Sweden And Germany Welfare State Employment Crisis

Sweden And Germany Welfare State Employment Crisis

Sweden And Germany Welfare State Employment Crisis

Introduction

The economic crisis in Western Europe since 1974 has created an unfavourable environment for the pursuit of social democratic politics. This paper contrasts the nature of political responses to the crisis — especially to the threat of mass unemployment — in West Germany and Sweden. The difference in 'crisis-management'policies pursued in the two states is traced to the greater strength of social democratic values and the social democratic movement in Sweden — which is, in turn, attributable to the absence of a confessional division in the Swedish labour movement and to Sweden's (historically determined) higher level of trade union organisation.

Theoritical Framework

The thirty-year period from the end of the Second World War to.the eve of the first oil-price crisis in 1973 may come to be viewed as the 'golden age' of social democracy in north-western Europe. Social democratic parties were not everywhere in government, but even parties which were not labelled 'social democratic' often pursued social democratic policies when they were in office.' That is to say, they sought to steer the economy along the path of economic growth and full employment and, with the fruits of economic growth, increased government expenditure and expanded the welfare state (Yeates, 1991). Since 1974, however, the growth basis of social democratic politics has been severely eroded. As growth rates have decelerated, the 'fiscal crisis of the state' has everywhere intensified. The gap between what governments spend and what they collect in revenue has grown and government indebtedness in most states has risen sharply. The policies and programmes associated with the welfare state have to be financed increasingly with borrowed money or else they can not be financed at all, because the old policy instruments for reflating economies in recession have become less and less effective (Roth, Gabriel. 1987).

For social democratic parties and governments, the economic crisis and the 'fiscal crisis of the state' pose some very awkward questions, for they have a traditional commitment to a large public sector, full employment and the welfare state and they have their social bases among those population groups which are, or would be, worst hit by unemployment and the progressive erosion of welfare state programmes and policies. When the 'raw material' of social democratic politics, economic growth, begins to run out, what are social democratic governments to do (Rein, Martin & Lee Rainwater 1986)? This article describes briefly how one governing social democratic party, the West German, has responded to the simultaneous growth of unemployment and curtailment of the scope for increased government expenditure in one policy area, that of labour market policy. There then follows a discussion of the political and economic constraints which have reduced the West German government's freedom of choice in responding to the economic crisis. An attempt is made to compare West German 'crisis-management' policies with those pursued over the same period in Sweden and to explain why, in these two ...