[Futurework] A Volvo without tyres

[Keith Hudson]

Hi Tor,

Further to our recent discussion as to whether Sweden can afford its high spending on welfare or not I quote some paragraphs from a recent Economist report. (Incidentally, about your own country, the report says that many Norwegians thinks that oil-bloated success could smother other parts of the economy, making you lazy, unenterprising and decreasingly able to generate new value. I'm sure this doesn't apply to you, but this is what the Economist thinks of some of your countrymen!)

Keith Hudson

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Meanwhile Sweden, the region's biggest economy, has gradually been slipping behind its Nordic neighbours in terms of income per person. "Sweden has become the poorest in the neighbourhood. Iceland, Norway, Finland and Denmark are richer and on a better trajectory," says Magnus Henrekson of the Stockholm School of Economics. Ericsson, the country's biggest telecoms-equipment company, is having a rough time. It is shedding 60,000 jobs over three years, and in April reported its eighth consecutive quarterly loss.

The city of Stockholm boomed briefly at the end of the 1990s, mostly because of big investments in technology companies and heavy spending on research and development, but the shine is wearing off here too. Swedes worry about the lack of new big companies. Small service firms do well, but Stefan Folster of the Confederation of Swedish Enterprise points out that every one of Sweden's 50 largest companies was formed before 1970.

In the early 1990s Sweden's public sector became too dominant even for Nordic tastes, with public spending in 1993 reaching 67.5% of GDP and the economy shrinking by 5.2% between 1990 and 1993. Carl Bildt's Conservative government introduced reforms to cut public spending which were carried further by its Social Democrat successor. Since then, says Mr Pagrotsky, the industry minister, "We've had fairly good development for ten years, though we have not been fantastic."

But now he is worried about adverse demographic factors. All the Nordic countries face an acute problem with ageing populations, and Sweden also suffers a higher rate of sick leave and absenteeism than other European countries. Mr Folster says these problems are so widespread (especially in the public sector and among women) that the proportion of people actually working is now the same as in 1995, when Sweden was in recession. Already the Finns are joking that: "The Swedish welfare state is like a Volvo without tyres: it is a great car, but it doesn't work."
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Keith Hudson, 6 Upper Camden Place, Bath, England