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What is living and what is dead in Swedish social democracy?

What is living and what is dead in Swedish social democracy?

Magnus ryner

Seeming to confirm that politics proceeds through contradiction, the essentials of a neoliberal project – the subordination of the social to market discipline – has been consolidated in Europe by social-democratic governments. As yet another political project which is referred to as ʻthe Third Wayʼ, this articulation of social democracy with economic liberalism sets high demands on ideology, understood in the Gramscian sense as a multi-levelled phenomenon that contains and fuses a wide range of more or less coherent discursive forms from ʻcommon senseʼ to ʻphilosophyʼ.

Ideology in this sense is a material practice, with the function to ʻcementʼ (or, better, interpellate) multifarious, stratified and antagonistic segments of society into a broad political direction. Politicians and mass parties play a strategic role in this context as ʻorganic intellectualsʼ, as it is they who take on the task of ensuring this coherence. In this practice they deploy a number of discursive techniques at different levels of civil and political society. These range from ʻspin-doctoringʼ to internal party work and policy formulation, and assume different forms depending on what specific context of civil/political society they are directed at. In terms of content, provided that it is possible to achieve operational coherence at the policy level, heterogeneity in ʻthe messageʼ and even factionalism are not necessarily a weakness, but rather a strength, since this increases the range of interests and identities that can be integrated into the political project. In other words, the successful mass party elaborates and mediates different and heterogeneous interpretations of ʻcommon senseʼ, with a coherent and operational political strategy within the state in a way that is also consistent with socio-economic developments. In this process, social scientists and philosophers may under certain conditions play a crucial role, providing ideological discourse with a special logical coherence, direction and authority. The cosmopolitan intellectual1 of the Third Way par excellence, Anthony Giddens, seeks to contribute to resolving the difficulties of the Third Way articulation by fusing neoliberal economics with more communitarian sentiments that draw on recent developments in ʻreflexive sociologyʼ.

In this article I criticize the trajectory of Giddensʼs The Third Way: The Renewal of Social Democracy2 exactly at the level where Giddens seeks to pitch it: as a social-scientific/philosophical justification of a neoliberalization of social democracy. In this endeavour, I am joining a growing chorus of Left critics. [3] The distinct contribution of my critique is its reference to research on Swedish social democracy and its crisis in the wake of neoliberal globalization. Such a focus on the ʻSwedish modelʼ can be justified for two reasons. First, the Swedish model was for a long time a paradigmatic case for the European reformist Left, because of its perceived capacity to integrate economic and distributive rationality. Whilst there was a lot of simple-minded hubris associated with this, I argue that this has now resulted in an equally simple-minded disillusionment. My exposition seeks to demonstrate that there are many positive lessons for the Left to learn from the legacy of the Swedish model, which can help meet the urgent need of formulating concrete alternatives. The second reason for focusing on Sweden is because a closer reading of The Third Way makes it clear that crucial passages in Giddensʼs dismissal of what he calls ʻtraditional social democracyʼ rest on a faulty interpretation of the crisis of the Swedish model in the 1990s.

The thesis I seek to defend is that Giddensʼs attempt to reconcile radical democratic principles (ʻno authority without democracyʼ) with neoliberal socio-economic discipline (ʻno rights without responsibilitiesʼ) is flawed and cannot escape the essential limitations on democratic citizenship exerted by commodification. This is masked in the Third Way through a sleight-of-hand through which very different types of risk – ecological, social and financial risk – are treated as if they were one and the same. This conflation of types of risk ignores not only that the incidence of risk is systematically unevenly distributed in capitalism, but also that the radical democratic citizenship which the challenge of ecological risk requires is undermined by the exposure to social and financial risk that the institutions of the Third Way imply. In short, radical democracy presupposes exactly the decommodification strategies and social citizenship which Giddens would have the Left abandon.

It is for that reason that it is interesting to reconsider the structural reforms of the welfare state that the Swedish Left mobilized around, and partly implemented, in the 1970s and the 1980s. I argue that these reforms provide important clues for how one might, within the context of post-Fordist forces of production and late-modern patterns of societalization, plausibly construct a politics of ʻno authority without democracyʼ. Contrary to what Giddens implies, this Swedish model did not falter due to economic dysfunctions. Rather, the crisis was politically determined: the requisite power mobilization on the Left did not materialize because of the limitations and contradictions implied in the integration of the organizations of the reformist Left into the management of the capitalist state. This confirms the continued relevance of Poulantzasʼs analysis in State, Power, Socialism.

The conflation of risk

I will not argue against Giddensʼs principle of ʻno authority without democracyʼ. The problem is rather that it is irreconcilable with ʻno rights without responsibilitiesʼ. Giddens does, to be sure, imply the contrary and links neoliberal economics with radical participatory politics. The link is made, via Beck, with reference to a generic conception of ʻriskʼ.

Providing citizens with security has long been a concern of social democrats. The welfare state has been seen as the vehicle of social security. One of the main lessons to be drawn from ecological questions is that just as much attention needs to be given to risk. The new prominence of risk connects individual autonomy on the one hand with the sweeping influence over scientific and technological change on the other. Risk draws attention to the dangers we face – the most important of which we have created for ourselves – but also to the opportunities that go along with them. Risk is not just a negative phenomenon – something to be avoided or minimized. It is at the same time the energizing principle of a society that has broken away from tradition and nature. [4]

This reading allows him to treat the imperative for democratic civic involvement in ecological riskmanagement as equivalent and synonymous with the risk that the individual faces in the management of his or her pension, unemployment and health. In this context ecological, social and financial risk are treated as if they had the same ontological quality: taking responsibility for the environment and oneʼs mutual fund become one and the same.

