Jonas Hinnfors
Professor of Political Science
Department of Political Science
University of Gothenburg
PO Box 711
SE 405 30 Gothenburg
Sweden
[email protected]
www.pol.gu.se
MARKET-FRIENDLY SOCIAL DEMOCRACY
A host of literature claims that social democratic parties in general and the British Labour Party
and the Swedish Social Democratic Party (SAP) in particular have left their original aims.
Social democracy is supposedly in ‘decline and fall’ from a Golden Age apex (liberally defined
as around 1965; for an overview see Bonoli and Powell 2004: 4). To such an extent social
democracy seems to have embraced neo-liberal ideas that in one account Labour’s ‘policy far
more closely reflects the preconceptions and prescriptions of the Thatcher and Major
governments’ (Heffernan 2000: 72, viii; Callaghan 2000: 163 f.; Morgan 2001: 588; Thomson
2000: 7) ‘cognitively locked [up] into these new [neo-liberal laissez-faire] ideas’ (Blyth 2002:
237 f.; Pennings 1999) rather than any version of ‘social democracy.’ The parties would
correspond more to be spreading ‘the gospel of market fundamentalism’ (Hall 2003: 19, 13-14;
Hay 1999: 57 f.).
The Swedish sister party, SAP, the very epitome of a Golden Age social democratic party, has
gained a recent reputation of moving in much the same direction as the Labour Party. Claims
contain judgements that SAP had caused the ‘demise’ of the ‘strong state’ (Lindvall and
Rothstein 2004: 2). A decade earlier ‘Sweden seemed immune to worldwide political trends in a
conservative or neoliberal direction. [But s]uddenly, this success story unravelled in 1989-91’
(Pontusson 1992: 305; Pierre 1999: 50 f.; Scase 1977: 164 f.).
The gist of the statements above is that the authors claim that two strong left parties have
moved from a Golden Age of social democracy around 1965–85--when the ideological goals
were set to promote someting different than market logic to a contemporary situation where the
market's position is by far stronger. No doubt, the parties have indeed introduced a host of
marketisation measures since the 1990s. Not necessarily by reducing the size of the public
sector as such but by partly transforming its scope and the way in which it functions. The idea
of state-run companies is no longer on the agenda in the sense it still was during the 1960s and
70s although the 2008-09 credit crunch may well have altered views re financial institutions. A
range of market-emulating policies and ideas have been launched since 1985 for the public
sector to operate in a way similar to markets, e.g. internal marketisation, outsourcing, PublicPrivate Initiatives, school and hospital vouchers, financial deregulation etc. (Hinnfors&Shaw
2004).
However, at the same time it is clear both parties have firmly stood by the element that Sheri
Berman has described as a key for alerting 'the relationship among state, market, and society'-the welfare state (Berman 2006: 181). According to Berman '[w]elfare states thus marked a
significant break with a liberal gesellschaft and a move toward a more communitarian
gemeinschaft' (Berman 2006: 181) delinking social support from market position. Both parties
have maintained the scale of the welfare state, in some instances cutbacks have been made but
in others huge improvements have been launched (Hinnfors&Shaw 2004; Lindbom.
Social democracy accepted the fundamentals of the market economy long ago (Berman 2006).
The position between market and regulation, although perhaps posing an ideological 'dilemma'
(Thomson 2000), has made up the very essence of social democracy allowing social democratic
parties to reach out to wide sectors of the electorate. Without denying the presence of important
market-accepting new policies, it may be fair to claim that social democracy has for a long time
had to struggle with balancing notions of 'planning', 'steering' and 'control' with those of
'efficiency', 'profit' and 'competitiveness'. The drastic accounts above seem to be stretching the
argument somewhat thus missing clear elements of stability in the ideological trajectories of the
parties (Hinnfors 2006). Even so, it is somewhat puzzling that so many market-emulating
policies could be so rather rapidly accepted and introduced over a relatively short time period in
both parties during the 1980s and 90s.
Still, the character of the old positions when—at least rhetorically—steering, planning and
control were more prominent is left rather an opaque matter except that the state was ‘strong’
and ideas about the market economy were more in favour of somehow opposing the ‘market’
with an element of steering and planning rather than in favour of the ‘market.’ We know that
social democratic parties achieved remarkable targets re the welfare state–to the extent even
that ‘the postwar order presented a clear triumph for social democratic principles and policies’
(Berman 2006: 188). In this sense society was decommodified on a scale never seen before in
human history–at least when combined with democracy. In spite of such achievements, some
have portrayed social democracy's Golden Age leaders as having ‘signally failed to provide any
sustained fresh political thinking and mount a serious ideological challenge to revisionism’
(Shaw 1996: 58). Others underline instead its success when even ‘many non-leftists moved
quickly to appropriate central planks of the social democratic program’ (Berman 2006: 188). No
doubt some parts of social democracy contemplated further 'next steps' into more unknown
socialist territory during the Golden Age (Hay 1999: 57 ff.; Cronin 2004: 66). However, the
social democratic movement was cautious about delivering hard-core planning institutions
(Coates, 2001; Cronin 2004: 66: Gamble 1894: 172; Hay 1999: 57) and has had some
difficulties in distancing themselves from the basic tenets of the market economy while at the
same time discussing future steps towards socialism.
Earlier research has primarily focused on actual policies delivered. Although actual policies are
obviously highly relevant they do not necessarily show a party's core ideological position.
Parties repeatedly run into strategic dilemmas and binds where delivery is prevented. This does
not mean the ideas were not there in the first place or that the parties do not try to come back
later with concrete policy proposals when the strategic context has improved. This article will
focus on how the parties managed to balance the two elements, market and regulation, when
they set out their ideological documents. To what extent were the two notions held separate and
to what extent were they mixed? These are questions we will deal with in the following using
the Swedish Social Democratic Party and the British Labour Party—two of the strongest social
democratic parties—and shed light on the parties’ ideological positions during the Golden Age
of Social Democracy and provide a small but significant piece to understand the ideological
landscape just before the marketisation policies after the Golden Age.
