State Control

Characteristic of the Swedish model was a seemingly large number of state monopolies. The state-owned sector never employed more than 10% of the workforce but the firms were close to people's everyday lives so any inefficiencies or idiosyncrasies were very visible.

The theorists of the Swedish Model argued that markets could not meet needs. They accepted that the needs of markets such as health and housing were effectively without limit, but then went on to argue that this was no reason to limit their ambitions. Sweden could have it all.

And just because there were no limits, the public sector and not the private sector was the only way to ensure the best possible allocation of resources. R & D spending on drug research was usually mentioned as an example. As a consequence the Swedish state collected a portfolio of firms owned by the people but run by the government.

There were the public service firms... Televerket (telephones), Postverket (post), Luftfartsverket (airports), Vattenfall (water & sewerage), SJ (railways) etc. These firms provided essential public services which only the state could guarantee...the usual argument for special public concern with utilities.

Then there were politically motivated state subsidiaries...Penninglotteriet (lottery), SAS (national airline), Atomenergi (nuclear power), Svensk Tobak (cigarettes), Vin & Sprit (alcohol), LKAB (mining company) etc. For these firms the state played the role of holding company similar to the Wilson government's National Enterprise Board in the 1960s.

But the arguments went further. State firms could put pressure on private firms. This would keep them on their toes and stop them from colluding, forming price cartels and generally working against the public interest.

And these beliefs in public sector superiority soon became beliefs in planning and a distaste for market allocations. The 1944 Myrdal Commission encouraged this type of thinking by telling the Swedish government to get involved in planning the country's economic development.