From the point of view of political and ideological practice this conflation is cunning, because it reconciles within the neoliberal social-democratic project conflicting economic demands with demands for legitimacy, social representation and civic participation. As a result it justifies on a philosophical-theoretical level a broad alliance of interests that otherwise would not be reconcilable. This parallels the practical politics of ʻNew Labourʼ in Britain, and its aim to be all-inclusive and construct a ʻpolitics without enemiesʼ, but ignores real and concrete political cleavages and antagonisms in an unequal society. [New Labour] speaks as if there are no longer any conflicting interests which cannot be reconciled. It therefore envisages a ʻpolitics without adversariesʼ.

This suggests that by some miracle of transcendence the interests represented by, say, the ban on tobacco advertising and ʻFormula Oneʼ, … ethical foreign policy and the sale of arms to Indonesia, media diversity and the concentrated drive-to-global-power of Rupert Murdochʼs media empire have been effortlessly ʻharmonisedʼ on a Higher Plane, above politics. [5]

Of course, one cannot deny that ʻpositive-sum gamesʼ and social compromises are possible. Indeed, it is difficult to envisage any social-democratic politics, past, present or future, without it, and indeed the ʻFordist compromiseʼ was essentially about this. [6] But such positive-sum games are based on particular conditions. Giddensʼs conflation of risk obscures rather than clarifies an analysis of these conditions, and pretends that there is scope for positive-sum solutions where there is none. It is far-fetched indeed to suggest that Beckʼs conception of ecological risk is of the same ontological quality as the kind of risk that is associated with the management of financial assets, which so severely constrain welfare states through globalized financial markets. The same goes for the kind of risk that wage-labour faces on the labour market. Furthermore, the ʻhuman energiesʼ required in the pursuit of a job and in the choice of a mutual fund, on the one hand, and in civic involvement and in the reasonable consideration of our actions in light of ecological risk, on the other hand, are hardly one and the same. In fact one can reasonably follow the classical works by Marx and Polanyi on the nature of alienation in the capitalist wage relation to argue that these ʻhuman energiesʼ stand in a relation of mutual conflict and contradiction to one another. This is especially the case for the socially unprotected worker without ʻhuman capitalʼ, who enters the labour market under subordinate conditions. Moreover, if it is at all possible to reconcile them, it requires a continued commitment to the ʻtraditionalʼ social-democratic project of humanization of capitalism – that is, the decommodification that Giddens rejects in his moralhazard argument.

The fundamental point was already made by Aristotle. [7] According to him leisure is required for civic involvement and ethical deliberation in the polity. This means that ʻfree and equalʼ citizens must be certain that the satisfaction of their basic human needs are guaranteed and hence are not dependent upon success in the marketplace. But, furthermore, capacities for practical reason, affiliation with fellow human beings, and relatedness to nature must also be fully encouraged and nurtured, and the autonomy of humans as individual must be respected. Only when these needs are satisfied can humans leave the ʻrealm of necessityʼ and enter the ʻrealm of freedomʼ as citizens capable of civic involvement in a democratic polity. What is more, in a democratic society these needs must be secured for all citizens to organize themselves democratically and ethically in society. In the Economic and Philosophical Manuscripts of 1844 it was Marxʼs point exactly that the leisure required, and these ʻarchitectonic functionsʼ, could not be adequately produced for the possessive individualist of capitalist society. Adequate amounts of leisure and ʻsecurityʼ are certainly not granted to the wage labourer. Furthermore, though, those who are affluent in capitalist society are also constantly compelled to face the risks and competition of the market. As a result, all their energies have to be concentrated on the reproduction of the conditions necessary for their existence, and the development of the architectonic functions are thus neglected. And, indeed, social welfare reform constituted exactly a response to this Marxist challenge to bourgeois society.

The problem with Giddensʼs conflated extension of Beckʼs management of ecological risk to the management of risk in the labour and financial markets is that the latter type of risk corresponds exactly to the kind of commodification of human life that undermines the architectonic functions. The result of this is that Giddens sets utterly unreasonable demands on the citizen. One wonders where one might find Giddensʼs heroic competitive, flexible and mobile individual who at the same time is a nurturing parent, rooted in a community, in which s/he has time and energy to invest civic involvement, and who in this context would refrain from engaging in power-charged strategic language games driven on by economic interests imposed by necessities as defined by the terms of market participation. It is as if the entire weight of the social contradictions of modern capitalism is to be borne by the individual, who has no social rights at all to claim ʻwithout responsibilitiesʼ. The highly unequally distributed incidence of this weight, which stems from the unequal terms on which individuals participate in the labour and capital markets, is too obvious to require further elaboration.

Symptomatically, it is on issues such as these that Giddens draws back from Habermas and Offe. In contrast to Giddens, however, Habermas and Offe continue in this context to be concerned with the dangers of the commodity logic of the capitalist economic system and its ʻcolonizationʼ of these communal networks. In recent work, Offe is particularly concerned with the threat of social marginalization that is inherent in private insurance. Such insurance gives powerful incentives to those with purchasing and market power to exclude others, in order to reduce risks and costs on premiums. More generally, neoliberal deregulation promotes residual measures, where only ʻthose in needʼ will be protected. This, however, tends to constitute different welfare constituencies as fragmented and marginal groups, who can easily be targeted as minority ʻspecial interestsʼ when further cutbacks are called for, or as neoliberal political constituencies call for ʻtax cutsʼ. This perpetuates rather than mitigates the fragmentary tendencies of post-traditional societies. [8] Whilst Giddens claims that the ʻThird Wayʼ is committed to prevent such social exclusion, he does not provide any reasonable evidence that it is up to this task.