Behind the buzz words – Tools for discursive analysis
A neglected—but powerful—indicator of the parties’ ideological beliefs is the way in which
they explain and elaborate on (in manifestos, programmes etc.) what they actually—in their
own words—mean by rather vague concepts like ‘planning’ and ‘control.’ Colin Hay (1999: 57
f.) has suggested that even though the Labour Party’s practice failed to deliver social democracy
in the 1970s its stated aspiration and ideology was still committed to a society where the
economy was not left to the market. Thus, Hay wants to separate ideas from actual practice,
which appears to be a wise research strategy. However, although stripped of their actual deeds
and actions there is still scope for interpretation and I will make two key methodological notes.
First, how do we discern the actual ideas behind the parties’ own captions and buzz words?
Rather than taking equivocal concepts like ‘planning’ at face value one need instead actually
look into the parties’ own ‘operationalisations’ of them (if, for a moment some academic-speak
were allowed). Sometimes party programmes and manifestos leave rather a lot to the reader’s
own imagination but, as will become clear in this article they tend to be surprisingly elaborate
and straightforward a few words or sentences behind the catchy key words.
Not that we should mistrust party representatives when they formulate election manifestos,
party programmes and similar. On the contrary, what we should do is in fact to pay attention to
how they describe, clarify and specify what they mean. As will become clear in the following,
both parties have continuously—in government and opposition—been remarkably open-minded
about the content behind the rhetoric and this is something that will be utlised in this article. In
the following I will pin down the parties’ own clarifications as a means to add insight into the
character and strength of their socialist, planning and reformism commitments as they have
appeared from the apex of the Golden Age (ca 1965) to when ‘New Labour’ and ‘New SAP’
took off (ca 1992). The rather different views in earlier research a to how far dreams of a 'next
step' away from reliance on the market economy may in part be due to the vague character of
several of the terms used by social democracy. A 'planned society' as a term has undeniable
connotations of some kind of socialist society. In this 'strong' version of planning, typical
concrete ideas about its realisation would be state owned industries, strict monitoring and
control of the economy according to goals set by politicians and functionaries rather than by the
market. However, equally plausible is to use 'plan' in a more everyday sense, meaning the
intention to actively carrying out certain tasks in a certain order. In this 'weak' version of
planning typical measures would be ideas about welfare state reform, industrial support, full
employment boosting etc. Combined these 'weak' planning measures could be very ambitious
indeed in the sense of offering wide-ranging tools for creating conditions for full employment
and for providing support for those who become unemployed or otherwise suffer from the
market economy's effects. At the same time it is clear that even such ambitious ideas do not
form a 'next step' away from the fundamentals of the market economy.
The party leaderships have strategic incentives to use the term 'plan' in such a way as to attract
as many voters as possible, including those who dream of a more fully fledged socialist society
and those who dream of a more social liberal society. By scrutinising the occurrence of the
terms themselves ('plan,' 'control,' 'steer' etc) and the parties' descriptions and clarifications of
what they mean by them--often a few lines further down in the policy documents--we will be
able to look behind the vote maximizing strategic rhetoric into the more hard core ideas.
The second note concerns what actually is a 'party' in this context? Parties are broad churches.
Party leaderships have to balance a number of demands from voters, members, party branches,
MPs, parliamentary coalition partners etc. Naturally these demands often push and pull in
contradictory directions and Lewis Minkin once noted that answers to the question 'What is
Labour Party policy' could differ widely depending on which part of the 'Party' one had asked.
In the end however, the parliamentary party leadership has to deal with such divergent demands
(Minkin 1978: 318: Sjöblom 1968: 51 ff.). As stated by Peter Hall, 'policy . . . is made by
governments and governments are made up by party leaderships.' (Hall 1984: 4) Only the
immediate leadership has the express task of authoritatively promoting policies. Thus, in the
following, it has to be remembered that statements made by actors like unions (e.g. TUC in the
UK or LO in Sweden) do not necessarily form part of the policies finally endorsed by the party
leaderships. Unions and party branches are of course important in many respects and
particularly if our task were to discuss the strength of various party power centres or the origin
of certain policies etc. These are interesting issues but outside the scope of this article, which
sets out to discuss authoritatively binding party ideology as endorsed by party leaderships.
Labour and the market: ‘Plan’ according to the market’s boundaries
Labour attempted several planning initiatives in the 1960s, including a ‘Prices and Incomes
Board,’ a ‘Department of Economic Affairs’ and a ‘National Plan’ for investments and growth.
A major goal was to boost management and scientific skills by ‘removing the fetters of social
conservatism’ (Cronin 2004: 66). It all sounded much like what Berman has defined as the core
of social democracy: using democratically acquired power to direct economic forces in the
service of the collective good (Berman 2003: 142). Radical voices wanted public ownership to
‘change the public-private balance’ (Judith Hart, quoted in Hatfield 1978: 158). There are many
types of ‘plan.’ The term 'planning' has obvious socialist overtones but could also connote any
activity where an actor wants to carry out various measures in a certain order. To what extent
the Labour Party actually offered a ‘planned society’ in the more socialist sense in the 1960s
and 70s is a moot point. Some would claim the capitalist market was fully accepted (Berman
2006) in the sense that its abolishing were off limits. A slightly different view is offered by
James Cronin according to whom the socialist planning 'dream' was in fact there but it was ‘a
toothless dream’ (Cronin 2004: 66, see Goodhart 1965; Stewart 1977: 50) in the sense that
while the ideas--according to Cronin--may have been present actual policy delivery was
lacking.
