World Economic Crisis Could Scupper Revival; Sweden Has Long Been Regarded as One of the Best Examples of Economic and Social Progress, but Times Have Changed, Says Geoff Thomas
Thomas, Geoff, The Birmingham Post (England)
It would be true to say that Sweden and the Swedes have had a very difficult time both economically and socially during the second half of the 1990s.
A huge process of transformation had taken the original and impoverished agricultural economy and developed it into the world's fourth richest country by 1970.
It is an imperative for Sweden to sustain high levels of industrial production and in an investment climate that promotes industrial and trading activity.
Therefore, when the country slipped from fourth to 17th place in per capita income among industrial nations and industrial production dipped from 35 to 20 per cent of GDP, alarm bells rang throughout the land.
The situation was critical, unemployment was soaring to 13 per cent, 500,000 jobs had been lost, and the Government budget deficit had reached in excess of 12 per cent of GDP.
Sweden had in fact moved rapidly to a condition whereby it had become "the new sick man of Europe".
Public and trading confidence was significantly eroded.
By 1996, however, Government efforts to consolidate the budget had begun to improve the confidence of capital markets, and there was emerging a more determined change in mood.
There were structural reforms in taxation and social security, and a period of sustained export-led growth, which provided a much-needed boost to the efforts of the Government to turn the country around.
Nevertheless, the balancing of public finances at the expense of higher tax on manufacturing, was resulting in lower growth than anticipated and increasing unemployment.
Sweden has too small a private sector, and a far too large commitment to the public sector.
Those in work had traditionally worked to produce too many public services that the country could no longer afford.
The situation was one whereby "so many on social security and in the public sector were sustained by the efforts of the relatively few working in the private sector."
It became clear that Sweden was caught in a welfare trap, and there was an urgent need to move something in the order of 600,000 people out of unemployment into the private sector.
The success of this policy would add something like 20 per cent to Sweden's GDP.
It had to become more profitable for the individual to work rather than to be unemployed, and companies to employ more labour rather than capital.
Recent trends indicate a considerable measure of success in Government strategies, to improve the economy's performance away from the conditions that prevailed in 1996.
This year there is expected to be an increase of around 3 per cent in GDP, with higher estimates for 1999.
There is a picture of relatively strong growth with domestic demand expanding across a broad front.
This will result in more export opportunities for countries like Britain.
Exports from Sweden into the UK last year were up to SKr58 billion.
Exports from the UK into Sweden were around SKr49 billion.
Inflation is expected to fall to around zero in 1998, and employment continues to increase with an anticipated jump in numbers in 1998/99 of around 100,000 people.
For Swedes however, difficulties remain. The government no longer has a deficit, companies are certainly doing better than before, with the Government protecting companies from high taxation.
For the individual, on the other hand, taxes remain high and salaries fairly static.
So, we see a picture of the large Swedish multi-national companies doing well, and a growing tendency for the small and supply companies moving into export and setting up offices in markets outside of Sweden itself.
Industrial relations are stable and the strikes that became characteristic of the 1970s are no longer in evidence.
All forecasts show a continuous trend towards improvement. …