302K. A. M. Eriksson and R. Nykvist

largely intact from the era of welfare capitalism in 1947 to today is the planning and building sector of Swedish cities, for which the municipal planning monopoly is a central characteristic. Hence, whereas large portions of the economy have been deregulated, this sector has remained at the opposite extreme of Swedish policy. There are problematic consequences to this combination of monopoly sectors and deregulated markets, which we will address. These coexisting extremes make Sweden an interesting case study for the processes and outcomes of different policies. Sweden was characterized by public–private cooperation in both innovation and technological developments during the era of welfare capitalism, but also earlier; one example is the cooperation between state agency Televerket and private company Ericsson in developing telecommunications throughout the twentieth century. This example largely supports the arguments of Mazzucato (2013) regarding the public sector’s role in innovation and risk-taking. However, this came to an end with the deregulation and abolishment of Televerket and its monopoly in the early 1990s. An expansion of innovation in telecommunications followed this policy change. In Sweden’s city planning and building sector, similar public–private innovation and risk-taking have occurred throughout most of the twentieth century and all of the twenty-first century so far. No fundamental policy change has taken place since the era of welfare capitalism and municipalities still hold monopolies over city planning procedures. A great deal of problems in city planning and housing are associated with this policy, for instance: 1. Inertia in the planning and building process—probably an important reason for

housing shortages. 2. A centrality of decision-making regarding city development. This may account

for the many malinvestments in city development that lead to urban and housing

environments that consumers and the public do not value (Hayek, 1945, 1978,

pp. 340–58; Lindbeck, 2012, pp. 121–131).

In our comparative case, in which an old monopolistic system was kept in place, striking negative effects on innovation, entrepreneurship, and the economy followed. In fact, the planning and building monopoly is often viewed as ineffective, causing higher prices for land, real estate, and housing, as well as inertia in the sector that may benefit a few actors but is detrimental for society. Telecommunications and finance, on the contrary, have arguably been among the Swedish economy’s more innovative and dynamic sectors since deregulation. A clear picture emerging from our comparison is that besides new technology and a positive zeitgeist, strong institutional entrepreneurs within the sector are needed for deregulation to happen. Rather than being a process pushed purely from the policy sphere, the deregulation of the telecommunications and stock exchange monopolies showcases the importance of specific conditions and interest-group dynamics, coupled with strong

today. The system was designed by economist Ingemar Ståhl with inspiration from the Chicago School of Milton Friedman and Gary Becker, and introduced by the social democrat Olof Palme who called himself a “democratic socialist.”

303Public-Steering and Private-Performing Sectors: Success and Failures in the. . .

institutional entrepreneurs from the sector itself. While many of the necessary conditions for such changes were the same, institutional entrepreneurs were not present in the planning and building sector that remained highly regulated and partly monopolized. The actual opening of old monopolized markets still happens in the policy sphere, so this kind of interaction is necessary for a smooth transition, overcoming vested interests, to reforms in mature economies. Among these cases, power coupled with strong entrepreneurs driving the change from the corporate sphere were present in both the telecommunications and the finance sectors. We explore these cases in more detail below.

2

The Three Cases

In this section, we describe the three cases in accordance with different activities and structures affecting outcomes of renewal or conservation of regulatory frameworks. Given the general zeitgeist in the mid-1980s, the overhaul of the old policies and—in the two successful cases—the implementation of new policies for these markets