The rise and fall of the Swedish model – interview with Swedish economist Rudolf Meidner

The rise and fall of the Swedish model – interview with Swedish economist Rudolf Meidner – Interview

Bertram Silverman

Introduction by Bertram Silverman

By the end of the 1940s, Swedish social democrats, like most socialists in Western Europe, had abandoned the goal of socializing production as the primary way of reforming capitalism. Instead, they sought to construct a welfare society within a capitalist structure. As affluence spread after World War II, most social democrats came to realize that the market system could achieve the goals of rising income and high employment. These golden years of high growth rates, full employment, and balanced foreign trade ended Sweden’s brief flirtation with nationalization and planning, which had arisen in response to wartime conditions. But clouds appeared to darken Sweden’s increasing prosperity. What came to be known as the “Swedish model” was a response to threatening economic problems.

The most significant postwar issue was the looming conflict between full employment and price stability. The task of rebuilding a war-ravaged Europe and rising real income at home had pushed demand for Swedish products beyond the nation’s productive capacity. Labor shortages caused wages to increase faster than productivity, inducing cost-push inflation. The social democratic government responded by introducing various income-policy measures, including a wage freeze in 1949-50. But these restrictions on wages failed, and they undermined workers’ confidence in their unions. Economists within the LO (Swedish Confederation of Trade Unions) reacted by developing a strategy to resolve the conflict between full employment and price stability. Named after its chief architects, Gosta Rehn and Rudolf Meidner, the plan became a central part of the Swedish model.

The Rehn/Meidner plan proposed that the government use restrictive fiscal and monetary policies to ensure that aggregate demand for goods and services was kept below the full employment level as a way of reducing wage-cost pressures. Full employment would be achieved through labor-market measures, such as retraining and travel allowances designed to make workers more employable. Active labor-market policies have been an important component of Sweden’s non-inflationary full-employment strategy.

The Swedish model also sought to create a more equal society. This was achieved in two ways. First, the government implemented a comprehensive and universal welfare system based on generous transfer payments and extensive public and social services. Second, the unions instituted what they called a wage policy of solidarity. Under solidaristic wage guidelines, workers doing the same work were to be paid the same wages regardless of the firm’s profitability, size, or location. At the same time, the wages of lower-paid, less-skilled workers were to increase more rapidly than the more-skilled, higher-paid employees. Sweden’s highly centralized collective-bargaining system and cooperation between the trade union confederation (which had organized 85 percent of the workforce) and the employers’ confederation made it possible to implement the solidaristic wage policy.

Two consequences followed from the wage policy of solidarity. On the one hand, less efficient firms unable to pay the higher wage costs for less productive workers were forced to either rationalize their operations or shut down. This created pockets of unemployment. On the other hand, more profitable firms gained excess profits as a result of the wage constraints exercised by the well-paid workers. The unemployment problem was resolved through active labor-market programs. The second problem was addressed by a plan pioneered by Rudolf Meidner.

Under the Meidner plan, part of the “forfeited” wage increases of the more skilled workers would be transferred into collective wage-earner funds as a way of sharing the excess profits that employers accumulated because of union wage constraints. Had it been implemented, the Meidner plan would have provided a mechanism for greater trade-union participation in investment decisions. But the Social Democratic party did not endorse the Meidner plan, and it never became part of the Swedish model.

Until the end of the 1980s, Swedish social democrats could proclaim that the primary goals of the Swedish model – full employment and equality – had been achieved. Unemployment rarely rose above 2 percent, and as more women sought paid employment, Sweden’s labor-force participation rate was among the highest in Europe. At the beginning of the 1980s, Sweden had the most egalitarian wage structure in Western Europe. Public expenditures reached a peak of 55 percent of the gross domestic product financed by the highest taxes in Western Europe. Thus, a substantial part of the economy was not regulated by market rules. Not surprisingly, by the early 1970s many social democrats had begun to feel that Sweden was on its way to constructing what a popular Swedish prime minister, P.A. Hansson, called a “people’s home” – a place where all Swedes would be treated like members of a family and where such values as equality, cooperation, helpfulness, and security would prevail. No wonder the Swedish model became a symbol for a Europe put on the defensive because of the rise of neoliberalism and the disintegration of state socialism.

