Socialist Labor Pains in Sweden

Many people are surprised to hear that Sweden is not a socialist country. Perhaps the confusion is primarily semantic. If people mean that socialism is perhaps a social democratic government and national health insurance, then Sweden is indeed "socialist." The Social Democratic Party has been in power for over 40 years now and has succeeded in establishing an elaborate network of social welfare programs designed to protect the individual from having to bear the full brunt of Acts of God or the Capitalist System. If you catch pneumonia or if you get liver cancer from vinyl chloride gas at work you need not worry about doctor bills. If your job becomes obsolete or if you are paralyzed in a car accident, the government provides any training and help in relocation necessary for you to get a new job. And when you are retired, you receive a very handsome pension (85 per cent of your best 15 years of earnings). But after all these reforms, the industrial economy is still based on private enterprise. Less than 5 per cent of industry is nationalized. It would be wrong, however, to conclude that Sweden has reached some stable synthesis of capitalism and social welfare, some "middle way" which can be followed indefinitely into the future. Rather, every reform seems to create a need for more radical reform, whether or not the reformers plan it that way.

The reformist nature of Sweden's socialist labor movement was established early in this century. In 1906, in negotiations with the Employers' Confederation (SAF), the National Confederation of Trade Unions (L.O.) gave up all claims of "managerial prerogatives" such as hiring, firing, and the organization of production in exchange for recognition. Ever since the now infamous "Paragraph 32" of SAF's rules has required that all contracts contain a statement of these prerogatives. However, recognition was much more important than hypothetical bargaining rights when it came to organizing. Furthermore, L.O. has traditionally been wary of entanglement in issues of management for fear of losing its independence and destroying working class solidarity by creating loyalties to individual firms.

This combination of pragmatism and concern for solidarity has resulted in very powerful unions (virtually all wage-earners are union members) and centralized wage negotiations. On the political front, the Social Democrats committed themselves to socialism in the long run and Keynesianism and the welfare state in the short run. This strategy has kept the party in power since 1932. After the Second World War, the Social Democratic/Labor party embraced the goals of full employment with rapid structural change (forcing unprofitable and low wage industries out of business and favoring investment in the expanding and progressive sectors of the economy), economic security for the individual through social welfare legislation, and increased real wages with equal pay for equal work. By the mid-sixties, it was clear that these goals would no longer serve to unite the movement. This was in part because many of the goals were largely achieved and no longer political issues (none of the non-socialist parties advocates dismantling the welfare state) and partly because the attainment of the other goals created new problems that threatened the movement's cohesion.

The rapid structural changes made life difficult not only for those whose jobs became obsolete, it also led to a faster pace of work and greater physical danger for everyone else as businesses pushed for higher productivity. The principle of equal pay for equal work was troublesome on several counts. First, it required centralized wage negotiations which meant that the average worker had little opportunity or cause for involvement in union affairs. Secondly, it required that higher paid L.O. members (usually working in the more profitable industries) refrain from taking out as much as they otherwise could in the interest of solidarity with their poorer union comrades. This requirement gave managers and stockholders higher profits with higher salaries and more dividends in direct contradiction to the goal of equality. Finally, since L.O.'s membership is mainly blue collar, it could do nothing to control the wages of the growing number of white-collar workers organized in separate labor confederations (mainly, the Central Organization of Salaried Employees).

The lack of coordination between blue and white collar confederations raised the possibility of inflationary rivalry between the two and an erosion of Social Democratic power, since the white collar confederation was officially politically neutral. While L.O. was not about to abandon its solidarity wage policy and Sweden could not afford to halt structural change in the face of international competition, it was obvious that these policies could not continue as the mainstays of the Social Democratic/Labor program. The need for a shift in emphasis became even clearer in 1969 with the beginning of a wave of wildcat strikes that has continued to the present. In the engineering industries nearly half of all the wildcat strikes in the post-war period have occured since 1968. It is perhaps this threat to Sweden's famed peaceful labor relations more than anything else which has radicalized the union leadership and has caused Social Democrats to remember their long-standing pledge to establish economic as well as political democracy in Sweden.

According to L.O. and the new Social Democratic party program, the time has now come for the third phase of the socialist movement. First came political democracy, then social welfare, and now economic democracy. The new campaign has two distinct parts, the first of which is well under way. The second part is just beginning to come under discussion but may eventually be more significant. The first part of the program is an attack on managerial prerogatives, symbolized by Paragraph 32 in the rules of the employers federation. The campaign began in earnest in 1971, with the L.O. convention calling for greater workers' control over working conditions, planning and personnel policies. Since then a spate of new laws has come into effect.

A 1972 law gives the unions two seats on the boards of directors of firms with 100 or more employees. This law is not considered an extension of union power so much as a way to obtain necessary insights into the operations of large firms.