Few Labour documents promise outright ‘socialism’ although some examples do exist, and
were ‘revived after 1970 and came to dominate policy-making in the party conference and the
NEC, although not the leadership (except briefly during Michael Foot’s leadership between
1981 and 1983)’ (Gamble 1992: 62). Perhaps the peak was around 1981 when The National
Executive Committee set the Party’s goal to ‘substitute private ownership by these diverse
forms [public enterprises, workers’ cooperatives, municipal ventures and ownership by
workers’ capital funds] of common ownership’ (Labour, NEC 1981: 11). However, at the same
time, the Party advocated ‘competitive stimuli by giving a lead on investment’ and ‘reduc[ing]
private monopoly by inserting public enterprise competition’ (Eric Heffer, quoted in Coates
1980: 90). The two examples show the tension within the party with the dominant view being
that public ownership would be a means to making better use of market processes with real
public influence changing the way private companies operated (Holland 1975: 159 f., see also
Chapters 2-4). Policies centred on encouraging private enterprise to becoming more competitive
through mergers etc. (Beckerman 1972: 191 ff.; Gamble 1994: 120; Labour 1970; Shaw 1996:
78; Woodward 1993: 88).
Overall, policies for (and ideas about) amelioration and redistributing by means of some kind of
welfare state were continuously present (Hay, 1999, Shaw 1994, Przeworski 1985). The next
step--beyond the welfare state's ameliorating character into the more unknown territory of some
kind of alternative economic system--is vaguer. ‘Planning’ as a term was widely used as such.
With its socialist connotations it may have been a way of wooing those who wanted more clearcut restrictions to the market. At the same time ‘plan’ has a more everyday meaning and this is
primarily how the term was used throughout. Indicative are the 1966 and 1970 election
manifestos. The 1966 manifesto begins by stating the Party’s intention to utilise ‘the guidance
of the National Plan’ to be freed from ‘the push and pull of the market’ (Labour 1966). The
strong words on keeping the market on the straight and narrow were matched by drastically
more different market-speak further on in the manifesto. Labour’s ‘overriding aim’ was the
‘pursuit of solvency and the defence of the pound ... [by creating] overseas confidence in
sterling’ and ‘[t]o maintain full employment and a high level of investment in productive
industry’ (Labour 1966). Passages like these are more to the core of social democracy where
market elements like ‘confidence’ and ‘productivity’ are matched by ‘full employment’ and
'investment.' The party’s aim to safeguard the welfare state and the interests of employees is
emphasised while at the same time the documents offer very little in the way of what would be
the next step towards a less market-dominated society beyond the welfare state and an element
of industrial dirigisme.
Sometimes the ‘planning element’ becomes stronger, sometimes weaker. The 1966 manifesto
lists a range of measures, which were to be implemented according to a National Plan. Pensions
and sickness benefits were increased, certain welfare state institutions were to be exempt from
cut-backs, investments in productive industries were to be improved etc. These are strong
references to what was actually going to be done and as such an example of how ‘plan’ was
being used in the everyday sense but still with symbolic references to an active state being on
top of the market. Other passages show a far more passive attitude towards the effects of the
market economy as where, even in reference to the symbolically important coalmines the Party
states that ‘Everything depends upon efficiency, costs and the resulting prices. If more can be
profitably sold, then no barrier will stand in the way of expansion’ (Labour 1966; cf Labour
1964: the government should provide credit ‘where the business justifies it’). A ‘plan’ that has
to be based on profitable sales or justified by business is weak but, as has been shown here,
such weak elements sat next to stronger elements.
Following the left’s increasing influence over the policy-formulating National Executive
Committee (Hatfield 1978) the ownership question resurfaced in the early 1970s. Public
enterprise was to be ‘substantially’ extended by taking some sectors into public ownership
(Labour 1974a). But, the Government claimed its ‘first priority’ was a ‘determined attack on
inflation and the appalling overseas deficit.’ These are examples of stronger planning elements
taking a more pronounced position during the 1970s. Somewhat peculiarly given Labour’s
Keynesian position, the Tories were accused of having allowed deficits to accumulate (Labour
1974b).
Whereas public ownership was important in the 1973 Party programme with ‘[p]ublic control
and participation’ projected for certain sectors, the meaning of ‘control’ was still left
unexplained (Labour Party 1973: 32 ff.). The ‘public control’ sections show how the ‘dream’ of
taking the next step towards a stronger version of socialist planning described by Cronin gained
some ground. However, the programme was very evasive regarding financial institutions.
Studies were ‘under way’ and, in keeping with more hard core market ideals, the Party stated
that ‘our exports must not be allowed to become uncompetitive against those of our leading
competitors’ (Labour Party 1973: 16). Such unequivocally market-accepting statements indicate
that the dream about a next step was vague and--instead--more focused on ambitious and farreaching versions of the by then well established social democratic society where the market
economy is balanced by a strong welfare state.
Some studies have claimed that increased public ownership—itself an element of ‘hard
planning—rather was to improve the way the market functioned and ‘towards state-initiated
restructuring of British capitalism on a large scale’ (Coates 1980: 96; Crosland 1956; DEA
1969; Holland 1975: 24; Shaw 1996: 115) involving the same ‘shedding of labour’ (Coates
1980: 96) as any other capitalist rationalizing process but such interpretations are difficult to
give empirical underpinning as such. Rather, the documents provide the characteristic credos
about the need for social justice for everyone on the one hand, while on the other hand still
emphasising productivity, competitiveness and high investment, in a ‘new deal’ (Labour
1974b).
