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Sweden: A military power during the 17th century, Sweden has not participated in any war for almost two centuries. An armed neutrality was preserved in both world wars. Sweden's long-successful economic formula of a capitalist system interlarded with substantial welfare elements was challenged in the 1990s by high unemployment and in 2000-02 and 2009 by the global economic downturns, but fiscal discipline over the past several years has allowed the country to weather economic vagaries. Sweden joined the EU in 1995, but the public rejected the introduction of the euro in a 2003 referendum.
and iron ore constitute the resource base of an economy heavily oriented toward foreign trade. Agriculture accounts for little more than 1% of GDP and of employment.Sweden: Introduction Economy: Aided by peace and neutrality for the whole of the 20th century. hydropower. excellent internal and external communications. and the government is proposing stimulus measures in the 2012 budget to curb the effects of a global economic slowdown and boost employment and growth. and a highly skilled labor force. Sweden has achieved an enviable standard of living under a mixed system of high-tech capitalism and extensive welfare benefits. In September 2003. Privately owned firms account for vast majority of industrial output. the Swedish economy slid into recession in the third quarter of 2008 and growth continued downward in 2009 as deteriorating global conditions reduced export demand and consumption. Sweden was in the midst of a sustained economic upswing. boosted by increased domestic demand and strong exports. Timber. and streamlining the state's role in the economy. Strong exports of commodities and a return to profitability by Sweden's banking sector drove the strong rebound in 2010. Despite strong finances and underlying fundamentals. reducing welfare dependence. This and robust finances offered the center-right government considerable scope to implement its reform program aimed at increasing employment. of which the engineering sector accounts for about 50% of output and exports. . which continued in 2011. Swedish voters turned down entry into the euro system concerned about the impact on the economy and sovereignty. Until 2008. It has a modern distribution system.
788 (July 2012 est.) .) Labor Force: 5.5% (2011 est.Sweden: Facts • • • • • • • • • Population: 9.2 billion (2011 est.) Current Account Surplus: $41.) Unemployment rate: 7.103.) Distribution of family income: 23 (2005) Inflation rate: 3% (2011 est.2 billion (2011 est.900 (2011 est.) GDP per capita: $40.018 million (2011 est. Real Growth rate: 4% (2011 est. GDP: $538.
sex. A high degree of social solidarity to bind individuals to a common purpose : Individuals are members of communities through ties of culture and history.A fair distribution of economic well being. 2. Swedish: Social Democracy Sweden remains the best example of social democracy.Work for all as the primary means of eliminating deprivation: Because human being seek to live productively. Henry Milner defines a social democratic system in terms of six basic principles governing the interaction of government and citizens: 1. Members enjoy reciprocal rights and obligations over and above the right of all human beings to be treated with tolerance and compassion without distinction as to race . rather than simply cash or services. The fruits of economic prosperity are to be distributed fairly. fair distribution is to be effected through directly remunerated employment. In other words taxes and transfer payments must be used but care should be taken lest high tax rates or overgenerous transfers create substantial disincentives to effort. 3. . disability and so on. but in such a way as not to undermine that prosperity.I.
6. it falls short of these defining characteristics in key ways. Democratic participation requires open and informed discussion. with complex systems of economic coordination. an informed well educated citizenry.i. the first principle’s drive for egalitarianism clashes with economic efficiency.e. and leading to high rates of absenteeism. a free and responsible press. hampering the operation of the labor market. and publicly accountable independent boards of inquiry into matters of controversy. This conflict has led to high unemployment and a falling sense of solidarity. participation must extend beyond electoral democracy: Especially in modern societies. 5.result from decisions made by the people themselves through free elections that fully safeguard fundamental political freedoms. reducing saving. In particular. full public access to information based on data reliably gathered and presented. without which it degenerates into a jungle in which the “fittest prosper” Democracy entails that the rules to be obeyedby leaders and followers alike. Although Sweden provides perhaps the best real world example of a social democracy. democracy entails active decentralized decision making and employee participation in management. . Rules to be made by a democratic process: A society of justice must follow rules. Access to information for all citizens.Social Democracy 4.
Unique /Distinct Political Economy II. Unique and Distinct Political Economy: (i) No participation in war since Napoleonic wars of 1913 (ii) Remains a neutral country (iii)No heavy military expenditure (iv) During GD active fiscal policy and devaluation resulted in high economic growth of 6%.II. never had any feudalism or serfdom. . (v) Avoided instability of capitalism and inefficiency and repression of socialism (vi) ethnically and culturally homogenous (vii) Swedes have a strong sense of solidarity and egalitarianism (viii) have a penchant for cooperation and compromise not conflict and litigation (ix) Culture of egalitarianism supported the development of a comprehensive welfare state (x) From its inception in 1889 the SDP believed that socialism best pursued through gradual reform of the capitalist system rather than violent revolution (xi) Swedes historically a free people.
insurance and outlets for consumer goods (x) As nation’s largest purchaser of consumer goods KF bargains with manufacturers for cut rate prices. Ship building industry purchased by the government 1907 to oust foreign control. and iron ore constitute the resource base of an economy heavily oriented toward foreign trade. Steel companies nationalized 1970 to save from bankruptcy (iv) private sector of Swedish industry dominated by a small number of large multinational corporations (v) (v)Timber. (iii) Those in government hands not because of ideology. Industrial Organization III. hydropower. passing the savings on to the consumers who own the organization. (vii) Despite higher levels of market concentration.III. Is offset by a high level of import competition (M=23% of GDP) (viii) Power also counterbalanced as Sweden has one of the world’s most extensive systems of consumer cooperatives. the power of domestic manufacturing cos. food stores. auto dealerships. . (vi) One of the highest levels of industrial concentration in the industrialized world. Industrial Organization of Sweden: (i) SDP unlike UK LP never promoted widespread nationalization of industry (ii) Privately owned firms account for 90% of industrial output. 1970s three largest firms in an average industry produced more than 80% of the industry’s output. 50% of Swedes are cooperative members of Kooperativa Fobundet first organized 1889. (ix) KF and its subsidiaries operate thousands of department stores. of which the engineering sector accounts for about 50% of output and exports.