But cracks in the foundation of the Swedish model were already visible by the end of the 1970s.(1) By the 1990s the model had collapsed. In the interview that follows, Rudolf Meidner reflects on the evolution of the Swedish model and why it failed. Meidner was research director of the LO from 1945 to 1966 and director of the Institute for Labor Market Research at the University of Stockholm from 1971 to 1979. He is now associated with the National Institute for Working Life (Arbetslivsinstitutet).

Q For many people Sweden has been a symbol of a humane market system – a middle ground between free-market capitalism and state socialism. As one of the major contributors to its development, how would you define the Swedish model?

A. There are many ways to define it. Perhaps the best way to describe the Swedish model is to relate how we older economists with roots in the labor movement conceived of the Swedish model. It had two goals: The primary objective was full employment and the second goal was equality.

Q. Wasn’t the central problem how to achieve full employment without inflation?

A. Yes, that was a crucial issue. The conflict between full employment and price stability became apparent immediately after World War II. At first the general view was that unemployment would be the most serious economic threat. But the opposite took place. A few months after the war ended, the risk of inflation became evident. You have to remember that the model was born in a period when we had full employment and high domestic and European demand for Swedish products. Sweden had benefited greatly from a ruined Europe hungry for our goods.

Q. What was the Swedish strategy to sustain price stability under such conditions?

A. In the beginning there was no strategy at all because these developments came as a real surprise. Our government and our economists were not prepared for such a situation. We had to think about what to do. Lord Beveridge claimed that full employment existed when there were more jobs than available workers.(*) We rejected that view because having more jobs than workers would create an inflationary situation. So the strategy at first was simply to convince the unions that inflation was not in their interest. But Gosta Rehn and I and some other union economists did not believe that persuasion would be sufficient. We believed that there had to be a political and economic strategy. We presented such a strategy piecemeal in the 1950s, in the form of a model in an LO report entitled “Unions and Full Employment.” The basic strategy was to prevent price increases by imposing rather restrictive fiscal and monetary policies that would limit the demand for labor.

Q. But wouldn’t the unions oppose such policies?

A. Imposing restrictive economic policies in a booming and flourishing economy presupposed a certain amount of political courage. Simply telling people that an overheated economy is inflationary is not enough to convince them. You must implement a policy that makes it possible for unions to be a little more cautious in their wage demands. In our view, excessively high profits are the cause of inflation because high profits make it possible for companies to offer higher wages at a time when higher monetary wages include a high risk of inflation.

Q So, as union economists you needed to convince the unions to accept some level of unemployment, correct?

A. Yes. If nothing were done then, such policies would have resulted in labor redundancies in some branches and regions and among some categories of workers. Therefore, you must offset that by implementing active labor-market policies. You can fight inflation in two ways: through fiscal and monetary restriction or by imposing government controls. You can control prices and investments. Some proposals were made to impose an incomes policy to control wages. But we thought that this was not a very efficient way of fighting inflation. Price and investment controls are negative incentives. It is not a very nice thing to tell people you shouldn’t invest, you shouldn’t raise wages. So we tried to reverse economic policy. We suggested that we institute generally restrictive fiscal and monetary policies that would produce some difficulties in the labor market. But then government would intervene more positively and actively to eliminate what Gosta Rehn called islands of unemployment. As you can see, active labor-market policies are a part of the model and the strategy to achieve full employment and price stability.

Q could you briefly describe the kind of active labor-market policies you introduced?

A. If you have a restrictive macroeconomic policy, there is a risk of lower demand, at least in some parts of the economy. But that could be solved not only by compensating the unemployed but also by assisting them in finding new jobs. Such assistance includes helping them move to other regions, mobility allowances, help in selling their homes, and of course training and retraining to enhance their job prospects. There are many instruments in the arsenal of active labor-market policies. They differ from financial compensation, which is a more passive response to unemployment. Giving people money for their existence does not address the problem of jobs and new production. But the circumstances must be similar to what they were in Sweden after the war and up to 1990, when the economy was expanding. What makes the model a little antiquated is our present situation of mass unemployment.

Q. I would like to get to that in just a moment. But Sweden did have a full employment economy until the early 1990s. Unemployment rarely rose above 2 percent.

