LARS CALMFORS: SWEDEN - FROM MACROECONOMIC FAILURE TO MACROECONOMIC SUCCESS

In this nice paper Professor Lars Calmfors takes a close look at the remaking of the Swedish econonomy and draws interesting conclusions:

» There is only limited support for the hypothesis that fundamental reforms require a deep economic crisis. Instead, most of the reforms in Sweden have been responses to long-standing problems rather than to acute crises.

» In most cases, there has been a strong perception among economists, policy makers and the general public of the problems that the reforms have sought to address.

» International developments have been important inspirations for many of the reforms. This holds true above all for the product and service market deregulations.

» Most of the reforms have been based on a broad political consensus. This is true for the tax reform, product and service market deregulations, the pension reform, the central bank reform and the establishment of a stricter fiscal framework.

» The Swedish experiences illustrate a number of ways of overcoming resistance to reforms from vested interests. The Swedish experiences illustrate a number of ways of overcoming resistance to reforms from vested interest. They include compensating transfers to potential losers (in the case of tax reform), strong ex-ante commitment (sometimes with the help of cross-party agreements or EU rules as discussed above, sometimes − as with the general labour market reforms − with the help of widely publicised pre-election promises), and complexity of the reforms making it difficult for the general public to see through them (as was probably the case with the pension reform).

Lars Calmfors: Sweden - From Macroeconomic Failure To Macroeconomic Success