Politics against pessimism: Social democratic possibilities since Ernst Wigforss

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Copyright © 2013. Peter Lang GmbH, Internationaler Verlag der Wissenschaften. All rights reserved.

social democratic possibilities since Ernst Wigforss Winton Higgins & Geoff Dow

Peter Lang

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID Created from nyulibrary-ebooks on 2021-08-01 13:07:15.

social democratic possibilities since Ernst Wigforss

Neoliberalism has now failed, so can a social democratic resurgence replace it? This book retrieves the political thought of Swedish politician Ernst Wigforss to explore the unrealised potential of social democracy. Wigforss drew on many schools of thought to produce an alternative social democratic strategy. It outflanked economic liberalism, allowed his party to dominate Swedish politics for a half-century, and his country to achieve affluence and social equity as converging rather than competing objectives. OECD economies have since evolved political capacities – the welfare state, corporatist regulation, expanded citizen entitlements, civic amenity – far in excess of pessimistic evaluations offered by mainstream analyses. This book suggests that such developments confirm Wigforss´s ideas, confounding conventional pessimism.

Copyright © 2013. Peter Lang GmbH, Internationaler Verlag der Wissenschaften. All rights reserved.

Full employment, social equity, economic democracy, new political institutions, and transformative economic management are now more imaginable than ever in western countries. But their achievement depends on a radical reformist political mobilisation of the kind that Wigforss inspired, one which integrates these aspirations as mutually reinforcing goals. This book presents valuable information about Ernst Wigforss and the theoretical development of Swedish social democracy in the context of broader western trends and their diverse scholarly analyses. Lennart Erixon, Stockholm University, Department of Economics The book is an important intervention into social democratic strategic thinking. It presents the political and economic aspirations of social democracy as long anticipated in heterodox political economy. Frank Stilwell, University of Sydney, Department of Political Economy

Winton Higgins and Geoff Dow have each taught political science and political economy courses for many years- Higgins at Macquarie University (but now a visiting fellow at UTS); and Dow at The University of Queensland. Winton Higgins is a graduate in arts, law and politics from Sydney, Stockholm and London universities. Geoff Dow is a graduate in economics, sociology and politics from Queensland.

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID Created from nyulibrary-ebooks on 2021-08-01 13:07:15.

Copyright © 2013. Peter Lang GmbH, Internationaler Verlag der Wissenschaften. All rights reserved.

social democratic possibilities since Ernst Wigforss

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=16 Created from nyulibrary-ebooks on 2021-08-01 13:07:15.

Copyright © 2013. Peter Lang GmbH, Internationaler Verlag der Wissenschaften. All rights reserved.

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=16 Created from nyulibrary-ebooks on 2021-08-01 13:07:15.

social democratic possibilities since Ernst Wigforss

Copyright © 2013. Peter Lang GmbH, Internationaler Verlag der Wissenschaften. All rights reserved.

Winton Higgins & Geoff Dow

PETER LANG Bern · Berlin · Bruxelles · Frank fur t am Main · New York · Ox ford · Wien

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=16 Created from nyulibrary-ebooks on 2021-08-01 13:07:15.

Bibliographic information published by die Deutsche Nationalbibliothek Die Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie ; detailed bibliographic data is available on the Internet at ‹ http://dnb.d-nb.de ›. British Library Cataloguing-in-Publication Data : A catalogue record for this book is available from The British Library, Great Britain Library of Congress Cataloging-in-Publication Data

Copyright © 2013. Peter Lang GmbH, Internationaler Verlag der Wissenschaften. All rights reserved.

Higgins, Winton. Politics against pessimism : social democratic possibilities since Ernst Wigforss / Winton Higgins & Geoff Dow. Includes bibliographical references. ISBN 978-3-0343-1445-9 – ISBN 978-3-0351-0582-7 (eBook) 1. Wigforss, Ernst, 1881-1977. 2. Wigforss, Ernst, 1881-1977–Influence. 3. Socialism–Sweden–History–20th century. 4. Labor movement–Sweden–History–20th century. 5. Sweden–Politics and government–1905-1950. 6. Sweden–Politics and government–1950-1973. I. Dow, Geoff. II. Title. HX338.8.W54H55 2013 2013026104

Cover design: Eva Ede, Stockholm

ISBN 978-3-0343-1445-9 pb.

ISBN 978-3-0351-0582-7 eBook

© Peter Lang AG, International Academic Publishers, Bern 2013 Hochfeldstrasse 32, CH-3012 Bern, Switzerland [email protected], www.peterlang.com All rights reserved. All parts of this publication are protected by copyright. Any utilisation outside the strict limits of the copyright law, without the permission of the publisher, is forbidden and liable to prosecution. This applies in particular to reproductions, translations, microfilming, and storage and processing in electronic retrieval systems. Printed in Switzerland

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=16 Created from nyulibrary-ebooks on 2021-08-01 13:07:15.

Copyright © 2013. Peter Lang GmbH, Internationaler Verlag der Wissenschaften. All rights reserved.

For Lena and Jane

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 13:07:15.

Copyright © 2013. Peter Lang GmbH, Internationaler Verlag der Wissenschaften. All rights reserved.

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 13:07:15.

Copyright © 2013. Peter Lang GmbH, Internationaler Verlag der Wissenschaften. All rights reserved.

Acknowledgements

This study has matured slowly, always in association with other projects of greater urgency but perhaps more modest importance. Thus it has spread itself over many years and several stints as guest researchers in Sweden. In this way it leaves us with many individuals and several institutions to thank. For help, support, guidance and exchange of ideas we particularly acknowledge the late Annika Baude, Christian Berggren, Stewart Clegg, Jennifer Curtin, Eva Ede, Lars Ekdahl, Lennart Erixon, Olle Hammarström, Ann-Britt Hellmark, Walter Korpi, the late Rudolf Meidner, Åsa Nelander, the late Gösta Rehn, Åke Sandberg, Frank Stilwell, Lennart Svensson, Andrew Vandenberg, Ann-Charlotte Viklund, Birger Viklund, Ylva Waldemarson, Bengt Åkermalm, and Cecilia Åse. We warmly thank them all, together with those – too numerous to name (but you know who you are) – who smoothed our way and welcomed us, not least in Sweden. We would also like to acknowledge our home institutions – the Transforming Cultures Research Centre at the University of Technology Sydney, and the School of Political Science and International Studies at the University of Queensland – for housing and resourcing us during this work. A number of institutions in Stockholm have also greatly assisted us: the Institute for Futures Studies, the Institute for Social Research at Stockholm University, the Labour Movement Archives and Library, and the Swedish Institute for Work Life Research. We especially thank our partners, Lena Bruselid and Jane Greenfield, for their unfailing affection and forbearance as we worked on this study.

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 13:07:15.

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8

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 13:07:15.

Introduction

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In the final analysis, conceptions of self, reason and society and visions of ethics and politics are inseparable. Seyla Benhabib

As a socio-economic system, capitalism delivers progress at the expense of economic dislocation, social insecurity and tangible deprivation. It has thus also summoned forth collectivist and leftist political movements that set out to ameliorate these disorders. Throughout the capitalist era, the conflict between the system’s economic-liberal promoters on the one hand, and on the other those who seek to impose social and moral priorities on it, has accounted for the main cleavage in western political life. Among other things, that conflict has moulded the mixed economies of the postwar era. As with other widespread conflicts, their course has never been predetermined; it always depends on historically unique starting points in different countries, and on each side’s ability to achieve programmatic clarity, to creatively exploit possibilities, and to crystallise its gains in new institutions. Hence each national mixed economy manifests in distinctive ways. But international impulses regulate the terms on which the conflict itself plays out. From the mid-1970s, neoliberalism – a new, allegedly necessary, rendering of perennial economic liberalism – came to dominate western political life, starting in Australia, the UK and the USA. This more virulent recension of the old economic-liberal creed sought once again to impose a utopian and unfettered capitalism, now on a global scale, with minimal regulation and punitive welfare provisions, and maximal monetisation and marketisation of the mechanisms that allocate resources and rewards, and that frame social relationships as a whole. Neoliberal parties successfully attacked their collectivist opponents when the latter were struggling to activate alternative policy solutions to the stagflation of the 1970s. So the collectivists, whether governments, parties, labour movements or intellectuals, soon lost confidence in their own programmatic creativity beyond what had already been achieved. So began the ‘crisis of the left’ (also known 15

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:58:44.

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as the ‘crisis of socialism’) which continues today, in spite of the abrupt fall from grace of neoliberalism itself in the global financial crisis that began in 2008. The quest for an unfettered capitalism has now once again demonstrated both its moral and economic bankruptcy, and the time is ripe for a resurgence of left politics. And yet the crisis of the left continues, not least as a programmatic vacuum predicated on an ignorance of the left’s own history. As with individuals, so with significant political movements: to have a future, one must first have a past. This book seeks to start filling that vacuum, not least by uncovering and mining a valuable deposit of theoretical and programmatic ideas that drove what we will argue is the left’s most formidable achievement in the west during the twentieth century – the social-democratic breakthrough and consolidation in Sweden. We argue that these ideas, suitably adapted and updated, can inform a social democratic revival in the current period and in virtually any western country. They are available to any political force – be it an electoral party, coalition or a union movement – which is prepared to grow into them. Indeed, this argument motivates our entire project. In looking at the Swedish precedent we will focus on the theory and practice of Ernst Wigforss (1881–1977), by common consent the architect of the process that left his party the most successful electoral organisation in western democratic history, and his country in a league of its own in its distinctly non-economic-liberal combination of economic efficiency and social equity. Economic liberalism places these two values in an antagonistic relationship, such that one must be bought at the expense of the other. In contrast, Wigforss demonstrated a politics that married equity to efficiency, thus redefining progress. We will argue that Wigforss’s legacy provides contemporary guidance for a resilient left alternative to the now discredited neoliberal policy nostrums. In doing so, we highlight three aspects of his work. First, he was economic liberalism’s most dangerous foe: his magisterial critique and his effective political marginalisation of this ideology provides a starting point for an equally pointed critique of neoliberalism that today’s left has yet to reclaim. Second, he demonstrated how programmatic clarity can be distilled from this critique, how a substantive left programme can mobilise 16

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:58:44.

mass support in a democratic polity, and how it can consolidate a stable majoritarian support base to underpin the achievement of longer-term goals. We hardly need to labour the point that left and centre-left politics in the twenty-first century appears bereft of programmatic starting points, and it needs role models like Wigforss more than ever. Third, Wigforss brushed aside economic-liberal notions of the minimal or market-affirming state in favour of developing a strong, institutionally creative state as an effective instrument of the democratic will, not least when that will sought ambitiously equitable and decent policy outcomes. Like Machiavelli, Wigforss saw politics not simply as the art of the possible, but as the art of possibilities. He sets a counter-precedent for those parties of the left and centre which have resigned themselves to today’s rule of pollsters, lobbyists and focus groups, and their reduction of electoral contests to trivialised and visionless ‘races to the bottom’.

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Ernst Wigforss Ernst Wigforss, Per Albin Hansson and Gustav Möller dominated Swedish social democracy’s second generation leadership from the mid-1920s. Wigforss was briefly Sweden’s treasurer in the 1920s, and for nearly 17 years from 1932. By popular consent he is the leading theoretician of his party, itself founded in 1889. We will further claim that the Swedish social democratic labour movement’s unique success in a western democratic polity arises from the statecraft embedded in Wigforss’s thought. Wigforss’s theory and practice are highly original and historically important, and making good the neglect of his work is in itself a worthwhile undertaking. But even more compelling reasons commend his ideas as a departure point in exploring the problems of radical politics, even in advanced capitalism today. The first concerns Wigforss’s sheer political effectiveness. He played the leading role in social democracy’s historic breakthrough in Sweden in 1932, and as treasurer was a driving force in the vital years in which that country emerged as the ‘model’ for the progressive transformation of social relationships and institutions in western countries. Second, Wigforss was an intellectual turned statesman who, true to 17

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:58:44.

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his original work habits, hammered out his politics in writing. In doing so he continually returned to first principles. He ‘changed the world’ in accordance with Marx’s eleventh thesis on Feuerbach, but also left behind a theoretical oeuvre that illuminated his policy orientations. While several socialist figures have modelled a relationship between theory and practice, Wigforss is arguably alone in creating a distinctive socialist statecraft. In particular, he took the measure of economic liberalism and challenged it most effectively, in both theory and practice. A third reason for choosing Wigforss as a companion in this exploration is that he exhibits so many counterfactual elements. His opponents and rivals variously accused him of being either an unworldly dogmatist out of touch with reality, or a cunning political operator without principles. Put together they bear witness to Wigforss’s peculiar combination of intellectual robustness and tactical flair. His politics also reveals a striking consistency throughout a long career, yet he mixed and matched without inhibition elements from the mutually hostile camps of marxism, utopian socialism, syndicalism and collectivist liberalism. While his political inclinations collided with mainstream economic orthodoxy, in the end it is the former, rather than the latter, that have earned endorsement from subsequent developments in capitalism. Like a good sailor, he set a straight course while remaining receptive to every intellectual wind that blew his way. He was a voracious reader, and few international debates – from economic theory to literary criticism – escaped his published comment. Above all, Wigforss fashioned a flagship modern development – Swedish social democracy – without ceasing to enter deep reservations about the enterprise of modernity itself. At bottom his quest was an ethical one that probed the moral failure of all major political expressions of the modernist enterprise. Hence the paradoxes he presented, of a highly effective politician who never settled into a political career for its own sake, and of a socialist who listened to modernity’s conservative critics. On his death in 1977, the valedictories underscored the futuristic nature of his prescriptions for reform, above all in industrial and economic democratisation. He had initiated so much, it was said, but so much remained to be done because the organs of the labour movement were still ‘catching up’ with his thought. This is still true. But there is a broader reason for returning to Wigforss now. It concerns today’s multifaceted 18

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:58:44.

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questioning of modernity as an historically bounded phase in the development of western civilisation, a questioning that constitutes an important dimension of the crisis of socialism. Is socialism simply another expression of a now outmoded and increasingly malign set of assumptions about rationality and progress? Have socialists in general long remained silent about the fundamental aspirations of their project, not because these are now beyond question, but because they would not survive the scepticism of a new generation that (in rhetoric at least) rejects their modernist presuppositions? The counterfactual Ernst Wigforss, who assiduously returned to the aspirations of socialism in his work over six decades in the twentieth century, may be the collaborator we need in dealing with the fundamental issue of whether the socialist project can overcome modernity’s moral risks. Wigforss is little known outside Sweden.1 In his own country, having outlived his enemies, he has fallen prey to his friends. On ceremonial occasions, when social democratic leaders recite the names of the heroes who now lie in the party pantheon, his name is pronounced with particular reverence. But the gulf between social democratic politics over recent decades and the politics he cultivated means that his profile has long had to be exhibited in soft focus. Indeed, the conventional historiography of Swedish social democracy goes even further and blurs this profile beyond recognition. According to this particular grand narrative, the movement began in the nineteenth century with a crude and socially disruptive foreign dogma (marxism), but in the course of a long and fruitful interaction with the benign native political culture, it matured into a sophisticated social-liberal political machine that integrated national political life and capitalist socio-economic development. In this story Wigforss is cast in the role of a local John the Baptist who heralded the coming of Keynes. In restoring Wigforss’s political profile we straighten out the more outlandish twists in this tale. But its authors at several turns have rendered

1

Tilton 1979, 1984 & 1990, ch. 3, as well as Higgins 1985a and 1988, pretty well exhaust any sustained English-language references. The Swedish reader has, of course, access to Wigforss’s whole oeuvre, a substantial portion of which is reprinted in the nine volumes of Ernst Wigforss Skrifter i urval (Tiden, 1981 – hereafter EWSU), as well as to Lindblom 1977. Amazingly there is no biography. Helldén 1990 presents a short ‘intellectual biography’.

19

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:58:44.

us a valuable service in problematising aspects of the socialist project that are now badly in need of clarification. In this clarification we do not treat him uncritically, but instead point to gaps and self-contradictions that his successors need to make good. This book is not a biography, though it will, we hope, present enough biographical detail to provide context and flavour in understanding Wigforss’s thought and career.

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The new democratic socialism When Wigforss joined the social democratic party in 1906, it had a developed marxist ideology and a sense of historic mission that it took from the sophisticated theoretical perspectives of the Second International, to which it belonged. In a nutshell, the party cleaved to a development theory that promised a coming ‘maturation’ of western European capitalism, at which time (but not before) a transition to socialist society would automatically find its way onto the historical agenda. This would take the form of a future social democratic government legislating to transfer existing largescale capitalist enterprises to the ownership and control of the state. In the meantime the task of the social democratic labour movement as a whole was to organise and consolidate itself in preparation for this transition, and to fight for universal suffrage and for incremental reforms to raise the physical and cultural standard of the working class. In this study we refer to this political tradition as the old democratic socialism. Hjalmar Branting, the leader of the party for the first 36 years of its existence (1889–1925), personified the old democratic socialism, which saw itself as the beneficiary of historical change rather than its arbiter. Almost to the end Branting appeared as the guarantor of the labour movement’s inexorable progress, not least in bringing the long campaign for universal suffrage to a successful conclusion in 1918. Yet right from the start Wigforss felt grave misgivings about this vision and its theoretical assumptions. The marxist development theory it rested on was unconvincing and more anti-political than a guide to action. Above all, it downplayed democracy as a fundamental principle of 20

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:58:44.

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association, as well as moral evaluations as such. In the end it failed to seize the political opportunities of the democratic state it itself had done so much to construct. The insurrectionist left periodically threw down the gauntlet to the old democratic socialism, but in Wigforss’s view it magnified rather than overcame the latter’s frailties. We call the political doctrine that Wigforss forged to replace this original social democratic politics the new democratic socialism. It might also simply be referred to as social democracy, were it not for the blurring and denaturing of this term since the 1970s. Wigforss’s socialist politics affirmed the new democratic constitutional state, but also a far richer notion of democracy together with a wider field for its application in subverting capital as a social relation inscribed in the typical forms of socio-economic organisation in capitalist society. It radically denied development theory as such (both marxist and economic-liberal) and saw political action in voluntarist terms, driven by elective moral choices. Rather than wait for ‘history’ to unfold, it developed a proactive statecraft to shape it. The emergence and application of this new democratic socialism to social change is the major theme of our book.

Retrieval When a tradition like democratic socialism finds itself in crisis we should approach its resolution with a little sense of method. Why try to retrieve something from the past when the conundrums we have to face belong to the present and the future? We have sought a provisional answer to this question in the work of the moral philosopher Alasdair MacIntyre and his illuminating discussion of practice, tradition and institution.2 The practice Wigforss engaged in was democratic socialist politics, itself a subset of political activism. In adapting MacIntyre’s definition we can say that this practice is a coherent, co-operative activity that seeks to realise certain values (or ‘goods’). A practice both cultivates a practical competence that integrally expresses those values, on the one hand, and 2

MacIntyre 1985, pp. 187–194, 221–225.

21

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:58:44.

