The end of the middle road: what happened to the Swedish model?

Monthly Review, March, 1993 by Kenneth Hermele

If there is one single industrial product that has symbolized the Swedish "middle road," it must be the Volvo car: high quality, middle to upper class, safety first, and manufactured in a humane way, without a traditional assembly line. Now this symbol has run up against serious problems. In November 1992, Volvo announced that it would close down two of its assembly plants in Sweden, precisely the two plants in Kalmar and Uddevalla where the new assembly concept was developed. Furthermore, future expansion would only take place at Volvo plants outside Sweden. Saab, which had already been sold to General Motors in an earlier crisis, also announced reductions in production and employment levels. These cutbacks are not just a simple reflection of the global economic crisis. They announce more profound changes in the Swedish model which have taken place over a longer period of time. They also indicate that the middle way has become a dead end.

The Swedish Social Democratic party gained control of the government in 1932. It was not to let go until 1976, forty-four years later, when the government was taken over by a three-party center-conservative coalition. For two consecutve election periods, 1976-1979 and 1979-1982, Social Democracy remained in opposition until it regained power in the elections of 1982, only to lose it again in 1991. Thus, Social Democracy maintained a position of political hegemony for the greater part of the period following the Second World War. The political dominance derived from an alliance between the major Swedish industrial firms and organized labor. This alliance constituted the essence of the "Swedish model."

The usual way of defining the Swedish model has focused on big, dominating labor unions and employers' organizations that negotiate peacefully and agree on wages and other work-related issues. Strikes, lockouts, or lesser conflicts are rare, and a common position on what is of mutual benefit is normally reached without severe contradictions. It is true that such a negotiated consensus was an important component of the Swedish model.

But the alliance on which Social Democracy based its rule was both broad and restricted. It was not a bargain struck between capital and labor in general, but a more limited alliance which left important sectors of society on the sidelines. But thus understood, it generated both a broadly based consensus and thorough structural reforms of the economy and society.

Small-scale and family firms were not favored while support was given to big capital. Through the tax system, expanding and investing firms were subsidized at the expense of smaller undertakings. For the Swedish transnational firms, the real effective tax rate on profits was much lower in Sweden than abroad. The outcome was a strong tendency towards concentration and monopolization of the Swedish economy, even in a geographical sense, creating economic growth zones in the South and West at the expense of the remaining parts.

Similarly, organized labor was the major part of the working class to benefit, particularly the metal workers employed by the Swedish transnational companies. The workers' interest in upholding the alliance was interpreted by Social Democracy and the dominant unions, especially the metal workers, as being the promise of increasing real wages at the expense of other aspects of working life. Hence, work content, responsibility, and other working conditions were sacrificed at the altar of Mammon.

Unorganized workers, part-time workers (especially women), and the labor force of less dynamic sectors such as textiles were left outside the alliance. In the 1980's, the consequences of this segregated labor market led a growing number of people (mostly women, many in part-time employment) to engage in harmful and wasteful occupations modelled on the tradition of Taylorism. It may sound strange, but the fact is that even today plants that are owned by many of Sweden's most renowned firms-among them Volvo, Ericsson, Electrolux, and Saab-Scania---employ one quarter of their labor force doing tasks with short cycles of two minutes only. This means that the same movement has to be repeated thirty times every hour, which inevitably leads to a rapid destruction of nerves and flexibility and causes severe muscular pain. An increasing number of women find themselves handicapped for life at the age of thirty or forty.

This subordination of human needs to the economic interests of a section of the working class resulted in a dramatic widening of the gap between white and blue collar workers in general. One example was the rate of premature deaths. Whereas white and blue collar workers had about the same frequency of premature deaths in 1961, the frequency dropped 25 percent for white collar workers over the next twenty five years, while for blue collar workers it actually increased a little.

The basic factor underpinning the alliance from the point of view of organized labor as well as of industrial capital was that Social Democracy could deliver the goods. Labor wanted a steady rise in real wages and secure employment coupled with improving social security; capital wanted beneficial tax rules supporting its domestic expansion as well as its strategy on international markets. As we shall see, however, this support for the expansion of the dominating Swedish corporations was not unconditional. Social Democracy was a harsh ally in the sense that it only accepted high performance and the ability to compete internationally. Capital, on the other hand, wanted law and order, political stability, and long-term policies supporting further concentration of economic power. In informal discussions, leading representatives of Swedish industrial capital, among them the Wallenberg family and the Volvo chairman P.G. Gyllenhammar, had grown accustomed to reaching a consensus with Social Democracy.