A. Yes, full employment was a fact, although very little was done to achieve it. Full employment was a result of the postwar situation in Europe. This was especially true in Sweden. Its productive resources were intact, and Sweden had suffered no losses of its human resources. Everything was in place for Sweden to play a very active role in the postwar boom in Western Europe. Therefore, it was not too difficult to achieve full employment because it existed without government initiatives.

Q. But what about inflation? Did you achieve full employment without inflation?

A. No. The Swedish government was successful in eliminating small recessions, but I do not think they were equally successful in fighting inflation.

Q. So the tension between full employment and inflation continued even though the model worked more or less during this period.

A. We used to say that the government did not follow the model. As I indicated before, it is much more difficult politically to introduce restrictive economic policies when you have a flourishing economy. It is much easier to fight unemployment because there is more agreement about expanding an economy in times of a weak labor market.

Q Let me turn to the second objective of the model. What role does the goal of equality play in the Swedish model?

A. Equality; like the goal of full employment, has been much more clearly defined in the Swedish model than in that of many other countries. You can promote equality in two ways. The first way is through a very large public sector that offers public services. Our public sector has always been larger than that of many other countries. The second method is through the implementation of a solidaristic wage policy. This is also part of the model as we define it. The union movement was responsible for developing the solidaristic wage policy. Under such a program, wages are determined by the kind of work one does and not by the profitability of the firm. In promoting this policy, Sweden, I think, is a special case. The wage policy of solidarity has been at the heart of the Swedish union movement for a long time. It is not simply the innovation of some elder economists. Far from it. The solidaristic wage policy originated at an LO congress in 1936. Ten years before, the LO created its own research department. The wage policy was introduced by the metal workers, which is still a leading labor union. Originally it was called a socialist wage policy The term was changed from socialist to solidaristic in 1938 when the editor of an LO journal wrote a short article entitled “Wage Policy of Solidarity.” That was the origin of the term.

Q. Do you need special kinds of institutional arrangements to implement such a policy?

A. Yes, it presupposes a very strong national confederation of unions. In 1936 the LO congress decided to investigate the role that the LO as a central organization should play in setting wage policy. As a consequence of those investigations by what was called the “committee of fifteen,” the 1941 congress of the LO gave much more power to the central trade union to set wage policy. Centralization of wage policy is not an easy thing to do. The LO needed to coordinate the claims of about thirty affiliated unions. But that was not enough to implement centralized bargaining. The LO’s counterpart, the Swedish Employers’ Organization (SAF), practically forced the LO to accept central wage negotiation in the mid-1950s. Clearly, centralized bargaining was in the interest of both employers and unions. Through centralized bargaining, the unions have been able to pursue a wage policy of solidarity by giving a little more to the lower-paid workers – to the young, to women, and to the unskilled and inexperienced.

Q. Such a policy seems rather remarkable. In a full employment economy you are asking your skilled workers to accept lower wage increases than less skilled workers, in other words, to accept lower wages. How do you explain the skilled workers’ acceptance of greater wage equality?

A. I’m not sure why Swedish workers have developed this solidarity with weaker groups. There must be historical reasons in Swedish traditions, decades before World War II. But it is not something that was imposed from above. We have convincing evidence showing that the rank and file strongly support the egalitarian wage policy and that it is accepted by skilled workers. The metal workers introduced the wage policy, and metal workers are paid above-average wages. It really is a form of class consciousness that says, “We are a labor movement and the strong ones are only a part of the movement.” There’s a real difference between Sweden and other countries where unions are mostly composed of workers with strong market power Otherwise, Sweden could not have organized 85 percent of its labor force. Swedish unions include weak groups, and it is not only the weaker groups that accept the wage policy of solidarity. The well paid also support it.

Q. But if the solidaristic wage policy promoted the concept of equal pay for equal work regardless of the profitability of the firm, then the most cost-effective and profitable firms will benefit the most. The less efficient will find themselves at a significant disadvantage.

A. That is one of the reasons why in the 1950s the employers’ confederation was interested in the wage policy of solidarity and centralized bargaining.

Q. So while you might narrow wage differentials, overall inequality in wealth and income might grow?

A. Yes. Normally wages are related to the profitability of the firm. In the Swedish model you receive the same wage independently of the firm’s profitability. As a consequence, two things happen. The first is what you suggested. Highly profitable firms earn excess profits.