If the Labour Party texts did somewhat turn away from the market in the aftermath of the oil
price shock in 1974, with some Labour Party actors favouring protecting the economy from the
international market (Coates 1980: 86 ff.; Gamble 1994: 178 f. Hatfield 1978: 151 ff.; Stewart
1977: 216 ff.) the double view on planning was stable. Labour wanted to give ‘high priority to
working for a return to full employment,’ although full employment ‘must go hand-in-hand
with keeping down inflation’ (Labour 1979). The public sector was given a role by the
manifesto to outline ‘positive strategies’ for industry, aid in investment, and provide training
and retraining programmes. Public ownership should only be used where ‘possible’ and as a
means to aid specific companies. Industries had to ‘adapt to new markets and technological
change’ (Labour 1979). Government planning is certainly an important part of the Party’s
ideology and the strength behind these standpoints should not be underestimated. Likewise, the
position of the market is always emphasised in precise and unequivocal words.
If ever, socialism was on the 1979-1983 agenda. Capital was the enemy. In NEC documents,
where the left consolidated its position (Minkin 1978: 326), the long-term goal was to
‘substitute private ownership by; public enterprises, workers’ cooperatives, municipal ventures
and ownership by workers’ capital funds’ (Labour Party, NEC 1981: 11). Here, undoubtedly,
we encounter strong versions of 'planning.' Capitalism’s inner drive to ‘move in search of the
highest private profit’ should be replaced by ‘social control of production’ (Labour Party, NEC
1981: 11). But, most intriguingly, ‘small businesses’ were excluded from the need for common
ownership. They should even be ‘encouraged’ (Labour Party, NEC 1981: 21). Even more
paradoxically, ‘the level of productivity right across industry’ should be raised by making it
‘more responsive to technical change and to changes in demand - particularly in world markets’
(Labour Party, NEC 1981: 19 f.). Next to the very strong notions of a planned society sat these
notions of traditional market thinking indicating that the weaker version of planning was still in
place.
Already the 1982 Party programme was distinctly less radical. Now, private companies were
manifestly accepted and the programme defensively stated that ‘[w]e do not say that common
ownership will need to reach down into every aspect of economic activity’ (Labour Party 1982:
9). The goal was to give ‘the community decisive power over the commanding heights of the
economy’ (Labour Party 1982: 9) but, ‘joint ventures between public and private companies’
was added to the list of public ownership forms with the range of nationalised industries
drastically reduced (Labour Party 1983: 11; Labour Party 1982: 9). The increased attraction of
the market was shown by the proposal to give ‘far more freedom [to public enterprises] to raise
funds on capital markets’ (Labour Party 1983: 11). Here, the weaker definition of planning is
pertinent to describe the party's position. No doubt, joint ventures etc. were 'plans' for how to
deal with the market economy, which was not to be left on its own. At the same time, stronger
versions of planning, such as for instance reducing the influence of capital markets as such were
now considerably less evident in the documents.
The election manifesto, which contributed to the devastating 1983 election defeat, was
surprisingly market-focused given the more radical formulations only a few years earlier.
According to the manifesto ‘we must … [maintain] the pound at a realistic and competitive
rate’ (Labour Party 1983: 9). ‘[P]ublic borrowing [should be] financed, through the financial
institutions and national savings, without disruptive or damaging changes in interest rates’
(Labour Party 1983: 9). ‘Realistic’ and ‘competitive’ exchange rates are those set by the
international capitalist economic system. The Party’s own operationalisations provide
indications on how they define the meaning of ‘planning.’ The ‘plan’ in the strong sense
remain. Statements about ‘controls’ and ‘monitoring’ are rife and indicate ‘strong’ planning
with clear references to the dream of a next step. What is surprising is how strong the market
rhetoric remains. ‘Competitive’ exchange rates and statements that ‘[c]ontrols w[ould] be
closely linked to our industrial planning, through agreed development plans with the leading
price-setting firms’ (Labour 1983) indicate weaker planning, where what was ‘agreed’ upon
was, obviously, to be set by the international capitalist market system. The surplus was to be
used in a planned manner, utilising the full range of an ambitious welfare state plus several
government subsidies etc. Controlling the market economy as such was less evident.
It has been suggested that ‘[t]he 1987 [Labour Party] manifesto was essentially a watered-down
version of the 1983 document’ (Driver and Martell 1998: 14) and that ‘the modernization of the
Labour Party began in earnest’ only after the 1987 election defeat (Ross 2000: 26; see also
Callaghan 2000: 118 ff.). However, while some traces of 1983 formulations remained they
hardly dominated. By raising a warning finger that ‘all [but a few welfare state policies] that
require substantial public finance must take lower priority in terms of timescale and public
resources’ (Labour 1987) the Party showed there was a narrow limit to public spending.
Moreover, the public sector was manifestly described as a means to achieve certain ends but not
an end in itself. Prioritised sectors were ‘health, housing, social services and crime-fighting.’
i.e. the ‘classic’ areas in a social liberal market economy, which were also targeted in Working
together for Britain where Labour wanted to ‘Rebuild[ing] Britain.’ The investment plans
concerned infrastructure and schools and hospitals rather than publicly owned industries.
Industry was to be boosted and modernised by setting up ‘Enterprise Boards’ (Labour Party
1985b: 10, 14) although with very vaguely described powers. In keeping with what was now
well established tradition, the planning element was present in its weak version and with clear
objectives within that framework: Funnelling surplus to the welfare state. Ideological elements
of a next step into a ‘dream’ of socialist planning (Cronin 2004) were less strong.
Rather than controlling exports, imports and exchange rates, as was still partly suggested in
1983 ‘[m]odern industry … requires consistent government support in education and training,
and in research (Labour Party 1987; Labour Party, TUC-NEC 1987: 6). Already two years
earlier, the Investing in Britain Programme was a catalogue of proposals on how to help
industry modernise and increase competitiveness through ‘joint discussions with firms and
unions’ in order to ‘identify priorities for investment ... provide financial assistance’ to firms
(Labour Party 1985: 7, 11). The market’s key function was made clear by stating that ‘there is
no reason why total employment in manufacturing should continue to fall – provided British
industry can capture a larger share of a growing market’ (Labour Party, NEC 1984: 11, italics in
original; see Labour Party, NEC 1985). These are clear statements of market acceptance ten
years before ‘New Labour.’ 'Planning' in the weaker sense is certainly present. The Party has
plans about how to modernise industry but at the same time the Party underlines how the
planning is to be organised within limits set by the market.
