The result was that even when the Social Democrats returned to power in 1994, the neoliberal programme of ‘deficit reduction, inflation control and balanced budgets rather than full employment and an equitable distribution of income became cornerstones of macroeconomic policy’.
Should/could the Social Democrats have pursued this neo-Keynesian policy-line in light of the neoliberal turn in the US, the UK, China, and in most of the developing world? The question is not only one of principle, but one of practicality. “Full employment and equitable distribution of income” worked so long as the leading international financial institutions were on board with the global mission of democracy, social stability, and economic growth. But now that this was no longer the global mission, is it at all possible for one country to pursue the high road, while the majority (and the most powerful) are locked in a headlong race to the bottom?
Could Swedish industry have maintained high wages, benefits, and taxes, but remained competitive on the world market? Be careful how you answer this question. Surely they could not if investors in Swedish industry were simply looking for a place to park their capital and receive the highest returns on their investment. They would best do this elsewhere. But let us assume—as the Social Democrats had argued a decade earlier—that Sweden continues down the path to socialization of production. In this case, national investment in public industry could go hand-in-hand with competitive prices on the global market.
So, could or should the Social Democrats have succeeded in this strategy?
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