Managing global finance: Choices and constraints in the Swedish financial crisis of 1992

This dissertation assesses the impact of global finance on policy options in the Swedish financial crisis of 1992. The aim is to improve understanding of the impact of global finance on state policymaking during a financial crisis and to determine the extent to which a state has policy options despite global financial constraints. Although the impact of global finance has narrowed the policy options available to policymakers, this thesis argues that there are still options available and decisive policy choices to make even in the worst case of a financial crisis situation. This study finds the common suppositions in the globalization literature inadequate for understanding a financial crisis as a consequence of their focus on either structural constraints or policy choices, and suggests a constrained choice approach focusing on the interplay between global constraints and policy choices. This study applies the constrained choice approach to three decisions during the Swedish financial crisis. They are the decisions to defend the krona, to support the banks, and to build a political coalition. The study finds that global material and ideational constraints, as well as alternative policy options for policymakers, were present in all three decisions. As the financial crisis worsened, the global constraints on policymaking increased, but not to the extent that policy options ceased to exist. In all three decisions, the policymakers waited as a long as possible before making their policy choice. Policy choice was reactive rather than proactive. Policy responses to global constraints became crucial in defending the remaining policy autonomy in the Swedish financial crisis of 1992.