Q. What was the response to the issue of “excess profits”?

A. The Swedish unions tried to persuade the government to tax some of the excess profits. But the government did not do that. Consequently, the unions recommended that these excess profits be invested into some kind of wage-earners’ fund that would create greater collective control over investment decisions. I would not say that the wage-earner fund idea is part of the Swedish model, but it certainly is a consequence of the model.

Q. But didn’t you introduce that idea? Wasn’t it called the “Meidner Plan”?

A. At a 1971 LO congress, a decision was made to investigate the problem of excess profits. I belonged to a group set up to explore the issue. We recommended taxing the excess profits and leaving the unions the task of administering these funds. As you know, that failed. The idea of wage-earner funds was not accepted by the Social Democratic party or inside the government. As a result, only some symbolic small regional funds were established. But they have disappeared.

Q. So the Meidner Plan was never incorporated into the model?

A. No, it was never officially incorporated into the model. But as you can see, it is a problem that must be solved. You can say; we failed, but the idea of wage-earner funds is not a Swedish concept. It is a West German idea, and it has been discussed for decades in other countries.

Q. You said that there were two consequences resulting from the solidaristic wage policy. What was the second?

A. It is what happens to less profitable firms. They cannot pay the same wages as the more efficient firms. As a consequence, they have to rationalize their operations. If they cannot, they will have to leave the marketplace and this will result in unemployment. Now you can see the connection between the wage policy of solidarity and active labor-market policies.

Q Clearly the goal of equality has played an important role in the development of the Swedish model. Did the goal of greater sexual equality influence how the labor movement and political leaders thought about achieving a more equal society? What role did sexual equality play in Sweden’s concept of creating what some called a “people’s home”?

A. I think you will get different answers to those questions depending on whom you ask. A good friend of mine who is a historian, Yvonne Hirdman, is writing a book on the Swedish Confederation of Trade Unions and women. She believes that the Swedish model was primarily a man’s program. I do not fully agree with her. During the many long wage negotiations, in which I participated, we argued that women’s wages should be increased more than men’s wages. Sometimes it was more symbolic than real. But beginning in the 1960s, we started to eliminate special wages for women. Before that time women were paid less than men for exactly the same work. That was open discrimination. Between 1960 and 1965 such differentials were ended by common agreement between employers and unions. After that the wage gap narrowed. In 1960 it was about 25 percent. By 1965 it was virtually eliminated. But women are still concentrated in low-wage jobs. So, if you average all wages and salaries, the gender gap is still rather large. But it is smaller than before, and it is not the result of paying different wages for the same job. Of course, the concentration of women in lower-paid jobs must also be solved. We have closed the gender wage gap but not totally – but perhaps more than in most countries.

Q What about employment policies?

A. Our full employment policy also promotes sexual equality. We have managed to increase women’s labor-force participation to practically the same rate as men’s. But this includes part-time work. Forty-five percent of our women work part-time compared with 3 to 4 percent of men.

Q. Does this suggest that the concept of a “people’s home” didn’t necessarily imply equality within the family?

A. That’s true, and that may be the most important aspect of the gender problem. We have managed to achieve at least some equality in the labor market but not in the family. Women still do most of the household work. But the goals of full employment and wage equality are related to sexual equality, and in that sense I would say that the concerns of women were a part of the Swedish model.

Q. In interviews in 1980 with Gunnar Myrdal and Gosta Rehn, I suggested that the Swedish welfare state was in trouble. Labor conflict had increased and many Swedes believed that too many of Sweden’s resources were being absorbed by the welfare system. You suggested in 1992 that the Swedish model has failed. In what sense has it failed?

A. It is not the model that has failed but rather negligence in its application. The most obvious failures came in the second part of the 1980s, When we had an overheated economy. The Swedish government did not confront the problem. On the contrary, it introduced a tax reform that had very negative effects on the goal of equality. The tax reforms reduced the taxes of well-off groups and did practically nothing for people with lower incomes.

Q. What about the 1990s? Unemployment is now 8 percent. The solidaristic wage policy has been almost abandoned and the welfare-state programs are being cut back.

A. I agree. Today I would say the Swedish model is not working either in its objectives or its application. Open unemployment has risen to 8 percent. But if you include people working part-time who want full-time work or have been forced into early retirement or are in labor-market programs and so forth, you could say that 15 percent of the Swedish labor force is unemployed. Clearly in that sense the model has failed. The goal of equality has been undermined but not quite as clearly. Over the past few years you can see a widening gap between different groups, even between men and women. So again you can say that the model has failed in the sense that equality is no longer one of its main goals. Nonetheless, the welfare system has not broken down.

