Strategies for optimism

The story of the Swedish labour movement
By Winton Higgins

In a few months Geoff Dow and I will be publishing a book, Politics against pessimism: social democratic possibilities since Ernst Wigforss (Bern: Peter Lang AG). We’re arguing that, more than ever, Western labour movements and social democracy have the potential to pursue positive programs to build decent, fair societies (including labour markets and work places), and to gain resilient electoral majorities for these programs. But to do that they have to develop and follow through on coherent strategies for change. (And thus stop listening to pundits’, pollsters’ and focus-group facilitators’ chatter).

We’re suggesting that the Swedish labour movement demonstrated such a strategy and commitment during the half-century from 1930, after which the party of labour lost its nerve, while the union movement, with mixed success, plunged on alone. We’re also suggesting that the political battle lines that Swedish labour faced are essentially the same as the ones that Australian labour now faces, so the Swedish case gives us a starting point for strategy-building in the present difficult political climate in our own country.

Ernst Wigforss’s contribution

The Ernst Wigforss (1881-1977) in the title of the book refers to the prominent social-democratic theoretician, politician and agitator who took the greatest part in devising his party’s new strategy, selling it to the party and then the electorate, and implementing it as the country’s treasurer for 17 unbroken years, 1932-49. Throughout his very long career he remained close to the union movement, which repaid the compliment by continuing to follow his strategic lead long after his retirement from cabinet.

Wigforss’s creativity arose out of his frustration with his party’s paralysis in the 1920s. The Swedish union movement – having adopted the industrial (instead of craft) basis for organising – then had the world’s highest union density, and the social democrats were the biggest party in parliament, but they still faced a majority coalition of centre and right parties whose common stock-in-trade was economic liberalism.

Economic liberalism began in Britain in the 1830s, and since then it has spread throughout the west, been rebadged from time to time (it is now known as neo-liberalism), but has essentially retained a constant content.

Its enduring political program is to quarantine property rights from political interference, and to set up, maintain and defend unregulated markets in resources, labour and capital, so as to empower private-property rights. Threats to this program have come through democratic politics, which economic liberals seek to hobble by insisting on small government, balanced budgets at all times, deregulation, and by opposing measures in aid of social security and equity, full employment, and the rights of labour.

Then as now, right-wing parties mobilise around this program, claiming it is economically rational, and promotes ‘freedom’ in some woolly sense. In proposing state intervention in aid of social equity and public amenities – the economic-liberal story goes –the left undermines economic efficiency so everyone is worse off. For economic liberals, fairness and efficiency are opposing goals.

In the 1920s Wigforss could see that the social democrats had no answer to this economic-liberal program. Occasionally they’d enter into short-lived coalition governments and actually collude in economic-liberal policies, which worsened working-class living and working conditions, and so demoralised their own electoral base. (Compare this predicament with the one we face in this country now!)

Wigforss’s answer was to directly confront every claim and aspect of economic liberalism, using what he called ‘a positive program’ of expansionary public spending, state intervention and welfare policy, to oppose it right across the board. In particular, he argued indefatigably that economic liberalism makes no sense in theory; in practice it’s a recipe for stagnation, unemployment and gross social inequities, and that efficiency and equity are in fact mutually reinforcing goals.

The social democrats ran with this line to great effect at the 1932 elections, in the context of the Great Depression, and were able to form Sweden’s first majority government in democratic times, in the process dismembering the centre-right coalition. And their policy initiatives were seen to work, both by their own constituency, and by the big industrialists who dominated the employers’ federation. The employers thus deserted their normal political representatives and chose to co-operate in the social democrats’ expansionary policies instead, in pursuit of their own ‘bottom line’.

The lasting effect of this victory was that economic liberalism was discredited, yet the centre-right had nothing else to agree on and mobilise around, so the social democrats remained in power for the next 44 years. They are the most successful party electorally in the west in democratic times. They were the only party of labour in the west to remain in power in the right-wing resurgence at the end of the forties, and they were thus able to pursue their long-term goal of full employment and comprehensive welfare.

The unions’ independent role

But what of the union movement? According to traditional social-democratic wisdom, which Wigforss strongly affirmed, the labour movement must always keep ‘movement socialism’ in balance with ‘state socialism’. The blue-collar unions sought an independent role for themselves, not least under their peak council, LO. In the first instance they centralised collective bargaining with the employers’ federation, which extended the unions’ authority over all issues to do with the labour market, and allowed them to pursue equitable outcomes through ‘solidarity wage policy’. Which in turn further increased their ability to recruit, even among weaker categories of workers.

The union movement also invested heavily in its own research capacity, and thus in its ability to generate independent policy responses to economic and political contingencies. From the late 1940s on, the union movement rather than the party produced the major new economic-policy initiatives, starting with the Rehn-Meidner model – named after two LO economists – that quickly became the centrepiece of Swedish macro-economic policy while the social democrats remained in power.

The Rehn-Meidner model expressed Wigforss’s core idea: the pursuit of efficiency and equity as converging goals. One of the by-products of this model was the labour market board, charged with maintaining full employment while providing workers with career choices and retraining as industry constantly restructured under pressure from one of the model’s central mechanisms – a permanent profit squeeze. The labour market board became the country’s largest public organisation and itself employed a majority of union activists.

Having gained its own central position in public economic management, the union movement could constantly raise its level of ambition: from full employment, to full employment under equitable and humane working conditions, and from there to ‘meaningful work’ and industrial democracy.

Finally and notoriously, in 1976 LO – in another round of stabilisation policy – proposed the reinvestment of superprofits generated in large and middle-sized firms back into those firms, which were to issue voting shares of equivalent value to collectivised ‘wage-earner funds’. This was an eminently pragmatic policy to dampen inflationary pressures on the labour market, so bolstering centralized collective wage bargaining, while providing industry with much needed new capital. No expropriation was involved. But when you did the sums, you found that within twenty years the labour movement would have a controlling interest in the firms involved!

This was the point at which a tired social-democratic party that had lost its political bearings, like so many parties of labour in the west at the time, ran scared and essentially opposed LO’s proposal. Once labour-movement cohesion was lost, the social democrats were vulnerable, and lost the 1976 election.


A great deal was then lost, but by no means all. Let me recap the main lessons as I see them:

• The labour movement must be prepared to confront economic liberalism (now rebadged as ‘neo-liberalism’ or ‘economic rationalism’) in theory, policy and practice. In doing so, it must treat efficiency and equity as converging goals;

• The union movement needs to develop a significant research and policy-making competence of its own, and work towards playing a coherent and independent role in public economic management;

• The party of labour must abandon the illusion that it must chew off its own ideological legs to win electoral favour; and

• When in government, a truly reformist party of labour must be prepared to develop new institutions to pursue new policy choices, rather than rely on old institutions whose hidebound forms of calculation obstruct reform and change.

Winton Higgins is a graduate of the universities of Sydney, Stockholm and London, and currently a research fellow in the Transforming Cultures Research Centre at the University of Technology Sydney. This is the text of his presentation at the Evatt Foundation's seminar, convened at the Evatt Office on Wednesday 17 April 2013.