The genius and limitation of the Swedish model

Carl Rowlands

This year marks the 30th anniversary of the assassination of Olaf Palme, Sweden’s Social Democrat prime minister, only so far warranting minimal attention in the British media. However, in Sweden, Palme, and his assassination, remain a constant source of fascination. His domestic policies, perhaps surprisingly, were regarded at the time as being centrist, placing him on the liberal wing of the Swedish Social Democrats, whilst his foreign policy could perhaps be described as a mixture of Corbynist (or Bennite) anti-imperialism and cold war realism. Arguably killed when already in the closing stages of his career, the unsolved and darkly guarded nature of his assassination in 1986 presents the puzzle of why, and who, would benefit from his death.

The fact that he was regarded as being on the right of the Social Democrats should not obscure the radically redistributive and constitutionally significant reforms he pursued during much of his time in office. He led a burgeoning, self-confident movement with huge backing from powerful trades unions, which commanded support across Sweden’s middle- and working- classes. Among the intelligentsia advising the vibrant labour movement at this time was an economist, Rudolf Meidner, originally a refugee from Weimar Germany. Rudolf Meidner was responsible for a number of key components in what has become known as the Swedish Model; reinforcing the welfare state with bulwarks of financial stability. All of these are worthy of deep study to anyone with even a passing interest in social justice, but the Meidner Plan,  as one of his schemes became known, is perhaps of particular interest in 2016.

As originally conceived, the Meidner Plan set out to decisively introduce greater degrees of economic democracy, in much the same way that the Bullock Report aimed to achieve the same aim in the UK. However, it was both more ambitious and more specific. A society which is living longer, and spending more time in education, requires ongoing increases in social expenditure. Add the effects of climate change and the effects of technology upon professions, and the issue appears even more stark. Meidner advocated a share levy, which would finance strategic funds known as ‘Wage Earner Funds’ (WEFs).

In doing so, he spread fear into the hearts of Swedish capitalists at the time, as well as those in his own party who feared for the operation of a mixed economy. In fact, a levy on shares is quite consistent with the recommendations of those such as Thomas Piketty, who advocate taxes upon wealth, rather than earnings, whilst such ideas have a long background in Fabianism during the inter-war years.  The specifics of the Meidner Plan involved companies issuing new shares every year, equivalent to 20 per cent of their profits. The Wage Earner Funds, representing local authorities and workplaces, would use the dividends from these to finance future social expenditure. Shareholder value would be diluted – slightly – on an ongoing basis.

Olaf Palme and his administration, sceptical about the plan, and rattled by the hostility towards the plan, reluctantly implemented a reduced version of the original Meidner Plan in the mid-1980s. In its truncated form, five small regional funds were established, mainly financed by an excess profit tax. The fund capital was used for purchasing shares in the stock market. Nonetheless, even in their limited form, the funds became the basis for a number of scientific research institutes.

There were a number of concerns regarding the implementation of the Meidner Plan which would need to be addressed by any contemporary interpretation: the risk of capital flight being chief amongst these. However, in many ways the Meidler Plan merely represented a more democratic and equitable method of managing the private pension funds and other similar institutions which now play such a huge, and unaccountable role in economic life. The Wage Earner Funds, in their short time as active participants in Swedish economic life, didn’t undermine economic efficiency or productivity. Their example, as with so much in the Swedish model, merits a closer examination by those looking to Labour to offer credible economic alternatives.

Image: mariusz kluzniak

  • (will not be published)

Please read our community standards