The Swedish reforms

Will Tanner writes:

Sweden’s financial crisis struck in 1991: the product of a now familiar cocktail of housing bubble, credit crunch and anti-competitive regulation. High taxes and productivity decline foretold years of low or negative growth: GDP fell by 4 per cent between 1990 and 1993.

So what did they do?

Swedish reformers used this fiscal crisis to radically reform the state. A centre-right coalition opened up the universal welfare state to choice and competition, using private companies and people power to improve quality and efficiency. State funding for education was reformed to follow the pupil, rather than the service, meaning that schools had to compete for custom for the first time. In healthcare, the private sector was invited to set up hospitals, GP clinics and even ambulances.

Sounds excellent. What happened?

Competition has delivered better services. At Kunskapsskolan, a private free school chain, children take greater responsibility for their own learning; setting their own goals, class schedules and recording progress online. The 10,000 pupils taught in its 33 schools consistently outperform the national average. Private healthcare companies have helped the Swedish healthcare system keep up with rapid change. St Göran hospital in Stockholm has been outsourced to a private company, Capio. Since 1999, St Göran has grown its market share, improved clinical care and patient satisfaction, and saved millions.

Oh that will send shudders to some. A private hospital with growing market share. I’m more interested in the improved clinical care and patient satisfaction.

One of the most important achievements in Sweden has been bringing workers on side. While outsourcing is still controversial, once-obstructionist unions have been persuaded that competition drives up wages and improves working conditions for members. They now largely support the reforms. In 2001, a major report by the powerful Municipal Workers’ Union went so far as to say that “competition between the various providers can promote and promulgate improvements in both productivity and quality”.

Sigh – what I would give for some Swedish unions.

As a result, Sweden now enjoys budget surpluses of up to 3 per cent of GDP a year. Meanwhile, since public sector reform improves economic performance by raising productivity, the Swedish economy continues to grow. 

That is my idea of the Scandinavian dream. Well that, plus Princess Madeleine.