Sweden: from welfare state to neoliberal state

This abstract draws on findings from research deliverable D3.3 on transitions and postcolonialism, which has been submitted but is not yet published. It is written by Annika Teppo and Mats Hyvönen, Uppsala University – Sweden.

Sweden’s political development moved gradually from a constitutional monarchy with estate representation to liberal democracy with universal suffrage in 1921. The interwar period marked the emergence of a distinctive social democratic social contract, symbolized by the idea of folkhemmet (“the people’s home”), which sought to combine social equality with economic growth. Through close cooperation between the state, capital, and labor, Sweden developed a strong welfare state based on social engineering, universal services, and meritocratic inclusion. Post-World War II economic expansion enabled a peaceful welfare transition, supported by both business elites and trade unions within a tripartite model of governance.

From the 1960s onward, labor immigration – particularly from Finland – expanded Sweden’s workforce and transformed it into a multiethnic society. While immigrants often occupied lower positions in the labor market, access to employment and welfare facilitated upward mobility. By the 1970s, however, demands for cultural and linguistic rights revealed the limits of material integration.

From the 1980s, Sweden underwent a slow but profound transition toward a more market- oriented, neoliberal model. Privatization, New Public Management reforms, weakened unions, and tax changes reshaped the welfare state without fully dismantling it. These shifts increased inequality, unemployment among immigrants, and social fragmentation. The contemporary social contract is more individualistic and market-driven, marked by rising polarization, welfare nostalgia, and new lines of exclusion, even as democracy remains formally consolidated.