The swedish model

It is in this context that I make the case for reconsidering the legacy of the Swedish model. My argument should not be seen as an apologia for postwar Swedish social democracy. Sweden has been riddled with the tendential accumulation, rationality and legitimation crises of Fordist welfare capitalism, and its original foundation in a homogenous industrial working-class project is, as Giddens suggests, anachronistic. Nevertheless, as neoinstitutionalism argues, different welfare state regimes do generate different trajectories of socio-political development and the universal welfare state regime of the Swedish model provides a more propitious framework for realizing a politics of ʻno authority without democracyʼ than Giddensʼs Third Way. [9] Moreover, contrary to what Giddensʼs and Lindbeckʼs moral hazard thesis suggests, such a reconstitution of the universal welfare state can be made compatible with post-Fordist economic rationality. We do not need to succumb to ʻno rights without responsibilitiesʼ. When considered dialectically, the Swedish model can continue to serve as a guide for the Left, because within it is an immanent logic of decommodification that also reflexively considers ex ante the terms of its economic reproduction.

Giddensʼs characterization of social democracy as having no conception of ʻthe supply sideʼ and productivity is a caricature, probably based on the comparatively unsuccessful experience of British Labourism. Socialdemocratic doctrines have indeed emphasized the idea of a progressive humanization of industrial capitalism. But these doctrines were also simultaneously concerned with the development of the productive forces, and hence with the ʻsupply sideʼ, as well as ʻdemand sideʼ planning measures that would achieve productivity growth and socially reflexive rationalization. This is, for example, the case with the ʻexpansive wage policyʼ of the metalworkersʼ union in Germany. [10] The same principle appears in a more developed form in the Swedish ʻRehn–Meidner modelʼ, a theoretical elaboration of thoughts on ʻsolidaristic wage policyʼ that the Swedish trade union began to develop in the 1930s. [11]

The Rehn–Meidner model sought to make a ʻhumanizationʼ of capitalism compatible with economic rationalization, through mutually reinforcing policies that modified the capitalist wage relation. The key ingredient is an unconditional commitment by the government to ensure full employment and universal social programmes based on ʻsocial citizenshipʼ principles. In this context, trade unions pool their bargaining power in centralized negotiations with employers and seek to maximize the wage share for workers in the economy as a whole. Wage negotiations generate only one central wage bargain for the entire economy, based on the principle ʻequal pay for equal workʼ. This means that low-productivity firms cannot afford the going rates and are forced out of business. But firms with high-productivity growth are rewarded with lower wage increases than they would have to pay in a ʻfreeʼ labour market at full employment, where the labour supply would be scarce. The effect of this solidaristic wage policy is a stimulation of the structural transformation of the economy and a diffusion of core technologies and employment. Resources are more rapidly transformed from the low-productivity firms to the high-productivity firms through the ʻtransformation pressureʼ that negotiated wages exert. [12] The transformation is further enhanced by public investments in selective labour market policy, which ensures that the labour force is trained according to the new labour demand. Grants are also provided for the relocation to new jobs. This is the ʻsupply sideʼ of the model that minimizes structural and ʻfrictionalʼ unemployment. On the demand side, macroeconomic policies are pursued to prevent cyclical unemployment. When labour demand in industry is saturated because of increased capital intensity, the state expands welfare state services (especially in childcare, health care, education and the care of the elderly) and employment. Solidaristic wage policy between the public and private sectors and increased taxes then partially take over the function of exerting transformation pressure. Alternatively (or in combination with the latter) work-time is reduced: ʻsolidaristic work policyʼ. [13]

Apart from this rationale for productivity, the Rehn–Meidner model also implies a rationale of redistribution and decommodification. This is because work becomes a citizenship right and solidaristic wage policy eliminates low-wage and precarious employment. The conception of ʻequal payʼ is not determined by the market here, but by the subjective conception of a ʻjust wageʼ of the wage-earner collective, as defined and organized from within encompassing trade unions. [14] This moral economy defines the terms of legitimacy for trade unions in wage bargaining. It provides an incentive for unions to set the macro-wage high, so that the room for manoeuvre of marketdetermined wages (ʻwage driftʼ) is minimized. As long as an appropriate macroeconomic stance is kept, this is productive because it facilitates transformation pressure. It should be noted that the model ought to be an instance of ʻmoral hazardʼ. Wages are not contingent on the performance of individuals. The state is unconditionally committed to pursue full employment. Should an individual nevertheless not obtain a job, or should wage-labour be insufficient to meet the publicly defined ʻincome normsʼ (caused by health problems or child-rearing expenses, for example), then universal social insurance payments are available. This model provided the chief policy paradigm for Swedish postwar politico-economic development, and was remarkably successful in ensuring a combination of economic growth, equality and social security. [15]

From the economic point of view, the Achilles heel of the Rehn–Meidner model can be located at the nexus of finance and investment. The imperatives of the moral economy implied a general profits squeeze as wage drift had to be avoided. In this context, there is no guarantee that capitalists would be motivated to reinvest on a level sufficient to maintain full employment. To redress this problem, the government pursued a deliberate low-interest-rate policy, which in the context of a full-employment economy in the postwar period required heavy controls and regulation on the financial and foreign exchange market. As a result of increased concentration of capital, internationalization of production, and increased demand for finance in the twilight of the Fordist period, incentives and capacities to evade capital controls and find alternative investment opportunities correspondingly increased. As a result, Swedish trade unions demanded a progressive socialization of the finance and investment function.

