. It is hypocrisy for politicians to claim to put families first and complain about our ageing society, at the same time as doing nothing about the realities of working life that make it so hard to have children. Without accessible and affordable childcare, it is women whose pay and careers suffer when they start a family. Sweden is not a gender-equal society. But it recognises that childcare is essential to achieving equality, as well as making good economic sense by allowing women to combine careers with having families.
Sweden has gone from being a monocultural society to one of the most multicultural in the world, in the space of a few decades. Has this been a disaster for Sweden? Categorically, no. Has it all been plain sailing? Absolutely not. Is recent human history characterised by large migrations? Are developed countries short of workers? Does it make any sense for the richest countries to accept the smallest numbers of migrants, when poor countries accept them as a matter of course? Is it hypocrisy for rich countries to turn away migrants fleeing the consequences of rich-nation policies? Sweden has at least woken up to these questions. In 2015, when there was humanitarian disaster in the Middle East, it opened its doors to tens of thousands of desperate people. It then slammed them shut again, because other EU countries refused to respond in the same way. It is now integrating these refugees into its society, with varying degrees of success. If we want to see the future of immigration in developed nations, then we need to look at Sweden, warts and all.
Some of Sweden’s distinct features come together when we talk about the environment. A history of taking bold political initiatives, a consensus culture, a long-term outlook and suspicion of short-termism, centrally planned housing construction, municipal intervention, and partnerships with the private sector have all combined to create conditions in which Sweden could commit to going carbon neutral by 2045, and have a chance of actually doing so.
First, partnerships between the public and private sectors are helpful when large and risky investments need to be made, such as carbon capture and storage technologies. ‘If we want that to happen, government has to team up with industry – it will cost taxpayers’ money at the beginning,’ says Oskar Larsson of the climate department at the Swedish Environmental Protection Agency. Larsson also points to a collaboration between a private Swedish steel company, a publicly owned iron ore miner and a public utility, backed by the state, to develop a zero-emissions method for making steel. Called Hybrit, this project – if successful – could revolutionise steel production worldwide and slash Sweden’s total carbon emissions by 10 per cent.
Stockholm city maintains a 50 per cent stake in the heating side of Fortum, the private business that co-runs heating and power generation in the city. This is an important factor in Stockholm’s goal to become carbon-free by 2040, five years before the rest of the country, says Björn Hugosson, Stockholm’s climate boss. ‘The lesson is that if you have a system you control, you can take measures to phase out emissions,’ he says. ‘When power stations are in the hands of private owners, you can’t.’
Second, a green transformation of the economy will create losers – companies, industries and even entire sectors will have to be closed down. How you deal with so-called ‘stranded assets’ like this is an issue that climate policymakers have not dealt with very well, according to Anders Wijkman, the climate guru we met earlier. Sweden’s transition system makes the country better equipped than most to cope with closing down parts of the economy that are an obstacle to achieving climate objectives.
So what of the future for the new Swedish model? This is modern welfare capitalism, and – for now, at least – it is functioning relatively well according to standard measures of success for capitalist economies. Emmanuel Macron, the current French president, who has proposed a ‘third way’ between right and left, has made much of the Nordic model as providing solutions for France. The impeccably freemarket Economist magazine has proclaimed that the Nordics, Sweden included, are ‘the next supermodel’ countries that have ‘reached the future first’ and are offering ‘highly innovative solutions that reject the tired orthodoxies of left and right’. Natalia Brzezinski, chief executive of Brilliant Minds, an annual tech conference in Stockholm, says: ‘People are talking about the Swedish model now, they are realising there is something special to be proud of, but it has all been hidden. The tech people have done a lot, they have made Swedes proud. This country is a symbol of what can be done, there should be a coming-out party for the Swedish model – it has been a sleepy place for so long.’
There is much, much more to the Swedish model than some sort of doe-eyed multiculturalism and handouts for the work-shy. However, some might see a threat to the model from the rapid rise of the far-right Sweden Democrats, who have become a vocal opposition to immigration. Certainly their arrival in or close to government would deliver a blow to Sweden’s image abroad. Unlike other right-wing populist parties in Scandinavia, the Sweden Democrats have their roots in the neo-Nazis, and despite efforts to rid the party of its more radical elements, high votes for the party go hand in hand with outbursts of grass-roots racism. But as far as image is concerned, Sweden may not have so much to fear. Denmark, which long ago jettisoned any pretence of social liberalism, still enjoys a cuddly image abroad associated with hygge – the Danish art of cosiness – when it is so clearly hygge for some and not for others. In Norway and Finland far-right parties have recently enjoyed ministerial positions, while in Denmark their support kept a minority centre-right administration in power. There is nothing exceptional about Sweden that would prevent its politics from going in similar directions.
The inroads made by far-right populists are a sign that all is not well with the country. Significant numbers of people feel left out. This book presents a top-down view of Swedish society, from people for whom life is comfortable and the model is working fine. Looked at from below, most Swedes lead busy, hard-working lives holding down jobs and raising families; margins are tight, and some find it more of a struggle than others. If the economy fails to deliver for them, then they will look for alternatives on the left and the right. But the Swedish model is about much more than politics. Further successes for populists would challenge the fundamentals, but not erase them – the underlying features of the model are likely to be around for a while to come.
Sweden’s high dependence on the world economy makes it vulnerable to the vagaries of capitalism beyond its borders. But it came through the 2008 crash better than most, and has built buffers against future crises. In Soviet times, Russians used to joke: why is Western capitalism on the edge of a precipice? Answer: So they can get a better look at us down here. That rather sums up Sweden’s position relative to a systemic crisis. This society has problems like any other, but for those at the top looking down – it doesn’t feel that the problems are likely to bring them crashing down any time soon. The challenge, in the meantime, is to make the model work better for more people.