In the ‘Policy Review,’ set in motion in 1987, Labour ‘laid out a series of far-reaching
proposals designed to correct market failures’ (Wickham-Jones 2000: 16). The 1989 Meet the
Challenge, Make the Change report stated that ‘the market and competition are essential in
meeting the demands of the consumer, promoting efficiency and stimulating innovation (Labour
1989: 10) and in Looking to the Future, (Labour 1990), the Party coined its philosophy on the
relationship between public sector and private enterprise with the slogan ‘[b]usiness where
appropriate: government where necessary’ (Labour 1990: 6).
To sum up briefly, Labour’s ‘relationship with private corporate capital is not new in Labour
Party terms’ (Coates 2001: 300). Less well known has been how strong the market element has
been in terms of what kind of society the Party was suggested in its own discourse. The Party
has formulated elements of stronger as well as weaker planning with the weaker dominating.
SAP: welfare state and market economy
Much as the Labour Party the SAP leadership has been cautious about veering far from the
fundamental ideas of the market economy. Almost without exception SAP’s alternative visions
for the economic system have been well inside the existing system. Refraining from ownership
as a means of correcting the market may form an important element of today’s policies but is
far from a new position. According to former Swedish Prime Minister Tage Erlander, the
demand for nationalisation had been pushed into the background. Instead the role of the public
sector has been that of an overarching body rather than an all-powerful commander (Shaw
1993) providing equality through a ‘cradle-to-grave’ welfare state (Gray 1996) and economic
policies. Indicative of SAP’s guarded attitude towards a socialist economic system is the taboo
status of ‘socialism’ in SAP documents. The term has been conspicuous through its absence
rather than its presence. Not a single reference to socialism can be found in SAP election
manifestos since before 1964.
In general, SAP claimed that true freedom was a matter of acting through the public sector
rather than distancing oneself from the public sector (SAP programme Resultat och reformer
(Results and Reforms), 1964: 10; Elvander 1980: 228). Still, it was always equally clear, just as
in the case of the Labour Party, during the Golden Age that the public sector rested on Swedish
industry gaining increased international ‘market shares’ (Riksdag Minutes AK 1965/3, 30: 32,
67, Sträng). with efficient companies, benefiting from ‘the dynamic developments of the world
economy’ (Riksdag Minutes FK 1965/3: 28, Erlander). Of course the market economy’s
outcomes should be ameliorated. In this sense the Party has had a very clear agenda where the
'weak' planning element has remained solid. Equally clear has been the Party's conviction that
without the market no surplus to use on the welfare state. When the parties define the role of the
market it is – rather surprisingly – always as the final arbiter of the economy. Its outcomes have
to be adjusted but the market economy appears not just to be a temporary evil which can be
disposed of in a future scenario. It is a force that, in the parties’ own wordings, sets the limits to
what can be ‘justified’.
The 1966 local elections were disappointing to SAP. Creeping signs of economic slowdown,
unemployment and negative social effects of structural change translated into a vitalised
ideological debate (SAP and LO 1968; SAP and LO 1969; SAP and LO 1972). As during the
end of the 1950s, focus was on industrial and economic policy. However, in spite of concerns
about the damaging social effects, the party leadership’s main target was to support even faster
structural changes. Only by creating top-of-the-league industries able to meet international
market competition could Sweden remain ahead of other leading industrial nations. Industrial
policy and the public sector were aimed at ‘security in change’ and to achieve competitive edge
for industry centred on ‘a free market, without customs or other regulations, and this market
was to be global’ (SAP 1968 Party Congress minutes, Myrdal: 188 ff; SAP and LO 1968: 6 ff;
26-39, 40-51, 68, 75, 82, 85; Karlsson 2001: 67; Pierre 1986: 112-20).
The PM, Mr Erlander, developed his views just before the 1968 general elections: ‘Demands on
the public sector will increase. ... [D]emands for freedom, equality and solidarity will be
realised through expanded public resources. ... The government sector must control
developments in a planned manner’ (Alsterdal 1967: 6 f.). His Minister for Finance, Gunnar
Sträng, held that ‘the most important objectives of our economic policy: full employment, rapid
growth and a more equal distribution of income, require a considerable effort on behalf of the
government’ (Government Proposal 1969:1, app. 1, p. 9; SAP 1968). Undoubtedly the goal was
to create a strong society. A key instrument was the so-called Rehn-Meidner Model. For all its
strength, the model rested on the view that the government should guide the economy into
becoming more competitive. Pockets of poverty and economic backwardness would be
squeezed out with drastic removals of the workforce to where the internationally profitable
industrial sectors were situated (for an overview of the Rehn-Meidner Model see Pontusson
1992; Callaghan 2000: 71 f.). According to Meidner himself the Model represented the
‘culmination of market-conforming thinking and unwillingness to plan or steer within the
labour movement’ (Hedborg and Meidner 1984: 202; Pontusson 1992: 62). In essence, the
Model forced hundreds of thousands of workers to migrate from less market-efficient sectors of
the economy to more efficient industries, usually involving a long-distance removal from the
north to the south of Sweden.
The SAP received more than fifty per cent of the overall votes cast in the 1968 general elections
and had effectively opened the parliamentary door for radical reforms. In fact, it would be hard
to imagine a more fully developed credo in favour of the welfare state and on the need to
correct the outcomes of the market economy than the 1970 manifesto. However, it was not
radical in the sense that any alternatives to the capitalist market economy were suggested. On
the contrary, the non-socialist parties were accused of pork-barrel politics detrimental to the
economy, leading to ‘weakened government financial policy, increased inflation and harm[ing]
foreign trade’ (SAP 1970). Similarly the 1973 manifesto included familiar combinations of
welfare reforms and implicit support for the market economy: ‘We compete successfully on the
export markets. The foreign currency reserves are at record levels. Sweden enjoys Europe’s
lowest inflation’ (SAP 1973). Expressions that social democracy would ‘not accept the free play
of economic forces’ suggested a less than positive attitude towards the market economy.
