Swedish riots: how welfarism creates outsiders

As the last fires are extinguished in some of the poorer suburbs in Sweden, it is interesting to collect together the commentary on what happened.

British comments on the riots in Stockholm hover between open-eyed wonder and, perhaps to some extent, malicious delight. The pictures of burning cars and youths throwing stones at police and firefighters strike a discordant note with the successful ‘Swedish Model’ of tolerance, equality and economic growth, as depicted by both the Swedish government and British politicians.

Some speech-writers and public opinion-makers might be embittered by the fact that the shining exception in depressed Europe now appears less successful than hoped. Others might be relieved.

After having been the flavour of the month for some time, it is reasonable to believe that people are getting rather fed up with the way both David Cameron and Ed Miliband have emphasised selected parts of Sweden’s mixed economy, the Swedish Third Way.

Perhaps the love affair with Sweden is cooling off? International media have been quick to notice that the latest OECD report highlights Sweden for having the fastest growing income gap of all the countries studied over the past 25 years. Word is spreading that we have failed to combine our generous immigrant policy with an inclusive integration programme. Others are wondering if our famed and partially privatised public sector might explain suburban discontent. On 26 May, the Financial Times questioned whether the ‘next supermodel’, which The Economist recently praised, might in fact be a dead end:

‘As for the welfare state, it is almost 20 years since Sweden turned from being the Nordic country that took social democracy the furthest to the one that experimented most radically with market liberalisation. Swedes must consider whether the pendulum that swung too far in one direction may now be overcompensating in the other.’

After having suffered patronising advice from Swedes on how to resolve the economic crisis, many outside of Sweden are now turning the tables on us. In an article in Dagens Nyheter on 28 May, the British philosopher Nina Power said: ‘Riots are always an unexpected shock – until, that is, they happen. Which they do, and will do increasingly so long as the project to privatise, financialise, monetise and securitise human life continues. These measures are predicated upon and require the widening of economic inequality, the very factor that will always generate social unrest, especially if combined with police violence and racist abuse.’

The truth is that the events in Sweden came as a shock to very few. As always, there are a number of reasons for the riots – some of which are very complex, some frustratingly simple.

When looking at the individuals being arrested, a fair share of them are professional radicals on a pilgrimage and non-local criminals, who hardly view a cut-up fire-hose as ‘a radical Habermas interpretation’, as claimed by a left-wing Swedish newspaper, but rather as a way of creating excitement and committing crimes.

But there is, of course, also a strong element of social tension to the riots, which is related to class and social exclusion. Even though the alleged dismantling of welfare is highly exaggerated, the residents in the district of Husby, north of Stockholm, where the riots began, do live on a site marked by poor school results and high unemployment. The question is whether reduced social ambitions really are a reasonable explanation for the violence.

Personally, I am sceptical. Rather than originating from a society model that has abandoned its ideals of equality, I regard the problems as a result of egalitarian ambitions that are too militant. Sweden is still an essentially social-democratic state, whose modern economic history stems from the so-called Rehn-Meidner model.

Left-wing voices often give prominence to the model as a shining example, especially now as Keynesian policy is brought up as a politically more tasteful alternative to cuts in public spending. But whoever chooses to present that kind of economic policy as a sacred solution to social problems must be aware that, as usual, there are two sides of the coin.

The Rehn-Meidner model was invented by the Swedish trade union movement in the 1940s. It is, in short, based on a mixture of public spending for high growth, equal pay for equal work, active labour-market policies, and low inflation. A growing welfare state was supposed to secure jobs and safeguard private purchasing power and demand, which in turn would contribute to low inflation figures. The idea was to create room for the trade unions to call for high increases in real wages, which would refine the Swedish economy by eliminating low-productive industries and at the same time get rid of dirty, low-paid jobs.

The ‘solidaric wage policy’ was assumed to force enterprises to move towards automation and in that way increase profits, which would also have a positive impact on working conditions.

This worked just fine as long as Sweden’s growth during the postwar period remained high. Later on, however, inflation rushed to double-digit rates and taxes were rapidly increased in order to afford the ever-growing welfare state, which ended up losing its competitiveness. For 20 years, average employees received no real wage increases, despite increasing costs for enterprises.

Even though Sweden abandoned much of the Rehn-Meidner model, we still have the lowest share of low-paid jobs within the EU, much depending on the unions’ sectoral agreements that force up real minimum wages.

When considering international competition, there are several obvious advantages to this. But it also hampers those who find themselves on the wrong side of the threshold. And now we arrive at the riots in Husby. The previously prosperous working-class has transformed itself into a lower middle-class. Today, we see a new kind of proletariat at the bottom of the social ladder, consisting of people who come off badly with the high requirements on the labour market, who lack in language skills, work experience and social network.

Only a small minority of the residents in Husby responds violently to this feeling of being an outsider. But to many people, the notion of ‘the universal welfare state’ is mere abstraction. The current social-security benefits may keep these people above the poverty line, but as the structural changes created the insider-outsider problem, benefits came to play a part of their own in making social exclusion permanent.

With this background in mind, it is slightly surreal to hear claims of a socialist U-turn being the best solution to today’s problems, including the abolishment of school choice and even higher thresholds for entry into the Swedish community. The freedom of choosing a better school outside the family’s residential district is often the only possibility at hand for a young person who, without having any money, wants to climb the social ladder. Why would we want to prevent them from doing that?

There are still lessons to be learned from our Third Way, and private choice in the public sector is one of them. But there are also mistakes to be avoided – and here, the negative consequences of having too large a welfare state is perhaps the most important.

Karin Svanborg-Sjövall works at the Swedish think-tank Timbro and is author of Private Choice in the Public Sector: The New Swedish Welfare Model. She will be speaking at the spiked drinks event ‘Time for a serious debate about the welfare state’ in London on Monday 3 June. See the spiked events page for more information.