Inflation in Utopia

Resource-rich, highly industrialized, welfare-loving Sweden has long enjoyed the highest living standard in Europe. Prices are stiff (76-c- for a pack of cigarettes, $9 for a fifth of Scotch, $1.50 per Ib. for hamburger), but after 32 years of unbroken and rising prosperity, Sweden's workers have grown so affluent that about all the tiny, obstreperous Communist Party could find to demand in the last election was "two houses for every family." Swedish families already own 375,000 vacation homes and 300,000 pleasure boats, as well as a car for every four persons. Domestic tranquility is rarely ruffled by labor trouble: the last strike of consequence took place in 1945, when 130,000 metal workers walked out for five months, and there has been no general strike since 1909.

Last week that enviable record was preserved--but just barely--as the Swedish Trade Union Confederation ratified a three-year contract with the Employers' Confederation covering almost all of the country's 3,050,000 workers. Before the agreement was signed, Sweden for four weeks had risked a crisis that could have crippled its economy. Labor demanded an inflationary 11 % -a-year pay increase, and management countered by setting a date to lock workers out of 90% of Sweden's industries. Only the cozy personal relations between the chairmen of the opposing federations, who have been negotiating with each other for so long that sometimes they take their wives along and talk aboard a yacht, resolved the deadlock. The settlement may prove nearly as disastrous as a strike, by pricing Swedish goods out of world markets. Swedish labor--already the highest paid in Europe--won a package of shorter hours and higher pay that will boost employers' wage costs by 30% over three years. Example: Stockholm construction workers will earn $3.20 an hour, work 42 1/2 hours a week. Said Prime Minister Tage Erlander: "We do see some inflationary dangers in it."

Sweden is already troubled by inflation. Prices jumped 61% last year, partly because wages have been going up between 8% and 11% a year since 1955 and productivity has not kept pace. Predictably, prosperity at home sucked in an 11% increase in imports last year, while exports gained a mere 3.3%; last week the government announced that the trade deficit continued to rise sharply during January and February. To halt that ominous trend, Erlander expects to give his country an unpleasant antidote that the U.S., confronted with almost the same problem, has so far spurned: a strongly deflationary budget, stiff tax boosts, sharp cuts in government spending.

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