Q. But there have been cutbacks in social programs.

A. Yes, but why? Was it because we could not afford it? I think there are several reasons. You have to look back to the 1980s. The tax reforms that favored the rich and the deregulation of capital and credit took place in just a few years without any real debate. Nobody could foresee the consequences of these policies.

Q In 1982 you devalued the krona. The economy revived, and, as you indicated, the government reduced its regulation of capital movement and credit. A speculative boom ensued in construction and housing. Why didn’t the social democratic government follow the Rehn-Meidner model by imposing more restrictive monetary and fiscal policies when the economy began to inflate in 19887 I think unemployment dropped to 1.5 percent at that time.

A. It is difficult for me to answer that question. I had retired at that time and I was not a spokesman for the unions. I was critical and I asked exactly the same question. In the case of tax cuts, they just made the wrong calculations. They argued that the tax reform was self-financing. Of course it was not. And it was scarcely of benefit to those with below-average incomes and to the poor, who already paid low taxes. Nor did the reform achieve any positive economic objectives. It may have cost the government 30 to 40 billion krona in lost revenue, and this is one of the reasons for our high budget deficit. The assumption that lower taxes would result in increased labor productivity and work effort was nonsense. There is no evidence that people are working harder.

Q. “Supply side” economists in the United States still support this view.

A. Yes, and it is one of the reasons why the model failed. The second is related to ending the restrictions on capital mobility and credit. In reality, the restrictions on capital movements were not working anyway so that probably was not the main problem. The more important factor was the deregulation of credit, which resulted in increased speculation. There was an enormous growth in construction attracting 150,000 new workers. At the same time there was a large increase in public building programs. It was a time when Swedes bought houses in Brussels and London.

Q. When the government finally put the brakes on, wasn’t the result a rather sharp economic decline and increase in unemployment?

A. Yes. I would say that the unwillingness to stop the speculation and to stabilize the economy at the end of the 1980s was one of the reasons, but not the only one. The second was the sharp economic decline in Europe and the United States at the beginning of the 1990s, which hurt Sweden a little more than other countries. A third factor was the internationalization of the Swedish economy. Sweden, like other countries, declared that it would join the European Union. But technical advances in communications achieve the same results. They make the world one large stock market, where in seconds you can move billions in financial capital. Internationalization limited the applicability of the Swedish model. The model was designed for a national economy under conditions that made it possible for the national government to make final decisions about stabilization and distributional policies. We are now part of an international economy. We are small country of 9 million people. Everything we do is immediately followed by a reaction in the financial markets. We no longer determine our own interest and currency rates. So, internationalization, with or without EU membership, is enough to make the Swedish model a little antiquated.

Q Haven’t changes in production technology also undermined the model? The new information technology leads to more decentralized decision-making that is less compatible with “Fordist” methods of centralized controls.

A. It may have contributed to it, but technical evolution takes decades to unfold. It could hardly be the main reason for the recent increase in unemployment.

Q. Nevertheless, doesn’t the new technology weaken the process of centralized bargaining? Isn’t there increasing pressure from employers for greater labor-market flexibility and more decentralized production and work decisions?

A. The technology makes centralized collective bargaining more difficult but not impossible. It is often forgotten that our wage policy has been traditionally composed of two parts, central and local negotiations. Wage determination in Sweden has been a result of central bargaining, but local and even individual negotiations, at least for white-collar groups, have also been a significant part of the bargaining process. We cannot centralize everything and never have. But it has become more difficult in an environment of rapidly changing qualifications and skills. Still, the LO can coordinate its own wage policy; but it has lost its counterpart – the Swedish Employers’ Organization (SAF).(*)

Q. The failure of the Swedish model has contributed to the view that full employment and equality lead to inflation and stagnation. If you wish to fight inflation, you must accept a level of unemployment that is higher than the one you sought to achieve. The failure has also contributed to the view that wage and welfare state policies designed to promote equality undermine private savings and work effort.