Equally clear is the fact that the party did not envisage an alternative type of economic system.
Instead, the party praised itself for managing the market economy efficiently and (elsewhere)
equalled a ‘closed economy’ with that of a ‘totalitarian economy’ and supported ‘a commitment
for enterprise expansion which will improve competitiveness’ (Riksdag Minutes 1975/16: 132
f., Sträng).
Exactly as with the Labour Party, concepts like ‘competitiveness’ abound, indicating firm
adherence to the market economy in the sense that the market economy sets certain limits
across which the Party was reluctant to tread. Sträng chose to talk about this rather than offering
any attempts at replacing the need for competitiveness through radical reforms of the economic
system. Along the same lines Prime Minister Olof Palme’s view was that market efficiency and
‘a powerful commitment to industrial investments is a precondition for employment increases ...
[in] the public sector’ (Riksdag Minutes 1975/97: 137, Palme).
While Palme did not confine industrial investments to the private sector he juxtaposed those
investments with the public sector. Indirectly readers were led to believe that the bulk of
investment, which would keep up employment in the public sector, had to emanate from the
private sector. In the same debate Sträng underlined the importance and desirability of
competitive companies ‘The whole technical and general development is such that companies
inevitably have to expand and grow in order to be efficient. If they want to sell across the globe,
which major Swedish companies do, they can’t come small. There is no wrong in acting big as
long as they respect social and labour market legislation … and guarantee steady jobs and fair
wages’ (Riksdag Minutes 1975/97: 82, Sträng).
Perhaps the apex of SAP’s quest for market containment, the 1975 party programme held that
‘[a] democratisation of the economic sphere will presuppose that citizen influence will be
effective at all levels of the economy. The entire economic sphere will have to be co-ordinated
in a planned administration under citizen control’ (SAP 1975). However, ‘planned’ turned out
to translate into by then (and still today) familiar proposals about public health care and social
security plus references to scientific and technical progress. Rather than reducing the
dependence on the international market the Party wanted to ‘strengthen the position of
individuals in order to make them stronger and better prepared to endure the changes caused by
changing forms of production which emerge as a consequence of new technical and economic
conditions … brought about by the internationally dependent economy’ (SAP 1975). No major
proposals to nationalise anything were suggested. The programme provides a clear-cut example
of policies about ‘enabling’ citizens to succeed in a market economy. Word by word the text
could probably have been put into a New Labour manifesto 25 years later (at the same time, the
powerful LO white collar union, discussed far reaching 'wage-earner funds' with the long time
goal of taking over the power from private business something which obviously was very far
from any New Labour ideas; hosever, these bold proposals were never adpoted by the SAP
party leadership either; in very diluted form compared to LO's first suggestions, funds were
finally introduced in 1982; more on this interesting epoque further below). However, the
similarities with New Labour may be found even a further ten years back when SAP launched
its 1968 Industrial Policy Programme including expanded jobcentre capacity and removals
support allowances. The programme’s catchword was ‘Security in Change.’ What is interesting
here is the similarity in the sense that both parties (SAP in the 1970s and New Labour 20 years
later; Hinnfors&Shaw 2004) advocated policies where the individual worker had to adapt-through education, removal to expansive regions, retraining etc--to the market's developments
and the determination among both parties to carry out the policies amid rather harsh effects on
the many individuals affected. SAP's idea--and actual policies--was to make workers move to
expansive regions, which in reality meant hundreds of thousands of workers had to leave the
northern areas--permanently or on monthly commutes--and move 500 miles south to where the
expansive and competitive industries were located and to live in the new sprawling tower
blocks; the uprooting effects of these measures on the people that had to move and on those left
behind and on the depopulated northern communities were probably no less than the effects of
New Labour's welfare-to-work policies. These effects are often neglected in renderings of the
Swedish party's Rehn-Meidner Model, which usually focus on the wage-levelling effects of the
'Model,' where uncompetitive firms--sually less well located--would be set 'too high' wages and
competitive firms--usually in the south--would be set 'too low' wages thus forcing weaker firms
out of business while improving the competitive edge among the already strong ones (Berman
2006: 185). In this 'weak' planning sense the parties provided a wide array of tools. But, at the
same time the character of the tools was very different and the overall context differed too. In
the 1970s, SAP's proposals for security in change and about 'enabling' the worker to withstand
the eve changing market economy conditions, were issued in an ideological environment where
some parts of the party toyed with ideas about stronger versions of planning and even with the
next step away from the market economy. Not so for New Labour 20 years later.
The more radical policy towards the end of the 1970s was to be the so-called wage-earners’
funds. Much has been said about the funds, e.g. that the proposals for taxing business profits were
the end of the compromise based ‘Swedish Model’ with its ‘sanctity for private ownership.’
(Blyth 2001: 9). No doubt, the funds were radical and unique in many ways and the unions
certainly took steps away from the traditional compromise-based Swedish model. However,
although unions–and LO in particular–form an important pressure group they do not constitute
‘the party’. In retrospect it is easy to confuse LO with the 'party,' but, as Eric Åsard, the leading
authority on the history of the funds, empahises when he portrays the process behind funds, the
1970-78 discussions on the funds reveal ‘an exceptional split between LO and SAP’ and a ‘tugof-war’ (Åsard 1985: 27; Gilljam 1988). What is remarkable is that when LO presented its very
radical proposal in 1975 there had been ‘no contacts whatsoever between Meidner’s [LO] group
and the Social Democratic party leadership’ (Åsard 1985: 32). Olof Palme, the then party leader,
had to learn about the proposal’s details through the newspapers (Åsard 1985: 39). In no way
were the radical suggestions driven by SAP's leadership, which were taken completely by
surprise and had to handle a dilemma where polls showed voters were unenthusiastic about a
fund system while at the same time a key SAP supporter group, LO, were in favour. While
Meidner described the LO plans as dealing with the core ownership questions (Åsard 1985: 34) at
no point did Olof Palme commit himself to such far reaching proposals. In the final very 'watered
down' proposal (Berman 2006: 198) carried by Parliament in 1983 the system was capped at
buying shares on the market at a total annual maximum of about £165M (1983 currency; app.
