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Tne Nordic model:From victories to new challenges
Riga, September 17, 2013
Klas EklundSenior Economist SEB
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The Nordics are hot
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The 1990s crisis in Sweden
The “Swedish model” cracked in the 1970’s
Two decades of slow growth, devaluations and inflation
1990’s: Deep crisis: Over-heating, currency crisis, rate hikes,
banking crisis, depression, unemployment, budget chaos
The grim realization: We were not God’s chosen people!
Forced brutal adaptation
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Comprehensive Swedish reforms
Big tax reform 1990-91
Financial market and FX deregulation 1991
Bank crisis resolution 1992-93
Utilities deregulation 1992
Floating currency 1992
Inflation target 1993
Independent central bank 1994
Fiscal austerity program 1993-96
Budget reform 1995
EU membership 1995
Pension reform 1996
Wage negotiations overhaul 1996
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The results
Well consolidated banks
Current account surplus
Budget surplus/balance
Falling government debt
Low inflation
Low interest rates
Falling unemployment
Rapid productivity growth
But still high unemployment
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Now: Nordic strength
Source: WEF
The peculiar Nordic Way
Big unions, big industry, big government, high taxes, egalitarianism
And openness, readiness to innovate
Ambition to combine equity with efficiency
Neither Anglo-Saxon unfettered markets nor Continental European rigidities
A strange mix of egalitarianism, high taxes – and free markets with individualism
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Nordic trust
The Swedish Government’s ”Commission for the Future”
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Globalisation
Will we be able to innovate and stay open?
Financing the welfare state
Will we be able to reform our welfare systems?
Regionalvulnerability
The labour market
Will we be able to mend the widening rifts?
Recipe 1. A more dynamic economy!
Build, spread and commercialize knowledge
School, university, R&D – but don’t overestimate R&D
The broader task: a creative society! Encourage entrepreneurs
Encourage SMEs
Encourage also simple services
Overhaul taxes and regulations
Build infrastructure
Support clusters and centers of excellence
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Recipe 2: Labour market on two legs!
Labour market is much more than high-productive positions in “the information society”
Also ”simple” jobs are necessary
Smooth transition from school to labour market
Lower thresholds
Broader labour market for non-moveable jobs
Recipe 3. Modernised welfare system!
Work longer, save more!
Make welfare services into growth sectors, not cost problems
Centralised state control creates inertia and inefficiencies
Pure markets do not work when information is asymmetric
Quality control, better procurement, creative cooperation between private and public sectors
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Conclusions
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When in crisis:‘Never waste a good crisis’
Bite the bullet, comprehensive reforms
Preparing the future:Buld innovative climate
Dynamism, flexibility, entrepreneurship
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