The Transformation of the Swedish Model: Economic Ideas, Distributional Conflict, and Institutional Change

Abstract

This article examines the transformation of the Swedish model of economic regulation from an ideational perspective. While the majority of arguments about the decline of the Swedish model have focused on the role of structural factors, this article looks to illuminate the ideational factors that made possible both the emergence and the transformation of the Swedish model. The article details how, during the 1930s and 1940s, economic ideas provided the Swedish state and its trade union allies with the means to construct the institutions of the Swedish model. By the 1970s, however, Swedish business suffered diminishing returns to continued participation within these institutions and responded to labor's challenges by adopting a two-pronged strategy of withdrawal from and ideological contestation of labor's supporting institutions. The politics of ideas was key in this regard. During the 1980s Swedish business marshaled alternative economic ideas to contest and thus delegitimate existing institutions and the patterns of distribution they made possible. Swedish business thus began the process of overturning the Swedish model long before capital mobility or domestic inflation was ever a problem. By highlighting these factors, the article offers an explanation of the transformation of the Swedish model that stresses the centrality of ideational contestation for understanding institutional change in general.