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The state of the economy is taking up more and more space in both the public consciousness and the political debate in Europe. Country after country is coming to terms with the consequences of various types of mismanagement over the decades, and are left paralysed as unpaid debts are catching up. The latest country that has become the centre of such attention is France, where the fragile government was forced to resign after a budget crisis. Previously, the financial crisis of Greece and other Mediterranean countries have highlighted the instability of large parts of the Eurozone.
In Sweden, the perspective on the approaching economic crisis mainly centres on the upkeep of the welfare system. The stereotypical view of Sweden is that the welfare system generally takes precedence before other financial priorities, but this view has for quite some time now been challenged by a trend of economic liberalisation, which, against the backdrop of the European economic crisis, is simultaneously losing but also winning the argument.
Sweden’s liberalisation: from celebrated to hated
The liberalisation of the “socialist” Sweden can be traced as far back as to the later half of the 1970s, when Social Democracy definitely lost power in government for the first time in over 40 years. But it was not until 2006, when the centre-right liberal Alliance started its two-term long governance, that the enthusiasm for low taxes and ‘marketisation’ of the welfare system truly took hold. This introduced competition between the public sector and newly-started private initiatives, where the latter operated on government licenses and partial public financial backing, but with a notorious hands-off approach.
In the years that have since followed, this system has become a hate object for many. The private welfare sector has been rife with abuse and fraud, due to inadequate control mechanisms and all-around naivety from the authorities. Privately operated clinics and schools are regularly exposed in the media for low standards, or scandals that have endangered their clients. Schools in particular have been prone to franchising, resulting in a handful of largely unaccountable corporations owning the education market, stirring debates about profits versus people.
The perception of injustice that this type of privatisation or liberalisation of a once almost entirely publicly owned sector has created is of course common on the left. On the nationalist right, the issue of who it is that is operating the private schools and clinics is becoming a growing issue. For a long time, Islamists used the right to operate private schools with unique programmes centred around their cultural and religious life to sustain Muslims segregation in Sweden, and to incubate radical and frequently violent ideology. Today all private schools with an Islamic profile have been closed by the authorities after connections to Jihadism (and sometimes the Islamic State) have been exposed, but many private school enterprises remain controversial due to their reputation of catering mainly to particular minority religious groups, despite being formally non-confessional.
What this reform, which technically occurred under the brief return of liberals of the early 1990s but reached its full extent in the 2010s, has meant for efficiency in the health and education sector is debatable. It may have facilitated a degree of austerity that Swedish governments have been known for for the past few decades, but it has also come at a social cost for Swedish society. Today many of its architects are in agreement that the private welfare enterprises need to be reeled in, if not abolished. One such example is the Liberals, the party which was once one of the primary voices for the system in the 1990s, but which now wants to restore education to the public sector.
But while many “freedom reforms” of the 1990s have grown to be reviled by the Swedish public, there is a nascent revisionist movement that aims to bring the positives of these debated systems to the forefront.
How important has liberalisation been for the Swedish economy?
Following the crisis of the early 1990s, Sweden underwent large-scale changes to its economy, which according to some was overburdened by the size of the public sector and overregulations. This occurred mainly at the hands of the centre-right liberals, and the privatisation, or perhaps more accurately, the hybridisation of education and health, is but the most concrete of the reforms that were undertaken. From this period onward, there was a general trend of facilitating entrepreneurship in various ways that slowly eroded the image of Sweden as a country defined by the truly one-and-only public sector.
From its entry into the European Union in 1995, coming out of a position of weakness, Sweden has since in many ways become one of the leading countries in Europe in among other things the tech sector. As of 2018, Sweden had the second-highest density of “unicorn” startups (non-publicly traded enterprises valued over one billion dollars) in the world, rivalling the United States. Other significant digital companies, such as Spotify, also add to the list of Swedish entrepreneurial miracles of the 2000s.
The significance of these enterprises, which are both symbolic and real in terms of economic contribution, has been highlighted a lot more as Sweden has balanced on the threshold of a recession during the 2020s. While Sweden’s GDP growth has been practically stagnant or negative for the last few years, there are a number of highly successful ventures that have defied all odds and stood tall even on the global market. The defenders of the liberalisation of the past few decades argue that this demonstrates the value of some of Sweden’s most precious immaterial assets, that being innovation and entrepreneurship. This is a perspective on Swedish economic history that goes far back.
The Swedish density of “geniuses” is a tradition that goes back all the way to the mid-19th century, when the country was in the midst of its modernisation. Trade guilds, monopolies, and the medieval Estates’ Diet were abolished, which unleashed an unprecedented flood of creativity that made Sweden one of the world’s foremost technological, industrial, and scientific contributors. The country has since then maintained a high number of technological patents on a global scale, very high compared to its low population.
Committed economic liberals extrapolate this view on Swedish history to mean that the Swedish prosperity of the 20th century was not due to social democracy, but in spite of it – rather it was the industriousness of the Swedes that would have carried the country to great heights regardless. They also point out that the defining actors of the Swedish miracle, numerous companies in steel, machinery, automobiles, and electrics, were all founded prior to the height of social democracy. It is also no coincidence that Sweden began its slow descent on the wealth index when the country became almost synonymous with social democracy. Resultantly, it stands to reason that the reforms of the 1990s and the 2000s that undid much of the corporatism of social democracy gave new blood to Swedish entrepreneurship, which is doing much to help the country stay afloat today.
This perspective is intellectually appealing and consistent. It has also been used to compare the development of Sweden compared to Norway, another Scandinavian welfare state renowned for its material prosperity. In Norway, the oil industry contributes massive sums to public investment funds, constituting a remarkably lucrative yet passive backbone to the country’s economy. But, as of late, a purported Norwegian inability to innovate and generate new wealth has sparked debate among economists and political commentators. The Norwegian economist Martin Bech Holte argued in a book published this very year that his country has become lazy due to the overabundance of oil – something which perhaps easily occurs in countries that become over-dependent on natural resources.
If the Swedish natural resource instead is the sheer creativity and innovation of its people, then liberalisation can definitely be seen as the way to harness that power.
The cost of economic prosperity
But as previously noted, the liberalisation movement of Sweden should not only be positively credited for having revived a rigid, nearly-socialised economy. Its social consequences have at times been out-right disastrous, especially regarding its view on migration and culture. As the irreparable effects of private schools and clinics are starting to become apparent, so are the effects of unfiltered labour migration. The increasing negligence of Swedish labour law follows in its footsteps, with a decline in safety standards as well as professional standards evident for those who dare to peek behind the curtain.
This is where conservatives must be the voice of reason when working with liberals to transform society. In Sweden, the forces of liberalisation control the narrative on many topics, and immigration is one of them – but we cannot let the safety and identity of Sweden, or of any other European country, be subservient to economic interests. While it is alluring for many nationalists and conservatives to join liberals in criticising the typical socialist-esque rigidity of the Swedish economy that still exists, they must be wary of what it is that is broken and what isn’t – and not try to “fix” everything in one sweep, like was attempted in the 1990s and 2000s.