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further elucidates what those values are (and in what forms they may best be expressed), on the other. As Wigforss’s story unfolds it will become clear why this notion of practice is far more useful than the one most socialist writing embraces. The latter postulates some socialist end state or ‘goal’, that socialist political practice serves in an instrumentally rational way. Choice of means thus becomes morally uninteresting, or ‘value neutral’. Against this, Bernstein’s notorious insight – that the movement is everything and the final goal counts for nothing – informed Wigforss’s approach. Political means must exhibit the ends they serve. Critics of both thinkers commonly assume that this elevation of movement over goals makes for a more accommodating, less ‘radical’ politics. This study will suggest the opposite. Democratic socialist practice cultivates certain values through the transformation of exploitative, hierarchical or restrictive social relationships. One institution that is inevitably drawn into this project is the state, which socialists – in common with other non-liberal political traditions – see as a vehicle for purposive and deliberative human action. The practice, then, includes statecraft – the pursuit and use of political power in aid of the wider ambition of social transformation. Instrumental rationality has no pride of place here, either. The skills of political mobilisation have an inalienable moral content as much as the aspirations they serve. In this way, they outflank both the static nostrums of public administration and the conventional wisdom of subordinating policy and programme to the dictates of advertising gimmickry. Democratic socialist practice, like any other practice, has a history, and so takes place in what MacIntyre calls a tradition. By this he means that a practice is informed by an ongoing process of reasoning, criticism and invention directed towards the elucidation and realisation of the values that the practice embodies. To be an effective practitioner is to have a good grasp of how the tradition came to form the practice as one encounters it in one’s own time. Equally importantly, good practitioners continually return in their own practice to the fundamental questions with which the tradition began, in search of fresh insights. In times of crisis in a tradition, it can also be useful to listen into what is being said in other traditions, even rival ones. In this study we are concerned with the democratic socialist tradition that began (to take a convenient starting point) with the 22

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formation of the Second Socialist International in 1889, but that has clear antecedents extending back through marxism and its rival socialist schools to eighteenth century radical democratic thought. A tradition is a living one, MacIntyre suggests, when its bearers continue this fundamental questioning, which entails conflict. The decline and death to which traditions are prone occur when the questioning ceases, and ideas and precepts are handed down as a self-evident heritage. Wigforss not only consciously situated himself within the democratic socialist tradition but fundamentally questioned and modified it in the course of his political practice. To revitalise that tradition today is to come to grips with Wigforss’s renovations in the course of our own return to the generative questions about the aspirations of socialism and how we might best pursue them. ‘An adequate sense of tradition manifests itself in a grasp of those future possibilities which the past has made available to the present,’ MacIntyre writes.3 But practices need to be sustained by more than tradition: they require the concrete settings of institutions. From the founding of the Second International, the major institutions of democratic socialism have been the social democratic parties that this body inspired, especially those in western Europe. These parties in turn characteristically extended their practice into union movements and other institutions of organised labour. Swedish social democracy exemplifies this process. The relationship between practices and traditions on the one hand and their sustaining institutions on the other is a problematic one. A variety of institutional contingencies – such as internal power struggles, dilution by other traditions and an influx of personnel with little or no sense of the institution’s original raison d’être – can render an institution a poor vehicle for a tradition, and even a corrupting influence on it. We will need to remain sensitive to these possibilities when looking at the history of Swedish social democracy. In retrieving Wigforss’s contribution to the democratic socialist tradition we will suggest that the questions he formulated are still with us, and that – as so many have testified – his answers have an acute relevance still, as elites uncertainly begin to acknowledge the damage their capitulations 3

MacIntyre 1985, p. 223.

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Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:58:44.

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to neoliberal marketisation and de-democratisation have wrought in poor and rich countries alike.4 Familiarity with his political values and priorities can lead to clear discriminations within the otherwise bewildering, cynical or disempowering theories and ideas that now claim to guide radical thought. To take the main thread in Wigforss’s democratic theory as an example, he extolled citizenship not only as membership of a particular society, but also as participation in its associational life and amenities. In his company, we can trace the elaboration of citizenship along two axes: a vertical one to do with opening up new aspects of citizenship – civic, political, social, economic and vocational; and a horizontal axis of inclusiveness, as more and more groups come to participate fully in social development. But even to focus in on citizenship is to raise philosophical issues to do with how we conceive the individual as such, and the role of the state in reinforcing democratic citizenship. Today various strands of liberalism, communitarianism, civic republicanism, feminism and critical theory have much to say on citizenship and its relation to the democratic state. To follow Wigforss is to develop clear preferences among them and to produce a coherent concept of democratic citizenship from those that survive the cull. In this way we can find in present-day thought the affinities and complementarities we need to update and fill out his democratic socialism.

4

Striking examples include books by Joseph Stiglitz 2002 and 2003, statements by James Wolfensohn in the early 2000s and conservative critiques of globalisation from John Gray 1998 and 2007 in Britain, Chalmers Johnson 2004 in the USA and John Ralston Saul 2005 in Canada. A version of Stiglitz’s and Wolfensohn’s struggles against entrenched development practices (the Washington Consensus) is provided in Wolfensohn’s personal biography (2010, ch. 14). Here the former head of the World Bank argued that he was never quite able to convince his colleagues to adopt a ‘comprehensive development framework’ which would prioritise multi-dimensional development (requiring consultation and dialogue with poor countries) and poverty reduction rather than liberalisation and structural adjustment. Inability to learn from policy mistakes, or to receive only ambisinister indoctrination, seems to be endemic in economic policy controversy across cultures. For a passionate though more general account of the tenacity of harmful economic ideas, see John Quiggin 2010.

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Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:58:44.

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Intellectual milieu Ernst Wigforss was, and remains, the major contributor not just to Swedish social democratic practice, but also to the theory of social democracy generally. He drew on not just one analytical tradition but many strands of thought and research in the social sciences – to create a coherent conception of political possibilities. While many early twentieth-century socialists professed the impotence of democratic political processes (thus mirroring the economic liberals’ assertion of their illegitimacy), Wigforss promoted a morally driven, participatory politics as the springboard and defining achievement of western progress. In the chapters that follow we will demonstrate that his mission was as successful as it was mainly because it built on a broad range of new social scientific understandings of the modern human condition. By its very nature it remains an unfinished project that demands constant receptivity to new inputs. We need to juxtapose Wigforss’s perceptions of capitalist political economy with subsequent evaluations and debates. This requirement has determined the arc of our discussion. Wigforss’s opposition to economic liberalism consisted not merely in his affirmation of inclusive, active citizenship, but in his insistence that the entitlements of citizenship should not be hostages to market outcomes. In this way Wigforss confirmed the conception of politics implicit in the tradition that ran from Aristotle through Machiavelli, the American civic republicans and pragmatists, Hegel, Weber, Christian social thought, institutional political economy, Keynes and the post-keynesians, and on to contemporary neo-weberian statism: namely that politics is the collective activity by which humanity seeks control over its own destiny. Freedom means self-rule, as the civic republicans insist. The wigforssian social democratic view thus asserts the power of the democratic will to wield policy and institutional creativity in order to neutralise the disruptive effects of market processes. These days the latter notoriously include global warming and ecological catastrophe. Market incentives, and the licence they give to individuals to engage in self-interested behaviour, often serve the public good, especially when entrepreneurial enthusiasms generate new industries and technologies. But this fact does 25

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:58:44.

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not support the economic-liberal creed that progress demands acquiescence in growing inequality, social insecurity, measurable deprivation and environmental destruction. Political creativity can discipline a market to make peace with fairly distributed life chances, steady social development, and sustainable, socially responsible industry. At about the same time Wigforss was developing his programme for Sweden’s postwar reconstruction, Joseph Schumpeter referred to market-led adjustment as a process of ‘creative destruction’. With far less insouciance towards the destructive effects of the market than his economic-liberal colleagues, Schumpeter implied that a key responsibility of policy processes would always be to attend to the undesirable consequences of liberal capitalism.5 In the words of postwar German ‘social-market’ economists, the market was a ‘good servant but a bad master.’ Most non-mainstream schools of economic analysis have developed this understanding: political intervention to deflect unwelcome market outcomes is neither illegitimate nor impossible. Market outcomes are not sovereign even though that is their advocates’ intention. Wigforss’s opposition to economic liberalism was never doctrinaire. The analytical traditions on which he drew varied in their enthusiasm for enlightenment rationality as the cynosure of modern development. Marxism called for the political supersession of the defining features of capitalist market economies – market modes of allocation, profitability as the main criterion for investment, commodity production, the commodification of labour, and authoritarian control of the production process as the exercise of proprietary rights. As an intellectual tradition it saw capitalism as an abstract, holistic model that defied piecemeal political reform. Wigforss accepted the main lines of marxism’s critique but resiled from its a priori political defeatism. To reach for the possibilities of politics meant that policy creativity needed to focus on the empirical specifics of particular economies. Its deviation from the abstract model pointed to a variable logic of accumulation, and thus to less scripted historical possibilities. For him, the democratisation of production and the transformation of undemocratic social relations were thoroughly imaginable this side of any

5

Joseph A. Schumpeter 1943, ch. 7; see also Dow 2001.

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Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:58:44.

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game-changing ‘socialist transition of capitalist society’, and they thus should find their way into the labour movement’s present action programme. Other schools of political economy either reached or permitted similar conclusions. For example, keynesianism – however disillusioned its major adherents were by opposition to its policy proposals and their post1945 ‘bastardisation’ – always rested on the conviction that macroeconomies should be managed. Though marxian and keynesian explanations of recessionary unemployment show affinities, they parted ways in their respective conceptions of how policy processes might respond. For the latter, specific problems, even recurrent ones, invited policy solutions.6 By the 1940s, the ‘post-keynesian’ writers had claimed that business groups – by resisting policy interventions, particularly concerning the control of investment – were preventing capital from behaving rationally; they were sacrificing their own profits to defend their exclusive proprietary prerogatives.7 This contestation over economic management reprised political battles Wigforss had already waged against his own party’s orthodoxy in the 1920s and 1930s. The idea that politics should impose elective criteria on economic decision making at the macroeconomic level had well enunciated nineteenth-century origins, especially outside the anglophone world. In the 1830s Hegel envisaged state institutions able to redress the effects of unguided egoism as a part of the natural development of society. Émile Durkheim in the 1890s suggested intermediary institutions able to compensate for the anomie and loss of organic solidarity resulting from the spread of market specialisations and the division of labour.8 The economic sociology that subsequently developed showed that curbs on private investment behaviour did not necessarily detract from the prosperity and material progress that capitalist economies generate. Thus, non-economic impositions on economic activity were gradually recognised as ineluctable, 6 7 8

See, for example, John Maynard Keynes 1932. See Michal Kalecki 1943. Keynes of course had implied as much in his radio addresses in the early 1930s. Émile Durkheim 1893 (see especially the 1902 preface to the second edition for his solutions to the problem of anomie).

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rather than as impediments to be ‘reformed’ away. The pure market of the economic-liberal textbooks could never be attained, as economic behaviour was always embedded in societal arrangements, themselves indispensable. At the same time, Christian churches initiated a branch of social and economic thought (later called the ‘social economy’ approach) that reinserted a moral dimension into criticisms of, and prescriptions for, capitalist development. The most influential ecclesiastical document, Pope Leo XIII’s 1891 Rerum novarum (On the condition of labour in new circumstances), legitimated trade unions as institutions able to bargain collectively with employers whose inclination would be to oppose improved or negotiated conditions of employment and remuneration. The church even suggested experiments in economic democracy and cooperative arrangements, and even admonished the winners from competitive processes to make provision for losers, in the interests of social cohesion. Catholic recoil from the commodification of labour in particular arguably exceeded the fervour of the marxist critique of it.9 The principle of decommodified production – outside the market on the basis of citizenship or ascriptive entitlement – was well recognised early in the twentieth century. These strands of thought, often with conservative rather than social democratic provenance, contributed to an intellectual milieu wherein societal and moral priorities were granted considerable authority, especially for the construction of institutions which could regulate key aspects of individual behaviour. Economies in the modern era were beginning to evolve in ways that demarcated them from the abstract depiction of the laissez-faire model. Alternative conceptions of how capitalist development might proceed under democratic auspices usually came with only vague gestures at political programmes. But many of the policy dilemmas faced in actual national contexts evoked the heterodox discussions with which Wigforss was broadly familiar. Social democracy would always need policies to counter the economic liberals’ evangelium that wealth creation and socio-economic de9

See Pecci 1891; also Troeltsch 1911, McHugh 1993 and Pabst 2011 for an analysis of Joseph Alois Ratzinger’s (2009) anti-globalist encyclical Caritas in veritate (Charity in truth).

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Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:58:44.

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mocratisation were utterly incompatible. He devoted much of his intellectual energy to convincing his party that only state and labour-movement institutions with a robust conception of public responsibilities could develop desirable societal capacities. As he tirelessly argued in the interwar period, recurrent unemployment constituted the most obvious indicator of market capitalism’s propensity to waste resources as well as generate social distress. In this way he anticipated specific controversies in political economy that would define parliamentary and extra-parliamentary politics in most western countries through the rest of the twentieth century. These controversies included whether taxation should be increased to fund collective provision or not; whether income equality facilitated or hampered high levels of economic activity; whether society as a whole or employers alone should assume responsibility for the quantity and quality of production; whether the polity was entitled to develop self-protective mechanisms intended to re-engineer market incentives; whether political institutions should be mandated to displace ‘rational’ processes which produced irrational outcomes; whether the complications of a mixed economy should be embraced or minimised; whether unusual (democratic) forms of organisation should be developed for the productive sector or not.10 Early analytical traditions prefigured all these practical conundrums. And they concern us still.11 In each country, intellectuals laboured to suggest reforms in accordance with the specific political realities and resource constraints they faced. For Wigforss, the overarching problem was to ensure that his own side did not succumb to the discursive power and anti-political thrust of main10 11

See Thorstein Veblen 1898a; also Hodgson 1998, 2004; Tribe 1995; and Milonakis & Fine 2009. Analytical traditions that have proven commensurate with Wigforss’s disquiet have asserted that trust, sociability and financial stability are regularly threatened by normal processes of capitalist activity under economic-liberal auspices – thus implying that politics and ‘embeddedness’ facilitate wealth creation rather than distort it. By extension of this argument, we concur that environmental sustainability and principled treatment of populations have become ‘non-economic’ issues with a major bearing on meaningful prosperity. Though the argument is not detailed here, we accept, as will become apparent in later chapters, that such interpellation into economic calculation can be and should be expected.

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stream economic liberalism. As we have now seen, there was no shortage of ideas to bolster his anti-economic-liberal democratic and moral aspirations. The latter fell on fertile theoretical terrain.

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The structure of the book The first chapter establishes an explanatory framework we will use in accounting for the significance of Wigforss’s contribution. This framework helps us to identify the basic cleavage in the politics of all western countries, between the successive expressions of economic liberalism on the one hand, and its historically diverse opponents on the other. This cleavage, we suggest, has vital ramifications for our story, including the nature and possibilities of commercial society, ‘market society’, citizenship and the moral aspirations appropriate to modernity. Within this framework we locate the development of social democracy in the late nineteenth and early twentieth century in chapter 2. Here the spotlight falls on the particularly coherent development of the social democratic labour movement in Sweden under the tutelage of the old democratic socialism. In chapter 3 we meet Ernst Wigforss himself. We highlight the moral and philosophical orientations he takes with him into the social democratic party before the first world war, and which remain fundamental to his politics until his death. Ignorance or misperception of these foundations has proven the greatest single source of error in interpreting his contribution. In chapter 4 we follow him as he moves into the major arena of democratic socialist practice – parliamentary politics – and departs from a political line that neither expresses nor furthers the moral aspirations he himself embraces. The renewal of the tradition that he now undertakes, we suggest, justifies the expression the ‘new democratic socialism’ to capture the contrast with the pre-existing conception.12 Nonetheless, the term stands for a demarcation within the tradition, not a dislocation. During 12

Although, as noted earlier, we will accede to contemporary usage by adopting the term ‘social democracy’ in most of what follows (chapters 4, 5 and 6 excepted, for reasons explained therein).

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this period social liberalism also establishes a foothold in the party as a rival response to the failure of the old democratic socialism; but, at least while Wigforss remains in the leadership, its influence is peripheral. His conception of democracy is communitarian rather than liberal, and he uses it to challenge liberalism as political and economic theory. The new democratic socialism finds expression, in chapter 5, in a revamped statecraft with which the party tackles the predicament of mass unemployment, both before and during the great depression in the 1930s. On the basis of this statecraft, Swedish social democracy establishes a political dominance that it managed to defend until the last decades of the twentieth century, in spite of the gradual displacement of democratic socialism by social liberalism in the party after Wigforss’s retirement in 1949. In the first two decades of this dominance, at least, Sweden embarks on an exceptional social and economic development. From the late forties until his death in 1977, Wigforss is preoccupied, we see in chapter 6, with enriching his democratic socialist perspective in terms of a critique of the social-liberal tide inside and outside the party throughout the postwar period. Both his critique of liberalism and subsequent deepening of the ‘late-modern’ socialist project shed an important light on today’s radical debates. What of Wigforss’s influence after his death? In chapter 7 we turn to the development of the blue-collar union movement, the other major component in the Swedish social democratic labour movement. As Wigforss’s star declines in the party during the postwar period, it tends to rise in LO and its leading unions. The movement elaborates its own version of the new democratic socialism, maintaining and expressing the doctrine until the final decade of the century. More than a doctrine, Wigforss’s integration of the values of democracy in all sites of human cooperation, social equity and economic efficiency, serves as a matrix which generates new policy responses in the union movement as it encounters new conundrums and aspirations. The last three substantive chapters restate the possibilities of the new democratic socialist politics that have emerged within political economy over the past century or so. Wigforss’s understandings of politics developed – and in some respects anticipated – heterodox contemporary developments in the analysis of capitalist economies. In chapter 8, we present data from the rich economies which show that political possibilities have not been 31

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eroded by the changes and disruption since the 1970s. First, the arena of collective provision has expanded – with higher public spending, broader and more reliable taxation revenues, uncurbed social transfer expenditures, and increasingly embedded citizenship entitlements. To these standard social democratic aspirations, we now note a number of important concomitants. Recurrent retreats from the austerity associated with liberal preferences occur, alongside growth in non-market provision (sometimes referred to as the decommodification of consumption) and the common and constant resort to unusual forms of macroeconomic governance – including a surprisingly successful if ad hoc involvement of unions in policymaking. These developments partly reflect burgeoning hostility to the homogenising effects of globalisation, as well as resentment towards elite complicity in the ongoing democratic deficit. But none of these developments will in themselves drive progressive change in the absence of a durable left ascendancy – one able to see to it that gains are not transitory and electorally opportunistic, but rather genuinely transformative.13 Given the confusion today over fundamentals, including new disquiet about assertions of the inevitability of market modes of regulation, we need to update the argument for social democracy’s central premise – the compatibility between its democratic and its wealth-producing components. Recent enthusiasm for the incorporation of ‘social capital’ into accounts of how economic performance is underpinned by social conditions – a recurrent feature of Wigforss’s democratic world view – appears as just one instance of this phenomenon. In chapter 9 we clarify the case for an expansion of labour’s macropolitical responsibilities. While institutionalist and post-keynesian traditions of the twentieth century confirmed increasingly unorthodox insights, it was Wigforss who best understood the need for organised labour to exploit the opportunities outlined in chapter 8. This chapter, then, takes up a central intellectual issue: how labour’s deliberative (and transformative) political activity at once contributes to and is shaped by structural circumstances. The heterodox insistence that social, moral and political prefer13

In our own time we have seen how genuine public goodwill and even political skill can, in the absence of effective statecraft, be debauched (Lanchester 2011b). The tragedy at the centre of contemporary politics is equivalent to that in the 1920s and 1930s.

