National Agenda : The ‘Swedish Model’ Doesn’t Seem Quite So Lovely These Days : Once the home of the world’s finest social democracy, the Scandinavian country is facing difficult times. And critics from across the domestic political spectrum are calling for change.

The citizens of this attractive, progressive Scandinavian nation prided themselves for years on their “Swedish model,” the exemplar of what they considered to be the world’s finest social democracy.

The Swedish model, it was thought, had appeal not just for the rest of Western Europe but for the states of Eastern Europe as well, once they broke out of their Communist shell, and beyond that for Third World nations.

Sweden’s model combined democratic values with a strong, industrialized economy featuring high living standards and low unemployment. It was a vibrant welfare state intent on narrowing class differences between rich and poor.

Through most of the postwar period, well into the 1980s, Sweden did seem a veritable paradise where the old, infirm, disadvantaged, and infants were looked after--while the young and healthy worked hard, enjoying good jobs, summer vacation cabins, and a boat to sail on the country’s lustrous waterways.

But now the Swedish model is under fire from right, left and center, and Sweden has become a troubled paradise.

“No one believes in the Swedish model anymore,” says Carl Bildt, the cerebral, assured leader of the Moderate (Conservative) Party. “It has become discredited.”

Concerned Swedish economists are questioning whether the welfare benefits are still worth what they say is the cost: the overwhelming taxes, economic slowdown, high inflation, falling productivity, lowering worker morale, and rising unemployment that seems now to characterize this nation of 8.6 million people.

Swedish spending power, once the top in Europe, has steadily declined, with the krona slumping as much as a third compared to the German mark. The gross national product, which came to a standstill in 1990, will drop this year. The value of manufactured products is down about 10% from 10 years ago.

As a measure of discontent, Sweden’s ruling Social Democratic Party, which has governed for all but four of the past 60 years and which invented the Swedish model, is in deep trouble: Opinion polls show only 30% support today compared to the 43.2% showing that was good enough to win the party the 1988 election.

Most observers say the Social Democrats under the tall, bespectacled Prime Minister Ingvar Carlsson will lose the next national election, scheduled for Sept. 15.

A Swedish Foreign Ministry official, with long experience abroad, observed: “The country is going through an identity crisis. So is the Social Democratic Party. People don’t know what it stands for any longer.”

Another official says: “Sweden is in transition. The old values are under attack. We are changing the system, changing the model. We realize the public sector has to be cut back and made to work better. A lot of sacred cows are going to be slaughtered.”

Once proud of their independence from the European Community, Swedish leaders have reversed themselves--Carlsson formally announced last Friday that his country will seek admission to the EC.

Conservative leader Bildt, widely tipped to become prime minister after the September election, says: “Sweden is moving away from its own model and becoming more like the rest of Europe. There is no alternative to joining Europe.”

As economist Daniel Viklund points out: “Corporate executives and industrialists believe that full Swedish membership in the EC would be the safest way of avoiding trade barriers in this, their most important export market.”

As for Sweden’s treasured neutrality, one official said: “Swedish neutrality was meant to be a buffer between the superpowers in the Cold War. Now that there’s no Cold War, nobody knows what neutrality is supposed to mean. We are trying to redefine neutrality.”

In addition to neutrality and the welfare state, what distinguished the Swedish model was an unwritten compact between employers and unions to set wage standards and avoid strikes. But this tacit agreement began to go awry when the trade union chiefs, if they could not get what they wanted from corporate negotiators, went directly to the Socialist government, which granted them pay raises. The result, according to economists, has been a fall in Swedish productivity.

The Swedish model was further discredited in the past two years when emerging Eastern European nations, shucking off communism, scorned democratic socialism and opted instead for free enterprise.

Looking back, ex-finance minister and Social Democrat Kjell-Olaf Feldt maintains in a new memoir that the Swedish model of social democracy is basically dead. He blames the unions for forcing the government into unwise policies, which boosted inflation to 10.5% last year (it’s currently running at 10.7%) and adversely affected competitive, cost-conscious industry.

