The policies of Sweden’s Social Democratic Government are often invoked to demonstrate that there exists a viable alternative to Thatcherite neo-liberalism, while for many currents within Europe’s dwindling group of ruling Socialist parties Sweden has come to represent the light beckoning at the end of a long tunnel of austerity and restructuring.footnote This article will adopt a historical rather than a directly comparative approach: focusing on the debate over ‘wage-earner funds’, it will trace the development of Swedish Social Democracy, and Swedish politics more generally, over the last twenty years. Such a perspective, however, will provide elements for comparative reflection in other countries of Western Europe. Against the background of what has actually happened in this period, it cannot but seem odd, and frankly disheartening, that the current government in Stockholm should be construed as the flagship of the European Left. It is easy to see that one element in this fascination is the political dominance of the Social Democratic Party (sap).footnote1 In seventeen parliamentary elections since 1928, it has averaged 46 per cent of the popular vote, never falling below 40 per cent and outdistancing the second largest party by an average of 25 percentage points. From 1932 to 1976, Sweden had but three prime ministers, and they were all Social Democrats. This represents the longest continuous government tenure of any working-class party, indeed any party tout court, operating in a liberal–democratic context. Following six years of coalition government by the so-called ‘bourgeois parties’—Centre, Liberal and Conservative—the Social Democrats took office again in 1982, and restored their claim to be the ‘natural party of government’ by winning the elections in 1985.

Sweden is also distinguished by its high rate of workforce unionization, which today stands at about 85 per cent. While the blue-collar unions affiliated to the lo federation have played a critical role in mobilizing the working-class vote for the sap, Social Democratic policies have promoted unionization both directly and indirectly. The ties between lo and the sap have always been very close, collective affiliation accounting for roughly three-quarters of sap members. But, in contrast to the British Labour Party, union members are collectively affiliated to local party organizations, and their votes count only if they participate in the selection of regular delegates to sap congresses—in other words, there is no such thing as ‘bloc votes’. At the national level, the mechanisms of losap coordination are of an entirely informal character.footnote2 As a result of changes in the class structure, and the unionization of white-collar strata, the struggle for the allegiance of white-collar unions and their members has become an increasingly central feature of Swedish politics. Organized into two separate federations, whitecollar unions have maintained their tradition of formal party neutrality. Since the late 1960s the larger of the two, the tco, has frequently entered into alliances on specific issues with lo and the sap, but its membership still tilts towards the bourgeois parties on election day.footnote3

It became commonplace in the late 1970s, especially among foreign observers, to interpret lo’s wage-earner funds proposal as part of a gradual transition to socialism under Social Democratic auspices. The actual idea first emerged within a broader reform offensive launched by the Swedish labour movement in the late 1960s, pushing for greater public influence over corporate investment decisions and worker influence over workplace conditions. The lo congress of 1976 eventually endorsed a scheme for collective profit-sharing which, if legislated, would have resulted in a slow yet inexorable transfer of ownership from private individuals and institutions to newly created funds representing wage-earners as a collective. Since the whole debate is now over, the time has come to draw up a balance-sheet of the experience, which can hardly be said to have fulfilled the hopes once placed in it.

The story of the wage-earner funds does not quite fit either of two conceptions of Social Democracy that have gained wide currency: what we might call the thesis of ‘corporatist integration’ (associated, in particular, with the work of Leo Panitch), and the thesis of ‘cumulative growth of labour’s power’ (for which Walter Korpi may serve as representative for our present purposes). To simplify greatly, Panitch conceives the essence of Social Democratic rule as the integration of the official leadership of the labour movement into the administration of capitalism. Class conflict between labour and capital does not disappear, but it now takes the form, at least in part, of conflicts within the labour movement between the rank-and-file and the leadership. In this view, it seems inconceivable that the leadership of the labour movement would initiate reforms that challenged the power of capital; workingclass mobilization outside the framework of corporatist class collaboration alone could provide the impetus for system-transformative demands.footnote4

For Korpi, on the other hand, the welfarist orientation of post-war Social Democracy involves an essentially tactical compromise, and labour’s exercise of political power within capitalism has in no sense precluded the pursuit of socialist goals. Again to simplify greatly, Korpi portrays the labour movement as a more or less unitary and rational actor with an inbuilt system-transformative drive. The extent to which labour challenges capitalism, at any given moment, depends on the prevailing balance of power. The radicalization of labour’s reformist ambitions in the 1970s is thus seen as a consequence of labour’s steadily growing power vis-`-vis capital in the postwar period, registered, most notably, in rising union membership. At least in the Swedish case, Korpi concludes, Social Democratic rule has strengthened the prospects for socialism.footnote5 Thus, while Panitch’s interpretation does not seem to allow for the debate over wage-earner funds, Korpi does not seem to allow for its outcome. The intention of this article is to show, first, that the Swedish labour movement really did begin to challenge the systemic power of capital in the 1970s, and secondly, that the challenge failed and labour went into retreat in the 1980s. It will also try to explain each of these developments. But we must begin by looking briefly at the historical background to this twenty-year cycle.

In the course of the 1920s, the sap effectively abandoned its commitment to large-scale nationalization as a primary and immediate objective of a majority government. Its reformist ambitions were not, however, restricted to ‘consumption politics’. Rather, the Social Democrats conceived the public works policy on which they campaigned in 1932 as part of a broader strategy to extend democratic control of the economy through macro-planning and state intervention in the restructuring of industry. Selective nationalizations would be a means of exercising public control, but only one of many means to be considered from a pragmatic point of view.footnote6 Alongside the extension of public control ‘from above’, the Social Democrats wished to democratize the economy through some form of co-determination at enterprise level.

The Social Democrats were able to consolidate control of government in the 1930s through a parliamentary coalition with the Agrarian Party, and an extra-parliamentary accommodation with organized business.footnote7 Each of these two prongs ruled out any reform initiatives that would significantly curtail the autonomy and power of private business. Most obviously, the Basic Agreement between lo and the saf (the employers’ federation), signed at Saltsjöbaden in 1938, rested on the unions’ tacit acceptance of paragraph 32 of the saf statutes, which stipulated that any collective bargaining agreement entered into by an saf affiliate must explicitly recognize managerial prerogative to hire and fire workers and to direct the labour process.