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ences need not capitulate to economic processes is central, of course, to Wigforss’s democratic temper. We will confirm the relevance of political economy to contemporary appraisals of prospects for social democracy in chapter 10, in the context of contemporary marxist revisions to that school’s own distinctive understanding of policy retreats and crises in the state. We link the apparent abrogation of politics in recent decades to another question: how has neoliberalism given form to, modified and stunted capitalist economic activity in this period? Comparative studies of ‘mature’ economies suggest that political caution has becomes less defensible in material terms. Is neoliberalism, then, entirely iatrogenic? There has been little recognition that policy interventions ameliorated the inflationary conflicts of the 1970s and 1980s, and the restructuring-induced crises of the 1980s and 1990s. Moreover, the available understandings of politics and the state (whether liberal or marxian) remain unconvincing. Continuing unemployment and financial crises prevail in the new century, as does political paralysis. Current problems which policy and institutions must address arise from generic problems in capitalism that Wigforss always responded to. Yet any recognition that politics can and does intervene in processes no longer seen as beyond humans’ deliberative efforts clearly diverges from commonplace assumptions about the proper ambit of policy. Today’s eclipse of economic liberalism puts such assumptions in contention once more. Having said what the book is about, we need to make clear what falls outside it. This is not another book about the ‘Swedish model’ nor Swedish social democracy understood as a realised or proposed socio-economic system, still less as a coherent political doctrine. Social democracy appears here in its original sense as an institutionalised political movement in which several distinct political currents contend. This is not to dismiss the wealth of literature that takes these phenomena as objects of study,14 but we do 14

See in particular Misgeld et al. 1989 and Anders Johansson 1989 for Swedish sources, and in English Misgeld et al. 1992, Pontusson 1992, Clement & Mahon 1994, Ryner 2002 and Trägårdh 2007. For the classic presentation of Swedish social democracy as a political movement see Korpi 1983; for a contemporary, if somewhat more technical, discussion, see Erixon 2011a.

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propose a quite different focus in capturing the experience of the Swedish labour movement. A short word on usage. First, in accordance with Swedish practice, we refer to non-socialist parties and other political actors as ‘bourgeois’. Until recent times, Sweden’s bourgeois formations themselves followed this usage, which thus has no marxist or perjorative connotation. Second, we use gender-inclusive terms throughout, except where they would do violence to a direct quotation or where they would impute inclusiveness to categories that have not merited it.

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1. The struggle over market society: from economic liberalism to the defence of politics

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The idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surroundings into a wilderness. Karl Polanyi

Ernst Wigforss’s political thought and practice encompassed a broad spectrum of the issues that were always apparent in – and still constitute – the political economy of western society. At the same time Wigforss’s political partisanship was highly focused. With moral passion, intellectual brilliance, strategic adroitness and personal energy as an agitator he was arguably the most formidable opponent that the political programme of economic liberalism has faced in any western polity. It is thanks to him more than to any other contemporary that economic-liberal politics in his own country was discredited and lay virtually paralysed for half a century after his party launched its unique frontal attack on it in the early 1930s. Even now, well into the twenty-first century, this revived but unreconstructed political programme continues to underpin liberalising internationalism and economic rationalism in western political life and lends the retrieval and revamping of Wigforss’s legacy particular urgency. By the time of Wigforss’s birth in 1881, and certainly by the time he became politically active in Sweden’s social democratic labour movement in the first decade of the twentieth century, the battle lines between economic liberalism and its variegated enemies had been well and truly drawn. A basic thesis of the present study is that this cleavage has fundamentally structured western politics since the first half of the nineteenth century, and continues to do so today in a less mediated form than ever. Any meaningful reconsideration and updating of Wigforss’s thought must begin by revisiting the issues that this most fundamental of all divides poses for western social and political life, for they forcefully moulded his politics. 35

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This first chapter sketches the issues Wigforss inherited when he came of age politically as a prelude to subsequent chapters, which will look at how he developed them and how today we might take his contribution further. The brief survey of these issues below necessarily contrasts with myths of origins that economic liberals have always appealed to in ‘scientific’ discourse (economic theory) or more overt forms of political propaganda – myths that today have ingratiated themselves into our political culture as supposedly self-evident truths.

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Market artifice, utopia and freedom The political programme of economic liberalism has as its goal the establishment and defence of market society – a social order in which the allocation of productive resources, the distribution of wealth, income and life chances, and all socio-economic relationships (‘private’ ones excepted) are exclusively subordinated to, and become functions of, market mechanisms. Market society requires goods and its human inhabitants to present themselves on markets in commodity form. Market society is thus a commodifying society. This project sets its face in theory against all nonmarket principles and forms of social organisation. All institutions for the relief of social distress, the redistributive state and political, public or social regulation of socio-economic processes are therefore anti-liberal. Such adjudicative principles, economic liberals have always claimed, are the harbingers of both tyranny and inefficiency, whereas in market society people are free and their individual efforts to maximise their welfare enjoy optimal outcomes. According to economic liberalism’s theory of development, market society represents the final, modern stage in humanity’s long progress out of some original state of savagery, chaos, personal insecurity and material misery. For its true believers, market society stands for the terminus and telos of historical development. Francis Fukuyama has powerfully restated this millenarian dimension of its myth in our own time.1

1

Fukuyama 1992.

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The early prophets and later messiahs of this New Jerusalem told its tale in different terms. The most prominent of the early prophets, John Locke, explained in ascetic-protestant language how each man’s personal relationship to God made him an equal, rights-bearing individual. An inviolable property right was the foremost of all rights, because it allowed for the private appropriation and thus development of nature’s riches, the material basis of civilisation. God bestowed these rights long before the state emerged, and the latter has no mandate to interfere with them. Over a century later Adam Smith dropped the overt theological allusions in favour of a covert one to the beneficent ‘invisible hand’ of the market that optimises the selfish activity of everyone to maximise national output for the common good.2 Shortly afterwards, Jeremy Bentham explained that maximal national output maximised human happiness. In the late eighteenth century neo-classical economic theorists, using parables from a mythical anthropological past, showed how self-regarding calculation based on marginal utility actually maximised everyone’s happiness. Closer to our time, Robert Nozick brought us full circle back to Locke (but in today’s ‘post-metaphysical’ fashion, of course), to the property-rights bearing individual to whom redistributive politics in particular is ‘unjust.’ But however the tale is told, markets are natural and market society a happinessand freedom-maximising condition ordained by nature (or a deity), something that spontaneously arises once the fetters of pre-market institutions are broken and so long as misguided ambitions to impose conscious human order on the economy are checked. Then as now, the tale draws on metaphysics and fictive origins. To confront economic liberalism with its actual political origins and place in anthropological history is to see a startlingly different version of it – indeed, the precise inversion of its founding myths – the one Wigforss himself addressed and added to. 2

Even for Adam Smith, the commitment to laissez-faire was ambivalent: in The theory of moral sentiments, while espousing the principle of the ‘invisible hand’, he wrote approvingly of ‘institutions which tend to promote the public welfare’ the ‘great systems’ and ‘constitutions of government’ which, through a ‘certain love of art and contrivance’ contribute to a ‘beautiful and orderly system’ (1759, p. 352). Later in The wealth of nations, he reserved for government the obligation to correct some dehumanising effects of the ‘division of labour’ (1776, Book V, pp. 366–367). See also ch. 9.

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Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 13:02:01.

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This confrontation has been the work of Karl Polanyi above all, in his classic study, The great transformation: the political and economic origins of our time,3 written during the second world war. He pinpoints the formulation and first breakthrough of economic-liberal politics to just fourteen years of British political history, an occurrence that followed closely the enfranchisement of the male middle class in the 1832 Reform Act, and that encompassed a sweeping programme of legislative and administrative intervention of which the Poor Law Amendment Act of 1834, the Bank Act of 1844 and the Anti-Corn Law Act of 1846 were the highlights. This programme grounded the three core tenets of market society: socially unprotected labour must find its own price on the market, the money supply must be subjected to an automatic restraining mechanism, and free trade.4 As we shall see in a moment, Polanyi gives us a still-valid account of the basic structure of political conflict in the west in his account of the resistance – both conservative and radical – this interventionist programme provoked when it surfaced. But first we need to briefly open up four themes in Polanyi’s historical analysis of economic liberalism – the artificiality of market society, its dependence on state intervention, its penchant for technocratic rule, and its negation of freedom in any meaningful sense. For these themes are vital to Wigforss’s politics. Long before the invention of market society, Polanyi points out, barter, trade and markets existed in human societies in Europe as they did elsewhere. But the historical and anthropological evidence shows that these mechanisms – along with other aspects of economic organisation, such as productive roles and determination of distributive shares – had universally been subordinated to social organisation, and in particular to political or customary regulation with an explicit ethical basis. Trade did not necessarily imply markets or competition, and markets for their part showed no tendency to spontaneously expand. When markets did expand – as they did significantly in the early sixteenth century – it was not spontaneous growth but the deus ex machina of the state (the mercantilist state in that instance) which drove the change. Smith’s famous reference to a natural human ‘propensity to barter, truck and exchange one thing for another,’ 3 4

1944. Polanyi 1944, p. 135.

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the origin of the economic-liberal myth of homo oeconomicus (economic man), is ‘almost entirely apocryphal.’ Nonetheless, ‘no misreading of the past ever proved more prophetic for the future.’5 The notion of self-regulating markets is thus a novelty that ‘has been present in no time but our own;’ it calls for the construction of a market economy, and of a market society to provide for the latter’s extremely demanding institutional supports. Market economy and market society certainly did not emerge from any ‘natural’ evolutionary process, and in fact represent a ‘complete reversal of the trend of development.’6 Polanyi points out:

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the control of the economic system by the market is of overwhelming consequence to the whole organization of society: it means no less than the running of society as an adjunct to the market. Instead of economy being embedded in social relations, social relations are embedded in the economic system. The vital importance of the economic factor to the existence of society precludes any other result. For once the economic system is organized in separate institutions, based on specific motives and conferring a special status, society must be shaped in such a manner as to allow that system to function according to its own laws. This is the meaning of the familiar assertion that a market economy can function only in a market society.7

The artificiality of market society – its dependence on the external intervention of an activist, engineering state as it were – is indicated in the pregnant phrase ‘society must be shaped.’ Among the ways it was shaped by the economic-liberal interventionists was in the creation of the three basic ‘fictitious commodities’ of land, labour and money; for labour markets and capital markets were among the new but central institutions that the construction of market society demanded to meet the requirements of industrialisation. Market economy was not only an anthropological mutant, but it also implied a peculiar and round-about approach to organising production. ‘The extreme artificiality of market economy,’ Polanyi observes, ‘is rooted in the fact that the process of production is here organised in the form of buying and selling.’8 As we shall see in chapter 4, this ruled out any direct 5 6 7 8

Polanyi 1944, pp. 43–44. Polanyi 1944, pp. 37, 68. Polanyi 1944, p. 57 (emphases added); see also p. 71. Polanyi 1944, p. 73.

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approach to the specific organisational and technical issues of manufacturing – an especially technology- and organisation-intensive form of production. In the co-ordination of industry these complex and multidimensional issues had to be reduced to the one artificial dimension of money and accounting procedures. Metaphysical assertions that would later be enshrined in mainstream economics propounded this form of rationality as optimal and inevitable, and many otherwise hostile thinkers and observers (including Karl Marx) wholly or partly accepted this claim. Wigforss would prove a startling exception. In fact, his masterstroke as an active politician would be the development of a politics of challenging market society’s rationality and fitness as the basis for further industrialisation. Market society has always been a utopian project. As such it is what would be characterised these days as a totalising utopia, one demanding total conformity to a blueprint or plan that specifies the form and functioning of all the vital institutions of society and the eradication of institutions that are antithetical or not integral to the utopian social design. Only a powerful state could impose such a total vision. Historically, the state has had to intervene massively into social and economic relationships to make them fit the utopian, procrustean bed of market society. This circumstance flatly contradicts the economic-liberal myth of origins that marginalises the state’s role in a fictitious natural evolution to market society and laissezfaire. In a crucial passage in which he outlines the basic political conflict around the market-society project, Polanyi writes: There was nothing natural about laissez-faire; free markets could never come into being merely by allowing things to take their course. Just as cotton manufactures – the leading free trade industry – were created by the help of protective tariffs, export bounties, and indirect wage subsidies, laissez-faire itself was enforced by the state. The [eighteen-]thirties and forties saw not only an outburst of legislation repealing restrictive regulations, but also an enormous increase in the administrative functions of the state, which was now being endowed with a central bureaucracy to fulfil the tasks set by the adherents of liberalism. The road to the free market was opened and kept open by an enormous increase in continuous, centrally organized and controlled interventionism. To make Adam Smith’s ‘simple and natural liberty’ compatible with the needs of a human society was a most complicated affair. […] [T]he introduction of free markets, far from doing away with the need for control, regulation, and intervention, enormously in-

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creased their range. Administrators had to be constantly on the watch to ensure the free working of the system. Thus even those who wished most ardently to free the state from all unnecessary duties, and whose whole philosophy demanded the restriction of state activities, could not but entrust the self-same state with the new powers, organs, and instruments required for the establishment of laissez-faire. The paradox was topped by another. While laissez-faire economy was the product of deliberate state action, subsequent restrictions on laissez-faire started in a spontaneous way. Laissez-faire was planned; planning was not.9

Economic liberalism, then, has only a rhetorical connection with state passivity in general. It only requires state abstention from market mechanisms (once the state has established them in the first place) and their outcomes. Given the artificiality of its utopia, its only consistent principle is the self-regulating market, which can require massive doses of state intervention to establish and maintain.10 What separates economic liberals from their opponents is not the question whether the state ought to intervene in social and economic matters, but what that intervention is for – to assert market mechanisms, or to serve other social and moral priorities. Put another way, it is a question of the mode of state regulation: should it create and defend unregulated markets to alienate its own powers from, or should it lend itself directly to conscious moral priorities and human purposes? The economic-liberal answer to this question is not a small state but rather the ‘nightwatchman state’ whose interventionist agenda consists in just one item – taking any and all action necessary to defend, enforce and institutionalise lockean rights, and above all the right of property. The utopian artificiality of the market-society project has required a special cadre to head the new administrative apparatus and to legitimate its actions at considerable remove from popular sentiment. Given modern credulity towards any elite claiming scientific status (analogous to premodern credulity towards ecclesiastical authority), the new wielders of state power had to carry scientific credentials. The discipline of political economy, and later the economics profession, fulfilled (and continues to fulfil) this role – providing a scientifically credentialled economic-liberal 9 10

Polanyi 1944, pp. 139–141. Polanyi 1944 p. 149.

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cadre in the commanding heights of the state. Today we can complement Polanyi’s observations of technocracy in the English state at the time of the great transformation with much more recent examples from economicliberal great restorations.11 As a staunch opponent of economic liberalism and Sweden’s longest serving Treasurer, Ernst Wigforss would nonetheless enjoy a particularly engaging relationship with the economics profession of his time! Like other liberals, economic liberals have had a great deal to say about freedom, and the freedom that inheres in market society. Market society is synonymous with free society, they claim. On closer examination, this freedom seems to be an esoteric attribute of their methodological individualism: one is free if one’s only obligations arise out of formally volitional acts. Any condition one formally or notionally contracts into, irrespective of real constraints on one’s choice under the circumstances – even if it is traditional marriage, wage labour, prostitution or civil slavery itself – is a manifestation of freedom.12 Freedom is one of the constitutive values of modernity, one that most opponents of economic liberalism share. Not unnaturally, a good deal of suspicion has fallen on the supposed freedoms of market society. Polanyi found it unconvincingly modelled in the political sentiments and entrepreneurial activities of Jeremy Bentham, one of the foremost activists in the great transformation in England and doctrinal champions of liberty. Bentham and his brother Samuel joined the ranks of the very first industrialists in the 1790s using the latter’s technical skills and the former’s panopticon model for a highly regimented prison regime, now to be deployed on the technically-free working poor. Out of these lucrative, micro-social experiments, Bentham came to see – like so many of his political sympathisers since – the enormous contribution the ‘minister of the police’ can make to productivity in maintaining social discipline, and the 11

12

As we shall see later in the book, it was an isolated elite made up of economists in ‘Kanslihushögern’ that began the wholesale return to economic liberalism in Sweden in the 1980s. The Australian version of this restoration in the same period has been one of the most thoroughgoing, and the nature of the technocracy involved there has been particularly well researched by Michael Pusey (1991, 2003). Of the many critics of liberal notions of freedom, the most formidable today is probably Carole Pateman (1988).

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supreme importance of social conformity.13 Market society, after all, has always presupposed order, regularity and market-conforming behaviour. Individual freedom in market society has never had anything to do with personal autonomy, real options or the possibility of dissenting ways of life. The drastic mechanism of denying the vast majority of the population immediate access to the means of a livelihood, and so forcing them onto a perennially oversupplied labour market, accounts for the gap between formal contractarian liberty and substantive bondage.14 But pursuit of more substantive freedoms has inspired many opponents of market society, not least Ernst Wigforss. The need for ‘freedom’ to find predictable, market-conforming expression was made abundantly clear by political economists in yet another paradox in economic-liberal doctrine: the absolute inexorability of market ‘laws.’ Polanyi comments:

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Essentially, economic society was founded on the grim realities of Nature; if man disobeyed the laws which ruled that society, the fell executioner would strangle the offspring of the improvident. The laws of a competitive society were put under the sanction of the jungle. […] [E]conomic society was subject to laws which were not human laws.15

Thus a doctrine that inspired the most draconian and utopian political voluntarism legitimated itself – and particularly its consequences – by reference to an equally extreme form of determinism. It was a contradiction Wigforss would exploit mercilessly. Polanyi describes the consequences of this utopian interventionism in nineteenth-century England without circumlocution as a ‘social catastrophe’ and a ‘veritable abyss of human degradation’.16 It was an outcome angrily 13

14 15 16

Polanyi 1944, pp. 106–107, 139. For Bentham’s extolling of social conformity and the ‘tribunal of public opinion’ see Wolin 1960, p. 348, [2004, p. 312] and for his contribution the understanding of social regimentation and control see Foucault 1979, ch. 3. Another great liberal theoriser of freedom, Alexis de Tocqueville, shared the same preoccupation with regimentation in prisons, and ultimately in North African colonies (see Ehnmark 1990). See above all C. B. Macpherson’s (1973) classic denunciation of imputed freedom on the labour market as restated by Milton Friedman. Polanyi 1944, p. 125; see also p. 84. Polanyi 1944, pp. 39, 98.

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and harrowingly described by such contemporary authors as Dickens, Kingsley, Engels, Blake and Carlyle. By way of political response a counterpole emerged in opposition to economic liberalism, one Polanyi refers to by the generic title of the ‘self-protection of society.’ It was a grab bag for a diverse collection of movements and doctrines, from those who rejected modernity as such (romantics, reactionaries and conservatives) to those who saw another potential development for the modern world – various manifestations of an emerging labour movement, socialists of many varieties and, later, feminists and dissident liberals. Since there was no way back to a (real or fictitious) pre-modern paradise, political movements based on one did not thrive. Western politics settled into a pattern of polarisation around two contrasting conceptions of modernisation – the economicliberal one, and one that persisted in accounting for modern society and its potential in social terms.

