Politicians, journalists, and economists have used the Swedish Moel concept in an unscientific and vague way, since the 1930s. The Swedish model began in the early 1930s, a period the country was lagging behind the economy of developed industrial countries in the world. The industrial development in the region was not strong enough to provide the growing population with constant employment, which resulted to people emigrating to America. The emigration was seen as a serious indicator that the development possibilities of the Swedish economy were going backward (Woolfson, Thörnqvist and Sommers, 2010). The Swedish model of industrial relations was used to rectify the situation. It was used to control the economic status of the country. It was seen as a successful and progressive model concerning the social and economic development that took place in a mixed economy. .
According to Lundberg(1985), there are several principle components of the Swedish Model that the model originated in 1930s such as Stabilization of the price level, Stockholm economists, Policy orientation, and the treatment of international relations.
One major component of the Swedish policy model is that it was used by the government and by the economists as a stabilization policy to stabilize the consumer prices. The price level constancy was considered the equilibrium between investments and savings. There were old arguments about the decline in the price level, which was brought about by the rise in productivity. However, these arguments played the secondary role. Politicians and economists took the role of stabilizing the level of prices as their main objective. The government and economists were able to achieve this objective successfully. The success of the achievement was made sweet by the fact that the only time a deviation appeared was when price inflated internationally in 1936-1937. During this period, the cost of living increased by 4%(Lundberg, 1985).