Saving the Swedish model: Learning from Sweden's return to full employment in the late 1990s

Article

In the mid to late 1990s, Sweden's economy staged a remarkable resurgence from a three-year-long recession which had left it with the largest government budget deficit in the OECD. In this essay for IPPR, former Swedish finance minister Par Nuder reflects on the policies and politics that enabled his country's recovery.

In the early 1990s, the Swedish labour market was hit by the worst shock it had experienced since the 1930s. Between the summers of 1990 and 1993, Sweden suffered three years of negative growth. The peak-to-trough fall in GDP was nearly 5 per cent, total employment fell by more than 12 per cent from 1990 to 1994, and employment in manufacturing fell by almost one-quarter.

The Social Democrats returned to power in 1994. It took four years for the government to balance the budget. Between 1994 and 2006, the Swedish economy created 400,000 new jobs, equivalent to 9 per cent of the labour force, and by the end of that period Sweden had the second-highest employment rate in the EU.

Par Nuder is a former Social Democrat MP who served as finance minister during the vital early years of Sweden's employment fight-back. Key points from his essay include:

  • The Swedish approach was based on clear value, underpinned by the 'Swedish model', which incorporates such priorities as lifelong learning, protecting people not jobs, and the importance of active labour market policies.
  • Pro-employment policies were future-focused, based on a long-term analysis of what the economy would look like after the recession.
  • The politics of budget-balancing and labour market reform were attached to a broader vision, proving that the Swedish model was not dead and turning the fight against unemployment into a national project.

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