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Commercial society, civil society, market society Before market society there was commercial society. The evolutionary, naturalist and essentialist discourse of economic liberalism has obscured this vital distinction even for most socialist thinkers, but it is important for our story to revive it. If there ever was a propensity to barter, truck and exchange, then its appropriate expression was in the commercial society that many pre-industrial observers of modernity – Smith, other members of the Scottish enlightenment and Georg Wilhelm Friedrich Hegel being the most important – saw as defining modern society. Commercial society was essentially the outcome of the political opening up of western European markets from the sixteenth century on. It offered much greater choice and mobility to the urban middle class in particular, and it carried at least some of the implications for peaceful wealth-creation that Smith celebrated. Markets proved useful means of communication between potential buyers on the one hand and producers and merchants on the other. Commercial society even bore the seeds of a rough and ready democratic order in that money broke down many ascriptive barriers and afforded its possessors open access to goods irrespective of birth. From Hobbes on, early modern 44

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theorists saw commercial society as the material basis on which ‘civilisation’ rested – a term early western modernity coined as a self-characterisation. But commercial society, as the Scottish enlightenment and Hegel also recognised, had a downside: the breakdown of community (Gemeinschaft) with its strong social solidarities and ethical meanings concretised in particular ways of life (Sittlichkeit). In their different ways they tried to plug these gaps in commercial society’s moral credentials. Smith again exercised his penchant for theories of human nature to come up with the idea that the denizens of civil society – self-regarding opportunists though they may be – were nonetheless imbued with ‘moral sentiments and natural affections’ that would cause them to respond charitably and solidaristically when confronted with the needs and misfortunes of others. By contrast, Hegel saw it as the state’s task to re-establish an ethical order at a higher level, as it were, and in practice to intervene to ameliorate the social exile of the propertyless, and the other dislocations and excesses of commercial society. These conceptual responses among others contributed to a notion of civil society that tried to ascribe a normative rationality to commercial society. The universal rule of law and the capacity of modern society to overcome particularism and establish civility – routine, harmonious and fair socio-economic intercourse between non-intimates in a large-scale, impersonal society – were among the singular achievements of commercial civil society.17 The notion of civil society, as we shall see in chapter 10, has subsequently been superseded by its collective analogue: social capital. That is to say, the social, political and intellectual achievements of people in communities can be seen to provide the basis for an enhanced civility as well as constituting necessary supports for the generation of social wealth and prosperity. With a number of important reservations and updatings we will affirm these ideas in the present study and suggest that Wigforss’s 17

See Krygier 1996. The case has also been elaborated by Friedrich Hayek in his contention that market society generated civilisation by virtue of its resemblance to ‘catallaxy’ – the process by which exchange ‘admits [participants] into the community’. Hayek, though, twists the notion into an argument against any ‘authoritative act of redistribution’ (1976, pp. 60–66).

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contribution can be understood in terms of a theory of civil society and societal decency as well. While Wigforss strenuously opposed the market-society project he tacitly accepted the existence (but not the extant form) of commercial society as a given. We must, however, be clear from the start that commercial society and the complicity of well-developed social capital have pre-industrial origins. The arrival of industrial capitalism radically changed the social assumptions on which the early social thinkers worked. The economic liberals’ utopia of market society was just one version of its possible industrial future, and for a time it was the only discursively available one.

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Subordination, exclusion and inequality versus citizenship Four decades before the 1832 Reform Act in Britain cleared the path for the great transformation to market society, two powerful genies escaped from the bottle of modernity – the democratic revolution and the industrial revolution. The former escaped in the French Revolution and proved highly corrosive (at least in the long-term) to any limits and distinctions on who belonged to and who could participate in modern society. Though its logic has often been slow to reveal itself, a new discourse about inclusive citizenship and self-rule was unleashed on western political culture. While the democratic revolution came to lead its unruly life in modern western political culture, the industrial revolution qualitatively remoulded the material foundations of modernity and of the industrial societies that actually emerged in the west, starting with England. The champions of market society set out to cripple the first genie and claim exclusive sovereignty over the second. Market society depended on the tutelage of a strong, technocratic state that knew when to intervene into and remould society and when to absent itself from the self-regulating markets it had itself created, and how to enforce the exclusive nature of its own construction of citizenship. The exclusivity of citizenship in market society had not only to do with the law of property accumulation that Locke extolled but, more importantly, with the way industrialisation driven by unregulated markets required an extension of the propensity to truck, 46

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barter and exchange inanimate chattels (and enslaved non-Europeans similarly conceived) to a propensity to systematically commodify non-propertied human beings as a whole. Commodified beings are necessarily subordinated, excluded from citizenship (both rights of membership and participation), and are in no way equal to their buyers. With his talent for crystallising doctrines and social relationships in concrete visual images, Anders Ehnmark captures the meaning of industrialisation under the auspices of market society in his account of Alexis de Tocqueville’s visit in 1857 to Manchester, where the New Jerusalem had already taken shape: Manchester forebodes industrialism’s ugly new world. (Queen Victoria would faint when she saw Manchester, for environmental reasons.) At the same time one could study what the market could accomplish if it was left to itself. Manchester enjoyed a sort of ideal condition according to the town’s own liberal philosophy (Cobden, Bright): a society without a state, an economy without politics. The hills and muddy canals where cotton from the New World met steam, machines and downtrodden Irishmen (in other words, cheap labour) – this historic meeting place was at the same time a Wild West. To a certain extent a lawless world. The town existed de facto, not formally. It lacked government. […] When no one ruled, the market ruled itself. Here, in the dawn of capitalism, existed a state of affairs that could never return, though it lived on as a utopia: the free market. In a very well written report Tocqueville studies the forms of this freedom. He calls the town a hell: it is shrouded in coal fumes, the sun is a dull disk, the muddy streets a ‘pestilential labyrinth.’ People live in undrained sheds and burrows. The river flows sluggishly through this landscape with its stinking sludge bearing a thousand colours from the factories’ discharge. ‘The styx of the new hell,’ he writes in his diary. In the midst of the slums the factories loom: ‘One hears ovens rumbling, the steam whistling. These massive buildings stop air and light reaching the human habitats they overshadow. They smother them in an eternal fog; here is the slave, there the master; there the riches of a few, here the misery of the vast majority; there the organised strength of the many produces more than society as a whole could achieve before, but for a single person’s benefit; here the individual appears weaker and more exposed than in the wilderness; here the effect, there the cause.’ ‘It is in this noxious sewer,’ he continues, ‘that the mightiest river of human diligence rises up to fertilise the whole world. From this filthy sewer flows pure gold. It is here the human mind is perfected and stupefied, civilisation brings forth its miracles and the civilised person virtually returns to the savage.’18 18

Ehnmark 1990, pp. 58–60.

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Conspicuous by their absence here are all the achievements of civil society, and even the rough and ready equality of pre-industrial commercial society. The image is of savagery rather than civilisation, and the freedom it modelled was discernible only in the camera obscura of liberal theory. Industrial capitalism proved a highly exclusive and exclusionary society. It embellished old exclusions and invented new ones. By far the most important old exclusion it intensified was the one against women. As feminist scholarship has now revealed,19 the modern gender system continued the pre-modern patriarchal subordination of women and their exclusion from political and social participation, but under a new, liberal and ‘fraternal’ dispensation. All (white) men were formally equal brothers, and the public sphere of economy and politics, in which the writ of universalist justice and equality ran (and ascriptive difference supposedly had no place), was exclusively theirs. Women were consigned to the private sphere which, by contrast, was defined in terms of particularism, hierarchy and male privilege. Industrialism did nothing to dissolve the private/public divide, but on the contrary further shrank the ‘private’ domestic world of women as the household lost its productive economic function and became an exclusive area of consumption and reproduction. With few and hardly attractive exceptions, the expanding world of industrial capitalism remained a man’s world until well into the latter half of the twentieth century. The important new exclusion from effective political, social and economic citizenship was the working class. Excluded from the ‘right to live’ by rural dispossession and the destruction of all relief systems in the economic liberals’ great transformation, the new recruits to industry were forced into the chaotic urban centres like Manchester and into employment on any terms. Universal liberal rights make no mention of food, clothing and shelter, to say nothing of tolerable working and living conditions. In keeping with its commodified status, the industrial workforce was essentially without rights at all, and as virtually every observer of the nineteenth century factory system testified, it was ruthlessly subordinated to the purposes of the owners of industry – to the hazards of their technical choices, their industrial conditions, their decisions to hire and fire, and 19

See Pateman 1988 in particular. We will return to this major issue later, particularly in chapter 6.

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their nonchalance towards housing, urban and other environmental issues. In that telling nineteenth-century phrase, industrial capitalism organised itself politically and socio-economically into ‘two nations.’ As several later observers, from Max Weber to George Douglas Howard Cole, have indicated, Marx defined the relationship between them altogether too narrowly in terms of ‘exploitation:’ a broader subordination is instead the key theme in the social relations of industrial capitalism. It is an order of domination and subordination. Exclusion from effective citizenship is one important dimension of that subordination. The democratic genie was thus a most unwelcome guest at the table of industrial capitalist society, especially when its business became the stock-in-trade of radical movements that stood for the ‘self-protection of society.’ Mainstream liberals have always seen the danger democracy posed to the rule of the propertied minority, and have resisted or restricted it with skill and courage. But when the time came for economic liberalism to define that mainstream, democracy was not only a threat to the propertied, but also to the economic liberals’ own technocratic nightwatchman state, with its peculiar pattern of social intervention and market abstention. In the latter half of the nineteenth century labour movement activists, dissident liberals, feminists and socialists – the bearers of the democratic revolution – spoke for different constituencies in many different idioms and projected quite different visions of the alternative industrial civilisation they wanted to achieve. But at the end of the day the core business of all of them was the same – the broadening and deepening of citizenship understood as both full membership of industrial society and full rights to participate in its processes and rewards. In the precarious world of market society the universal civic citizenship created by liberal ‘rights’ meant little for the socially exiled majority. The fight was joined for political citizenship (the vote), social citizenship (the right to live, and the right to do so at a standard set by the amenities and productivity of industrial society),20 industrial and economic citizenship (access to quality employment, and influence over worklife and production). The fight became all the more

20

Cf. Marshall 1950; see also Holmwood 2000.

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bitter as economic liberals realised that the broadening and deepening of citizenship meant transforming and transcending market society and displacing the economic-liberal version of industrial capitalism. The latter was notionally dedicated to a single, apparently universal, goal-maximising abstract national output (the ‘wealth of nations’) with studied disregard for the composition of that output, its relevance to social needs, the pattern of its distribution and the human and environmental costs of its production. By the end of the nineteenth century English dissident liberals in particular had joined issue with this programme on all points, sometimes noticing that periodic unemployment was tantamount to under-utilisation of societal resources and therefore recognising that production was not consistently liberalism’s strong suit. They read other social possibilities into the dramatic improvement in human productivity that mechanisation brought: the end of want and human drudgery, the improvement of social, physical and cultural amenity (urban improvement, health care and education), life-enhancing work, the targeting of production to social need and an end to ‘waste’ in the use of resources. In the pursuit of these priorities they saw the state in terms that were deeply antithetical to the economic-liberal nightwatchman state. For them it was a vehicle of democratically arrived at, conscious human purposes – an expression of moral and social priorities. These dissident collectivist liberals presaged the ultimate economic-liberal nightmare, the bringing of the industrial and democratic revolutions into a working relationship with one another. They came to exercise a formative influence on Ernst Wigforss in the most creative period in his career.

The Janus face of modern morality As the ‘social catastrophe’ of market society unfolded and impinged on the minds of the more sensitive observers, it was clear that economic liberalism had a moral problem. Its counter-pole, the self-protection of society, was largely grounded in moral recoil from the great transformation, and many of its elements sought to reconstitute the shattered moral unity of English society. 50

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Economic liberals have always mounted two closely related arguments to meet their moral challengers. Both relate to Adam Smith’s quasi-theological construction of the beneficent invisible hand of the market which a priori maximises material welfare. This construction grounds what Polanyi calls a ‘veritable faith in man’s secular salvation’ – a salvation consisting in optimal material consumption – that amounted to ‘fanaticism.’21 The first economic-liberal argument, then, is that the self-regulating market maximises this one human good, material consumption, and on this basis there can be no moral principle or judgment independent of (let alone in conflict with) market outcomes. Whatever is rational market behaviour is for this reason normatively rational as well. This argument is open to two sorts of objections: that the claim to optimal efficiency may be spurious; and that there is no warrant for allowing efficiency to crowd out all other values. Economic liberalism’s second argument is a stringent, determinist corollary of that proposition, one rooted in economic liberalism’s development theory. We have touched on it above – the appeal to inexorable laws of nature that supposedly underpin market outcomes. Human beings, this argument suggests, have no personal or political choice but to accept the laws of the market. Thus moral choice as such is denied in the bad faith of pseudo-scientific determinism – what Charles Taylor has dubbed the ‘naturalist temper.’22 Tocqueville’s reaction to the hell realm he found in Manchester exemplifies this stance. As Ehnmark notes, he does not call for public intervention, nor does he stoop to the standard moral alibi of economic liberalism that the invisible hand is ever poised to set matters right in the fullness of time; ‘his attitude can instead be summarised as a stoic preparedness to endure the suffering of others.’23 With these moral starting points, economic liberalism embodies the modern ethos of instrumental rationality. Individual self-interest or the goals of an institution are simply taken as given, and what is rational is what attains those goals most effectively. ‘Rationality’ degenerates to mere 21 22 23

Polanyi 1944, p. 135. Taylor 1989a, ch. 3. Unfortunately, and notoriously, economic liberals are not alone in this determinist bad faith, and Marx in weak moments fell into it himself. Ehnmark 1990 pp. 60–62.

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calculation, and what is instrumentally rational is once again normatively rational as well: there can be no competing moral criteria or judgements. This is the moral meaning of the commodification of labour (and of other social institutions and relationships as well). From the point of view of the calculating (individual or corporate) subject, other people and nature are simply objects of manipulation – sources of potential gratification or utility, or obstacles in the way to achieving one’s own ends and thus to be eliminated. Rational relationships are purely manipulative ones, in this view. As a modern ethos, instrumental rationality has found other expressions besides commodification. Anna Jónasdóttir has demonstrated how it underpinned liberal complicity in the subordination and domestic confinement of women since early modern times. The great liberal thinkers like Locke, Hobbes and Hume were too intellectually tough-minded to accept older superstitions about the supposed natural inferiority and subordination of women, and instead argued that women’s sexuality and domestic capacities are a natural resource which should be exploited like any other natural resource; their confinement to a dependent domestic sphere was the rational way to do so.24 Again, in Zygmunt Bauman’s explanation of the Holocaust, instrumental rationality co-ordinated a utopian project, a scientific culture, a technocratic elite and a bureaucratic apparatus to enrol many thousands of normal German citizens in the systematic killing of six million civilians.25 One of modernity’s harshest moral critics, Alasdair MacIntyre, sees instrumental rationality as the core of the former’s morally incoherent culture of bureaucratic individualism.26 In the eighteenth century, however, Immanuel Kant began the direct challenge to instrumental rationality in formulating an intersubjective moral position which suggested that normative rationality sprang from individuals’ mutual recognition of each other’s status as agents and subjects. ‘Your dignity, rights and purposes are as valid and weighty as mine, and we should relate to each other accordingly,’ is the essence of the intersubjectivist ethic, 24 25 26

Jónasdóttir 1991. Bauman 1989. MacIntyre 1985, p. 35.

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the lineage of which continued through Hegel and has recently perhaps been most influentially articulated in the discourse ethics of Jürgen Habermas. The moral culture of modernity is thus deeply ambivalent,27 and the political life of western countries has modelled this ambivalence. Economic liberals have embodied instrumental rationality, while many (but not all) of their opponents have attempted to articulate – at least to some extent – the opposed intersubjective ethic of civic friendship. The economic liberalism/self-protection of society divide does not neatly coincide with the one between instrumental rationality and an intersubjective normative rationality. Often the particularist nature of each collective political actor’s constituency has muddied the waters with sectional formulations of political interest and made a universalistic political expression of an intersubjectivist ethic difficult to formulate. We shall see in the following chapter how this was precisely the problem with which Ernst Wigforss began his career as a democratic socialist.

Modalities of utopia As we have seen, Polanyi links the expression of the market-society project as a totalising utopian blueprint to its proponents’ coercive instrumentalism and ruthless cult of rationalism. This link is most familiar to us in the critique of quite different totalising utopias in the twentieth century, such as communism and other overt forms of totalitarianism. Utopian politics of this totalising kind seems to lead unerringly – as it has in the pursuit of market society as well – to an order of socio-political domination and a technocratically enforced societal homogeneity. No less is demanded of a political ambition to break abruptly out of a historical process of social development and to begin again, historilessly, on the basis of pure reason. For this is a fundamentalist politics of millenarian redemption 28 that justifies the most drastic methods. Karl Popper’s famous – and for many, de27 28

See in particular Poole 1991. See Fehér 1985.

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finitive – critique of utopianism as inevitably totalitarian29 reflected solely on this totalising variety of utopianism. Yet totalising blueprints are just one possible modality of utopian thought and politics. The utopian vision at base simply sees the possibility of transcending existing conditions in pursuit of certain norms and ideals – norms and ideals that may already be present but imperfectly actualised in existing society and in forms of political mobilisation within it. As Bauman has argued, any serious political movement of social reform has to mobilise around a vision of social alternatives to what exists, and utopianism (at least in this minimal sense) is de rigueur.30 Utopian politics can eschew blueprints with their invitation to technocratic rule and coercive instrumentalism in favour of the normative aspirations of real social and political actors – aspirations that include democratic processes and the right of each to mould its preferred form of life in an open, plural society. This is a utopianism that does not seek the fundamentalist privilege of standing outside a complex historical development and that avoids technocratic and other forms of domination. Karl Mannheim31 and the school of critical theory as a whole, among others, have pointed to this other, softer modality of utopian thought and practice. Wigforss would develop as a self-confessed utopian, but decidedly of the latter variety. Unlike the utopianism of his opponents (and even some of his fellow leftists), his own utopian projections would look for more radical applications of the norms of the democratic revolution within the existing struggles and forms of mobilisation of his day. A political movement that seeks to crystallise the highest aspirations of the western tradition has to work with the grain of the latter. For the normative aspirations of western modernity are constantly emerging. Any other approach to utopia would work against the very democratic revolution it seeks to promote. In this sense Wigforss would prove to be both a utopian and – in a term he used as an accolade for certain non-conformist thinkers he admired – a ‘radical conservative.’

29 30 31

Popper 1945. Bauman 1976. Mannheim 1936.

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2. Industrial society and social democratic politics: political organisation in Sweden

From Marx you can also learn moderation.

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Ernst Wigforss

By the time of Ernst Wigforss’s birth in 1881, a modern industrial society had already begun to take shape in Sweden, and a marxist social democratic labour movement came to prominence within it during his childhood. The social relations of this modernisation process, together with their doctrinal forms and representations, provide the starting points for Wigforss’s practical and theoretical contribution to the development of Swedish social democracy. In this short chapter we outline some of the political conflicts and cross-currents that came from the convergence of industrialisation and marxist radicalisation of the labour movement in the years preceding the first world war. This will sketch in the background to Wigforss’s renewal of social democratic doctrine and strategy in the interwar years.