First, this took the form of publicly managed pension funds, financed by surcharges on capital. These pension funds would provide alternative source of finance, alternative to those of banks and shareholders. Later, it was argued that a more consistent solution of the problem required ʻwage earner fundsʼ. The basic idea here was that ʻexcessʼ profits that resulted from unions not seeking wage increases corresponding to productivity growth in high-productivity firms would be earmarked for the emission, or, in more moderate versions, purchase, of shares that would become the property of wage earners via trade unions. Hence, holding companies (owned by workers) would become the major investors in the economy and, in the most consistent applications, the result would be the transition to market socialism in Sweden. [16] The wage-earnerfund proposals were, however, defeated in political struggle, and the Swedish social-democratic party lost its nerve and retreated from the proposal. [17]

Underpinning the Rehn–Meidner model and its proposed extensions was a particular ideological–intellectual perspective that synthesized insights from Marxian and institutionalist political economy in order to redress capitalist ʻmisrationalizationʼ. [18] The latter notion was coined by Austro-Marxist Otto Bauer, who was invoked in debates on strategy in the Swedish labour movement in the 1930s. According to Bauer, misrationalization occurs when there is a discrepancy between the reduction of private-economic costs generated by rationalization in individual enterprises and societal costs. The reduction of costs of production for the individual capitalist is not necessarily the same as the reduction of costs for society, and in advanced, functionally differentiated and organically complex capitalism the tendency is towards increased gap between these costs. This tendency is due to wagelabour being a commodity in capitalist society, which the capitalist purchases only for the limited duration under which s/he needs it, whilst the reproduction of wage-labour takes place outside this relation. Hence capitalists do not incur the costs of this reproduction, which rather is borne by society as a whole (and in the case of laissez faire the cost is distributed to each individual wage-labouring household). The discrepancy between private and social rationalization can only be bridged when economic production and social reproduction are unified within the same organizational meta-principle, with increasingly socialist traits.

In this ideological conception, rationalization as a principle is affirmed. However, the naive equation of rationalization with the unleashing of market forces is profoundly problematized. What Swedish social democrats took from Bauer as a guiding principle in their pragmatic search for appropriate welfare state mechanisms was the idea that economic and social rationalization had to be viewed from an integral perspective and that a common organizational meta-principle was needed (ʻplanningʼ). This required an integral welfare state that had at its regulatory core institutions that could promote economic rationalization at the same time as this rationalization was checked for social concerns. Viewed from this perspective, Giddens does not so much infuse Left discourse with a conception of rationalization on the ʻsupply sideʼ, which previously was absent; rather, he loses the important distinction between private–individual and social rationalization and embraces the simple-minded and narrow market conception of rationalization. In contrast to an integral welfare state perspective, this results in a ʻresidualʼ welfare state perspective. Here, the market mechanism is not modified ex ante but is construed as the basic mechanism of social organization. Welfare state measures are merely used as ʻcorrectivesʼ ex post when people cannot for ʻvalid reasonsʼ manage to make ends meet through market participation. This is the welfare state type that has characterized especially AngloSaxon societies. [19] If anything, Giddens has merely advocated a purer type of residualism, which is riddled with contradictions. Though formally justified in terms of ʻindividual freedomʼ, this type of welfare state is by necessity selective and intrusive, as it is forced to economize on scarce welfare state resources and to subject its clients to surveillance that restricts and violates their freedom.

The radical implications of Otto Bauerʼs reformism should not be underestimated, because it implies a highly conditional tolerance of capitalist social relations and a fundamental challenge to the absolute discretion of private ownership of the means of production. In the Swedish context, capital has continuously fought off the most radical and logically consistent political implications of this thinking, as in the case of the wage-earner funds as well as Gunnar Myrdalʼs notions of democratic planning in the immediate postwar period. Nevertheless, Swedish social democrats in the postwar period were sufficiently strong to maintain the integral welfare state principle in the form of the Rehn–Meidner model. In other countries, this control of the ʻsupply sideʼ has been weaker – particularly in Britain, where Labour in the end only came to subscribe to a vulgar variant of demand-side Keynesianism, without any elements of integral planning. But this ʻretreat to the demand sideʼ was not due to a lack of an integral perspective in other countries. It rather expressed a compromise from the position of political weakness. What Giddens characterizes as the essence of ʻtraditional social democracyʼ is, then, no such thing. It is the dilution of social democracy in its postwar compromise with economic liberalism. His remedy for the crisis of this hybrid form is further hybridity.

