With successes, new policy goals must be defined
Sweden’s long-term strategic ambitions are global competitiveness, a lean but effective and productive public sector, and carefully managed international influence. Many indicators suggest that Sweden is well on its way to achieving these goals. The key challenges facing the government relate to aiding the economic and social losers. Sweden’s long-term social and economic sustainability hinges on the capacity of the government to address this need. Sweden’s government now faces the challenge of clearly defining its social agenda. Choosing which strategy to implement is not feasible until the government delineates its policy objectives.
Some reforms to be reversed - but which?
With the Social Democrats’ return to political power, a key issue is determining which of the previous non-socialist government’s reforms of the welfare state, education system and labor market should be continued and which should be reversed. Reversing a large number of reforms could introduce a stop-and-go pattern of policymaking that would be detrimental to institutional capacity, stability and predictability, which are important for economic development. On the other hand, simply further administering an inherently non-socialist policy agenda would be difficult to sustain electorally.
Unemployment an issue even with high growth
In terms of challenges facing the government, four related problems stand out: immigration and accommodating asylum-seekers, unemployment, integration and equality. Over the past several years, Sweden has enjoyed strong economic development, except for the odd year in the midst of the global financial crisis. However, even during high-growth periods, the government has recorded relatively high levels of unemployment. Whether these are the result of shortcomings in the preparing of students for work life or invisible thresholds to entering the labor market, unemployment in general and youth unemployment in particular remains a problem. The previous government put their trust overwhelmingly in the market and incentives; the new government appears to be more “dirigiste” in its approach. It is too early to assess whether this new policy style will be any more successful in addressing these urgent issues.
Despite funding, integration not
Integration poses a similar type of challenge. Visible and invisible obstacles prevent immigrants from finding meaningful jobs and societal acceptance in Sweden. A comparison with other countries is insufficient. Unlike other countries, Sweden has devoted financial resources to solving the problem. Yet its formula has not worked, likely because the government has been unable to overcome societal obstacles. The government has taken the first step in strengthening the internal strategic capacity of the state, but now, in a second step, it needs to address the issue of making societal governance more integrative and effective.
Core values being tested by refugee crisis
Core values of Swedish governance such as equality and equal treatment are being tested by the acute crisis in accommodating asylum-seekers and refugees from Syria and other war-torn countries. In the past, equality was one of the major features of the Swedish model. However, inequality has increased in Sweden because of wage bargaining deregulation, the trend away from collective wage determination toward individualized patterns and increasing income from capital for high-income earners. Tax reforms under the previous government further accelerated the trend toward inequality. From a comparative point of view, Sweden remains a very egalitarian society. From a historical point of view, however, the rise in inequality has been strikingly fast and threatens to further undermine societal trust and integration. Addressing rising inequality will therefore be a political challenge for the new red-green government.
Choice between collective goals or deregulation
The government has a rare opportunity to capitalize on high institutional trust, a strong economy, a vibrant civil society and a competent professional staff at all levels of government. The key decision it must make is whether to employ those resources to pursue collective goals or instead promote individual initiatives and deregulation. This is obviously a political decision, although many scholars argue that the correlation between growth and a small public sector is weaker than once assumed. For Sweden, it appears unlikely that strong growth can be sustained with a “race to the bottom” strategy, which would undermine integration, equality and trust. Instead, economic prosperity will more likely be the outcome of concerted action between an effective, capable and productive public sector and a globally competitive and balanced business community.
Integration is biggest
The major challenge in the longer term, however, will be integration. The very large number of immigrants represent, in the short term, a significant challenge in terms of accommodation and welfare provision. These challenges will impact local governments even harder in 2018, when state subsidies will be reduced. In the longer term, achieving real integration will be essential to the future wealth and stability of the country.
Pierre, J. (ed) (2015), The Oxford Handbook of Swedish Politics (Oxford: Oxford University Press).