The Rise and Fall of the Swedish Model

Some decades ago a constant pilgrimage to Sweden could be observed. Scholars and politicians visited our country in order to study our social system. They admired the public welfare institutions, the peaceful co-operation between workers and employers and the rational economic planning. Still voices may be heard from various parts of the world speaking highly of ”the Swedish Model” as of a capitalism – or even a socialism -with a human face.

At home, however, the Swedish Model has run into a severe snag. In 1990 the then Volvo executive, Pehr. G. Gyllenhammar, even referred to it as a ”national myth”:

”We need to liberate ourselves from our national myth… The only way of saving our jobs and our standard of living is for us, Swedish citizens, to become real Europeans, exposing ourselves to real competition.”

Two years later Sweden entered into its most severe economic slump since the 30-ies. The Swedish krona (SEK) was dumped on the international currency markets by our big enterprise and by our banks. The bourgeois government coalition at the time was supported by the social democrat opposition party in its policy of severe cut-downs in welfare spenditure. One of our leading business magazines observed:

”The bourgeois parties and the socialists now make a common effort to bury the old Swedish Model”.

How could a system, recently hailed as a panacea for social development, suffer such a fate? The political right wing – among them some leading social democrats – readily answers: ”We, the Swedes have been living above our assets. We enjoy too many rights and have too few duties. We enjoy too much welfare from public institutions instead of working in industry. The public sector has marginalised and enfeebled private enterprise”.

This, of course, is sheer propaganda. In Sweden, about the same proportion of citizens are employed in industrial production as is the case in other western countries, and an unusually high proportion are wage earners, because almost all women are working outside the family. The proportion of our national income consumed by the public sector has, in fact decreased to some degree since the middle of the 70-ies. If public expenditure comprises a comparatively large part of our national product it is only because our health care, our children’s care and a major part of our social service has been arranged by means of the public sector, as has the major part of our social security system.

The most expansive sector of our state budget has for some years been the financial support of private enterprise. At the end of the 80-ies capital markets were de-regulated. Currency transactions across our borders were let free. In three years SEK 99 Billions were invested abroad – mainly on the real estate market of London and other European big cities. Then the real estate market collapsed. The real estate companies went bankrupt and dragged the Swedish banks with them into the abyss. The Swedish tax payers now have to pay shoals of billions to support our bank enterprises in order to avoid a collapse of our credit system – and in order for our traditional capital owners to remain in command of their empires.

The sky-rocketting unemployment rate has contributed to the decline of the public finances. In 1990 the rate was less than 2 per cent. Now it is five times higher. As a consequence tax incomes have dwindled and social expenditure is rising. Our Swedish politicians no longer try to get elected by means of the slogan of ”full employment”. This is a sign of crisis for the Swedish Model – however the cracks in the building were quite visible long ago.

The Swedish working class was organised by the Social Democratic Party (SAP) and by the trade unions. The influence of the Communist Party and related groupings was always a very limited one. In 1918 the Swedish people conquered the right to vote, in the wake of the Bolshevik revolution. The leading bankers and industrialists in the nascent export industry feared a Russian development. They pinned their hope to Hjalmar Branting and other leading individuals in Swedish social democracy, in whom they had discovered willing partners in a class compromise.

The Swedish Social Democrats deserted the idea of a general nationalisation of the means of production. Now and then this issue was reconsidered, but it never went as far as to concrete measures. With the exception of post- and telegraph communications, railways and mining industry (nationalised by the rightist govenments at the beginning of the century) Swedish enterprises have never been owned by the state in a large scale. The strategy of the SAP was instead to enhance industrial growth by means of state intervention in the market economy. This way, it was maintained, the common ”cake”, from which we all were to have our share, would grow as large as possible. Then the remaining problem was to distribute the shares as fairly and squarely as possible.

In many ways this strategy was successful. The social democrats formed their first government in 1920. Between 1932 and 1976 they remained in power. Then followed a period of make-shift parliamentary majorities and governments.