The political economy of early Swedish industrialisation Up to the 1870s, Sweden was a largely agrarian and wretchedly poor backwater of Europe. A long drawn-out agrarian crisis sent around two fifths of the population – largely from the southern provinces – into emigration; its most significant destination was America. Later, the continuing rural desperation would fulfil the same function as the Enclosure Acts in England, and drive the surplus population into the squalor of the new industrial centres. The Swedish countryside was also dotted with small-scale mining communities and other towns which lived off exploiting natural resources (above all forests and mineral deposits), and off traditional handicrafts 55

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which were sometimes built around natural resources. Pulp and paper production, timber, metallurgy, and pursuits like glass production were located in small rural company towns, known as bruk. With the rapid expansion of international trade in the 1870s bankers began to buy up or pour funds into these bruk in a haphazard way to take advantage of the export bonanza. In the recession at the end of the decade the bubble burst, and both banks and bruk found themselves in serious financial jeopardy. The country’s modern industrial families were the ones that managed to survive and even take advantage of this collapse by rationalising and consolidating existing holdings, taking over the assets of their improvident rivals, and taking a more informed and strategic approach to developing the country’s potential as an exporter of value-added products. The new industrialists understood that the domestic market was far too small to support their industrial ambitions, which they could realise only by successfully competing on international markets, and by using the opportunities for specialisation and economies of scale that they offered. Sweden was also a latecomer to international competition in manufactured goods, and had to take advantage of technological and organisational innovations to break into the world market. By far the most important of the new industrial families were the Wallenbergs, whose rise is paradigmatic of Swedish industrialisation. André Oscar Wallenberg (1816 –1886) and his bank, Stockholms Enskilda Bank, were among those that had overextended themselves in the boom of the 1870s and been thrown into turmoil at its abrupt end. His two sons, Marcus and Knut, displaced him and immediately began to rationalise, consolidate, and soon expand the bank’s industrial holdings. Throughout their long careers they literally sat in the same office as they developed their highly concentrated industrial empire, even when between them they came to sit on the boards of two thirds of the companies listed on the Stockholm Stock Exchange. Though the bank was their headquarters, they were industrialists first and exemplified the schumpeterian entrepreneurial and industrial empire-building hero. Marcus Wallenberg (1864–1943) in particular made a major contribution to the development of industries that would become virtually synonymous with Swedish industrialisation – iron and steel, electrical and diesel motors, light 56

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engineering, telephone, electrical power generation and advanced forestry products.1 In economic terms this sort of highly concentrated ownership and export-focused leadership succeeded well, and Swedish industry doubled its output between 1896 and 1907. But the new industrialists met resistance in both social and political forms. The franchise was severely limited, and their modernising, free trading predilections faced a hostile protectionist majority of traditional bruk owners, rural interests and the upper echelons of the civil service in parliament (riksdag). This pre-industrial right wing (högern) of Swedish politics, whose position Söderpalm has summed up as ‘anti-capitalist conservatism’, enjoyed the support of much of the press and the monarchy.2 Representation of industrial interests became the business of the liberal opposition, until the right temporarily came under the more forward-looking leadership of Arvid Lindman in 1906. But the rapprochement between industrial interests and the conservatives did not survive the outbreak of the first world war due to the latter’s pro-German stance, which the industrialists saw as disastrous for their major markets in the Entente powers. On top of this resistance from pre-industrial interests came a new menace to the industrial families from a rapidly crystallising labour movement spawned by the industrialisation process itself. The pre-existing craft unions and artisans’ guilds were not in themselves a threat, and indeed were seen by some liberals as potentially recruitable to a politics of class harmony and social betterment. Scandinavian associational life was traditionally vigorous but not necessarily subversive. However, foreign influences – largely German, to some extent mediated by Danish agitators – began to impact on workers, unions and dissident intellectuals. Sweden’s social democrats founded their party (Socialdemokratiska arbetarepartiet – SAP) in 1889, fourteen years after the formation of the German Social Democratic Party (SDP). The SAP became a member of the Second Socialist International, which the SDP led from its inception, also in 1889. 1 2

Torsten Gårdlund (1976) has published a particularly well researched and contextualised biography of the older Marcus Wallenberg. His previous work (1942) on early Swedish industrial society presents useful background material. Söderpalm 1963.

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Early Swedish social democracy Like its German role model, the new Swedish party comprised the disparate political currents of marxism and lassalleanism.3 Unlike its German counterpart, the Swedish party was the head of a mass movement from its inception, with union organisations representing 90 per cent of its branches, and unionists 95 percent of its members, in its first decade. In fact, it acted as a peak union council until it formed an affiliated union confederation (Landsorganisationen i Sverige – LO) in 1898 to fulfil this role. The marxism that the Second International promulgated soon gained the upper hand, partly due to the force of the party leader Hjalmar Branting’s personality, and partly because the most influential lassallean in the early leadership, Axel Danielsson, met an untimely death in 1900. The early social democratic leadership’s ideological and strategic conceptions moulded its movement’s often ambivalent relationships with the other actors in Sweden’s modernisation, and these conceptions came largely from the German party. Karl Marx himself had died in 1883 leaving a subtle and complex analysis of capitalism but an underdeveloped notion of political strategy. He died before his doctrine came to undergird a mass movement in Germany, and before the military and bureaucratic outgrowth of most European states. His conception of the transition to socialist society was thus based on the politics of insurrectionary coteries that the First International (founded in 1864) exemplified, and that the fragility of most European regimes in the mid-nineteenth century seemed to justify. The subsequent emergence of the modern state, and the seemingly inexorable growth of a working class mass movement which mobilised around a reworked version of his doctrine, completely changed the political perspective. The version of Marx’s doctrine in question gained the title ‘orthodox marxism,’ and was largely the product of one of his literary executors, Karl Kautsky (1854–1938). The latter’s brief, as it were, was to produce a ver3

Ferdinand Lassalle (1825–1864) was a hegelian marxist and (later) state socialist whose pamphleteering on behalf of workers in the 1860s was partly responsible for the formation of the (German) Social Democratic Party.

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sion of the doctrine that was accessible and unambiguous, and so served as the basis for education, progaganda and agitation in the building of an organised mass base. The subtlety and open-endedness (or, perhaps, the incompleteness) of the original gave way to a dogmatic and determinist theory of development which announced three ‘guarantees of history.’ First, capitalism would collapse under the weight of its own contradictions once it had ‘matured’ and brought forth the highest development of the forces of production (organisation and technology, and above all the working class that deployed them) that was compatible with its social organisation. Second, as capitalism matured – a process that included concentration of ownership in ever larger capital units – it would erode all pre-capitalist, intermediate classes. Thus a tiny, monopolistic bourgeoisie would be left confronting a working class that comprised the vast majority of the population. On that basis, and third, the social democratic party as the political expression of the objective interests of this working class would gain a parliamentary majority once the ongoing struggle for universal suffrage was won.4 The orthodox marxism of the Second International (broadly from the 1890s until the second world war) implied a number of political priorities and assumptions. The first priority was movement building, to which the whole enterprise of orthodox marxism was tailored. The working class had to become organised in the social democratic party and affiliated union organisations. It had to be educated by a social democratic press and in workers’ educational and cultural pursuits. Its material and cultural standard had to be raised, if possible, through gains won in industrial conflict and in social-policy concessions won from the state. In short, the working class’s task was to prepare itself to assume responsibility for social reconstruction when ‘history’ delivered its coup de grâce to the fully matured capitalist system and so ushered in the ‘social revolution.’ Friedrich Engels’ new (1895) Introduction to Marx’s much earlier Class struggles in France 1848 to 1850 provides the most succinct and accessible statement of the political prospects that drove the Second International. In retrospect, Engels writes, he and Marx had failed to see that economic development was not yet ‘ripe’ for revolution in the middle of the century 4

For an excellent introduction to Kautsky’s thought see Salvadori 1979.

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when they were part of the insurrectionary push in Europe, and when the only extant models of revolution were insurrections undertaken by minority social groups. But the ‘mode of struggle of 1848 is today obsolete in every respect.’ The proletarian revolution will be the first majoritarian one, and will not be made by insurrectionary means; the working class ‘has to slowly press forward from position to position in a hard tenacious struggle.’ Extension of the suffrage had made the ‘astonishing growth of the party’ in electoral support the main form of struggle. Now ‘the bourgeoisie and the government came to be much more afraid of the legal than of the illegal action of the workers’ party, of the results of elections than of those of rebellion.’ ‘To keep this growth going without interruption until it of itself gets beyond the control of the prevailing governmental system, not to fritter away this daily increasing shock force in vanguard skirmishes, but to keep it intact until the decisive day, that is our main task.’ ‘[W]e are thriving far better on legal methods than on illegal methods and overthrow. The parties of Order, as they call themselves, are perishing under the legal conditions created by themselves.’5 Participation in elections and parliament served as occasions for agitation and movement building. Electoral advance in turn opened the way for limited, ameliorative reforms to help prepare the working class for its future role. These reforms were in no sense intended to alter the way the capitalist system functioned pending its maturation and crisis (the ‘decisive day’), still less to initiate a process of transition from it. The development of a positive transitional programme, or socialist policy of any kind, fell outside this conception. And given the expectation of an eventual working class majority at some stage after universal suffrage was won, there was no need to seek support from any other social groups or their political representatives. Finally, once the crisis came, the socialist majority would unproblematically legislate to transfer ownership and control of the major means of production, distribution and exchange to the state.

5

Engels 1895, pp. 655, 656, 657, 658, 660, 668, 669. Our emphasis. Engels’ enormous personal authority, and the fact that the essence of this introduction was published in the official Die Neue Zeit, makes it clear that this was the mainstream political line of the SPD, and by implication, of the Second International as a whole.

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Hjalmar Branting expresses this standard Second International line with particular clarity, for instance, in his programmatically important 1906 essay ‘The revolutionary general strike’ directed against the insurrectionary left opposition (the ‘young socialists’) within the SAP: Social democracy understands full well that the economic foundations of the social revolution lie in the eventual incompatibility between the forces of production and the traditional order of private property. The dissolution of capitalist society follows basic economic laws. The revolutionary working class can only overthrow the existing social order when the process of production has developed to a certain level, whereupon it is ripe for a socialist mode of production. In order to be able to overthrow capitalism when this level of maturity is reached, the proletariat must take power in the state and rebuild it to its purposes. Only state power can provide the leverage to carry through the expropriation of the capitalist class and the re-organisation of production on the basis of social ownership of the means of production. The very nature of modern means of production, and their further concentration in large-scale units and in networks and trusts, makes it essential to transfer the most important branches of production into the hands of the state and to organise them on a national scale, and some even on an international one […]. To take advantage of this potential requires people with determination, but also with insight and ability to carry through such a thoroughgoing transformation. To be able to bring down the dictatorship of the bourgeoisie the working class must therefore raise itself to organisational, intellectual and moral superiority over its opponent […]. For its upliftment the working class thus has an absolute need for those multifarious reforms which social democracy on its behalf forces from bourgeois society in its parliamentary struggles.6

Such were the essential tenets of what we call the old democratic socialism of the Second International and of the first generation of Swedish party leaders. It was democratic in a number of senses. It fought for political citizenship (universal suffrage) and some elements of socio-economic citizenship. It posited the use of parliament, once capitalism had fully matured and entered into terminal crisis, to transfer socio-economic power to the sovereign people (or at least its working-class majority) represented by the democratic state. Curiously perhaps (given its marxist provenance), it assumed liberal notions of democracy and democratic accountability,

6

Branting 1979, pp. 123–125. Emphasis in the original.

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not only in parliamentary and electoral matters, but also in its own organisations. Finally, in its own unspecified way, it pointed to a democratic, participatory society. However, the evolutionary determinism underpinning this road to socialism implied a severe limitation on any re-organisation of the economy. As the heir to capitalism’s mature development, socialist society would simply incorporate through nationalisation the organisational design of large-scale, centralised capitalist industry. Social democratic leaderships which worked from these assumptions had no use for a statecraft that might point to a more ambitious use of an eventual electoral majority and of the capacities of the modern state before the ripening of conditions and the ‘decisive day’. The sophisticated analytical apparatus of marxist theory – social democracy’s major intellectual asset – could thus not be deployed in the development of policy to serve a positive programme directed towards the socialist transformation of society. The notions of maturation and of a ‘decisive day’ implied a drastic discontinuity in historical development, and any steps towards socialism depended on and awaited it. Two factors qualified the determinism, the passive programmatic stance it generated, and the ‘statism’ of this early kautskian social democratic political paradigm. The first was the revisionist debate at the turn of the century in the German party and the International. Eduard Bernstein – another old friend and literary executor of Marx and Engels, and member of the German party leadership – published a number of articles in the social democratic press which attacked the notion of the ‘guarantees of history’. Capitalism has shown its capacity to neutralise its crisis tendencies by becoming more ‘organised’, he suggested. He also made an attempt to demonstrate empirically that the predicted sociological polarisation, and thus the political postulate of a coming socialist majority in parliament, were false. His attack cut the fatalistic legs from under the old democratic socialism, and he instead recommended a much more voluntarist political posture for social democracy. Socialism was a historical possibility only, not a historical necessity. To realise that possibility, it had to take the policymaking aspects of the state more seriously, and it had to break out of class insularity and political sectarianism to build alliances with other ‘progressive forces’, which meant progressive liberalism. For Bernstein, the active pursuit of universalistic moral priorities, rather than awaiting a guaran62

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teed historical destiny for a working class sectional interest, had to underpin social democracy’s political strategy.7 Bernstein conceived a more voluntarist and alliance-building politics, but he did not substantially expand the horizons of socialist statecraft. With the defenders of orthodox marxism he retained what one might call the maturation thesis – the idea that capitalism had not yet fully ‘ripened’ or exhausted its progressive potential for developing the forces of production. It was becoming more scale-intensive, more co-ordinated, more organised. In so doing, it was not only evading terminal crisis, but also laying the socio-economic foundations for an eventual, contingent transition to socialist society. The notion of a ‘decisive day’ is still tacitly present in Bernstein’s revisionism, even if it is marked by the completion of the project of organised capitalism rather than crisis. Until that day, capitalism – as in the orthodox view – had to be administered according to its own rules while the labour movement sought purely ameliorative reform. The Swedish social democratic leadership never took a hard and fast position on the colliding perspectives in the revisionist debate. It tended to persevere with the orthodox idiom while making major concessions to revisionist perspectives in practice, especially in working with progressive liberals in pursuit of its single most important objective, universal suffrage. The more important modifying factor on orthodox marxism in Sweden was the development of the union movement in association with other popular movements. The movement-building priority announced by the Second International fell upon particularly fertile soil in Scandinavian countries with their pre-existing strong associational life. The great historical achievement of the first generation of Swedish social democratic leaders comprised the foundations they laid for a redoubtable labour movement under their own banner. The social democrats swiftly foiled liberal attempts to establish a bridgehead in the organisations of the new industrial working class. They prescribed the strategies and organisational forms to win industrial confrontations, and to unite and maximally recruit working men. Strike funds, and provisions to cushion activists against employers’ 7

The essentials in Bernstein’s contribution to the revisionist debate are reproduced in Bernstein 1961.

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victimisation, gave social democratic unions around the turn of the century the resilience to mount and win bitterly contested offensives to force employers to negotiate national industrial agreements and concede the unions’ right to organise at the workplace. As the union movement consolidated these gains, another difficult – but ultimately successful – campaign was launched to restructure the movement on industrial lines. Industrial (as opposed to ‘trade’ or craft) unionism facilitates maximum recruitment unobstructed by occupational divisions, and allows each industrial union to negotiate singlehandedly for the whole workforce in any one industry.8 The unions were organs of socialist agitation, recruitment and strategy: the socialist transformation of society provided them with their raison d’être. The division of labour between them and the party simply specified that the party would conceive the strategy and provide the offensive arm of the united social democratic labour movement at the level of the state. The union movement for its part was defined by its defensive role – defending the interests of working people in working and living conditions. As Lindhagen has argued in his long insightful history of early Swedish social democracy, it was a question of holding ‘state socialism’ and ‘movement socialism’ in balance and harmony: In its best expressions, as in Branting’s words, these two traditions are tied to each other. They are indisssolubly united. The one depends on the other. Both stipulate both the means and the goal. The movement is formed in the struggle for political power. Its work in other fields prepares the ground for the socialist society where democracy thrives even outside and beyond the political sphere. The life of the movement in all its branches prefigures the social ethos of the future. Branting, Danielsson and Sterky, Sandler and Engberg, Möller and Wigforss all bear witness to this.9

As Lindhagen also points out, this approach to movement-building found concrete expression in the formidable, compact world of Arbetarsverige (Worker Sweden) that social democracy achieved long before it came anywhere near governmental power. Worker Sweden was a world of grinding poverty and appalling working and living conditions. But it was also a world of strong community ties, supportive relationships and tightly interlocking institutions – those 8 9

Malmgren 1981, p. 9. Lindhagen 1972, pp. 252–253.

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organised by social democracy and those that came to ally themselves closely with its complex and dense labour movement. To the former category belonged the party, the unions, social democratic newspapers and other press, the workers’ educational association (ABF), the movement to build cultural and social centres (Folkets hus) for working people in every town, and the horticultural movement (kolonistugerörelsen). To the latter category belonged the all-important consumers’ co-operative movement, the temperance movement and even some dissident forms of Christianity outside the state church.10 The energetic social democratic agitation, mass media and educational and cultural institutions in particular created a public in today’s idiom – a large body of people so initiated into the terms of socialist discourse that they had made it their own and could use it to critically evaluate appeals from other quarters. In gramscian terms Worker Sweden was a counter-hegemonic formation that defied the logic of market society and sought to provide for the entire material and cultural needs of the working class. It sought to do so to prepare the latter physically, culturally, and above all politically, to take centre stage and rebuild society when history at last sounded the cue. The early rise of Swedish social democracy to political prominence, in the face of a restricted franchise and the unreserved hostility of the old Swedish establishment, would be incomprehensible without this picture of the labour movement as whole. Social democracy was a new kind of party based on a highly mobilised mass movement, and Branting in particular deployed its resources with dexterity. He entered the lower house of the riksdag in 1897 as its first social democratic member. In 1902 LO staged a dramatic political general strike to demand universal suffrage, and a strategic alliance with liberal elements delivered some widening of the lower-house suffrage in 1906. By 1908 the party had 34 representatives in the lower house, and by 1914 it held 38 percent of the seats to become the largest party in the chamber. Widespread gains in local-government elections accompanied parliamentary ones. Branting led his party into coalition government with the liberals in 1917, and this government duly legislated for universal suffrage the following year. In 1920 he formed the first all-social democratic ministry. 10

Lindhagen 1972, pp. 198–202.

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But this whole development was premised on history following a scientifically discoverable script that would lead to the triumph of a certain sectional interest, rather than on the basis of universalistic or universalisable moral commitments. The script featured the process of modernisation, and especially industrialisation on capitalist terms. On closer examination the sectional interest in question, that of the working class, turned out not to be as majoritarian as it claimed to be on paper. In Sweden as elsewhere, women in general were excluded from the brave new world of industrial production and labour-movement participation except on the most marginalised terms. A test of women’s place in paid employment and in the union movement came in 1905 when the government moved to ‘protect’ women by banning their employment at night. Unions representing women night workers and other women’s organisations protested, in particular to the social democratic leadership that supported the measure. Branting’s deathless reply to them was ‘Klass kommer före kön!’ (Class comes before sex),11 which became holy writ in union organisations in particular – a writ that sought to systematically outlaw any expression of or mobilisation around specific women’s interests in the decision-making and negotiating arenas of the labour movement. As we shall see in chapter 8, it was only eight decades later, and under considerable external pressure, that LO began a painful reassessment of this exclusionary logic. The social democrats lumped feminist concerns together with moral issues in general as ‘bourgeois humanism’ – an enervating diversion from a scientifically based class politics.

Social democracy as seen from the boardroom Sweden’s industrial families had a theory of development and a scientifically based class politics of their own in economic liberalism sanctified by neo-classical economic theory. The latter foretold no death agony or even transcendence of capitalism, and they looked to the future and modern progress with a faith and confidence that rivalled that of their would-be 11

Karlsson 1981.