(vi) System of Centralized collective bargaining (SCCB).IV. Within the economy wide guidelines. working hours and fringe benefits. Labor Markets IV. Economists say the equality of wage costs would force inefficient firms to either make improvements or close down. If industry and local affiliates did not abide by the provisions of national framework agreement they risk loss of financial and administrative support from SAF and LO. industry wide and local negotiations are held between employer groups and union affiliates. Under this system wage negotiations first carried out at the national level between LO and SAF. . Labor Markets of Sweden: (i) 82% of LF unionized (ii)one of the hallmarks of the Swedish welfare system is the smooth running of its labor markets (iii) Sweden historically had lowest UE rate and lowest labor unrest (iv)1898 all labor unions combined to form the Swedish confederation of labor trade unions (LO) (v) 1902 Swedish employers association (SAF) created to countervail the power of LO. which result in Binding Framework Agreement concerning average wage increases. To (a) promote equality (b) increase productivity. (vii) Wage Solidarity: granting the largest wage increases to the lowest paid workers.
Demand oriented programs (relief work.Labor Markets (viii) Active not passive labor markets: Policy based on the premise that it is better for the government to actively prevent unemployment rather than passively compensating those who are rendered unemployed. . matching programs (ix) Labor market boards: help (a) when plant closing increase public service employment (b) attract new firms © support existing firms with subsidies (d) issue building permits (e) expand occupational training programs (f) pay for job search and moving expenses. © the transfer of large share corporate ownership to the labor through formation of wage earners funds. (x) Codetermination and Employee Ownership (a) workers able to participate in management through worker councils which play a consulting role in hiring/firing and employee safety through their representation in the board of directors (b) Each company with 25 or more employees must allow the local union to appoint 2 board members. These funds financed through a tax on corporate profits and a supplementary payroll tax. job location. self employment). supply oriented (training/retraining .
Labor Markets (ix) Recent Labor Market Developments (1) A startling development in Sweden in early 1990s was a sharp rise in unemployment. unions. (3) In 2001 the government. (6) The successful conclusion of this round of collective agreements represented in many ways the ultimate test of the wage formation system in Sweden to deliver appropriate outcomes.8 percent per annum and a reduction in working hours added roughly another of 0. and employers readied a guideline agreement to cover the entire labor sector for three years. The agreement specified hourly wage increases of 2. shocking in an economy predicated on the idea of a universal right to work. (5)The trend means greater difficulty in distinguishing between the agreed official settlement and wage drift as more deviations from the national agreements become codified into a local arrangement. (2) UE peaked at about 8% in 1994 and 1997.5 percent to labor costs. . (4) Although still coordinated at the national level. Swedish labor negotiations show movement toward decentralization with more agreed upon at the plant or office level.
Fiscal and Monetary Policy V. (iv) Beginning 1955 traditional instruments of monetary and fiscal policy were supplemented with the use of Investment Reserve Fund System.(viii) Studies show that the system was successful in stabilizing Swedish economy during 1950s and 1960s. . Fiscal and Monetary Policy: (i) In 1930s before GD social democrats made a proposal to the parliament to use expansionary fiscal policy and monetary policy to lower UE. DR and OMO and (x) Riksbank has also exercised direct controls over bank lending. (ix) In its handling of Monetary policy the Swedish government has used the traditional RRR. (iii) UE in Sweden never exceeded 7% (USA 25%). (vii) Money in the account could be used for capital investment but the timing and location of investment were approved by the labor market board. by awarding advantages to companies that saved during boom and invested during downturns. (v) Investment reserve was designed to stabilize investment expenditure. In 1980s Riksbank instructed to increase lending in Swedish Koronor by no more than 4% for purposes other than housing. (ii) 1932 social democrats came to power and this became a government policy. (vi) A Swedish company could escape taxation on up to 40 % of its profits by setting them aside in a non-interest bearing investment reserve account with central Riksbank.
on an average day 1 out of 4 workers absent. (xii) Positives: Most equal income distribution. hospitalization. During the first 360 days compensation 90% of normal income. average Swedish work week shortest. (xi) Negatives: tax rate 60%. support for welfare system strong as 50% of population receives some part of its income from the public system. until a child reaches 8 years. dental.Social Welfare/Income Distribution VI. surgery. life expectancy highest after Japan. pharmaceutical costs (vi) two week paid vacation (vii) vacation grants for housewives (viii) free marital counseling (ix) network of paid samaritans to dispense home help to the elderly (x) parental income compensation upto 450 days. infant mortality low. incentives low. per capital prison population low . Social Welfare and Income Distribution: (i) Cash maternity benefits (ii) family allowance for each child under 16 regardless of family income(iii) free child care (iv) free public education through graduate school (v) free health insurance (medical. lowest poverty among industrialized countries.
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