MALMO, Sweden — Last Saturday afternoon, after weeks of steadily building pressure, the leader of Sweden’s Social Democratic Party called a press conference in his hometown to announce his resignation.

“The party has experienced a fall which, unfortunately, is unprecedented,” Hakan Juholt said as he stepped down.

More from GlobalPost: Sweden races to beat US on mobile phone payments

As if to underline the point, the next day’s polls gave the Social Democrats just 24.6 per cent of voters’ support, their lowest share in over a century.

For outsiders at least, Social Democracy is almost as synonymous with Swedishness as ABBA and Ikea.

This is the party that during its unbroken 40-year rule from the 1930s to the 1970s, constructed a welfare economy that combined high taxes and lavish benefits with a booming industrial economy, to the consternation of free-market neoliberals everywhere.

Now, a third term for the centre-right Moderate Party in 2014 looks a very real possibility.

So are Sweden’s days as the poster-child for Social Democracy at an end?

The reaction of the party does little inspires confidence. Juholt was the second leader to step down in less than a year. But last weekend, the party's heavyweights one-after-another ruled themselves out as his successor.

No one, it seemed, wanted to pick up the poisoned chalice, leaving the leadership to go to on Friday to Stefan Löfven, an uncharismatic, but solidly working class union boss.

"He was one of the few names that everyone could agree on," Maria Crofts, political commentator for Dagens Nyheter, said.

More from GlobalPost: Charter school license for sale on Blocket, Sweden’s eBay

The party’s troubles are “similar to what happened to the Labor Party in the UK in the 1980s,” argues Stefan Stern, a state secretary the last Social Democratic administration. “It took 17 years in that case before the party pulled itself together. I certainly hope that doesn’t happen here.” The paradox is that, while support for the party is sagging, support for the high-tax, high-spending model it created is growing.

“The Social Democratic Party may be in dire straits electorally, but the social democratic welfare state is more popular than ever,” Professor Stefan Svallfors at Umea University concluded in a study last December.

“There are absolutely no signs of any decreasing public support for welfare policies,” he reported. “More people state their willingness to pay higher taxes for welfare policy purposes; more people want collective financing of welfare policies; and fewer people perceive extensive welfare abuse in 2010 than was the case in previous surveys.”

“What has happened is simple,” argues Bo Rothstein, professor of politics at Gothenburg University. “The center right parties have understood that they couldn’t go libertarian. The Swedish electorate would simply say ‘no’.”

He argues that those in the party who used to favor a smaller state, like Sweden's finance minister Anders Borg are now actually convinced of the efficiencies of the Swedish model.

“It’s a neo-liberal myth that these policies are very expensive, very costly. They are actually very economically efficient,” he argues.

“The six countries in Europe that now have very high budget deficits, they have not been known for their social democratic types of universal social welfare policies. The high tax countries are doing phenomenally well economically.” The Moderates’ move has left the Social Democrats paralyzed by a turf war between those who want to take the party to the left, and those who want to appeal more to the middle classes.

More from GlobalPost: Is the FBI monitoring your Twitter, Facebook?

Ilmar Reepalu, mayor of the Social Democratic stronghold of Malmo since 1994, has been watching events in the capital to the North with a growing frustration.

“It's not the politics that's the problem today. It’s that the leader that we have has had so many problems that we're not discussing the politics at all,” he stresses. “There's been almost no discussion of Social Democratic policy.” In his office, there’s an oil painting of the workers at Kockums, the shipyard in Malmo that shut down at the end of the 1980s, pushing unemployment to 22 percent by the time he became mayor in 1994.

At that time, the mayor argues, the Social Democrats acted to generate jobs, successfully reducing unemployment to 5 per cent by the time the Moderates won the election in 2006.

More from GlobalPost: Sweden recognizes digital piracy religion: Kopimism

Mayor Reepalu believes that Swedes are wrong to trust the Moderates with the welfare state.

“In their rhetoric, yes, they support it, but if you look at the result of their government, who's getting the bigger part of the wealth redistribution in the country?” he asks.

“When they were a real conservative party, they said we will lower the taxes by 100 billion Swedish Kronor, and they lost completely in 1994 with that politics. Today they've done that, but at the same time they've got people to believe that their policy is very beneficial to the lower segments of society.” He believes that Sweden is losing the solidarity and equality which made it special.

“People are getting poor. We are seeing poor children,” he says. “People without jobs, they don't get enough money from the social security. This looks like Sweden in the 1930s.” Youth unemployment in his city has shot up in just one year from 8 per cent to 25 percent, he says.

“We have a government that doesn't act,” the mayor complains. “In these periods, normally, you should, first of all, invest in things that need to be done, in climate change, like infrastructure. It's awful to have people unemployed doing nothing.” Rothstein, however, has more faith in the willingness of the Moderates to protect the social democratic model they once campaigned against.

“Sweden was run by the social democrats for 60 years, and they basically preserved capitalism," he argues. "Now we may be run by the centre-right for the same amount of time, and they’re likely to preserve the welfare state.”

More from GlobalPost: Sweden's Twitter democracy



