Comfort Costs

By Popper, Nathaniel | Harvard International Review, Fall 2000 | Go to article overview

Comfort Costs


Popper, Nathaniel, Harvard International Review


Scandinavian Welfare States

For unemployed workers in Scandinavia, getting a job can mean losing as much as 50 percent of income.

The extravagant unemployment benefits provided in the Scandinavian countries are just one aspect of their famously generous welfare policies. The Social Democratic parties (SDPs) that assumed power during the 1930s in Scandinavian countries ruled without interruption until the 1960s and bred the largesse of the welfare state, spending over 60 percent of total government expenditure on health, education, and income-security programs. Since the 1960s, these parties have ruled with only short interruptions and have maintained the social-welfare programs that brought them to power in the 1930s.

In the elections of the late 1990s, however, these SDPs have lost their hegemony over Scandinavian politics. Sweden's September 1998 elections delivered the Swedish SDP's worst election results in 70 years. In Denmark's March 1998 elections, the ruling SDP government barely gained enough support to form a new coalition, garnering only a slim majority of the vote. By December 1998, support for the new government fell to 20 percent. In 1997, the Norwegian SDP, known as the Norwegian Labor Party (DnA). relinquished control for the first time since 1985.

These electoral disasters came after economic decline forced the SDPs to retreat from their unqualified support of welfare programs. Ironically, traditionally conservative parties have adopted socially liberal policies to win votes. While support for these parties has picked up with good economic times recently, these election results demonstrate that the Scandinavian people want to maintain their sizable welfare systems even in the face of economic decline.

This decline grew most serious as the post-Cold War European reduction in growth rates hit the Scandinavian states at the end of the 1980s, aggravating already high budget deficits and sending unemployment soaring. In Denmark, the unemployment rate rose from an already high 9.5 percent to 12.4 percent in 1993. At the same time, Sweden's rate jumped from 1.5 percent to 8.2 percent. Norway saw the smallest increases in unemployment, but the rate still rose from 4.9 percent to 6 percent. As revenue from taxation decreased, the Scandinavian governments had little choice but to cut expenditures, including spending on welfare programs.

This phenomenon has been most pronounced in Sweden, where the recession that preceded it was the most severe. Since the 1970s, Sweden has fallen from 5th to 15th place in the world in per capita GDP. These economic problems surfaced before 1990, but only in that year did the Swedish SDP leader lngvar Carlsson propose cuts to the welfare system. His government was quickly voted out by the people in favor of a more conservative coalition in the 1990 elections. In the years that this coalition governed, however, the unemployment rate rose each year, and in 1994 the SDP was reinstalled.

Upon the Swedish SDP's return to power, Carlsson raised taxes to avoid welfare reform, but when the budget deficit continued, Carlsson retired in 1995 and was replaced as prime minister and head of the SDP by his previous finance minister Goran Personn.

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