A. As you probably expect, I disagree. I think unemployment is mostly a political and not an economic problem. We are following the Maastricht rules. Under these guidelines the most important goal is price stability. Sweden is a member in good standing of the EU and follows its rules very well – perhaps better than other countries have for some time now. The Swedish government has been trying to follow the new ideology of low budget deficits as a means of achieving price stability. But you cannot do this and at the same time achieve full employment. There are recent political pressures to include a new paragraph in the Maastricht treaty that says it is as important to have full employment as it is to have price stability. But personally I doubt very much that they will be successful. The Germans have already said that they are not interested. Maybe the British prime minister, Tony Blair, is and perhaps the French socialist government is, so perhaps there will be a new paragraph in the treaty. But in my view it does not change anything.

Q. Are you pessimistic about achieving full employment?

A. We can do much more, but there are limits. Sweden is too small a country to be able to say that from now on it will pursue an expansionist economic policy and neglect budget problems and even accept some price increases. We know the consequences. The stock market will decline. The value of our currency will fall. As a small country it cannot neglect international reactions to domestic economic policies. But it can do much more, and the government now seems willing to do much more. There is nothing that suggests we cannot pursue active labor-market policies, even more active industrial policies. Sweden is in the process of losing not only part of its manufacturing industry but even the headquarters of large companies in the search for lower labor costs. That makes it difficult for Sweden to tax the excess profits of some of the more successful corporations. What can we do? I always return to my old idea of our unions trying to activate their own pension funds. Workers pay billions into the private pension system. If our unions followed the Quebec example of using pension funds to influence corporate decisions, maybe profits would not be the only criteria influencing the movement of capital.

Q Do you think trade unions can play a more active role in reducing capital flight?

A. It is the only suggestion I have, because as a small country we cannot pursue an independent economic policy. But we do have wage-earner capital in our pension funds. I am not going back to the wage-earner fund idea because that failed. Under the wage-earner fund plan, we recommended taking profits from the capitalists. Now we can say we are not taking one krona from the capitalists. We are using our own pension funds, our own money.

Q In the United States there is increasing interest in privatizing our social welfare system, including social security. Is this also a trend in Sweden?

A. We are privatizing our pension system. I am totally against it. Eventually it will mean that we will significantly decrease our collective investment in the pension funds, because people will pay premiums to private insurance companies instead of investing them into the collective pension system. And there has been no debate about it. Officially there has been no criticism of this enormous change in our capital market. We are losing our collective capital. This is the position of the Swedish Social Democratic party. As you can see, I am very critical of this policy. I do not know why the issue has not been debated. It is an important element of the Swedish model that has been destroyed. Pension capital has been used for public investments. One million new homes would not have been built without it. The only party that is openly critical of this policy has been the left party (Vans Terpartat, party of the left, the new name of the Communist party), not the social democrats. This is an example of some of the new neoliberal ideas that have been taken over by the Social Democratic party. As I said earlier, I have recommended that the unions themselves control the pension payment of their own members as they do in Quebec.

Q. But you have written that the Swedish model is being destroyed because the power of the labor movement has diminished.

A. Yes, here as in all other countries.

Q. This is puzzling. Why, in a country where 85 percent of the workforce is unionized, hasn’t the LO been able to mobilize its members to change the direction of social democratic policies?

A. I don’t think they are able to do it because they are afraid to start a debate on wage-earner funds.

Q. But what about the issue of unemployment, which must be a fundamental concern of the labor movement?

A. Of course it is fundamental. You do have many declarations and lots of programs but nothing of real significance. Recently there was an international protest day against unemployment. The only thing that happened in Sweden was the convening of a seminar attended by fifty people. If the unions tried to organize a demonstration, they could probably mobilize only two hundred to three hundred people. That is not surprising to me. If you look at the literature on the social and psychological effects of unemployment, you find the same results. People think that they are to blame for their unemployment. Perhaps it is a little different in some European countries, but in Sweden people are passive.

