Internationalization and the Social Democratic Model

Abstract

This article examines the crisis of the social democratic model in the four countries (Austria, Norway, Finland, and Sweden) in which social democracy was most successful in maintaining and even extending its two central achievements—full employment and the institutional welfare state—through the end of the 1980s. Four major conclusions emerge from the analysis. First, supply side measures, more so than demand management, were central to the employment and growth models pursued by social democracy prior to the early 1970s. Second, the increasing trade openness contributed little to the recent problems of social democracy. By contrast, financial internationalization and deregulation and the multinationalization of capital undermined important features of the supply and demand sides of the models. Third, changes in the international and domestic economies have weakened centralized bargaining. Fourth, governments in the three Nordic countries made serious mistakes in economic policy, which greatly aggravated their difficulties.