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social democratic gravediggers. For them the social democratic labour movement constituted a militant challenge to their profits and authority at the point of production, but at the same time a valuable potential ally dedicated to capitalist modernisation in the struggle against a reactionary establishment. To meet union militancy Swedish employers were quick to set up their own combative organisations. In 1896 the engineering firms established their own peak organisation, Verkstadsföreningen and an associated organisation to examine technological and organisational issues, Teknologföreningen. In reply to the centralisation of the union movement in LO in 1898, the Swedish Employers’ Federation (SAF) was formed in 1902. While the employers could not hold the line against union demands for national agreements and the right to organise, they began to realise that social democratic unionism brought its advantages for them as well as obvious problems. Union discipline was strict, and more unruly currents in union life, like anarchists and syndicalists, were the objects of unrelenting social democratic hostility. Indeed, social democracy promoted the ideal of den skötsamme arbetaren (the responsible worker) who, true to this modernising mission and ultimate destiny in the elite of socialist society, was a skilled and productive worker and a socially stable, prudent representative of Worker Sweden. Nonetheless, by 1909 SAF’s leadership was viewing the growth and militancy of LO and its affiliates with some alarm, and it staged a confrontation and a widespread lockout to bring its opponent to its knees. SAF’s plan succeeded: LO lost a third of its membership in the defeat, and entered into the famous December Compromise of that year whereby, in exchange for formal recognition of the right to organise and enter into national agreements (concessions long since won in fact) LO conceded the crucial right of the employers to hire and fire labour, and to complete control of the production process. The employers entertained no false expectations that their victory would put an end to union militancy, but they could now rest fairly confident that they had the resources to contain it and meet it. At the political level the employers recognised in the social democrats unreserved support for the country’s modernisation along capitalist lines, and of industrial expansion under free trade conditions in particular. The 67

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social democrats affirmed the ongoing capitalist modernisation and its myth of progress wholeheartedly. They depicted an ultimate socialist terminus for that progress in their liturgy only, not in their political practice. Pending the ‘decisive day’ social democracy had no argument with economic-liberal public policy which it saw as establishing the most appropriate conditions under which capitalism could complete its progressive mission and ‘ripen’. As Sven Anders Söderpalm’s history shows, in the crisis of the conservative Hammarskjöld government in 1917 there were intense contacts between the social democratic and the industrialists’ leaderships, and warm personal contact between Branting and Marcus Wallenberg. On this basis Sweden’s employers played a crucial role in bringing down the conservative government and replacing it after the subsequent election with a coalition of left-leaning liberals and social democrats. They eventually chose to support the imminent enactment of universal suffrage. With this reform the industrialists struck the decisive blow against their traditional political enemies in the old anti-capitalist establishment, and the social democrats took a giant step towards gaining the first programmatic requirement of The communist manifesto, ‘to win the battle of democracy’.12 The first upper-house election after the reform would bring Ernst Wigforss into the riksdag. Unlike present-day social democratic politics, which at first blush looks similar to that of the first generation of social democratic leaders, the political line described here was entirely free of opportunism and ideological self-effacement. A more principled politics than Branting’s would be hard to imagine. The problem, as we shall see, lay in the frailty and limitations of the principles. As a basis of agitation, education and movement building in pre-democratic Sweden they succeeded brilliantly. Their validity in democratic times would be quite another matter.

12

Marx & Engels 1848, p. 52.

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3. Wigforss’s democratic commitment: repositioning socialist politics

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In briefest outline this is the story of a boy from an artisan family who soon reveals his bookish side and who – thanks to his mother’s energy and ambition – is able to take up study. Who is able to do this only because he is a boy and not a girl, and thus can go to grammar school, and the school itself happens to be in his home town. Who continues in his role of providing an example of Swedish social mobility through school and university. Who vacillates between a research and a teaching career until the labour movement pulls him away from both on its rising tide and takes him with it into political activism and influence, into parliament and government. Ernst Wigforss

With these words Wigforss opens his life story in the three-volume autobiography1 he began just two months after his retirement as Sweden’s treasurer in 1949, when he was 69 years of age. Its publication was to win him lavish acclaim as a contributor to autobiography as a literary form, and the above excerpt exemplifies its virtues of social sensitivity and personal reflexivity. As political history it is balanced and free from special pleading, and carefully backed up by documentary references. It’s an often unique source of historical information, and just as importantly, a statement of the author’s enduring political commitments. Its emphases point clearly to what remained very much alive throughout Wigforss’s long political career and even longer contribution to democratic socialist theory. In what follows we make frequent recourse to his autobiography.

1

The three volumes were published separately in the 1950s, and have since been reproduced as the last three volumes (VII–IX) of his selected works, Ernst Wigforss skrifter i urval (EWSU) published in 1981 by the social democratic publishing house, Tiden, to mark the centenary of his birth. Except when quoting directly from the memoirs or noting an especially important point made in them, we will not reference them further.

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In this chapter we outline Wigforss’s development before he began to make a direct impact on the social democratic party’s programmatic thinking. In the first sections, we sketch the most salient aspects of his personal and intellectual biography, before going on to introduce the themes Wigforss explored in this period – themes that continued to underpin both his thought and the politics he would later model in practice.

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A fortunate childhood Ernst Wigforss was born in Halmstad, in the southern Swedish province of Halland, on 24 January 1881 at the dawn of the country’s industrialisation. But the Halmstad of his childhood and adolescence was shielded from the industrialisation process, situated on the west coast of Sweden at some remove from the emerging industrial centres of Malmö to the south and Gothenburg to the north. It was a rural and maritime town with easy access to the countryside and the sea. Its inhabitants were not shielded, however, from the rural poverty of southern Sweden. Ernst’s parents, Tekla and Frans Wigforss, had seven children, of whom six survived. Ernst was their fourth child and firstborn son. A fourth daughter and second son came after him. Frans Wigforss was a master painter and descendant of a long line of artisans, both painters and tanners. The family lived in straitened and sometimes precarious financial circumstances. The boom years from the mid-1890s modestly improved its circumstances, but not before the family business was actually bankrupted in 1888 and the two older daughters were sent to join the stream of emigrants to America. Apart from these difficulties, Frans and Tekla Wigforss managed to offer their children a secure home environment. A strong religious and ascetic influence reigned in the home, as the Wigforsses belonged to an evangelical movement (Missionsförbundet) apart from their attendance at the state Lutheran church. Frans Wigforss comes across in his son’s memoirs as a calm and sober man, but of pious disposition and with an almost pathological deference to social and political authority. ‘He was disquieted […] by the possibility that I might turn out to be, or already was, a socialist. But socialism was 70

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for him not so much a social and political doctrine as religious heresy.’2 Nonetheless, the father-son relationship seems to have been positive, with Ernst often helping his father with pressing work. Ernst gained from him a strong sense of the dignity of labour and social justice, as well as a powerful distaste for social and personal arrogance. But Tekla Wigforss was the dominant figure in the household and the one who made the greatest impact on Ernst’s emotional and intellectual development. In spite of the family’s conservative milieu and her own limited access to education, she was intelligent, imaginative, passionate and wilful – characteristics she imprinted onto her elder son. She controlled the family’s finances and steered its members’ development. She brooked no interference in her promotion of her eldest son, and no doubt her ambitions for him were encouraged and requited by his enthusiasm for learning. She would live to see him become the country’s treasurer twice over. Ernst Wigforss thus enjoyed a relatively untroubled and happy childhood. His memoirs exude a compelling warmth towards not only his family (especially his vivacious mother) but also his schoolmates and teachers. He excelled at school, but also indulged in the usual pastimes and escapades of his age and gender in the unspoiled and accessible waterways and countryside around Halmstad. Several of his school friends (like many he would later make at university) remained part of his circle until they died. He grew up to be an emotionally secure and harmonious individual who deeply honoured his closest relationships and friendships. His mother’s influence remained palpable as well in his abiding respect and sympathy for women, something neither his culture nor many of his later associations would have fostered. Nonetheless, for all his philogyny, he was not destined to make his mark in gender politics.

2

EWSU VII, p. 34.

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Adolescence – the ‘years of the breakthrough’3 Young Ernst developed early into a voracious reader, and grammar school enormously encouraged this habit through its classic nineteenth-century curriculum, making him literate in the major languages of the western world. This curriculum gave pride of place to Greek and Latin, but also included French, German and English beside the intensive study of Swedish literature. He formed the habit of reading whatever he could lay his hands on – adventure stories at first – in the original languages, and later developed a strong taste for Swedish, English and German poetry. Beside these literary interests he developed an analytic bent in a fascination with mathematics and an increasing interest in philosophy. The latter provided an outlet for the intense existential questioning that accompanied his adolescence. Two crucial and enduring intellectual characteristics arose out of his enthusiasm for reading and the richness and variety of what he read. The first was receptivity – an openness to new ideas no matter what their provenance. The second was the balancing virtue of reflexivity. Wigforss would continue throughout his life to expose himself to the most disparate intellectual influences, a process which in turn promoted constant questioning and re-evaluation. Any form of fideism was utterly foreign to him. As we shall soon see, he certainly had his enduring literary and political inspirations, but they were never to be followed blindly. ‘I got used to letting my idols entertain their own opinions, even if they diverged from my own,’ as he puts it.4 None of the early ‘idols’ fired any particular interest in socialism, but even at school Wigforss was touched by the radical current whipped up by åttitalisterna – the radical liberal and socialist intellectuals of the 1880s whose most prominent members were August Strindberg, Hjalmar Branting and Knut Wiksell. As in England, socialist and radical liberal intellectuals recognised their common cause in the propagation of democratic values against the brutality of capitalist industrialisation. ‘[My] reading awakened no curiosity about Swedish socialism or social democracy,’ Wigforss com3 4

Wigforss’s phrase – EWSU VII, p. 109. EWSU VII, p. 108.

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ments. ‘But socialism as an expression of opposition against poverty and oppression, against industrialism’s and capitalism’s callous advance against humanity, was integral to my ideas about what a freedom lover should struggle for.’5 By far the greatest influence on him during his adolescent years was Viktor Rydberg (1828–1895), whose revolutionising poetic genius, spiritual vision and epic revolt against the human degradation of the industrialising process invite comparison with the work of William Blake. In his memoirs Wigforss says quite simply of Rydberg’s influence on his life: ‘When he came, he came as a revelation.’6 That revelation continues to reverberate in the 69 year old Wigforss’s memoirs as a still vital inspiration.

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Those who believe that one learns revolutionary commitment from Marx are often cruelly deceived. From Marx you can also learn moderation. That the most beautiful revolutionary dreams remain dreams so long as the preconditions have not ripened, over which we have little power. This is not all I have learned, but in this context that is the nub of it. If there have ever flowed in my veins any drops of what might be called revolutionary blood, I have inherited them from Viktor Rydberg, not from Karl Marx.7

Rydberg called forth Wigforss’s adolescent idealism, sense of thwarted social justice, and outrage at an industrialisation process that was still beyond the latter’s personal experience. Wigforss comments on Rydberg’s masterpiece, The chant of the cave (Grottesången): What gives the poem significance way beyond its starting point in material want is its exposure of a social ethos which pursues wealth in ruthless competition between individuals and which sees material wealth as sufficient legitimation for a society without human fellowship, full of fear, conflict and hate.8

But Rydberg was also a social conservative. While Wigforss refused to follow him in abjuring socialism and in defending orthodox religion and racial vanities, Rydberg’s influence left him receptive to critiques of blind modernist celebrations of progress, and to conservative social critique in general. 5 6 7 8

EWSU VII, p. 106. EWSU VII, p. 71 (and see also p. 110). EWSU VII, p. 125. EWSU VII, p. 121.

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As we shall see at several points in this study, Wigforss maintained the intellectual habit of returning to face the underside of modernity and the grains of truth expressed by its conservative critics. Apart from Rydberg, other influences in his adolescence reinforced this habit. One was Buckle’s The history of civilisation which expressed

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a basic idea that perhaps provided a warning against a far too facile and unexamined faith in progress. It was the idea of the contradiction between humanity’s – at least western humanity’s – rapid technical and intellectual progress and the slow or nonexistent moral progress. It had an affinity with the intellectual world I was constructing, primarily under Rydberg’s influence, where the pessimist may not turn out right in the end, but his threatening shadow never wholly vanishes and the weight of his argument tends to make the optimist’s position into a counterfactual.

Ernst Wigforss would remain what one might call a reflective modern, one who resisted the headier self-deceptions and destructive posturings of modern culture, which he would encounter in the ranks of social democracy. The symbiotic relationship between nationalism and warmongering attracted the young Ernst Wigforss’s outrage. This recoil, too, would remain with him and contribute to his non-conformist position in social democratic ranks. Even outside its militaristic context, patriotism struck him as abhorrent. Patriotism was also jingoistic speeches, patriotic cant, an expression of the ludicrous and the mendacious, against which the sober everyday soul, the critical and laconic boyish intelligence and the new ideals all united in their revulsion. Nor would the problem disappear in the future […] these early reactions never faded. The word ‘patriotic’ has retained its overtone of cant. Even in times when I have felt a sense of connection with land and people – the whole people – most intensely, I have not been able to take the word ‘fatherland’ into my mouth.9

As we shall see below, ‘these early reactions’ contributed to the moral underpinnings of Wigforss’s politics. His first contact with the radical spirit of åttitalisterna appears to have been from the age of fourteen in the form of ‘Lund radicalism’ which his bohemian and radical cousin, John Wigforss, introduced on his occasional 9

EWSU VII, pp. 110–111.

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visits to Ernst’s family. John Wigforss was eight years older than his cousin and a student at the University of Lund where the radicalism of the 1880s had taken root. Though it was the beginning of Ernst’s long and intense relationship with Lund radicalism, by no means all its icons found favour with its reflective teenage adherent. He angrily and irrevocably consigned the generally idolised August Strindberg to outer darkness as a misogynist (where Nietzsche would soon join him). ‘Equality between the sexes was fundamental. What I knew about his [Strindberg’s] attitude to women and marriage could hardly have been less compatible with my ideas about comradeship [between the sexes].’10 These modernist and anti-modernist currents were swept up into the vortex of a long drawn out spiritual crisis. Despite his loyalty to his parents, Wigforss could not accept the incoherence in their conventional monotheism – the implication that a normatively rational and omnipotent force could create a world of gross misery and injustice. He groped for some fallback position, a non-omnipotent god who was a sort of metaphor for normative order. ‘The God I did not want to let go of was the one that stood guarantor for the world and life having a rational meaning.’11 This long drawn out and ultimately unresolved crisis bridges his adolescence and his university years, and the freshness of his repeated return to its central problematic in his memoirs pays tribute to the constant search for the normatively rational in his later thought.

Lund radical Wigforss consummated his mother’s ambitions for him in 1899 by excelling in his matriculation and entering Lund university, where he intended to qualify as a high school teacher. In class and gender terms it was an exclusive world: he was at a disadvantage with his new associates both socially and financially in this upper class enclave, and the virtual exclusion of women from university life added to his social and sexual frustrations. 10 11

EWSU VII, p. 119. EWSU VII, p. 114.

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During his first two years, before he began to be awarded scholarships, the intellectual excitement of the university was mixed with loneliness and penury. In a quite unstudied response to his circumstances, he intensified the asceticism of his childhood milieu. He missed meals, and in 1904 he became a teetotaller for life. At the same time he continued his schooldays interest in gymnastics. His political opponents would later try to lampoon him as a cold and fanatical puritan, and hostile cartoonists would make much of his spare physiognomy in this caricature. But his asceticism was born of family circumstance and later of temporary necessity. Its continuation in later life had nothing to do with a killjoy disapproval of the world of the senses as such, but simply with the assertion of personal priorities in his intense and manifold interests. By degrees the new student found his feet, and with his enormous curiosity and capacity for work, he became deeply engaged in both formal academic work and the ferment of debate on philosophical, religious and social issues. The discussions tended to overflow into the new friendships and large circle of acquaintances of the student homes and discussion clubs. In Lund Wigforss made strong, lifelong friendships, developed new interests, and inevitably the idea of gaining a quick qualification before seeking a school post gave way to the possibility of pursuing an academic career. He left Lund for the first time ten years after he arrived, and even then was soon to return. The university neither demanded nor encouraged specialisation, and his interest in languages led him to deepen into those he already had, while adding Icelandic, Italian and eventually Sanskrit to them. These interests would eventually lead to his doctoral research in philology with an original study of the dialect spoken in the southern part of his home province, Halland. But outside language and linguistics, he also undertook studies in philosophy, mathematics and economic theory. The principal expression of Lund radicalism was a large and lively discussion group, ‘The younger old boys’ (De yngre gubbarna – DYG). It represented ‘the left’ as the term was then understood, and encompassed socialist and radical-liberal currents. It encapsulated the intense debate over social, philosophical and religious issues whereby the country’s intellectual elite greeted the modernisation of Swedish society and institutions – a debate which an established tradition of academic freedom permitted. Until he turned 26, Wigforss suffered from a paralysing fear of engaging 76

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in public debate, and so from 1901 he was an ‘invisible member’ of DYG, closely following its debates, until he overcame his fear and joined it formally in 1906. A year later he was elected chairman. At least some of his hesitation in becoming actively involved in DYG seems also to have come from a deep distaste for the polemical brutality and schadenfreude which many of the leading participants indulged in – not least the critics of religion. As Wigforss noted at the time, much of the intemperate polemic against Christianity ducked what for him were the all-important questions of moral theory, and about the values that should underpin human sociality in particular. Nonetheless, many of his lasting personal and intellectual commitments stem from his involvement in DYG. The latter also had close relationships with the local branch of the social democratic party, even though by no means all of its members saw themselves as socialists. Wigforss joined a wave of DYG members who sought membership in the SAP at the end of 1906. The botanist Bengt Lidforss and economic theorist Knut Wicksell (the ‘storm centre of our intellectual life’) personified the spirit of DYG. Both uncompromisingly articulated radical social and political opinions and atheism, and both were demonised by much of the Swedish establishment as ‘dangers to society’ (samhällsfarliga) – not least when their appointment to their respective professorships came under governmental review and episcopal challenge. Apart from their personal contributions to the life of DYG, they were causes célèbres that made strong calls on the loyalty of the Lund radicals. Both also wrote for the social democratic press and championed the social democratic labour movement. Yet for Wigforss each in his own way represented aspects of the underside of modernity that stimulated his deepest ruminations on its culture. Lidforss in particular mixed his rigour as a natural scientist with strident misogyny and promotion of scientific racism, not least that of Houston Stewart Chamberlain,12 and was one of the most brutal polemicists 12

Chamberlain ranks with Gobineau as one of the two main theoreticians of scientific racism. He was Richard Wagner’s son-in-law and an important figure in the Bayreuth Circle and the Willhelmine court in Germany. His 1,100-odd page, two volume Grundlagen des 19ten Jahrhunderts became the classic text for pan-Germanic race supremacists in the lead-up to the first world war, and to some extent set the stage for the nazi revival of scientific racism.

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against religion. To a large extent Lidforss, despite his social radicalism, came to represent for Wigforss the morbid aspects of modernity. The latter spent the spring term of 1906 in Berlin studying Sanskrit, and was there confronted with the widespread capitulation of much of the German intellectual elite to scientific racism, a syndrome which Lidforss was not alone in representing in Sweden. Berlin clearly reinforced Wigforss’s suspicion of scientific culture (as well as his growing anglophilia). In most respects Knut Wicksell played a quite contrasting role as an ‘idol’. He is still honoured internationally as the progenitor of modern monetary theory in the neo-classical mainstream of economic theory. But in his native country he was known (and is remembered) as a tireless campaigner for many of the most radical causes – which he saw as justified by a strict application of economic principles – and as the bane of the social, political and religious establishment. (The latter eventually managed to have him convicted and jailed for blasphemy in 1909.) On top of his argument that Sweden should disarm completely as the country was too small to repulse an invasion by any larger power, he pushed for social and sexual reforms that he deduced from his neo-malthusianism and hatred of social exploitation. He campaigned for early civil marriage outside the church, gender equality, and universal access to sex education and contraception as the way to end both the social blight of prostitution and the uncontrolled fertility which he saw as an effect of poverty and a major element in its perpetuation. Wicksell also practised what he preached, scandalously entering into a civil marriage with the Norwegian radical Anna Bugge and refusing to ‘legitimate’ it in a religious sacrament. For her part, Anna Bugge-Wicksell ‘with her intellectual clarity and wide ranging social interests clearly represented for us a part of what we were keen to see in a new generation of women – the equals and workmates of men.’13 Wigforss became part of the wicksellian circle, and in 1924, not long before his death, Wicksell expressed satisfaction at his somewhat wayward young 13

EWSU VII, p. 265. Wigforss’s ideals here were more than usually ahead of their time: the Swedish labour market permitted women’s wholesale entry into the paid labour force only in the 1960s, and even then pronounced gender segregation and other aspects of the gender system hardly supported their equal status or even presence in male dominated industries: see chapter 7.