£366M in 2007 currency) per year until 1990 when purchases were to end (at a likely 10 per cent
average shareholding level in listed companies; Gilljam 1988: 36). Well-known in Sweden is the
then finance minister, Kjell-Olof Feldt’s impromptu ‘poem’ scribbled down on a piece of paper
in Parliament’s debating chamber minutes after Parliament had carried the fund proposal.
Captured by a hard-working journalist’s camera, the poem gives the flavour of the mood of the
party leadership: ‘Wage-earner funds, such crap indeed, but now we have huffed, puffed and
shuffled and done the deed.’ (Feldt 1991: 153).
Rather than being fought by the SAP party leadership the funds were driven by LO and the final
SAP proposals were rather far from the original LO proposals (c.f. Pontusson 1992; Callaghan
2000: 72 ff.; and these two have not been sufficiently held apart in some earlier research) . The
change from LO's position--dealing with the question of collectivist ownership--which was
central to Meidner’s original proposal (Meidner 1975) to the Party's position--dealing with
capital formation, is reflected in the 1982 election manifesto. The manifesto held that funds were
needed ‘to bring down the huge deficits in the Government budget and in our foreign trade. To
secure future employment levels, incomes and pensions will need improved capital formation and
increased savings’ (SAP 1982). In the weak sense this is an example of elaborate planning for
how to underpin the public sector, while the emphasis on deficit fighting is an indicator the party
leadership never really embraced the original wage-earners’ fund ideas with their strong planning
connotations. When Prime Minister Palme discussed where social democracy was heading--thus
elaborating on ideological 'dreams'--he emphasised that ‘[t]he social democrats want to continue
on the welfare construction, but it has to be at a pace the economy can handle. We promise no
new cost-demanding reforms’ (Palme 1982: 24). This is a clear example of how firmly
embedded--long before financial deregulations etc--the weaker notions of planning were. The
plan for welfare state consolidation was as fundamental as ever. Equally fundamental was the
view that the market economy as we know it is an essential foundation, setting limits.
In the wake of Palme’s cautious standpoint about protecting the welfare state without any new
reform sprees, the programme Framtid för Sverige (Future for Sweden) still stressed that
privatisations and public sector cuts had to be prevented to guarantee social welfare. However, a
distinctly new element was that the programme referred to the social sector’s relative share of
the economy rather than the absolute share. Indirectly this would imply that in times of
economic slow-down the Government might have to cut down some welfare programmes –
while maintaining their relative share of the economy. There was a definitive cap on its use
above which it may even become counter productive.
Most of the planning-speak was lifted off in the 1985 election manifesto. Arguments centred on
the need to support enterprise by creating favourable conditions for investment and research
(SAP 1985). One of the more outspoken proponents of the new idiom the Minister for Finance
claimed ‘[w]e should stop backbiting the market economy. ... As is well known the market
economy ... has won a total victory over its only known alternative, planned economy. …
[O]nly in certain circumstances and on certain markets is a planned economy superior to market
solutions’ (Feldt 1989; SAP 1989: 18; Ahlqvist and Engqvist 1984: 72, 100; see SAP 1989:
153, 180 ff.). This was a party, which did not rid itself of the market.
Conclusions: A continuous awareness of market boundaries
Social democracy is a political movement prepared to ameliorate the effects of the market
economy. But, how far were the parties prepared to go in order to replace the fundamental
functioning of the market economy as such? Earlier research seems to indicate that the parties
have used terminology, which taken by its own could well indicate the parties' intention to take
new steps away from the market economy. 'Planning,' 'control' and 'state influence' form
important parts of the documents. However, as the overview above has shown, Labour and SAP
rhetoric, such as ‘planning,’ ‘control’ and ‘influence’ are usually of the 'weak' version, although
regularly with an ambitious range of measures. Socialism as a mobilising concept was still vivid
in both parties during the Golden Age indicated by the widely used 'planning' term. In the sense
that socialism was another word for the ‘good society’ the concept was full of substance but
only so long as the good society took the shape of an ambitious welfare state rather than an
alternative economic system.
Hardcore 'strong' planning sat very uneasily with the Parties' market ideologies. Planning stood
for ideas about efficiency, creativity and welfare state and how to achieve these ends in an
organised manner lead by politicians rather than left to market actors alone. As such, these ideas
were easily reconciled with the liberal market economy. 'Stronger' versions of planning were
not absent but less evident and clearly fell outside the Party’s overarching goals.
Earlier renderings of the parties’ 1960s/70s fundamental ideologies as clearly attached to
‘planning’ in general may be indirectly caused by the fact that both parties managed to
implement extensive welfare state reforms after WWII. Most of the ideas, and the ensuing
reforms (e.g. the UK Beveridge plan) were as much liberal projects as they were social
democratic and several important aspects of the policies were embraced by non-social
democrats as well (Berman 2006). They same applies if we use Hay’s seemingly ‘exacting
definition [of social democratic ideology]: a commitment to redistribution, democratic
economic governance, and social protectionism’ (1999: 57). In practice many, perhaps most,
parties redistribute, regulate the economic sphere and provide some social protection (Pierson
2001: 16, Bonoli and Powell 2004: 8).