During this century Sweden developed from one of the poorer countries of Europe into one of the richest. The wages rose to the degree that it became possible for most workers to own a car and a TV and other modern consumer goods. The erection of cheap, functional apartments or villas for working people was encouraged, an (almost) free medical care was established, the care of aged was developed and all of us entered into a national pension system.

Most of these things were common to all west-European countries. In Sweden however, the strong position of the trade union movement was a typical feature. After a nation-wide settlement between the Swedish TUC (LO) and the Association of Swedish Employers (SAF) in 1938 the handling of disputes on the labour market on the whole was delegated to those two organisations. The employers accepted (sometimes grudgingly) the right of workers to organise in trade unions and their right to negotiate and to be recognised as an equal in negotiations on wages and other labour issues with the employers. The trade unions, on their behalf, gave up their right to strike during the terms of settlements. The right of the employers to organise the working process was recognised.

The overwhelming majority of the Swedish salariat is organised in the trade unions -whereas in countries like France or England only some tens per cent belong to a trade union. One factor, important for the unity of working people has been the absence, typical of Scandinavian countries, of religious, and, up till now, of ethnic cleavages within the people. Not only workers, but all groups of the salariat, even officers, policemen and vicars, are members of a trade union. One reason for this high degree of organisation is the fact that the unemployment insurance is administered by the trade unions. For many decades the members of any local branch of trade union (belonging to the LO) were collectively enlisted as members of the local branch of the Social Democratic Party.

Like the SAP leaders the LO began its policy of collaboration with the employers on an early stage. The collective bargaining of wages very seldom led to strikes and confrontations. The LO branches adjusted their claims to the development of productivity of the large export industrial enterprises. They assisted the employers in disciplining the working class.

Thus the Swedish Model was formed as a Trinity of the State, the trade unions and Big Enterprise. It was not until the end of the 60’s that this model had to stand its first serious challenge. The Swedish model was attacked from below.

The development of social welfare had consequences that people were not willing to accept any more. In the factories the production was organised according to American, allegedly scientific, managerial principles: assembly lines and a fragmented work process. Time measurement studies were performed in the working sites in order to measure all unprofitable movements and to eliminate all unnecessary moments of rest enjoyed by the operators. By applying piece-rate wages the work process was condensed and speeded up. Many workers were protesting against the stress, and against the strain put on their muscles, tendons and joints – the LO, however, did not support them. The LO did not struggle for the abolishment of piece-rate wages, but for an ”objective time measurement leading to objectively sound piece-rates”. Workers were to be enlightened as to the advantages of scientific management. It was allegedly scientific – thus it was a good thing.

By means of similar arguments the SAP encouraged the depopulation of the Swedish countryside induced by the development of the big industry. The Northern part of Sweden was evacuated by means of an active policy on behalf of the national authorities. This process was named ”structural rationalisation”. Labour power with a low productivity was to move to a more productive employment at the big industries in the Southern part of the country. Those unwilling to forsake their home, their family and their friends were abused as ”elements of inertia”.

In the winter of 1969 the workers at the national mining corporation in the extreme North of Sweden stroke. The strike was characterised as a ”wild-cat” strike, i.e. it was organised against the will of the LO and it violated the central collective settlement with the employers – which included prohibition of strikes during the term of agreement. The SAP leaders were shocked by the strike. It was challenging not only the employers, but the policy of appeasement governing the Swedish model altogether. The miners did not ask for ”fair” piece rate wages. They demanded the abolishment of piece-rate wages altogether. They did not want the allegedly scientific management any more. The tyranny of the time measurement and of the foremen had to be done away with. There was no need for the workers to accept the premature worning out of their bodies in order to enhance corporate profits.

All over Sweden the miners´ strike met with a strong and positive response. In many industries in the Southern part of Sweden there were action taken to the same aims. Other popular movements attacked other elements of the policy dominating Sweden during the post-war era. A strong solidarity movement with Vietnam was questioning the liaisons of the political leadership with the US.

