Scandinavian social democrats have not been immune to the woes of the European centre-left, reports Michael McTernan
IT may come as a surprise to some that Scandinavia has not been a haven for social democracy at a time when Europe’s political map has been littered with centre-left casualties. Much like other parties on the European centre-left, those in the Nordic countries have stuttered and stumbled in recent years.
The Swedish social democrats have lost back-to-back elections, having governed the country for 65 of the last 80 years. The Danish social democrats won a much-heralded victory in 2011 but have now hit a historic low in the polls. In Finland, there is a grand coalition of the left and right. And in Norway, which might be considered an outlier due to its resource riches, the centre-left Labour party holds power.
Denmark and Sweden, therefore, provide good examples of the left both in power and in opposition. Together with the victory of François Hollande in France last May, Helle Thorning-Schmidt’s triumph in the October 2011 Danish general election was seen by many on the left as a signal that Europe would now make the pursuit of growth its dominant policy priority. However, the new centre-left government went to work with a firm message: it would not respond to the economic crisis with a traditional Keynesian focus on fiscal stimulus; rather, it would put fiscal discipline front and centre. Prudence was not a value to be conceded to the right and the simplistic division between Keynesianism and austerity would be rejected. The 2013 budget was extremely tight, resulting in the largest round of state administration redundancies since the 1920s and wide-ranging cuts to social entitlement programmes.
These moves have made the social democrats very unpopular on the left, which is particularly problematic as they lead a minority coalition which includes the Socialist party. More substantially, last year the government had to considerably revise down its growth forecasts (from 0.9 per cent to -0.4 per cent) and is desperately hoping for a return to growth in 2013 to vindicate its policies. Indeed, to kickstart this much-needed growth it has faced further criticism by passing tax reforms that benefitted higher earners at the expense of pensioners and unemployment benefits and, more recently, launched a growth plan which included cutting corporation taxes from 25 per cent to 22 per cent.
This drive to get the public finances on track and spur private sector growth has been paired with a programme of important structural reforms to education, the labour market and the welfare state, with a view to safeguarding Denmark’s social model and economic future. Inequality in Denmark has increased at a faster rate than in any other European country over the period 2001-10. But, as commentator Kristian Madsen has put it, the Danish leader ‘has been unable to connect her thrifty economics to a political vision for a post-crisis welfare state’.
The Danish experience demonstrates that there is an incredibly difficult and politically testing balancing act between fiscal responsibility, structural reforms to ensure a sustainable and equitable future model for growth, and short-term spending to avert recession.
Under the leadership of Stefan Löfven, a respected and trusted former trade union leader, the Swedish social democrats are edging ahead of the centre-right government in the polls. However, in Fredrik Reinfeldt, the prime minister, and his Moderate party they have a formidable opponent.
Ahead of the next general election in 2014, the social democrats have adopted a cautious strategy which does not differentiate significantly from the government’s path. For example, at the end of last year they introduced a shadow budget which was less expansionary than that of the government.
Their strategy instead is to hold Reinfeldt to account for his programme of tax cuts and reforms which have weakened the ‘Nordic model’. His economic approach has been largely premised on the notion that Sweden does not have enough low-skill service sector jobs: by bolstering the middle-classes’ spending capacity through tax cuts as well as cutting unemployment insurance, more jobs could be created and sustained. The problem is that unemployment is higher now than when Reinfeldt first made his promises and the tax cuts have put pressure on the sustainability of the welfare system. The pressures on the ‘Nordic model’ are brought home by the rise of rightwing and far-right populist parties. A poll in Denmark recently put the anti-immigrant populist People’s party above the social democrats at 17.4 per cent; the far-right Swedish Democrats are now polling at 10 per cent; the True Finns are on 18.1 per cent; and the Norwegian Progress party is polling around 16-17 per cent.
This highlights again the stresses that Europe’s social models and representative democracies have been put under by both the aftershocks of the economic crisis and longer-term challenges such as global competitiveness, ageing and demography. The cohesive Nordic model formula of good jobs, social protection and open economies is indeed to be envied; but it is not immune to the short- and long-term storms sweeping the continent.
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Michael McTernan is editor and senior researcher at Policy Network
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