Such is the stultifying uniformity of wages in Sweden, this official and others contend, that those young Swedes seeking a university degree can never make up in salary the time lost in attending school.

In some cases, a truck driver might make only 10% less than his boss. But even in cases where a company director makes twice as much as his employees, his higher taxes and subsidies to the worker tend to level out the actual disposable incomes in Sweden.

Moreover, Swedes work fewer hours than any other European nationality. Swedish physicians work an average of 1,600 hours annually compared to 2,800 in the United States, according to one survey. Because of the high marginal taxes, it pays a Swedish doctor to stay home and paint his house rather than hiring high-priced outside decorators.

Worker incentive is further hampered, critics say, because overtime pay is taxed at rates from 85% to 90%.

Under fire, the Social Democratic government revised the tax structure to reduce the highest rates of income taxes. However, the overall tax burden remained the same, and the government raised value-added taxes on a wide range of items, including food, drink, rents, and hotel and restaurant costs, which negatively affect tourism.

Liberal welfare benefits have reduced productivity. As Hans Werthen, chairman of Electrolux household appliances, puts it: “I always say there are more sick people in a Swedish factory than a Swedish hospital. Twenty-five percent of the people in a Swedish hospital are patients; 25% of the workers in any factory are on sick leave. But you have to allow that 25% of the workers in a Swedish hospital will be on sick leave too.”

As for investment, says one official, “Swedish capital voted with its feet when they dropped exchange controls in 1989. They took their money into other European countries and into factories outside Sweden which were more efficient.”

“There is a sense that Sweden has given up its lead that it established after the war,” said one Western diplomatic observer. “Other countries have caught up and surpassed Sweden.”

To some extent, what’s happening in Sweden is part of regional changes affecting other Scandinavian countries as well.

Sweden, Norway, Finland and Iceland have long been members of the six-nation European Free Trade Assn. (EFTA) along with Switzerland and Austria.

But the Nordic states are increasingly eyeing the EC as the key to their future. Although EFTA holds regular meetings with the EC, and its members enjoy a more favored position with the Community than, for example, the former Warsaw Pact nations of Central and Eastern Europe, it’s not the same as EC membership. And with the advent of the single market among the 12 EC nations, economist Viklund points out, “EFTA countries could not expect to enjoy all the newly created advantages of the internal EC market.”

“Sweden no longer has the luxury of being a singular, neutral state in the northern corner of Europe,” said a Western diplomat here. “It can well be left out in the cold--in the new shape of Europe.”

Although Sweden, with its forests, lakes, inlets and attractive cities still ranks high in livability, public unease has been increasing.

The mood is reflected in the sinking popularity of the Social Democrats and the other traditional parties: the Conservatives; the Communists, now called the Left; the agrarian Center Party; the Liberals, and the Greens.

In 1988, the Greens gained 20 seats in the Riksdag, the Parliament.

But now two other parties have surfaced: the old Christian Democratic Alliance, which was founded in the 1960s but is showing newfound strength; and a new populist protest party called New Democracy, which was at first dismissed by the Conservatives’ Bildt as a “joke.”

But New Democracy is no joke: it is running about 10% in the opinion polls in a system where only 4% of the national vote is needed to gain seats in the Riksdag.

The New Democracy leader, a shrewd 58-year-old industrialist named Ian Wachtmeister, said in an interview: “We are opposed to the entire system. It’s time the government treated us like people, not numbers. We’re not extremists. But we are saying what many people are thinking.

“There’s far too much public spending. We will have no growth this year. We believe in free enterprise instead of stupid laws and taxes. Why is it that Swedish biscuits cost half the price in France than in Stockholm?

“We thought the freed Eastern Europe would look up to the Swedish model. But they only laughed at us. Now, we will have a great future if we join Europe and no future if we remain outside.”

