The economic issues Sweden - Assignment Example

Sweden is a strongly industrialized Western nation with a free enterprise economy located in Northern Europe. In 2001, Sweden’s population was estimated to be 8,870,000, with only 19 people per square kilometer or 12 people per square mile. A Scandinavian country, Sweden’s land borders the other Scandinavian countries of Finland and Norway. It has a coastline of about 1,243 square miles flanked by the Baltic Sea, Gulf of Bothnia, Kattegat, and Skagerrak. Sweden’s land mass consists of approximately 411,000 square kilometers, which is roughly 158,660 square miles, just slightly larger than California.

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The terrain is generally flat or gently rolling lowlands with mountains in the west. The climate for the most part, as with other Scandinavian countries, is cold, with cloudy winters and cool, partly cloudy summers. Swedes experience sub-arctic temperatures in the northern portion of the country. The Swedish terrain and temperature are not conducive to crop growth. Consequently, only 6. 8 percent of Swedish land can be cultivated for crops that are replanted after each harvest such as wheat, maize, and rice. 93. 2 percent of its land includes permanent meadows and pastures, forests and woodlands, cities and towns, roads and barren land.

As a result, Sweden relies heavily on imports for food products, but is able to export many of its natural resources such as wood, zinc, iron ore, lead, copper, silver, timber, uranium and hydropower (Central Intelligence Agency [CIA], 2003). Sweden’s Standard of Living Because of this free enterprise economy, Sweden is ranked as having one of the highest living standards in the world. “Aided by peace and neutrality for the whole 20th century, Sweden has achieved an enviable standard of living under a mixed system of high-tech capitalism and extensive welfare benefits.

It has a modern distribution, excellent internal and external communications, and a skilled labor force (Central Intelligence Agency [CIA], 2003). ” Among European nations, Sweden ranks as a leader in the number of cars, telephones, and television sets it has in relation to its population. Another measure of the nation’s prosperity is that Swedes spend more money per person on holidays than any other people in Europe. Swedes pay high taxes, but the government provides many welfare benefits. Every family receives an allowance for (1) each child under 16 and (2) each child in a secondary school or university. In some cases of hardship, it pays up to a fourth of a family’s rent. It also guarantees an employed person a four-week annual holiday with pay.

Swedes who lose their jobs receive unemployment benefits representing a high proportion of their former earnings. Citizens have largely free medical service. After retirement, most Swedes receive annual pensions of about 60 percent of their average earnings during their 15 highest-paid years (Northerner Scandinavia AB). The government also provides pensions for widows, orphans, and children who have lost one parent. The principle of access to free (tax-financed) education for the whole population, throughout life, is among the pillars of the Swedish welfare state. Education begins in day care centers and preschools, which an overwhelming majority of Swedish children attend, then continues with the nine-year compulsory school and the voluntary upper secondary school, to which practically all Swedish youngsters continue.

More remarkable in an international perspective is that university and college education in Sweden is also heavily tax-financed and thus more or less free, as well as supported by a generous system of study loans and grants that makes higher education accessible to people from all social classes. “During the past decade, large investments have been made in higher education and the number of students has risen by 50 percent. Also characteristic of the Swedish educational ethos are extensive publicly subsidized systems of further education, retraining, adult schools and study circles (Swedish Institute, 2004, p. ). ” In addition, the private business sector offers a well-developed system of further education and self-improvement.

In a highly developed industrial nation such as Sweden, with a steady and unquenchable need for advanced knowledge, research plays a key role as an investment in the future. Sweden has a long history of ambitious research and development programs, both in the private business sector and the public sector and often includes collaboration between the two.

Sweden tops European comparative statistics both in terms of research investments as a percentage of GDP and in the number of published scientific works per capita (Swedish Institute, 2004, p. 1). ” Sweden’s Urban and Rural Populace “One-fifth of all Swedish families have country homes where they can enjoy spending weekends and holidays (Northerner Scandinavia AB). ” About 84 percent of Sweden’s population lives in urban areas in or near one of their three largest cities: Stockholm, Goteborg, and Malmo.

The metropolitan area of Stockholm, the largest city in Sweden, has a total population of about 1. 5 million people. Sweden’s cities are modern and efficient. They feature blends of traditional and functional modern architecture. “Suburbs of the larger cities have high-rise apartment buildings, many of which were built during the 1950i?? s and 1960i?? s in response to rapid urbanization. Roads and public transportation facilities, such as railways and buses, link Sweden’s city centers and suburbs (Northerner Scandinavia AB). ” In addition, Stockholm has a sprawling underground railway system.

