Investments to achieve full employment

Economy


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Boost demand

To achieve full employment, it is important that the overall demand for goods and services is high. Sweden has been experiencing low demand for a long time. The financial crisis that affected the world from autumn 2008 is an important factor. But there are also signs of a more long-term demand deficit. To increase demand, we propose that central government implements an expansive economic programme in the coming years, in order to thereafter stabilise demand at a higher level. The objective of the programme is to strengthen Sweden’s long-term economic development and induce households and private enterprises to increase their consumption and investment.

Fiscal policy programme

Lower interest rates are necessary to boost the economy, but that is not enough. Sweden has reached a point where it is no longer possible to cut the repo rate more. To increase aggregate demand, fiscal policy should therefore also support domestic consumption and investment.

There is scope to make these efforts. Sweden currently has strong general government finances. Since the crisis of the 1990s general government gross debt has fallen from 70 to 40 per cent of GDP. Net general government debt has been turned from a deficit of 30 per cent of GDP to a surplus of just over 25 per cent of GDP. The problem is therefore not public finances but shortcomings in other areas, such as a growing housing shortage, falling school results and too little investment in preparatory labour market policies.

The LO Executive Council proposes the following:

  • The Swedish Trade Union Confederation shall work to ensure that the Riksbank’s monetary policy mandate is clarified, to include both stabilisation of inflation around the inflation target and unemployment around a long-term sustainable level
  • The Swedish Trade Union Confederation shall work to ensure that fiscal policy is to take greater responsibility for stabilising Swedish economic development
  • The Swedish Trade Union Confederation shall work to ensure that there are complete, temporary, fiscal policy packages for adjustment when there is a sharp recession
  • The Swedish Trade Union Confederation shall work to ensure that the automatic stabilisers in unemployment insurance are reformed so that workers are given full and reliable income protection

Read more in the Congress Report Full employment and a wage policy of solidarity (pdf)