A 1973 law extends health and safety regulation to all enterprises with five or more employees and strengthens the position of the union safety steward elected by the employees. The employer now has the burden of proof in a dispute about dangerous working conditions, enabling the safety steward to stop production he considers dangerous pending a judgement from the state safety inspector. The employer must also provide information called for by the safety steward or safety committee in larger plants including plans for proposed changes in plant layout and equipment. Such changes can then be held up in the interest of health and safety.

A group of laws which went into effect in the summer of 1974 does much to restrict management's right to hire and fire employees. The employer must give at least one month's notice of dismissal, with older workers entitled to up to six month's notice. Unreasonable dismissals are illegal with the employer bearing the burden of proof when challenged by the unions and the employee retaining his job at full pay pending a court decision. If the employer lays off workers, he must do so according to seniority with employees over 45 receiving double seniority. Employees retain seniority in re-employment for one year after lay off. The same group of laws contains measures to protect handicapped workers and shop stewards, the latter receiving time and training for union work at company expense, rights to information and protection against discrimination in earnings job assignments.

In legislation now being prepared by the government, the legal basis for managerial prerogative is finally eliminated. Under the new law, unions will have the right to negotiate anything and everything, including top level financial decisions. Strikes will be permitted on (non-wage) issues of workers' control even if there is a contract in force. The union's interpretation of non-wage questions will be valid pending a decision by the Labor Court. The employer will have the right of interpretation on wage issues for the first ten days. There may be no implementation of management decisions without first notifying and negotiating with the union. The employer must provide all information requested by the union.

The attack on bosses' power is well suited to the current needs of the L.O. and the Social Democrats. It provides a focus for worker unrest and serves to unite wage-earners in a common struggle, thereby drawing attention away from the wage policy, which could otherwise prove divisive. It also gives workers some control over technological development, ameliorating the effects of structural change. Finally, it tends to splinter the non-socialist opposition parties, with the Liberal and Center Parties often supporting many of the specific reforms (especially in matters of health and safety) with only the Conservatives consistently voting against the reforms.

The second part of the campaign seeks to democratize the economy by eliminating the private ownership of large corporations. Although this is economic democracy in the more orthodox socialist sense, the method proposed is rather innovative. The same L.O. convention which called for the abolition of Paragraph 32 also commissioned L.O. economist Rudolf Meidner to do a study of "wage-earners' funds" for the control of corporate profits. Originally, the intent was to get at the profits left behind by L.O.'s solidarity wage policy in high wage firms. What has emerged, however, is a plan for the gradual socialization of the Swedish economy.

Briefly, Meidner's plan calls for collective profit-sharing in firms with 100 or more employees. These firms would be required to issue new shares of stock of a national union council. The stock would correspond to a fixed percentage of company profits (Meidner suggests 10 to 30 per cent). The dividends would be used for the purchase of additional stock and to finance the educational programs necessary for the success of the attack on managerial prerogatives (workers' education in health, safety, accounting, finance, etc.).

The plan has several interesting features. First, no profits are actually removed from the firm. A certain percentage becomes the property of the employees (all employees in the country) but this portion then remains in the company as working capital. Secondly, obviously, none of the profit share is consumed. This feature prevents inflationary pressures that could nullify the effect of the transfer. Thirdly, it does bottle up some of the profits left in high-wage firms by L.O.'s wage policy, that presumably would otherwise go to managers or private shareholders. Finally, it reverses the normal order of socialization in mixed economies, by socializing the most profitable companies first, although it would still be a good 20 years before the employees' fund would have a majority ownership in even the most profitable firms.

The Meidner approach to economic democracy isn't nearly as attractive politically as the first. The average worker would not see many concrete results for years to come. The approach would probably frighten a good deal of capital out of the country. Its centralized character would frighten Liberals and Centrists, who are afraid of union domination. Moreover, it would eventually require a complete change in the relations between the national union federations and the union locals, with the federations enforcing national union policy over the opposition of various locals. With the common enemy gone, the battles over central versus local controls would become relatively more important.

Because of the risks inherent in the socialization approach, both Social Democrats and union leaders have been cautious in their comments so far. In fact, the party seems almost embarassed by Meidner's proposal and would probably have preferred to deal with it after next September's elections. However, it fits in well with the traditions of the socialist labor movement in Sweden. And, given the party's commitment to redistribution of income and socialization of productive wealth, it will probably be impossible (for it) wholly to dismiss the proposal. In the end, there will probably be some form of collective profit-sharing even if not of the type envisioned by Meidner.

Put together, the two campaigns for "economic democracy" point toward a major transformation of Swedish society. Whether the transformation will succeed is another matter, one that depends upon developments here and in the rest of Western Europe, as well as Sweden. But some sort of fundamental change seems assured.

Eric Stenshoel '75-4 is writing his senior thesis in Economics on collective profit-sharing in Sweden. He is from Minneapolis and lives in Adams House.