As in other industrialized nations, traffic congestion presents a daily challenge for people who work and live in Sweden’s cities. However, because Sweden relies heavily on electrical energy for heating and industry, pollution is less of a problem there than in many other countries. Sweden’s Products and Industry The main products of Sweden are forestry; iron and steel; engineering and manufacturing; and chemical. The Swedish forest industry has played an important part in the Swedish economy since the middle of the 19th century.

It has over the years become mainly export-oriented and accounted for almost half of Swedish exports during the 1950s. “The Swedish sawmill industry is still the largest in Europe and accounts for about 10% of the world’s exports. In the pulp and paper industries, Sweden was the third largest exporter in the world in the early 90s. Forests cover a large part of Sweden; Swedish forestry is considered very modern and it operates with long-term ecological objectives (The Swedish Information Smorgasbord, Major Branches of Industry). ”

Other traditional industries in Sweden are the iron and steel and mining industries. Sweden was the largest exporter of iron products in Europe for over two hundred years; however, its importance has diminished in recent years. “The mining industry is dominated by the LKAB Company and 90% of its production is exported, mainly to the German steel industry. The exports of iron ore have decreased since the mid 1970s but Sweden is still among the top ten exporters in the world (The Swedish Information Smorgasbord, Major Branches of Industry). The steel industry is also exporting most of its production, and Swedish steel producers have concentrated on quality. As a result, more than half of the sales value consists of the more expensive special steel used for precision tools and ball bearings.

The engineering industry is the largest manufacturing industry in Sweden and has a very high technological level. “Swedish engineering companies like SKE, ABB and Ericsson and inventions like the ball bearing have given Sweden a good worldwide reputation in this sector (The Swedish Information Smorgasbord, , Major Branches of Industry). The car and airplane industries are also significant with companies such as Volvo and SAAB that are well-known in these fields and produce both cars and trucks under various brand names. SAAB is also a producer of commercial and military airplanes Many traditional Swedish mechanical manufacturing companies have diversified into the electronics industry, which has grown rapidly. Sweden has one of the most automated manufacturing industries in the world, and Sweden’s ABB is the largest producer of industrial robots in Europe.

Another large manufacturer who diversified into the electronics industry is Ericsson. Ericsson is a very successful company in telecommunications and sells digital exchanges and cellular phone systems to markets all over the world (The Swedish Information Smorgasbord, Major Branches of Industry). “Several of its companies enjoy a worldwide reputation, and names like Ericsson, Volvo and Astra stand for high quality and state-of-the-art products (SAS Cargo Group A/S, 2002, p. 1). ” Chemical products have been manufactured in Sweden for more than a hundred years.

The Swedish chemical industry was in the beginning mainly producing matches and explosives, while paint and plastics have grown to become a large share of chemical production (The Swedish Information Smorgasbord, Major Branches of Industry). ” Dominating the medical portion is Astra and Pharmacia & Upjohn; medical research is the most intensive of all industries and their products have been very successful. Sweden’s Labor Market The Swedish labor market situation changed dramatically as a result of the recession in the early 1990s. Sweden had a chronic labor shortage for many decades, coupled with high wages.

Today, the labor supply is plentiful and, as a result of depreciation of the krona and productivity gains, wage costs are competitive with those in Western Europe. “Sweden’s labor force totals about 4. 3 million, or about 70 percent of the working age population. The percentage of working women is almost the same as men. However, about one-quarter of those employed, mainly women, work only part-time (Invest in Sweden Agency, 2003, p. 1). ” Although Sweden is well-known for its many international export companies, manufacturing employs only about 20 percent of the total labor force.

This provides an indication of industrial efficiency. As a result of the historic policies of trade unions to eliminate low-paid jobs and equalize wages, there are relatively small differences between the wage levels of highly-skilled and entry-level industrial workers. However, changes are under way as unions recognize the need to compensate workers for special talents and individual efforts in education and training. One of the unique features of Sweden’s wage rate structure is that managers, engineers and technicians are paid considerably less than their counterparts in Europe.

This is despite the fact that engineers and other university graduates are well-organized in strong unions. Sweden’s Government Sweden is a monarchy and the office of head of state is held by a king or queen. The title is inherited by the eldest child of the incumbent Head of State. Sweden’s Head of State is the nation’s supreme representative but has no political powers. He is regularly informed of the affairs and concerns of the realm and chairs the Advisory Council on Foreign Affairs. “Carl XVI Gustaf has been the Head of State of Sweden since 1973.

