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Sweden is seen by many as a bastion of social democracy. But in reality some of its public policy is among the most unashamedly pro-market of any developed country.
Large swaths of core public services in Sweden — including schools, hospitals and care homes — are run by for-profit private groups using taxpayers’ money under a decades-old system.
“It is a peculiar market, and a peculiar way of setting up schools. But it is a very Swedish story,” says Karin Grundberg Wolodarski, author of Experimentet (The Experiment), a recent book on how the country set up one of the world’s most deregulated schools systems.
The issue has long been politically contentious as the groups — some listed on the stock exchange or owned by private equity firms — can pay out dividends from money they receive from the state, unlike many other countries where such companies are privately funded.
Now, those for-profit companies are set for a boost as for the first time in eight years a rightwing government — seen as more friendly to private enterprise — will be in power in Stockholm after last month’s tight parliamentary elections.
The start of the government, the first in modern Swedish history to be backed by a far-right party, was both auspicious for the for-profit sector and bathed in controversy.
One of the most controversial appointments by prime minister Ulf Kristersson was of Lotta Edholm as schools minister. Edholm was a board member and shareholder of Tellusgruppen, a listed group that runs 25 preschools and seven primary schools in Sweden.
The shares of Tellus, and those of its competitors, shot up on news of Edholm’s appointment, although she soon resigned from her board role. The government agreement also said that profits in new schools would be banned, but not for existing operators, pleasing the established players.
So, will the new government help reduce the political risk that has long dogged the sector, or will Sweden’s experiment remain controversial?
The scale of private operators among schools is ever-expanding. About one in five pre-, primary and secondary school pupils in Sweden goes to an independent school, according to the Swedish Association of Independent Schools.
For-profit schools were introduced by a rightwing government in the early 1990s, largely to deal with the issue of religious and non-conventional schools. Parents were given freedom to choose a school using a tax-funded voucher. School operators were allowed to make profits, but few foresaw just how big the sector could become as private companies have expanded, particularly in the big cities of Stockholm, Gothenburg and Malmö.
AcadeMedia, the biggest private operator in Sweden, is listed on the Stockholm stock exchange with one in 10 Swedish teenagers going to one of its secondary schools. Chief executive Marcus Strömberg says his independent schools are completely different from UK or US ones such as Eton, Harrow or Phillips Academy, where fees are steep and entrance is limited.
“I like to say we take good schools at a low cost to a lot of people. In the UK, it’s about expensive schools at high cost to a few people,” he adds.
Leftwing politicians in Sweden have grown increasingly critical of for-profit schools, with several parties calling for them to be banned as the country lags behind neighbours such as Finland and Estonia in international educational rankings and public opinion is divided on their merits. But the Social Democrats, the main leftwing party, did little to stem the rise of such schools when they were in power, even as they deployed harsh rhetoric about them and how they have supposedly increased inequality.
Grundberg Wolodarski says it would be good for the left and right to agree on what kind of school system is best as well as debate just how big the private sector should be allowed to become.
Strömberg believes there could be up to 20 per cent more independent schools by the time the new government’s four-year stint in power is up. But he argues political risk is holding the sector back and that there is a need for long-term rules to be agreed.
“It is very difficult for investors to understand political noise. When the Social Democrats talk with a very loud voice, it’s hard for investors. But the real political risk has been very low all the time. We have been working in this way for 30 years,” he adds.
A polarised political debate might not be ideal for schools, pupils or the quality of the education system, but it might be natural when such a core function of the state is put in private hands.
Twitter: @rmilneNordic
richard.milne@ft.com
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