The purpose of this assignment is to understand better the global business, economic, and political environment. This will be accomplished by researching and evaluating the cases assigned and presenting your findings.

Task Description:Create an interesting 10-minute-long visual PowerPoint presentation defining and expanding on the assigned case and its relation to globalization. Quote,"define and expand on the case provided so your peers understand the fundamentals of the case." Answer all questions asked at the end of the case study as well through your presentation. In the presentation, each student must present apart. The total presentation time per group is expected to be 10 minutes.

MGMT8111 GROUP 1

SWEDEN: AN ECONOMIC MODEL FOR OTHERS TO FOLLOW?

Sweden, along with its Scandinavian neighbours, has become identified with an economic model that combines a market economy with social welfare. The thinking behind this combination acknowledges the benefits of the market but recognizes that policies can be put in place to temper its inequalities and promote social well-being. The political underpinning of this thinking is most evident in the policies of the social democratic parties that have been at the forefront of politics in all the Scandinavian countries. To critics, there are inherent contradictions in these twin ideals. They maintain that high levels of social welfare inevitably entail high taxes, which discourage enterprises, while, at the same time, generous welfare benefits discourage people from seeking productive employment. The result can be increased public spending that spirals out of control, leading to a possible economic crisis. The critics would note that this is roughly what happened to Sweden's economy in the 1980s. A financial crisis in 1991 saw the ruin of two banks that had to be nationalized. Economic recession and high unemployment led to growing pressure on public expenditure. The virtues of the so-called 'Nordic' model were looking more like myth than reality. It looked as if the critics had been right.

However, Sweden's government took a firm hand and guided the country out of its economic woes. Did this mean the old model would be abandoned? In fact, much of what the government did certainly seemed inconsistent with the old model (Stenfors, 2015). For example, privatization was introduced in many services, such as healthcare and education. And taxes were lowered. This did not seem to fit the picture of social-democratic orthodoxy, as markets appeared to be supplanting the state. However, in the Swedish context, the strength of the nation's cultural commitment to equality, full employment and individual freedoms remained the foundation for the reforms. Market forces and financial innovations were seen as means of restoring economic growth, not as ends in themselves. Hence, for example, privatization of services was introduced where efficiencies could be made, without sacrificing quality and without undermining the overall system. Welfare spending was reduced after the crisis, but not drastically. Sweden remains essentially committed to social welfare. Government spending still accounts for half its economy.

Government efficiencies were an essential element of the newer version of the Swedish economic model, reining in the high levels of debt and strictly controlling public spending. Sweden was also alert to the changes taking place in a globalized economic environment. For businesses, Sweden has been a good deal more competitive as a location than might be imagined. Whereas corporation tax in the 1980s was 35%, it is now 22%, which is considerably less than in the US. Moreover, there are numerous tax exemptions. The company enjoys exemption from capital gains tax and from tax on dividends from shares held for business purposes, whether in a listed or non-listed company. These policies are favorable to the holding company structure, which is common among Swedish businesses. Sweden's economy is dominated by the large holding companies that are run as family dynasties, the most notable one of which is the Wallenberg's.

The Wallenberg family, now in its fifth generation, controls a huge array of businesses. Their holding company, Investor, controls a business empire worth in the vicinity of $250 billion. They are famous for their long-term perspective and for their active management of the many companies under their control. These include Electrolux, the white goods manufacturer; Saab, the aerospace company; and Ericsson, the telecoms equipment maker. Family members sit on multiple boards, and control board appointments. There are weighted voting rights held by family members, so that they can effectively control board appointments. It is sometimes said that this system creates too cozy an atmosphere between managers and the dominant shareholders (Milne, 2015). It could be argued that the system works in Sweden, where there is a high level of trust and those in charge feel a strong sense of personal responsibility. The family dynasty as it operates in Sweden is seen as a source of stability and long-term business strategy.

Sweden's economy suffered from the financial crisis of 2008, as did other European countries, which are the main destinations of its exports. However, it has been able to recover rather more strongly than its European neighbors, partly because its banks had been recapitalized after the earlier crisis, and its government had in place prudent policies to keep public spending under control. Is Sweden still enjoying the social stability that reflects its egalitarian values? Inequality is growing, and the rise of the anti-immigration political party, the Swedish Democrats, suggests that the consensus on the social aspects of the Swedish model could be coming under strain.

Sources: Stenfors, A. (2015) 'The Swedish model in 2015: A "safe haven" or a "Nordic Noir"?', Global Labor Column, No. 201, May, University of the Witwatersrand, at www.column.global-labour-university.org; Bergston, C.F. (2013) 'Obama should take lessons from Sweden to the G-20', The Washington Post, 29 August, at www.washingtonpost.com; Sanandaji, N. (2015) 'The end of Nordic illusions', Wall Street Journal, 24 June, at www.wsj.com; Milne, R. (2015) 'Meet the Wallenbergs', Financial Times, 6 June, at www.ft.com.

Questions for discussion:

• What are the strengths of Sweden's economic model?
• How has Sweden's economic model changed since the 1980s?
• What criticisms could be made against the dominant family-run holding companies in Sweden?
• To what extent is Sweden's economic model a good one for other countries to follow?