Q. You seem rather pessimistic. Are there any parts of the Swedish model that are still functioning?

A. It takes time to totally destroy such deeply rooted Swedish traditions: solidarity, high-quality public services, general welfare, and even active labor-market policies. Active labor-market policies were designed to take care of 3 to 4 percent of the labor force. Today such programs cannot solve the unemployment problem. But I have not given up the idea of returning to a full-employment economy. There is no such thing as a natural rate of unemployment. The level of employment and unemployment is significantly influenced by what the government does. It is a result of economic policies. The unions cannot do very much. They can undermine full employment by demanding excessively high nominal wages, which can undermine the whole system. But the Swedish unions will not do that, so it is up to the government. In the United States, wage earners are forced to decrease their wages so that employers can hire more people at lower wages. We reject that approach. We cannot accept wage levels that are below modest living standards. I think that what is left of the Swedish model is the feeling, only the feeling, among people and within the labor movement that we must return to higher employment and that there are ways to do it without inflation. Yet, at this moment the Swedish government is totally committed to European Monetary Union rules. But there is a chance that there will be no EMU in the near future, and that the Swedish government’s extreme commitment to give the highest priority to price stability can be modified. I think we can at least give the same priority to full employment and try to find solutions to make full employment and price stability compatible. We worked on this problem for fifty years, and now the younger generation must continue to work on this issue. Price stability and full employment are not incompatible goals.

Q What will it take to revitalize the social democratic movement?

A. It will take a long time, maybe twenty years.

Q. Why so long?

A. Because you must have the experience of a total failure of the present system. It must be clearly felt by practically everyone that the current liberal market approach does not work. But it is still working. Capital is dominant. Since we are members of the European Union, the next step must be to find new rules that govern economic relations.

Q. What do you mean by a total failure of the system?

A. There are different ways in which it could fail. It could be very painful. Economic problems could result in fascist dictatorships. But responses to economic decline could take a better route, for example, international cooperation to find new rules regulating capital movements. Perhaps capital movements could be taxed. Eventually, even winning groups will discover that you cannot have a society with such dominance of capitalist interests. Profit is one thing, but it cannot be the only criterion for human life. But it will take a long time to revive the old ideals of solidarity and the values of human dignity that are totally neglected now.

Q. So, in the short run you are very pessimistic about reviving the social democratic model.

A. Yes, in the short run. You must go through a very painful period, perhaps decades. You see signs of it already in a country like Sweden. We are excluding large groups of people. Immigrants are living under very difficult conditions. And our long-term unemployed are excluded from what life should give people. The gaps are widening. Solidarity is just a word that is used in pronouncements but is not realized.

Q. But are there new voices who are thinking creatively about social democratic reform in response to these changing economic conditions?

A. Don’t ask an old man. There is a risk that I cannot hear these new voices, but that is dangerous. For an eighty-three-year-old man it is easy to say that I cannot hear these new ideas. Many of them are nonsocialist concepts taken over from neoclassical ideology. But I must be careful not to be too pessimistic. I know that it was easier for us. We had the privilege of living at a time when we had goals and the possibilities of achieving them. It was a very exceptional moment in Sweden, perhaps even in human history. Everything was moving in the right direction. We were on the way to achieving these splendid goals of solidarity, of equal opportunity, of general welfare, of high employment, so that everyone could be free to choose. And the economic system was efficient and competitive. Of course, there is a risk that my memory is not so clear. But there is much to suggest that these were the best decades and that you will not get them back so easily, at least not for a generation. But your question was, “Are there people with new ideas?” I don’t see them today. But maybe that’s my fault.

* William Beveridge drafted Britain’s initial post-World War II plan for a full-employment economy. See his Full Employment in a Full Society (London: HMSO, 1944).

* In a longer version of this interview Meidner also addressed problems associated with the divisions between the LO (which represents blue-collar workers) and the white-collar unions organized by two central organizations: the Central Organization of Salaried Employees (TCO) and the Swedish Confederation of Professional Associations (SACO-SR).


1. For a discussion of some of the emerging problems of the Swedish model, see Silverman’s discussion and interviews with Gunnar Myrdal, Gosta Rehn et al., “The Crisis of the Swedish Welfare State,” Challenge (July-August 1980): 36-51.

BERTRAM SILVERMAN is professor of economics, emeritus, and director of the Center for the Study of Labor and Democracy at Hofstra University. He is the author, with Murray Yanowitch, of New Rich, New Poor, New Russia: Winners and Losers on the Russian Road to Capitalism (Armonk, NY: M.E. Sharpe, 1997). This interview was conducted in Stockholm at the National Institute for Working Life (Arbetslivsinstitutet) on June 4, 1997.

COPYRIGHT 1998 M.E. Sharpe, Inc.

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