I would maintain that the integral welfare state perspective, which centres on a decommodification of the wage-labour relation, is as relevant as it ever was. If we accept Giddensʼs contention of a more pluralist, heterogeneous and ʻdenaturalizedʼ society in which social policy becomes more complex and difficult to implement, because norms must be discursively established, then it is more universal programmes and entitlements that are needed, combined with regulatory policies that prevent capitalist misrationalization ex ante. [20] It is a fallacy to think that cultural heterogeneity is antithetical to universalism. Only if social entitlements are formulated on a universal level can they be sufficiently abstract to include a multifarious range of identities and interests. [21] Only through abstract social policy norms can the welfare state ʻdo its jobʼ without refraining from the impositional encoding of ʻcorrect livingʼ on social groups. Such general norms are also necessary in order to allow the state to devolve the implementation of welfare policy to different groups, so that they can gear the general entitlements towards their particular needs and situation. Moreover, such a universal–abstract conception of social citizenship is needed to prevent social divisions and distributive conflicts between different groups. [22] It is only through decommodification and this broader conception of social citizenship that one can envisage adequate architectonic capacities emerging, which would allow citizens to cope, for example, with the environmental risks that Giddens raises by invoking Beck. [23] But to be meaningful at all in this context, universal entitlements need to be set at high levels, and services need to be of a high quality. This means that they are costly and that they require higher tax rates and rates of public consumption than Giddens is willing to contemplate. [24] Universalism, as opposed to redistribution through means-testing, also means that the prevention of poverty is best resolved ex ante at the level of the wage relation. Qua the Rehn–Meidner model, this requires a tight discipline on capital and in its most consistent application implies a socialization of finance and market socialism. In other words, social wage relations need to be modified before the capitalist labour market generates its external effects on the lifeworld.

This is why the Swedish New Left did not oppose the universal welfare state so much as seek to extend it in the 1970s and 1980s and to fill it with democratic content, through reforms in the areas of workplace democracy and social service delivery. This project rested on a broad-based ʻwage-earner allianceʼ which encompassed blueand white-collar workers, and an increasingly heterogeneous welfare state constituency that nevertheless remained committed to universalism. [25] The workplace reforms centred on the Work Environment and Co-determination Acts, which extended considerable powers to local trade unions and shop stewards to shape workplace organization. Work-safety representatives were, for example, given authority to shut down unsafe work, and it was employers that carried the burden of proof in tripartite tribunals to show that work was safe and could be recommenced. The relatively strong language of this legislation and of the Work Safety Laws, along with the strong local and central position of Swedish trade unions (with a unionization rate well above 80 per cent) and full employment, ensured that these local provisions indeed translated into real power to shape working life, at least to a degree, in terms of the adaptation of new technology and the organization of work time. [26] If wage-earner funds had been implemented, this power would have become yet stronger. In terms of social provisions, ambitious proposals were put forward in the early 1980s to decentralize the administration of social services and to grant local clients influence over their administration. If they had been successfully combined with the co-determination reforms, this could have resulted in the freeing up of leisure time (through, for example, fully compensated reductions of the working week, and work sabbaticals), which would have resulted in real democratization of welfare state provision. In short, these reforms would have gone a long way towards realizing the principle of ʻno authority without democracyʼ. [27]

Viability and moral hazard

If we accept that the Swedish model provided an adequate mode of economic regulation in the Fordist period, does it provide the basis for a viable mode in a ʻpost-Fordistʼ era where the terms of global capitalist competition have intensified, where there is less scope to tolerate ʻmoral hazardʼ? The answer is yes. [28] First, Giddensʼs and Lindbeckʼs claims notwithstanding, there is no problem of ʻmoral hazardʼ. If there were, then we would expect Sweden to have had a higher number of vacancies (unfilled jobs) at a given rate of economic activity and unemployment than other advanced capitalist countries in the 1970s and 1980s. According to OECD statistics, the exact opposite is the case. [29] Second, a modified Rehn–Meidner model demonstrably provides an appropriate framework for a progressive post-Fordism. As regulation theorists have argued, post-Fordism does not inherently require a ʻnumerically flexibleʼ and commodified labour market. ʻNegotiated involvementʼ constitutes an alternative post-Fordist trajectory. Here co-determination for labour on the shop floor, operating in tandem with a solidaristic wage policy and active labour market policy à la Rehn–Meidner model, provides an alternative form for functional flexibility. [30] This was verified in Swedish industrial experiments of the 1980s. [31] This in turn can underwrite high wage employment in a public social-service sector, which provides use values for social reproduction. [32] Hence, this model does not presuppose ʻthe male-breadwinner modelʼ that Giddens attributes to ʻtraditional social democracyʼ.

What, then, was the problem? Clearly there was one, because events between 1989 and 1994 shattered the Swedish model as a paradigm. They started with accelerating inflation 1989–90, fuelled by strikes and wage rivalry between different unions that fragmented wage bargaining coordination. This, in turn, led to a run on the Swedish currency, which compelled the government, for the first time since the budget of 1932, to give up its full-employment commitment in favour of price stability. The austerity measures that ensued dovetailed with the world recession and a crisis of the financial system as borrowers defaulted on debt en masse. This exacerbated currency collapse further and forced overnight interest rates up to the unbelievable level of 500 per cent in late 1992. Subsequently, Sweden experienced negative growth rates through 1994. Whilst the economy recovered in the late 1990s, the policy routines of the Swedish model were abandoned: unemployment remained high, social insurance replacement ratios were reduced, and collective bargaining was decentralized along sectoral lines. Swedenʼs post-Fordist development shifted towards a neoliberal trajectory. Nothing symbolized this more than the shutdown of the Kalmar and Uddevalla plants in 1994, as Volvo eliminated spare capacity during the deep recession.