Efficiency, full employment and equality. Such would be the textbook definition of social
democracy (Przeworski 1987: 241; welfare state, industrial accident legislation, zoning laws,
environmental restrictions, collective bargaining legislation etc; Glyn and Wood 2001; Hay
1999: 57; Hibbs 1987: 4; Shaw 1993: 116; Tilton 1992: 414 ff.). Far-reaching as the policies
may appear—some hold they correspond to a ‘planned’ society ‘where freedom for private
initiative is framed or curbed by social control’ (Tilton 1992: 417) in the service of the common
good (Berman 2003: 142)—it is still surprising how closely they conform to a mixed market
economy. Thomson (2000) suggests that in the new social democracy ‘equality’ has been
replaced by ‘fairness’, ‘collective rights’ by ‘individual rights’, ‘expansion of the state to
counteract the ills of capitalism’ by ‘aid the market’, ‘redistribution’ by ‘individual entitlements
to achieve enhancement’, ‘the state as a provider’ by ‘the state as enabler’ and ‘en ethic of
cooperation’ by ‘community’. (Thomson 2000: 11). But, as we have seen, aiding the market and
enabling citizens in time of change were vital parts of Golden Age social democratic thinking as
well. It was suggeste by SAP and the Labour Party to be done in a 'planned' manner and, in this
'weak' sense, planning has been an ongoing theme in the parties.
The somewhat puzzling lack of 'stronger versions of planning or steering measures may simply
be that to confront revisionism would have challenged the very heart of social democratic
thinking. As the data in this article have shown, the Labour Party and SAP were firmly
embedded in market-economy ideas well before any ‘New’ versions of the parties emerged. To
challenge these economic foundations would be to enter into completely new ideological
territory and ‘very few’ linked even ‘socialism’ to ‘the notion of a revolutionary break’ and
more to an overall ‘ethic’ of equity (Cronin 2004: 29, Hinnfors and Shaw 2004: 7). Failing such
challenge the meaning of revisionism loses much of its cutting edge.
The concept of revisionism is vague (Wickham-Jones 1995: 700). Socialism ‘today’ was always
left defined bewilderingly close to any ambitious version of welfare state social liberalism. It is
one thing to accept that social democracy accepted democratic means and that the road to
something beyond the market economy had to be step-by-step peaceful (Sassoon 1996: 734).
But, even with a ‘reform not revolution’ approach (Fishman 1996: 44; Hodgson 1981: 196 f.,
216 ff.) the end result about something different has been rather vague.
The conspicuous references to market behaviour in the Golden Age policy documents indicate
that social democracy was—and is—not reformist in the sense that it is set to go very much
further than expanding the welfare state. It is, rather, a reform-focused movement with a wide
range of proposals on how to improve people’s lives by correcting some of the market
economy’s unfair results (Shaw 1996: 54 f.; see Crosland 1956). However, this poses a
dilemma. With ideas about a next step firmly in the background there is a shortage of visions. It
would be more credible to talk about something like a reformist path to the welfare state. If this
interpretation were to hold true, we have to rethink the very ideological foundations of social
democracy.
‘Revisionist’ had become synonymous to ‘modernising,’ with optimistic views about the
possibilities to boost the quality of society through technological and scientific advances
(Cronin 2004: 88 f.). As part of the modernising drive came the view that ineffective industries
could in fact be turned into competitive exemplars (Cronin 2004 88 ff.). The paradox was that
notions of competition became closely associated with public enterprise and with public
enterprise's market efficiency rather than any refined planning instruments and thus, in a way,
paving the ground for the ease with which later marketisation reforms were formulated and
implemented.
Rhetorically, the earlier party leaderships were able to hold out the image of a distant future
society with a socialist lining. Planning and control were key words. Today the promise of a
future Eden is less clear. The fact that in spite of the ‘inner logic’ to look for new brave welfare
state reforms, so few real ideological innovations have emerged indicates that social democracy
has had something to defend. The movement had carved out a section for itself on the
ideological left-right scale based on ambitious sets of 'weak' planning. Occasionally the leaders
allowed and endorsed debate about stretching the ideological limits. As soon as the debate came
perilously close to drastically different economic alternatives they pulled the emergency brake.
It would be easy to claim that the Golden Age social democracy applied the market merely as
an instrument. The common good was always the top goal. In this sense the market economy
has definitely been an instrument. But, the market is not just any old instrument easily
exchanged for another instrument. It has been regarded as the very foundation upon which the
welfare state rests and there has been rock solid awareness about this inside the core leaderships
of social democracy.
Both Labour and SAP have recently launched a host of market-emulating reforms in the public
sector. They have also contributed to deregulating financial markets etc. In 1995 Labour cleared
itself of its programme’s Clause IV, the pledge to common ownership of the means of
production, perhaps a dramatic step towards market acceptance. However, an equally plausible
interpretation is that the new policies share ideological foundations with core social democratic
ideas. Basic tenets of market thinking were strongly embedded in social democratic tradition
and contributed to the relative ease with which new market experiments have been introduced.
What the Party did was to rid itself from 'strong' planning, which--in view of the parties policies
during the 1960s/70s/80s was less dramatic than perhaps the debating din surrounding the
abolishing of Clause IV indicated.
Generating fresh resources for constantly new market-correcting reforms is of vital importance
to social democratic ideology. As long as these correctives do not interfere with basic
fundamentals of how the market operates new reforms can be introduced. The parties have
developed market ideologies to square with the limits. To some extent social democracy is
caught in a trap. Very early the parties chose the welfare state as the first step to decommodify
society and to ameliorate the unfair outcomes of the market economy. However, once there, the
welfare state had to be upheld. With dwindling or even stable resources for the welfare state, the
social democratic project risks grinding to a halt. So far a well functioning market economy has
been the best option to safeguarding welfare state delivery, and—thus—social democracy.
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