In this capacity he is the representative of the entire country and as such, has only ceremonial duties and functions. The Head of State has no prerogative political power and does not participate in political life. The Swedish monarchy is purely constitutional (The Swedish Government, 2004, p. 1). ” The Head of State makes state visits to other countries and acts as host for representatives of other countries who are visiting Sweden. At the beginning of each parliamentary year, the Head of State opens the coming year’s session at the Riksdag.

The Head of State does not take part in the deliberations of the government and is not required to sign any government decisions. “Sweden has three democratically elected levels of government: the Riksdag (Swedish parliament) at the national level, the county councils at the regional level and the municipalities at the local level (The Swedish Government, 2004, p. 1). ” Each level has different duties and areas of responsibilities. Elections are held every four years, and elections to all three levels take place on the same day. The Swedish Constitution defines the basic powers and tasks of government and the rights of its citizens.

The roles of the county councils, municipalities and regions are defined by the Local Government Act of 1992 (The Swedish Government, 2004, p. 1). Sweden’s Economic Appearance within the Region Sweden joined the European Union in 1995. “The European Union (EU) is a family of democratic European countries, committed to working together for peace and prosperity. In order to deliver steady growth and create jobs across the Union, member governments must run their economies according to the same sound principles of economic management.

The keys to success are close policy coordination, peer pressure and consensus. The single currency is part of this process (European Union [EU], 2004). ” Germany, the United Kingdom, the United States, Norway, Finland and Denmark are Sweden’s most important trading partners. Sweden became a member of the EC (European Community) in 1995, but is still not a member of the EMU (European Monetary Union). In 2000, Sweden’s Gross Domestic Product (GDP) was $275. 4 billion USD. The Gross Domestic Product per head was $31,000 USD and the GDP growth was 3. 5 percent with an inflation rate of 1. 8 percent.

The government’s commitment to fiscal discipline resulted in a substantial budgetary surplus in 2001, which was cut by more than half in 2002, due to the global economic slowdown, revenue declines and spending increases. In 1998, Sweden exported approximately $85. 5 billion in machinery, motor vehicles, paper products, pulp and wood, iron and steel products, and chemicals. It exported these commodities to Germany, the United Kingdom, Denmark, Finland, Norway and the United States. Also during this period, Sweden’s imports were $66 billion from Germany, the United Kingdom, Denmark, France, Norway, and the United States.

The commodities that were imported were machinery, petroleum and petroleum products, chemicals, motor vehicles, foodstuffs, iron and steel and clothing (Photius Coutsoukis, 1999). Sweden’s Current Economic Standings Because Sweden’s domestic market is relatively small, many industries rely heavily on export. “The 1973 oil crisis and the subsequent decline in international business activity therefore affected Sweden more drastically than many other countries. The political answer to this was government subsidies to suffering industrial sectors, like steel and shipbuilding.

These measures were not completely successful, however, since they kept up employment only temporarily (The Swedish Information Smorgasbord, The 1970s and 80s). ” Consequently, the problems in the economy eventually would cause inflation as well as unemployment. The picture was not completely dark, though, because the chemical, plastics, electronics and car industries did fairly well. “Sweden has taken quite an amazing leap into the ‘New Economy’ in recent years. In only a few years, Sweden has shifted into an entrepreneurial economy.

The transformation was initiated by the Internet revolution as well as by the nation’s very high standards in bioscience. It has affected most parts of society, not the least the venture capital sector (Swedish Private Equity & Venture Capital Association [SVCA], 2003, p. 1). ” The Swedish venture capital market is the third largest in the world after the United States and Great Britain. The number of venture capital companies in the Swedish Venture Capital Association has increased from 24 in 1994 to 130 in 2000 (Swedish Private Equity & Venture Capital Association [SVCA], 2003).

Many of the new companies work with information technology-related fields. Sweden remains one of the worldi?? s most prosperous nations. However, the country experienced economic problems during the late 1980s and early 1990s. Growth increased little and industrial output declined, but inflation rose greatly. In addition, high wages harmed the ability of Sweden’s industries to compete with industries in other countries. Overall, the Swedish economy performed well in 2002 despite the impact of the global recession and setbacks in the important IT and telecom sectors.

A growth rate of 1. 9 percent was achieved, which was almost twice the average for other EU member states. With an average growth rate of 3. 1 percent between 1998 and 2002, Sweden outperformed even the United States. Although a recovery is under way, economic activity is predicted to remain subdued with growth declining to 1. 3 percent in 2003. According to the National Institute of Economic Research, the Swedish economy will accelerate as the global recovery gains momentum and reach an expected growth rate of 2. 4 percent in 2004 (Invest in Sweden Agency, 2003, p. 1). “