But, as argued above, contrary to the neoliberal thesis, the causes of the crisis cannot be reduced to microeconomic dysfunctions and moral hazard on the labour market. Rather, the propitious tendencies towards a progressive post-Fordism were not realized because of the failure to institutionalize a supporting mode of regulation based on the reforms of the 1970s discussed in the previous section. This failure was, in turn, an outcome of social struggle, where the wage-earner alliance associated with the latter reforms was divided and defeated by forces led by transnationally mobile Swedish capital. This resulted in a hybridic, unstable and contradictory regulation, with a crisis logic that progressively tended towards ever more neoliberal solutions. Critical in this context was the interpellation of strategically important state apparatuses and social-democratic personnel into the neoliberal hegemonic project – especially those located in the Ministry of Finance and the Central Bank. This pre-empted the progressive project primarily organized around the trade unions, the social policy complex and the Ministry of Labour. It would be overly voluntarist merely to conclude that ʻthe leaders betrayed usʼ. Rather, it underlines the importance of structural features of social relations of capitalist accumulation, including those of the state.

Increasing internationalization of production, the collapse of Bretton Woods, and the globalization of finance conspired to undermine the precarious relations between finance and investment that the Rehn–Meidner model presupposed. [33] This undermined the prospects to determine ʻjust wagesʼ in accordance to the tradeunion ʻmoral economyʼ. As a result the scope for ʻresponsibleʼ coordinated bargaining was severely limited. At the same time, employers had in the 1980s adopted a neoliberal ideological orientation. Hence they had deliberately begun to insist on a decentralization of bargaining, and they resisted any attempt to maintain a solidaristic wage policy. Increasingly they took the view that wages should be a tool of individual managers. As a result, they used the increased structural power that transnational production implied and increased divisions within the wage-earner collective generated by procyclical economic policy and the ensuing wage drift to decentralize bargaining. This was the determining factor behind the unravelling of the public and private and whiteand blue-collar factions of the wage-earner alliance. [35]

But these structural developments of ʻglobalizationʼ and the deliberate actions of business must be actively constituted and enabled through the state. Here we find the most interesting part of the story of Swedish neoliberalism in the 1990s: the remarkable ease with which the Swedish social-democratic personnel in the Finance Ministry and Central Bank not only acted to pre-empt the implementation of wage-earner funds, but also deregulated financial markets and, especially, deliberately destabilized the terms of solidaristic wage policy through a monetary and borrowing policy that deliberately increased the sensitivity of Swedish interest rates to global financial markets. [35] The broader purpose of this so-called ʻnorms-basedʼ monetary policy was to contain inflation by exerting market discipline on collective actors, such as unions and social-service agencies in wage and budget bargaining. [36] This is clearly a variant of ʻdisciplinary neoliberalismʼ, [37] and it represents a redefinition by the Ministry of Finance and the Central Bank of the patterns of social representation in the state. In effect, the Ministry of Finance abandoned its support of solidaristic wage policy. The tendencies towards deeper commodification of the wage relation were thus enforced.

The structural power mobilized by this form of rule was effectively used to create a ʻcrisis consciousnessʼ at strategic junctures. Previously inconceivable decisions ʻto calm the marketʼ were taken in the context of rapid capital flight, including the decision formally to abandon the full-employment commitment in 1990. The basic fallacy was that disciplinary neo-liberalism would enhance incomes policy. Short-termism and the speculative nature of international financial flows, however, totally undermined any predictability for bargaining in the late 1980s. Apart from the effect of economic overheating resulting from procyclical policy, the defensive distributive struggles of increas-ingly fragmented trade unions generated wage-push inflation, which exacerbated the problem. Of course, this provided the basis for blaming the trade unions for the crisis, and it is in this context that one should consider Lindbeckʼs moral hazard argument. However, the largest source also of this conjunctural instability can be traced to financial capital. Bank lending was overextended as a result of deregulation. This resulted in bad loans and defaults in the deep recession of the early 1990s. Capital deregulation and the strategy to increase Swedenʼs interest rate sensitivity thus seriously backfired.

The policy of the Ministry of Finance is so antithetical to our understanding of Swedish social-democratic economic rationality that it is tempting to invoke the term ʻfalse consciousnessʼ. The policy clearly contradicted the terms of solidaristic wage policy, which also has been critical to the continued electoral hegemony of Swedish social democracy, based as it is on a ʻwage-earner allianceʼ. [38] The reasonable interpretation is that the Ministry of Finance acted according to its ideational convictions; this, then, would be a case of the permeation of transnational neoliberal hegemony in the practice of Swedish social-democratic elites.

But why did social democrats at the ʻcommanding heightsʼ of economic regulation become neoliberals? I have argued at greater length elsewhere that this receptiveness to neoliberalism was generated as a result of ideational developments within social-democratic circles during the golden age of Fordism itself. [39] Under the surface of policy continuity, the way of arguing and justifying the mode of regulation changed. It changed from the Marxian–institutionalist conception to a piecemeal social engineering conception. As a result of this, the crisis of the 1970s was not, as in the trade unions, interpreted as a crisis of capitalism, but as a falsification of Keynesian ideas, which verified the ʻnull hypothesisʼ of monetarism. This shift in the epistemic form of economic policy discourse, as opposed to content, corresponds to the period in which the Swedish social democrats established themselves as the managerial cadre of the capitalist state.