However, the SAP succeeded in managing the storm. They proclaimed a further expansion of the public sector and the systems of social security. At the factory level new reforms were introduced, allegedly aiming towards a bigger influence on behalf of the workers. At the beginning there was a lot of anti-Capitalist rhetoric’s involved, which evoked protest from among the entrepreneurs and from the bourgeois parties. No real antagonism developed, however. The new laws of ”rights of participation in decisions” did not really question the fundamental prerogatives of the employers. They only prescribed that the employer had to inform the local trade union before formally making his decisions. The prize the workers had to pay for this was a more draconian legislation against wild-cat strikes.

Apparently the Swedish model had managed to get out of the crisis with an increased strength. But it was challenged again in the middle of the 80’s – this Time from above. After years of thorough preparations the big enterprises of Sweden launched a fervent campaign for a ”change of system”. The ”social contract ” with the SAP was annulled unilaterally. They demanded an end to the ”suffocation of freedom and private enterprise and human rights” in behalf of trade unions and the public sector. The social democrats were accused of planning to introduce an East European model in Sweden.

This change of attitude was related to a similar trend in big parts of the western industrial world. The old agreements of class collaboration were annulled everywhere by the employers. Trade Unions were attacked. Against the old, state controlled welfare capitalism new, neo-liberal ideas were introduced. The long post-war era of economic growth had come to an end. There was a diminished room for compromises. At the same time the relations of strength changed in favour of the employers: on one hand the forces facing big business were enfeebled. Crises, technological development and a new international division of labour rarefied and paralysed the strongest and most well-organised sectors of the working class.

On the other hand the claims of the big enterprises grew more demanding. In the Swedish model a small number of export industries were cultivated to become trans-national corporations. Volvo, ABB, Ericsson and others grew strong under the protection from the state and from av benevolent trade union movement. Accordingly Sweden has more large international corporations than other industrial societies of a comparable size. Fifteen of the largest corporations alone produce 20 per cent of our total export. These corporations alone employ 16 per cent of all industrially employed. However, their share of the employment within Sweden is dwindling -by 11 per cent 1985-90. Abroad they increased their labour force by 56 per cent during the same period.. Strategically imp ortant sectors of production ever more often are allocated abroad, and an ever increasing part of the Swedish production consists of component parts of products the main body of which are manufactured in the principal factories on the continent.

In this new situation big enterprise strives to abolish all national institutions and rules hampering the process of capital concentration and centralisation on the European level: currency regulations, environment protection, among other. As the main part of production nowadays will be situated abroad there is less demand for a compromise with national and local trade union and social interests. Accordingly the Volvo executive will refer to the very social order which once gave his enterprise its present shape and fame as a ”national myth”. The cuckoo is ready to leave the nest who bred him.

The SAP has chosen to follow suit. During its term of government at the end of the 80-ies it was a leading force in adapting the nation to the demands of big enterprise. It abolished the currency regulations, liberalised the capital markets and introduced a tax reform favouring the highly salaried, but reducing tax income – i e state expenditures for social welfare. It also took the decision to introduce Sweden into the European Union, the cartel of West European Industrial Countries, and this decision was enforced by means of a plebiscite in the autumn of 1994.

This policy completes an important line of the traditional SAP strategy: supporting the market and its special demands for structural changes of the society -the only novelty being that the Swedish people no longer is offered full employment, increasing welfare and new welfare institutions in return for its sacrifices.

The leader of the largest Swedish corporation, the ABB executive Percy Barnevik recently told Financial Times what to expect from the new Europe:

”If anyone is maintaining that we are going to have a hell of a demand for Labour power in a couple of years, I invariably will answer: Tell me where! What jobs? In which cities? Summing it all together, I rather see the risk of our present 10 per cent of unemployment easily will become 20 or even 25%.”

This is ”social dynamite”, says Barnevik. The tranquillity and optimism characterising the grand era of the Swedish Model has scattered in the general European crisis.

Mikael Nyberg, 1996

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