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admirer of two decades earlier coming into the new social democratic cabinet as treasurer.14 In 1908 Wigforss published his first work on socialist theory, The materialist conception of history. It launched a series of pamphlets to be published by DYG and its counterpart in Uppsala, Laboremus. We will return to its argument below. In spite of its tendency to heresy against the version of marxism current in the SAP at the time, Wigforss’s pamphlet was favourably reviewed by Hjalmar Branting who shortly after started the party’s theoretical journal Tiden and solicited further work from Wigforss for it. In 1908 Wigforss also moved temporarily to Gothenburg, his doctoral thesis as yet unfinished, to take up a teaching post at the grammar school there. Here he began an intensive engagement with the labour movement – in the SAP branch, the party’s youth wing, and its workers’ educational arm, Arbetareinstitutet. He was able to hone his pedagogical skills and had his one real taste of an industrial working class milieu. Although the years in Gothenburg were seminal for his political development, and the local party branch would in 1919 select him for election to the reformed upper house of the riksdag, his life there was scarcely conducive to his finishing his doctorate. In 1911 we find him back in Lund, and once again chairman of DYG. Two years later he finished the thesis and became a lecturer in Nordic languages at the university. He also married Eva Jönsson, a schoolteacher and fellow student; the marriage would last until his death 63 years later. During the first world war Wigforss demonstrated an impressive capacity for work and political engagement on widespread fronts. This included vigorous campaigning against the tide of opinion for major military expenditure, and sympathy in some quarters (some even inside the social democratic labour movement) for the Central Powers, a sentiment that threatened to drag Sweden into the war. From the 1905 breakup of 14

Gårdlund 1956: 341. This work is an invaluable source of information about Wicksell’s stormy career as a publicist and equally stormy private life. As Gårdlund comments in this present context, Branting, Wigforss and Sandler ‘thanks to their talent and moral toughness belonged to the small minority who came through the purgatory of the wicksellian judgment on people unscathed.’

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the Swedish-Norwegian union, which to Wigforss’s horror brought these two countries to the brink of war, he repeatedly threw his energy into peace campaigns, a continuing aspect of his political practice that falls largely outside this study. But his agitation in opposition to pan-German ‘activism’ led to the writing and publishing of his longest work, World war and world peace in 1915, to which we will return, and his temporary employment in the secretariat of the Ford Conference in Stockholm – an initiative of Henry Ford to try to mediate between the belligerents in the war. But the war years also saw him actively involved in the social democratic newspaper Arbetet, and still cultivating an academic career in a distracted, stop-go fashion. He even took up the study of economic theory again, and found time in 1916 to represent the party on the Lund city council and the Malmöhus county council, his first taste of nuts and bolts ‘day-to-day politics’ (dagspolitik). A measure of his growing prominence in the party was the Lund branch’s attempt to have him take a seat in the lower house in the 1917 national election. After some agonising, he declined the offer. A political career for its own sake would never attract him, and he was not yet clear either how he could use one to further the causes he espoused or whether he should abandon other career opportunities for politics. More immediately, he felt intense personal discomfort in the SAP’s inexorable slide towards the reformist/revolutionary split later that year – the local manifestation of the effective collapse of the Second International in the wake of the majority of the German social democrats’ support for the German war effort. Wigforss and his student friends had originally been recruited into the SAP to counteract the influence of the Young Socialists, the insurrectionary left opposition in the party in the first decade of the century. In 1917, in the wake of the Russian revolution, the party was faced with a far more serious split as a new left opposition sought to emulate the politics of the bolsheviks. Wigforss sided once more with the leadership, many of whom he now knew personally. But he did so with little enthusiasm. He abhorred the travesty of democracy that the left opposition represented, but he felt that both the party leadership and the opposition lacked ‘intelligible guidelines for socialist policy’. Reformism as such was not the problem – it was rather the leadership’s inability to operationalise its reformism 80

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into an ‘action programme’. He expressed these views openly, and found himself ‘fairly homeless’ in the growing polarisation.15 We expand on this political problem early in the next chapter.

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Democratic desiderata A shared commitment to democracy – to the principle of free and equal association – united the radical liberals and socialists in DYG. The major issue between these two groups was whether socialism was necessary to the achievement of democracy. Even for the socialist section of the membership, like Ernst Wigforss, democratic commitment came first. A commitment to socialism was contingent on its being the best available expression of democratic aspirations. The meaning of socialism itself was virtually exhausted by its commitment to democratic principles of association in all aspects of political, social and economic interaction. The primacy of the democratic commitment distinguished these intellectual recruits to the social democratic labour movement from its more organic, working class membership. The latter was schooled in a marxist understanding of socialism as an expression of class interest in the common ownership of the means of production and the just distribution of the product of modern industry. For Wigforss, a commitment to socialism was contingent, and his relationship to marxism doubly so, as it was far from clear to him that it was what it claimed to be, the alpha and omega of socialist theory. The principal interpretation of marxism that held sway with Wigforss and many of his intellectual peers was the sophisticated, somewhat revisionist one presented in the classical German sociologist Werner Sombart’s Socialism and the social movement in the nineteenth century, first published in 1897.16 On occasions throughout his career Wigforss would refer to himself as a marxist, partly as a symbolic distancing from self-effacing forms of reformism and partly out of intellectual indebtedness to certain aspects of marxist theory, above all its underconsumptionist crisis theory and its 15 16

EWSU VIII, p. 38, 75–79. EWSU VII, p. 271.

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insistence on socialism’s roots in class conflict. But he never showed any tendency to unreflected adherence to marxism as a whole. Wigforss formed the lifelong habit of returning to first principles, and those principles concerned ethical questions above all. A century later, the crisis of socialism and the eclipse of marxism coincides with a renaissance of moral and political philosophy, as in the late twentieth century radical political thought returned to a number of issues – such as the meaning of freedom, individual autonomy and moral agency – that clearly exercised the mind of the young Ernst Wigforss. Retracing his journey of discovery thus has far greater fraîcheur than most returns to a period in socialist history that was otherwise largely preoccupied with questions internal to marxism itself – a doctrine that, by de-emphasising the democratic imperative, tended to isolate itself from the mainstream of western thought. The following thematisation of his early thought thus relates to recent debates in radical thought and historical transformation that we revisit – through political economy – in our final chapter.

The primacy of ethics What spurred Wigforss’s constant return to first principles throughout his active life were two related fields of tension in his thought already alluded to. One concerned the question of finding an ethical underpinning for social arrangements and for political action to change them. The second concerned the positive and negative possibilities in modern culture, not least in its scientific and technocratic aspects. In his first years in Lund, Wigforss abandoned religious belief more and more firmly without in any way following the tide of atheistic opinion into various deterministic mindsets. He described his commitment to socialism from the beginning as ‘emotional’ rather than narrowly rationalistic, and in today’s idiom we could say the emotion in question was a ‘moral emotion’. Even though then current forms of neo-kantianism exercised an influence on him, he felt a growing need to break away from metaphysical supports for normative reasoning as well. Wigforss’s rejection of metaphysical starting points was quite clear in his student years. 82

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A number of intellectual influences eased his way, above all the contemporary Danish moral philosopher Harald Høffding. The latter had strong socialist sympathies, but expressed a clear preference for what he called ‘empirical socialism.’ By this he meant typically experimental English forms like fabianism and guild socialism, as against ‘speculative socialism’ exemplified by marxism. In a line of development that to some extent followed Bernstein, Høffding suggested that universalistic moral principles and normative reason once more become available when one abandons the philosophy of history and other metaphysical truth-claims that marxism made. On this basis Høffding argued that moral evaluation survives the end of religious belief and of all other metaphysical systems. A supporting influence on Wigforss in this direction was William James’ Varieties of religious experience, with its emphasis on individual moral responsibility that counteracted the ‘paralysing influence that scientific determinism had been able to exercise.’17 Yet another influence in the same direction came from John Dewey, who shared James’ membership of the school of philosophical pragmatism. The assertion of the ‘durability of values’ (värdenas bestånd) underpins Wigforss’s socialism and the values themselves are the enduring first principles he returns to. Høffding helped Wigforss specify substantive evaluations in socialism, not least in introducing him to another influence of fundamental importance, Ferdinand Tönnies’s Gemeinschaft und Gesellschaft (Community and society). This work, which remains a standard text on the sociological and philosophical meaning of modernity, re-articulated Hegel’s famous thesis about the loss of the lived experience of community in modern society. Moral meaning and values, a function of community, were also lost in this process. For Wigforss, the re-establishment of the experience of community – of a deep fellowship (innerlig gememskap) – was thus a priority in itself and the precondition to the pursuit of other values. Socialism alone could achieve this, but it could do so neither by resurrecting pre-modern forms of parochial solidarity nor by merely asserting the sectional class solidarity of the labour movement. What was demanded was a universalistic normative reason that supported an inclusive community. 17

EWSU VII, p. 239.

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A common commitment to democracy underpinned DYG and Lund radicalism. What accounted for the further step into socialism? The democratic faith that took me and others over to the socialist camp was the demand for equal status for all citizens in society. Equal status in civil rights, equal status in the possibilities of participating in both the intellectual and material culture. That this equal status at the same time implied the same freedom for all to develop their potential and make their contributions was so self-evident that the point hardly had to be argued.18

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Even the most radical forms of liberalism failed to make a complete break with the industrial capitalist society which subverted the values of community, equality and freedom. In this emerging society freedom was hardly a conspicuous aspect. Socialist community had not least to make freedom a reality for the propertyless. The solution was to own the means of production together and employ oneself […]. But whether community should be developed through state socialism or other forms of collective ownership was not the essential problem. That lay rather in the relationship between the community and the individual: how those forms of individualism that were valuable in our eyes as well could be preserved, while those forms which were incompatible with community and destructive of society were extinguished.19

The ethical mission of the socialist movement, then, was to prefigure and promote forms of community which not only gave free rein to, but also supported, individual autonomy, and which put such free individuals on a basis of social equality with each other. Whatever ‘freedom’ existed in capitalist society was tied to drastic social insecurity and alienated labour, which ruled out real autonomy – that is, unconstrained and independent choice. Freedom belonged to the propertied alone. In an industrial society with large-scale production and concentrated forms of ownership and control, private property was no longer a credible basis for universally enjoyed freedom. Such a basis had to restore social security and create some form of joint ownership and control of the large-scale productive units upon which so many now depended for their 18 19

EWSU VII, p. 271. EWSU VII, p. 291.

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livelihood and working life. An effective, free citizenship under modern conditions had to go beyond property rights in order to re-secure the universal right to a livelihood (Polanyi’s ‘right to live’) and rights of meaningful participation in productive life that capitalist industrialisation had destroyed. For reasons that will emerge successively throughout this study, we call ‘those forms of individualism that were valuable in our eyes’ aspects of individuality to distinguish them from the individualism of liberal theory. The latter refers to either the self-interest maximising individual of mainstream economic thought or the atomised artefact of liberal social and political theory – the basis of what is usually referred to as methodological individualism. Individuality by contrast invokes the individual’s capacity for autonomous moral agency, including reflexivity and dissent, and nonconformist life projects. Wigforss makes his concern for this aspect of the individual’s relationship with society clear, for instance, in his reference to

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a continuing investigation of the question: how should social relationships be framed to make moral agency (ett moraliskt handlande) possible. Without this sort of foundation for people’s association with each other, all preaching about morality is just empty talk.20

Needless to say, this was no conventional problematic within the social democratic labour movement, and when Wigforss began to write and publish for the latter, the divergence soon became apparent. In The materialist conception of history,21 Wigforss tries to strike a balance between the economic determinist factors stressed in marxist theory and moral-volitional ones in the process of social change. He affirms marxism as a mobilising doctrine in an unavoidable class struggle and as a valuable heuristic tool in understanding the lines of socio-economic development under capitalism. But he also asserts the autonomous determinacy of moral arguments, which are no longer encumbered by religious and metaphysical starting points. They’re neither superstructural reflections of an economic ‘base’ nor expressions of class interest. Indeed,

20 21

EWSU VII, p. 281. EWSU I, pp. 19–105.

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the author is at pains to emphasise the affinity between Christian moral starting points, above all universality and universal forms of solidarity, on the one hand, and the values of community on the other. Given the pamphlet’s title, the emphasis on moral theory is striking. Its conclusion clinches the primacy of moral issues and of the social preconditions of moral agency: But people’s morality? Why should that be greater in a socialist society than in the present one? Simply because, human nature being what it is, a society where the isolated individual is forced into struggle with others for her/his very existence, must breed and nurture all the egoistic instincts and is thus immoral. A socialist society by contrast is in principle moral as it allows the individual to fulfil her/his own goals by working at the same time for everyone else’s. It is the rationally calculating, fundamentally socially destructive individualism on which the present society rests that socialism opposes. But individualism is a word with many meanings, and no-one wants to simply renounce the fruit that its development, for better or worse, has left to us […]. Socialists want to preserve all the freedom of the individual that is compatible with the freedom of others. The socialist wants the masses to participate in all the possibilities of civilisation that bourgeois society to its credit has created and to its shame wants to reserve for the few. Is he not in the end the greatest ‘individualist’ when he believes that ‘the mass’ consists of individuals with possibilities and rights to personal development? But the only individualism that he believes has a future is the one that arises from and is nourished by an intense experience of community. The conflict between society’s rights and the individual’s is for him hardly an insoluble problem.22

Despite Wigforss’s immediate concern that the 1908 pamphlet was too ‘dogmatic,’ and his later concern that it might quickly became dated, it became a classic within Swedish social democratic literature. It was republished by the social democratic publishing house in 1934, and again in 1970. However, it is unclear how much of it the party leader, Hjalmar Branting, understood. When a prominent social democrat, Carl Lindhagen, published similar views in Tiden about the primacy of moral issues over materialist determinism under the title ‘Heresies’, Branting as the journal’s editor asked Wigforss to write a reply to correct Lindhagen’s ‘altogether far too humanistic views’. Branting had come to the wrong address. 22

EWSU I, p. 104.

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Wigforss’s own heresies had been strongly nurtured by the immediate experience of the general strike of 1909, when he had been depressed by the isolation of the strikers, the ineffectiveness of the strike weapon in a conflict on that scale, and the inadequacy of the labour movement’s particularistic solidarity. The experience exemplified the need for the movement to mobilise around a universalistic ethic and solidarity. When Wigforss fulfilled Branting’s commission in 1910 with ‘Socialism and morality’, the lesson of this experience was driven home:

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The worker is now moved to the class struggle by his own well-understood class interest. But if socialism is to be assured of victory, it cannot rest satisfied with this alone. It must marshal all its supporters’ spiritual energies. And this is only possible by unblocking the mainsprings of idealism and morality in their minds. The worker thus arrives at the insight that he struggles for something bigger than lifting himself out of oppression and poverty. He can experience himself as the means whereby society at large is liberated from the present order’s immorality, from its money-lust and brutality, its venality and servility, its subversion of a sense of fellowship between people.23

As we shall see, it was modern French syndicalism, rather than romantic retrospectives to older solidarities, that provided the model for a modern sense of community, and at the same time made the connection between community and democracy. The strong moral current – the sense of the ‘durability of values’ – that Wigforss and his generation of social democratic leaders were to bring to Swedish social democracy is striking. When the first volume of his memoirs came out in 1950, a letter from a younger friend and former colleague, then UN Secretary-General Dag Hammarskjöld, took up this issue. Hammarskjöld had been a young economist in the thirties who, as one of Wigforss’s admired radical conservatives, rejected economic liberalism and had been permanent head of treasury between 1936 and 1946 under Wigforss’s treasurership. Hammarskjöld writes to his old employer: I envy you somewhat. In spite of everything it is a much purer world you describe than the one my generation met. What strikes me most strongly – something I had never seen so clearly in our discussions – is the catastrophic degeneration of values

23

EWSU I, p. 120.

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during the quarter-century that divides us. Without falling to dramatisation I would liken the moral context of the intellectual debate I have experienced, in comparison to the one you recount, to a bombed city whose inhabitants can feel they are doing well if they can cobble together a few fragments of the ruins for a temporary shelter without thought to context, planning or permanence.24

Today’s resurgence of moral and political philosophy has at last focused on this ‘bombed city’ and placed its rebuilding on the agenda. For the left, awareness of its original layout can prove useful.

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Science, scientific culture and technocracy We suggested above that Wigforss grew up a reflective modern – one who affirmed modernity’s potential alleviation of distress and opening up of new possibilities and freedoms for human life, but who also saw the costs and dangers inherent in its unreflected self-congratulation in the cult of progress. Scientific culture above all was for him modernity’s mole of nature – that which threatened to frustrate and even pervert modernity’s liberatory potential. He was hardly anti-intellectual: he counted natural and social science, understood as traditions of rational inquiry and analysis, as among the boons of modernity that allowed for the social and technical progress evident in so many spheres of modern life. The culture that often surrounded this endeavour, however, had a tendency to commit three sins in particular: it could illegitimately militate against a voluntarist politics based on moral priorities, it lacked the self-reflection to check its own degeneration into charlatanry and consequent recruitment to modernity’s morally most reprehensible endeavours, and it legitimated technocracy – the modern form of oligarchy. We will indicate briefly how Wigforss noted these frailties of scientific culture in turn before his political career began in earnest. 24

Quoted by Wigforss in his contribution to a memorial volume to Hammarskjöld – EWSU VI, pp. 271–27 (our emphasis). Alasdair MacIntyre opens his classic After virtue: a study in moral theory (1985, ch. 1) with a chillingly close metaphor of catastrophe and obliteration in contemporary moral discourse.

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As we have seen, Wigforss saw the socialist project at least partly in terms of broadening citizenship by making it inclusive, and of deepening it by adding social and economic dimensions. His notion of citizenship expressed the ethical priorities of community, democracy, justice and freedom. In adumbrating this politics, he found himself frustrated by those forms of science that lay closest to him politically and intellectually. Marxism – even revisionist marxism – was at base a developmental theory that could not address issues of – and ethical priorities in – citizenship. ‘When you listen to Marx and Engels you could well believe that Socrates never existed,’ he complains in a 1907 letter to his friend Malte Jacobsson.25 The French syndicalist critique of marxism ‘as a temptation to resignation’ crystallised much of his frustration with the latter as the basis for programmatic thinking. ‘I considered it a brilliant critique of those who interpreted marxism as an economic fatalism (ödestro) as well as that revisionism which contented itself with debunking the belief in a coming catastrophe but did not seek any galvanising alternative.’26 In Wigforss’s perception this intellectual problem accounted for the programmatic sterility of both the social democratic revisionist leadership and of its left opponents who returned to the ‘fatalism’ of orthodox marxism. He encountered precisely the same problem in neo-classical economic theory, not least in the person of Knut Wicksell, his stimulus to studying it. Wigforss found two theses that Wicksell expounded quite unacceptable. The first (for which Wicksell was notorious within the otherwise friendly labour movement) denied the possibility of union struggle having any efficacy at all against market determination of wage levels and the distribution of income. The second was his refusal to countenance the idea that industry or any part of it could be made more efficient by any means other than mere exposure to competition.27 A central theme in the political line Wigforss would subsequently develop would flatly contradict the latter premise in particular. More broadly one could say that his career would develop in part as one long rebellion against the political pessimism and discouragement of political creativity that even sympathetic 25 26 27

Quoted in EWSU VII, p. 280. EWSU VII, p. 360. Emphasis added. EWSU VII, pp. 189–190.