Thus there was an impasse in the traditional socialdemocratic project in Sweden. But the impasse does not pertain to the policy of decommodification, as Giddens suggests. Their decommodification strategies remain the lasting contributions of Swedish social democrats to socialist thought. It rather pertains, as Poulantzas suggests, to the ʻinstitutional materialityʼ of the capitalist state sui generis and its attendant discourses, which tends to capture the reformist labour movement. [40]

As the implausibility of Giddensʼs discussion of risk shows, the politics without enemies ʻbeyondʼ left and right is a mirage. At best, and disregarding the threat of the extreme Right, we are faced with a struggle between capitalism and commodification on the one hand, and democracy and decommodification on the other, where the former has the upper hand. But this is not because of objective and intransitive realities. Pluralist and democratic market socialism is possible, and the Left does not have to reinvent the wheel in this endeavour.

The Swedish experience does, however, underline the difficulty of engaging in a war of position in the capitalist state. In my critique of Giddens I argued that when the real causes of the crisis of the Swedish model were understood, his argument amounted to a tautology: neoliberalism is necessary because of neoliberalism. This points to a powerful dialectic within the capitalist state: when the labour movement and the Left have managed to achieve a degree of decommodification and generated hybridic forms of regulation, ʻscientificʼ analysis in the state finds ways arbitrarily to blame and purge the element of decommodification in moments of crisis. We can see this in the fact that the Left has been blamed for the crisis of the weak ʻdemand-sideʼ variants of Keynesianism, when these were in fact creations of the Right. But we can also see it in the way that the economic elites of the comparatively strong Swedish labour movement were progressively interpellated by the institutional materiality of the capitalist state and rejected their own creation.


I thank Mark Neocleous for comments on previous drafts.

1. ^ Pace Gramsci, Selections from the Prison Notebooks, trans. and ed. Q, Hoare and G. Nowell-Smith, International Publishers, New York, 1971, pp. 56n and 374.

2. ^ Anthony Giddens, The Third Way: The Renewal of Social Democracy, Polity Press, Cambridge, 1998 (henceforth TW).

3. ^ E.g. Stuart Hall, ʻThe Great Moving Nowhere Showʼ, Marxism Today, Special Issue, November/December 1998; Chantal Mouffe, ʻThe Radical Centre: Politics without Adversaryʼ, Soundings 9, 1998; Nikolas Rose, ʻInventiveness in Politicsʼ, Economy and Society, vol. 28, no. 3, 1999; Riccardo Petrella, ʻMan nannte es den dritten Wegʼ, Le Monde Diplomatique (German-language version), 6 October 1999; Alex Callinicos, Against the Third Way, Polity Press, Cambridge, 2001.

4. ^ TW, pp. 62–3.

5. ^ Hall, ʻThe Great Moving Nowhere Showʼ, p. 10. See also Mouffe, ʻThe Radical Centreʼ.

6. ^ E.g. Michel Aglietta, A Theory of Capitalist Regulation, New Left Books, London, 1979.

7. ^ Martha Nussbaum, ʻAristotelean Social Democracyʼ, in B.R. Douglas et al., Liberalism and the Good, Routledge, London, 1990,

8. ^ Claus Offe, Modernity and the State, Polity Press, Cambridge, 1996, pp. 105–20; 147–200.

9. ^ See especially Ulf Himmelstrand et al. Beyond the Welfare State, Heineman, London, 1981.

10. ^ See Peter Swenson, Fair Shares: Unions, Pay and Politics in Sweden and West Germany, Cornell University Press, Ithaca, 1989.

11. ^ Anders L. Johansson, Tillväxt och klass-samarbete, Tiden, Stockholm, 1989; Gösta Rehn, ʻEkonomisk politik vid full sysselsättningʼ, Tiden 3, 1948; Rudolf Meidner, ʻLönepolitikens dilemma vid full sysselsättningʼ, Tiden 9, 1948; LO, Fackföreningsrörelsen och den fulla sysselsättningen, LO, Stockholm, 1951.

12. ^ Lennart Erixon, ʻRehn-Meidnermodellen: En tredje väg i den ekonomiska politikenʼ, Arbetslivscentrum. Research Report 4, 1994.

13. ^ Anna Hedborg and Rudolf Meidner, Folkhemsmodellen, Rabén & Sjögren, Stockholm, 1984; Wallace Clement and Rianne Mahon, eds, Swedish Social Democracy, Canadian Scholarsʼ Press, Toronto, 1994.

14. ^ Swenson, Fair Shares.

15. ^ Sven E. Olsson, ʻSwedenʼ, in Peter Flora, ed., Growth to Limits, De Greuyter, Berlin, 1987.

16. ^ Rudolf Meidner, ʻOur Concept of the Third Way: Some Remarks on the Socio-Political Tenets of the Swedish Labour Movementʼ, Economic and Industrial Democracy, vol. 1, no, 1, 1980; Jonas Pontusson, The Limits of Social Democracy, Cornell University Press, Ithaca, 1992.

17. ^ Jonas Pontusson, ʻRadicalization and Retreat in Swedish Social Democracyʼ, New Left Review 165, 1987.

18. ^ For an elaboration, see Magnus Ryner, Capitalist Restructuring, Globalisation and the Third Way, Routledge,

London, 2002, chs 3 and 7.

19. ^ Gosta Esping-Andersen, The Three Worlds of Welfare Capitalism, Cambridge, Polity Press, 1990.

20. ^ Offe, Modernity and the State.

21. ^ Bo Rothstein, Just Institutions Matter, Cambridge University Press, Cambridge, 1997.