New Democracy has also raised the law-and-order issue, with Wachtmeister declaring: “We need cops on the street, not women traffic wardens giving tickets.”

Swedish newspapers have lately been reporting a seemingly larger number of robberies--including one at a police station that had been shut down in the evening because of a lack of manpower.

The Conservatives have presented a program, “New Start for Sweden,” which advocates reducing the overall tax burden, cutting public spending, increasing the private sector and reducing the influence of unions on industry decision-making.

The Social Democrats now say they want to influence Europe by entering the EC, but the party turnaround has left supporters confused. As one worker said: “The left is going to the right and you don’t know where anyone stands anymore.”

In their election campaign, the Social Democrats have adopted the slogan “Sweden Is Unique,” and their television ads have accentuated the positive by stressing social benefits such as pensions, unemployment insurance, day-care centers, paid vacations and maternal leaves.

“The idea is to point out how good life is in Sweden,” said one official, “and how much the Socialists have done for the country.”

Nobody is confident about predicting the results of the September election but nearly everyone agrees that Sweden is in for changes in the years ahead.

As Kenneth Eriksson, who runs his own chauffeuring firm, summed up: “This election will be about the future. We are all tired of high taxes and of politicians who care only about the ‘Swedish model’ and not about people.”

The Tax Bite Tax as a percentage of gross domestic product in OECD countries. * Turkey: 24.1%

United States: 30.0

Japan: 30.2

Austria: 31.3

Portugal: 31.4

Switzerland: 32.0

Spain: 33.0

Canada: 34.5

Finland: 35.9

Italy: 36.2

Greece: 37.4

Britain: 37.5

Germany: 37.6

New Zealand: 38.6

Ireland: 39.9

Austria: 42.3

Luxembourg: 43.8

France: 44.8

Belgium: 46.1

Netherlands: 48.0

Norway: 48.3

Denmark: 52.0

SWEDEN: 56.7

* 1987 figures

Source: Organization for Economic Cooperation and Development

Affluence and Inflation

Sweden remains among top 10 nations in Organization for Economic Cooperation and Development in per capita gross domestic product, a measure of affluence. But other nations surpass it, and it suffers from hefty inflation. PER CAPITA GROSS DOMESTIC PRODUCT (in dollars) SWITZERLAND: $27,581

ICELAND: 24,031

JAPAN: 23,235

SWEDEN: 21,546

FINLAND: 21,287

NORWAY: 21,241

DENMARK: 20,926

GERMANY: 19,581

UNITED STATES: 19,558

CANADA: 18,675

LUXEMBOURG: 17,592

FRANCE: 17,002

AUSTRIA: 16,748

NETHERLANDS: 15,461

BELGIUM: 15,180

AUSTRALIA: 14,937

ITALY: 14,430

UNITED KINGDOM: 14,413

NEW ZEALAND: 12,568

IRELAND: 9,182

SPAIN: 8,722

GREECE: 5,244

PORTUGAL: 4,264

YUGOSLAVIA: 2,664

TURKEY: 1,305

Source: OECD. Figures from 1988 INFLATION

TURKEY: 56.0

GREECE: 21.0

PORTUGAL: 13.6

ICELAND: 12.5

SWEDEN: 10.5

SPAIN: 7.5

ITALY: 6.9

FINLAND: 6.5

UNITED KINGDOM: 5.8

NORWAY: 4.7

AUSTRALIA: 4.5

SWITZERLAND: 4.5

BELGIUM: 4.4

NEW ZEALAND: 4.4

UNITED STATES: 4.2

IRELAND: 3.6

AUSTRIA: 3.5

LUXEMBOURG: 3.5

CANADA: 3.4

FRANCE: 3.4

GERMANY: 3.4

DENMARK: 3.3

NETHERLANDS: 3.2

JAPAN: 1.5

Source: OECD. Figures from 1988