AUSTERITY AND THE SWEDISH POLITICAL ECONOMY: A Case Study on the Rise of the Swedish Consolidation State

Abstract

Following the 1990-1994 crisis, the Swedish government embarked on an ambitious austerity programme that transformed the Swedish polity beyond recognition. This has given rise to a ‘consolidation state’ that operates based on a strict austerity regime combined with a sacrosanct commitment to attain budget surpluses and never default on its creditors. At its core lies a fundamental transformation of political institutions whereby the Swedish government’s obligations to the people have been subordinated to servicing the country’s debts so as to satisfy the demands of international financial markets. The implementation of a new fiscal framework and the transfer of important economic policy decisions to technocratic bodies outside the purview of elected governments has led to a rule-bound economic policy where fiscal policy is insulated from democracy. This institutionalisation of austerity has constrained the political wiggle-room and impeded efforts to allocate resources for anything other than tax cuts and paying down the debt. The dissertation focuses on how the establishment of a consolidation state in Sweden has reproduced austerity since the 1990s and then compares it to developments in Europe and the US.