22. ^ On the integrative qualities of welfare universalism and the gender nexus, see Diane Sainsbury, Gender, Equality and the Welfare State, Cambridge University Press,

Cambridge, 1996. I have advanced similar arguments pertaining to the welfare state and immigration, based on the research by Keith Banting. See inter alia Ryner, ʻEuropean Welfare State Transformation and Migrationʼ; and Keith Banting, ʻLooking in Three Directions: Migration and the European Welfare Stateʼ, in Michael Bommes and Andrew Geddes, eds, Immigration and Welfare: Challenging the Borders of the Welfare State, Routledge, London, 2000.

23. ^ Offe, Modernity and the State.

24. ^ Rothstein, Just Institutions Matter.

25. ^ Himmelstrand et al., Beyond the Welfare State.

26. ^ Guy Standing, Unemployment and Labour Market Flexibility: Sweden, ILO, Geneva, 1988.

27. ^ There are, of course many potential pitfalls here and ʻdevil in the detailʼ that go beyond what is possible to discuss here. Especially recommended on this is the work of Bo Rothstein, whose overall conclusion is that as long as universalism and decommodification can be maintained, these problems can be redressed. See, inter alia, Just Institutions Matter, and ʻSocial Capital in the Social Democratic Welfare State: The Swedish Model and Civil Societyʼ, Paper Presented at the 11th International Conference of Europeanists, Baltimore, 26 February–1 March 1998.

28. ^ See Ryner Capitalist Restructuring, ch. 2, for further elaboration.

29. ^ OECD Employment Outlook, OECD, Paris, 1992, pp. 62–6, cited in Bertil Holmlund, ʻArbetslösheten – konjunkturfenomen eller systemfel?ʼ, Swedish Ministry of Finance, Nya villkor för ekonomi och politik, SOU 1993:16 bilaga 1, pp. 419–21.

30. ^ Daniélle Leborgne and Alain Lipietz, ʻNew Technologies, New Modes of Regulation: Some Spatial Implicationsʼ, Environment and Planning D: Society and Space 6, 1988.

31. ^ Especially noteworthy are the Kalmar and Uddevalla plants of Volvo, to which Leborgne and Lipietz also refer. These plants combined a remarkable departure from conveyor belt technology, returned considerable elements of crafts production and decision making to individual workers in a framework of strong union negotiating power on the labour process and work environment, with exceptional productivity growth and high quality output. As similar experiences in other sectors show, these kind of experiments are not only viable in the automobile sector.

32. ^ See Esping-Andersen, The Three Worlds of Welfare Capitalism. Esping-Andersen has recently abandoned this position, but he does so on the basis of the faulty argument of ʻmoral hazardʼ which has been criticized here. See, for example, Welfare States in Transition, SAGE, London, 1996.

33. ^ Internationalization of production undermined the relationship between wage moderation in high productivity sectors and future domestic investments. The breakdown of Bretton Woods undermined the precarious balance between international demand and domestic macroeconomic balance. In particular, globalization of finance imposed higher, and above all more unstable, unpredictable interest and exchange rates.

34. ^ See especially my ʻEconomic Policy in the 1980sʼ, in Clement and Mahon, Swedish Social Democracy.

35. ^ Together with a vow not to devalue again, the government declared it would no longer borrow abroad directly to finance the debt or cover balance-of-payments deficits, but would instead only borrow on the domestic market (i.e. only issue bonds in Swedish crowns). This meant that in order to maintain a balance of payments, the Swedish interest rate would have to increase to a level where private agents would hold bonds or other debt in Swedish crowns, despite the devaluation risk.

36. ^ Swedish Ministry of Finance, Valutautflödena 1985 och den ekonomiska politiken, Ds.Fi. 1985: 16.

37. ^ Stephen Gill, ʻReflections on Global Order and Sociohistorical Timeʼ, Alternatives 16, 1991.

38. ^ Andrew Martin, Wage Bargaining and Swedish Politics: The Political Implications of the End of Central Negotiations, FIEF, Stockholm, 1993.

39. ^ Capitalist Restructuring, ch. 7.

40. ^ Nicos Poulantzas, State, Power, Socialism, New Left Books, London, 1978.Centre for Research in Modern European Philosophy Attendance by arrangement. Contact: Dr Ray Brassier ( Research Associate, Centre for Research in Modern European Philosophy, Middlesex University, White Hart Lane, London N17 8HR, Tel. 020-8411-6220 Research Seminars EVENTS Jan-March 2003

6 February, 6–8 pm

ʻHow the West was One:

Heidegger and the Greek Origins of Continental Philosophyʼ Stella Sandford

20 February, 6–8 pm

MMMarx’7th Annual Conference

questioning, critique, construction: aspects of philosophy

Modern European Philosophy encompasses a diverse assortment of traditions, approaches and concerns.

This conference will consider what is at stake in the differences between three of its main tendencies today.

Saturday 15 March, 10 am–6 pm

Speakers include: Jay Bernstein (New School for Social Research) Rudi Visker (University of Leuven)

£25 waged, £12 unwaged

Capitalism and Philosophy Lab

Saturday 25 January, 2–6pm

ʻStructure and Dialecticʼ Jason Barker, Ray Brassier, Christian Kerslake The start of a regular workshop on approaches to capitalism in French philosophy since the 1960s, placing Althusserianism back into its proper philosophical context.

Future topics will include: Technoscience and capital, Capitalism and nihilism, Capitalism and psychotherapy, Repetition and history

Saturday 29 March, 2–6 pm

ʻMilitant Subjectivityʼ Speakers: to be confirmed ʻHegelʼs Logic and Marxʼs Capital: The Logic of CapitalʼChristopher J. Arthur

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