Follow the Swedish Model?, by Eric Le Boucher
The mid-sized city of Uppsala, to the northwest of Stockholm, had gambled everything on this project: renovate the university, expand the biology curriculum, finance research laboratories, and give the Pharmacia group every reason to be happy to keep its headquarters there. Drawn by the cutting edge biotech industry, the city's future seeemed assured. But in July 2002, disaster struck: Pharmacia was bought by the American company Pfizer for $56 billion, and jobs at headquarters and in the laboratories were quickly moved to the U.S., leaving dismay in their wake.
"We turned this catastrophe into an opportunity," explained Thomas Östros, the Swedish minister of industry and commerce and representative of Uppsala, during his trip to Paris this week. "Pharmacia was gone, not the students." And it was up to the city to help in the creation of biotechnology start-ups. Eventually, seven small to mid-sized businesses survived, then flourished. Today Uppsala has more jobs in the industry than when Pharmacia was the sole employer.
In the beginning of the 1990s, Sweden had the same problems as other countries, says Stéphane Boujnah ("Notes on The Stainless Swedish Model", En temps réel, December 2002). Star companies (Volvo, Saab, Pharmacia, Stora) were passing into the hands of foreigners. Small and mid-sized companies suffered. Unemployment grew at a brutal pace from 2% to 10%. The quality of education and healthcare deteriorated, as black market jobs appeared, inequalities increased, and brain-drain became a concern. The Social Democratic Party saw its dominance threatened for the first time in 60 years.
The government then decided to initiate a series of vast reforms. The administration was completely restructured around 13 ministries and 300 agencies. Stock ownership [le capital] of these was made public or mixed [mixte], as was the case with the postal service and telecommunications. Certain functions were completely privatized. The ministries had their staffs cut and were limited to high-level political mediation roles. At the same time, the government decided to increase loans for research and development to more than 4% of GDP (the EU average being 2.5%) and to cover the country with high-bandwidth network. The government also created private schools for parents to choose among [donne le choix aux parents]. A supplementary stock-based retirement plan [une retraite complémentaire par capitalisation] was introduced and pensions were tied to the country's economic performance.
This "renewal strategy", sums up Thomas Östros, is composed of three components: (1) an openness to competition and the forces of change; (2) a massive drive to support innovation, universities, and research; and (3) a state that remains strong, but that has been completely retailored [adapté].
Today, Sweden has "American-style" growth, with the unemployment rate back at 5%, as well as a balanced budget. Rather than causing a drop in the quality of public services, the reforms were actually the basis for their revitalization.
The great achievement of this country -- as, incidentally, that of Denmark -- was to find a way to preserve broad security for individuals while providing the economy with a necessary flexibility: whence the neologism, "flexicurity". According to economist André Sapir, the Scandinavian model is the only one in Europe that is both just and efficient (in an column on October 23-24). According to him, the Anglo-Saxon model is efficient, but inequitable; the Franco-German model is equitable, but not efficient (too expensive); and the Latin model is both inefficient and inequitable. Thus, the [French] choice must be to slide either towards the Anglo-Saxon or towards the Nordic approach.
Is it possible to copy Sweden? Two objections are raised. The first points to the small size of that country of 9 million people, as to the size of the Scandinavian countries in general, where the spirit of the "house in common" is very deeply rooted. In particuliar, 80% of salaried employees belong to the single centralized Swedish Trade Union Confederation (Landsorganisationen i Sverige, LO) [syndiqués auprès de l'unique centrale, LO], which is largely consensus-based [habitée par une volonté de consensus]. Let us recall that in France, unions are divided in a race for ever higher bids, and represent only 8% of salaried employees.
The other objection is one of frame of mind. According to economist Pierre Cahuc, Scandinavia is permeated with a powerful "civic spirit" that renders its model untransferable to a country like France. "Civic attitudes are built on a national level and are deeply rooted regardless of what changes may occur in the economic environment."
"It's neither a question of size, nor of morale," retorts the Swedish minister, "but one of model" -- that is, of a coordinated strategy of structural reforms. The key is not to change mentalities, but to propose "lots of State and lots of free market, both together [beaucoup d'Etat et beaucoup de marché, les deux ensemble]."
"France and Sweden are very close," he adds, "a strong state, the same industrial structure. We have demonstrated that we can fight and preserve many industries in our country. And create many jobs in related services."
And Thomas Östros doesn't understand why France, closed in on itself, fears globalization and opening up [Et Thomas Östros de ne vraiment pas comprendre pourquoi la France, renfermée sur elle-même, craint la mondialisation et l'ouverture.]