Financial crises and industrial development: The new Swedish model

Abstract

As a small export-oriented country Sweden’s economy is more exposed to international economic crises than larger economies are. Compared to many other countries’ economies, Sweden’s economy recovered quickly from the last financial crisis of 2008/2009. Domestic banks did not experience severe trouble nor did government deficits increase to irresponsible levels. The long-term negative trend of employment in the manufacturing industry accelerated during the crisis, but has also recovered to some extent, thanks to a positive productivity growth which is among the highest in Europe.

The foremost reason that Sweden mastered the last crisis better than most other European countries is that Sweden learned from her experience with the severe financial crisis 15 years before. Since the crisis in the 1990s, there have been ongoing discussions about how to reform Sweden and how to make it less vulnerable to future crises. Many reforms have been implemented since the mid-1990s in almost all areas of the welfare state. Major actors in Sweden, in response to the previous crisis, have identified the importance of having positive industrial relations. The manufacturing sector is seen as one of the main pillars of the national wealth in Sweden. Because it is so important for the Swedish economy, labor market parties have agreed to take a long-term perspective to secure Sweden’s international industrial competiveness. This shows that also the new Swedish model is heavily rooted in the long-standing Swedish tradition of consensus-based labor market models.