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forms of social science propagated. In that rebellion, marxism and mainstream economics would characteristically find themselves invidiously bracketed together. The degeneration of both social and biological science into charlatanry was the gruesome discovery of Wigforss’s 1906 sojourn in Berlin. Scientific racism had made deep inroads into German intellectual life, leaving even radical and social democratic circles tainted. Pan-Germanic and antisemitic ecstasies were dressed up in scientific garb and mixed with philosophical humbug about war bringing out the highest human virtues and being the natural and impartial arbiter of the quality of races. In his usual omnivorous style he read Chamberlain and many of his epigones, and even went to public meetings in Germany where antisemitism and war propaganda were being preached. As noted above, nine years later this research bore fruit in his monumental ‘war book’, which proved to be an arsenal of arguments deployed against both left and right sympathisers with the German cause in the first world war. Undoubtedly the corruption of the modern project that Wigforss witnessed in Germany caused him considerable personal anguish and permanently raised his guard against all who based their truth-claims on science. Two passages in the war book quoted from the prominent sociologist Werner Sombart – who, as we saw, provided Wigforss and many of his fellows with their grounding in revisionist marxism – exemplify the problem poignantly enough: But war is sacred to us not only because it nurtures humanity’s noblest features; we revere it no less because it appears to us as the highest moral power to which providence resorts in order to preserve people from degeneration and decay […]. We Germans in our time will walk in the world proud, with heads uplifted, in the sure knowledge of being a race of gods. Just as the German eagle soars high above everything that crawls along on the ground, so the German will feel himself raised above the human chaos which surrounds him and which he sees in a bottomless depth beneath him.28

That members of the radical Swedish scientific elite like Lidforss and Steffen could replicate positions like this brought the problem close to home. In 28

Wigforss 1915, vol. 2, pp. 171, 174.

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the light of today’s Holocaust research Wigforss’s war book is an extraordinarily prescient document. It prefigures the collusion of the German intellectual and scientific elite in the rise of nazism and its blackest schemes. More broadly, it strongly supports Zygmunt Bauman’s contention that the Holocaust was less a German syndrome and more an ‘achievement’ of modernity that brought together the latter’s scientific culture, the technocracy that this culture created and legitimated, rational bureaucracy, and technology.29 Science real or bogus and its social applications encapsulated the tension Wigforss felt and expressed about modernity. During his first years in Gothenburg he discovered H G Wells, who like Rydberg before him, came as ‘pure revelation to my own soul!’ as he put it in a letter to his close friend Erik Hedén in 1912. Wigforss confessed to feeling ‘more related to him than to any other writer, Swedish or foreign’.30 Wells’s futuristic projections epitomised what Høffding had called ‘empirical’ as opposed to ‘speculative’ socialism: a programme of social reconstruction uninhibited by developmental theories but stimulated by ideals and real technical possibilities. What Wigforss describes as Wells’s ‘almost pathological recoil from Marx’31 hardly dampened his enthusiasm for this genial and humane – but also highly reflective – celebrant of modernity. Wells is an important intellectual stepping stone to Wigforss’s later appropriation of the English collectivist liberals’ open-ended, experimental style of reform that will come up in the next chapter. But Wigforss also deployed against Wells’s modernism an idiosyncratic contemporary in English letters – G K Chesterton – as a stalking horse. Chesterton was modern in expressing the democratic revolution in pure form, but with singular wit and zest debunked the pretensions of both modern and pre-modern enemies of democracy and what he regarded as inadequate expressions of democracy. He wrote for the radical Daily News, but earned his reputation as a ‘reactionary’ by deploring the puffedup self-importance of the scientific elite, socialism, and even feminism (for his own eccentric, non-misogynist reasons), and by hankering back to 29 30 31

Bauman 1989. Quoted in EWSU VII, p. 410. EWSU VII, p. 339.

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older forms of solidarity. He rejected socialism in particular for the tendency he perceived in it to replicate the oligarchic forms of existing society – a line of criticism that would always strike a nerve in Wigforss. Chesterton’s modern bêtes noires all deformed the democratic spirit, which was the apotheosis of the dignity of the ordinary individual. No matter how much better ‘experts’ may be at writing love letters, defining best child-raising practices and making political decisions, the iron law of democracy for Chesterton is that each individual shall take charge of her/his personal relationships, raise her/his own children and decide on the laws of the country without interference from or substitution by so-called authorities. Chesterton is perhaps the purest expression of what Charles Taylor calls the ‘taste and habit of self-rule.’32 In 1911, on his return to Lund, Wigforss delivered a long lecture on Chesterton and Wells to a DYG audience. It was subsequently published in Tiden, and then as a separate monograph called Two radicals in 1914.33 Perhaps more than any other piece he wrote, it captures the tension Wigforss felt and constantly renewed about what nowadays might be called The Modern Project. What surprises the reader today is not so much what he gleaned from Wells as what he took from Chesterton. Of the latter’s works cited, What’s wrong with the world made the strongest impression, and its stimulus to Wigforss’s predilection for syndicalism and later engagement with industrial democracy are obvious. The book is a broadside against all forms of oligarchic interference with self-rule, and in this the hereditary aristocracy (the detested house of lords), the business plutocracy and the science-legitimated technocracy are all of a piece; their claims to legitimacy vary but are all equally ridiculous and equally pernicious. To quote from Chesterton’s book on the ‘idolatry’ of expertise: The essential argument is ‘Specialists must be despots; men must be specialists. You cannot have equality in a soap factory; so you cannot have it anywhere […] We must have commercial civilisation; therefore we must destroy democracy.’ […] This is the huge modern heresy of altering the human soul to fit its conditions, instead of altering human conditions to fit the human soul. If soap-boiling is really inconsistent with brotherhood, so much the worse for soap-boiling, not for brother32 33

Taylor 1990, p. 115. Now republished in EWSU VI, pp. 105–145.

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hood. If civilisation really cannot get on with democracy, so much the worse for civilisation, not for democracy.34

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But it is the technocrats, especially the medical and sociological experts, who are the target of Chesterton’s ire par excellence. Medical experts had just persuaded some local authorities to order the cropping of little girls’ hair in poorer districts to prevent the spread of lice, and this triggers Chesterton’s concluding, drastic manifesto. It is the lice and their social preconditions that should be gotten rid of, not the hair – getting to the cure the wrong way round was a typically technocratic mistake. Despite its edwardian sentimentality and gendered view of the world, there is no doubt that Wigforss fell for the chestertonian manifesto’s fierce egalitarian spirit and anti-technocratic sentiment: Because a girl should have long hair, she should have clean hair; because she should have clean hair, she should not have an unclean home; because she should not have an unclean home, she should have a free and leisured mother; because she should have a free mother, she should not have an usurious landlord; because there should not be an usurious landlord, there should be a redistribution of property; because there should be a redistribution of property, there shall be a revolution. That little urchin with red-gold hair (whom I have just watched toddling past my house), she shall not be lopped or tamed or altered; her hair shall not be cut short like a convict’s. No, all the kingdoms of the earth shall be hacked about and mutilated to suit her. The winds of the world shall be tempered to that lamb unshorn. All crowns that cannot fit her head shall be broken; all raiment and building that does not harmonise with her glory shall waste away. Her mother may bid her bind her hair, for that is a natural authority; but the Emperor of the Planet shall not bid her to cut it off. She is the human and sacred image; all around her the social fabric shall sway and split and fall; all the pillars of society shall be shaken, and the roofs of ages come rushing down; and not one hair of her head shall be harmed.35

For Wigforss, the critical role Chesterton and Wells play together is to affirm democratic voluntarism, ‘to confront the law-bound nature of evolution with the revolution’s right.’36 Egalitarianism and freedom constitute the essence of the latter that no ‘scientific’ consideration may gainsay.

34 35 36

Chesterton 1912, pp. 107–108. Our emphasis. Chesterton 1912, pp. 283–284. EWSU VI, p. 113. Emphasis in the original.

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Community-building, deliberative democracy

Copyright © 2013. Peter Lang GmbH, Internationaler Verlag der Wissenschaften. All rights reserved.

The problem neither of these two radicals could solve was that of re-creating community in modern forms. Chesterton ended up in sentimental retrospectives to pre-modern forms of solidarity, and would rather close the soap factory than take the possibility of ‘brotherhood’ in it seriously. As a modern, however, Wigforss could not follow Chesterton into what Ross Poole has called the ‘seductions of the past’.37 He put his money on the soap-boiling brotherhood instead. His discovery of French syndicalism (Georges Sorel above all) convinced him of the possibility of re-establishing a processual community through democratic organising principles at any site of human co-operation. It was not so much an important rider on existing rudimentary socialist thinking about social transformation, as a completely new approach to it: In principle nationalisation should mean production for our common welfare, for need and not for profit. But would feelings of belonging and fellowship thereby take root? It was here that the workers’ solidaristic ethic came in as a sign that not just the forms of economic organisation but also people’s minds were beginning to indicate something new in the womb of the old society. I thought it was something to work with. But I also had the insight that there were psychological problems that called for solutions, not just juridical and organisational ones. There was probably […] the memory of how emotional connectedness has taken root in limited circles, smaller collectivities that the individual can feel a familiarity and a connection with […]. [R]evolutionary syndicalism’s critique of marxism made me think about this problem seriously. What is certain is that my own ideas about what community in a socialist society should mean had already been formed by experiences of community in comradeship, and that an egalitarian working community in a smaller circle has ever since stood out as the prototype of what one reaches out for in one’s dream of a socialist society.38

Unlike pre-modern communities based on shared, intractable ascriptive particularities – race, ethnicity, language, sex – the new community was defined by its egalitarian and interactive processes and its openness. We have here a forerunner of the habermasian idea of a ‘communication com37 38

Poole 1991, p. 146. EWSU VII, p. 293.

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munity’, based on relations of openness, symmetry and reciprocity in communication. As we have seen, Wigforss described his political position as ‘purely emotional’ socialism. One can add to that his quite instinctual commitment to democracy understood at base as unconstrained communication both at the micro level and in national politics. For him democratic communication demanded articulacy, but also civility, tolerance and receptivity. We have already noted his consternation at their absence in the first years of debate he witnessed in DYG where there were no rules ‘about humane treatment of those with divergent views, about how hard the lashes could be, how deeply one could upset the feelings of an opponent.’39 Some of his strongest language was reserved for indignation at the bolsheviks in emotional letters from 1917 and 1918 to his close friends Erik Hedén, a member of the left opposition in the SAP sympathetic to bolshevism, and Albert Nilsson who had similar inclinations. To the former he writes: If I could only find the key to the riddle why it is the bolsheviki who should be seen to represent the people and its will in Russia […]. More and more I see no other way out of the chaos than to implacably and blindly and fanatically uphold democracy, even its right to run itself badly, wage war, make lunatic offensives, destroy itself and the country, oppress minorities – until it has learned better ways. The alternative is to choose pure arbitrariness.40

Nilsson for his part is told: What seems to me worst is not the argument that democracy – real democracy – is impossible as long as there is no economic democracy. Therein lies a deep truth, and the inference that the working class ought to take advantage of the situation and use dictatorial means to revolutionise the economy can be considered in abstract terms. But to put the idea into practice in such a way that the group which happens to have access to the most machine guns may treat all other (and partly more sensible) opinions as ‘counter-revolutionary’ and their holders as fair game, that upsets me beyond measure. And the madness is not to see the consequences, namely that in time each faction will have learned the knack of collecting the most machine guns. [The risk] is so great that it arouses suspicions of deliberately autocratic intentions.41 39 40 41

EWSU VII, p. 197. Quoted in EWSU VIII, p. 100. Quoted in EWSU VIII, p. 101.

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This strong reaction against the bolsheviks goes hand in hand with Wigforss’s silence on the need to change or set aside constitutional government – at least once universal suffrage was won. Implicitly, Wigforss was a constitutional democrat, a believer in moderate government, and an opponent of plebiscitory forms that failed to respect the rights of minorities and thus jeopardised the opinion-forming process. The constitutional state did not stand in the way of effective democratic politics: to suggest otherwise was the special pleading of the would-be tyrant. Thanks mainly to his pedagogical experience and his energetic commitment to peace campaigns in 1905 and in the first world war, he overcame his chronic fear of public debate and at least integrated his fear of personal conflict to become an exemplar of a democratic communicator. He arguably became the most effective speaker in the history of Swedish social democracy, and one of the first to use the new medium of radio consummately. With the possible exception of August Palm at the dawn of Swedish social democracy, Wigforss’s contribution to cultivating its public (in the sense introduced in the previous chapter) would prove uniquely powerful. This initiated public would in turn repay him tenfold as it became social democracy’s vital resource in particularly polarised election campaigns from the 1930s. In this role he was the antithesis of the demogogue. His style was dispassionate, at times even socratic. Tage Erlander, prime minister between 1946 and 1969, perhaps best captures this aspect of Wigforss’s political talent in his personal experience of it from the early 1920s on – experiences related in his introduction to a 1961 festskrift to celebrate Wigforss’s eightieth birthday: His speaking style is simple and apparently artless, he shuns rhetoric and oratorical flourishes. But he draws people in. The listener feels like a participant in an investigation in which intellectual rigour does not hide the deep emotional commitment. To listen to Ernst Wigforss is an intellectual adventure that leaves nobody unmoved. There are thousands in our country for whom an encounter with Ernst Wigforss has been decisive not only for their opinions but also for their active participation in politics. I have reason to suspect that Ernst Wigforss has also felt an intense need of the stimulus for his political endeavour that his speeches and discussions up and down the country have provided. This springs from his view of politics as an expression of people’s aspirations in a living democracy.42 42

Erlander 1961, p. 9.

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Illustrations of Erlander’s description can still be found in the archives of Swedish Radio, in recordings of long, set-piece radio debates Wigforss participated in, especially in the 1930s, 1940s and 1950s. In themselves they are a shock to someone used to today’s electronic journalism, as they carry no assumptions about the miniscule attention span of the listener – a self-fulfilling prophecy that came later. Radio talks and debates then were a cool medium that made heavy demands on the participants’ intellectual preparedness and ability to sustain a logical argument and that was unforgiving of bluster and non sequitur alike. Courtesy and decorum usually went hand in hand with lethal intellectual duals. Wigforss comes across in the recordings (and in the memory of many listeners) as a master of this medium. Debating him was clearly not a sport for the intellectually shallow or the shortwinded! Wigforss’s personal practice thus modelled what, after Habermas, we might understand as the essence of democratic process – deliberative opinion- and will-formation. It was a process that resisted foreclosure by scientific truth-claims, technocratic pontification and authoritarian fiat as much as by demagoguery. In this chapter we have traced Wigforss’s early development to flesh out his ethical and political profile as it appeared before the inevitable episodic accentuation of aspects of his politics, once he fully entered into the national political process, obscured this rounded picture. The present study posits Wigforss’s fidelity to his starting points, throughout his career, as crucial to the emergence of Swedish social democracy, something that becomes much clearer from writings after his retirement from cabinet. As we shall see along the way, this is not an uncontested view. But any other, we suggest, either falls into rather gross forms of essentialism about the issues he faced, or replicates the two mutually contradictory caricatures – the dogmatist and the opportunist – that his opponents and detractors used to obscure his genuine profile. Again, Erlander’s eye for the caricatures and what they distorted is sharp: Political opponents have often sought to present Ernst Wigforss as a rigid dogmatist who inflexibly holds to a doctrinaire socialism of marxist provenance. Others have described him as an out-and-out pragmatist who grasps what is possible in practice unconcerned with whether this happens to break with previously held doctrine. Both

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these descriptions give a distorted picture. Wigforss has always appreciated practical realities. His mind is far too open, his intellectual vitality far too great to allow him to be chained to a rigid dogma. Ernst Wigforss is unyielding nonetheless. He has always been unyielding in holding to democratic socialism’s fundamental ideas, in constantly elucidating the link between concrete measures and the values that ultimately underpin political positions. His mission has been to create context and continuity in social democratic politics. For Wigforss equality, solidarity and participation are not high-sounding words to air on ceremonial occasions. They reflect an ideological conviction that constitutes the driving force of political action. In a time of rapid change which calls for flexible adjustment of policy to social development, Ernst Wigforss has constantly emphasised the necessity of a firm ideological basis for social democratic political activity. Only in this way will our movement gain effectiveness and the power to convince. On this basis we can exercise the daring to set up future political goals.43

A whole dimension of Wigforss’s politics, which Erlander is grappling to express here and which the caricaturists would wilfully misunderstand, was socialist statecraft: the extrapolation from democratic socialist starting points of an effective political practice of social change. Socialist statecraft means confronting the question of power – how to gain it and wield it to further rather than obliterate chosen ethical purposes. The next two chapters will focus on Wigforss’s approach to this problem, and the new current in democratic socialism his efforts crystallised.

43

Erlander 1961, pp. 8–9.

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4. The democratisation and politicisation of capitalism: from British collectivist liberalism to Swedish social democracy in the 1920s

Nothing is as revolutionising as genuine reformism

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Rudolf Meidner

As soon as universal suffrage and a democratic state became immediate prospects, the original strategy of Swedish social democracy became palpably obsolete. Constitutional issues around democratic government and the new world of policy formation fell outside its limited and speculative conceptions of the state and of the transition to socialism. Despite clinching at least one important (but traditionally ameliorative) reform – the eight-hour working day – social democratic minority governments in the 1920s failed to make a significant impact on the acute socio-economic predicaments – mass unemployment and poverty – facing their working class constituency, or even to announce policy lines that showed promise of doing so. Indeed, the SAP under Branting became yet another parliamentary and ministerial bearer of orthodox economic liberal policy, and as such a source rather than the means of supersession of these predicaments. Electoral stagnation inevitably set in: the anticipated socialist majority, the fruit of universal suffrage, was clearly not emerging. Two contenders to replace the old democratic socialism as the political stock-in-trade of the SAP emerged, both products of second-generation intellectuals. One, associated with Nils Karleby, was an early version of social liberalism, and as such affirmed the claimed optimality of capitalist market economy while promising to equitably redistribute its product. The socialist project in this revision thus collapsed into a merely redistributive one, notwithstanding the barnstorming rhetoric with which Karleby announced it. The other contender to replace the original model was Ernst Wigforss’s new, expanded version of the democratic socialist project. Neither of these two contrasting strands would ever manage to completely oust the other, and the tension between them would colour 99

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the political development of the social democratic labour movement in Sweden to the present day. This chapter traces the development of the new democratic socialism in Wigforss’s thought and career from the constitutional crisis of 1918 that ushered in the democratic state. This development had two related aspects. One was the exploration of what a democratic state, society and economy implied, and the search for ways to operationalise them. The other was to take up the challenge of forming distinctively socialist policy as a means to make a real impact on the working class’s predicaments, and to use this prospect to agitational advantage in order to win the much-needed electoral majority which ‘history’ showed no inclination to deliver if left to itself.

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The unchartered territory of political democracy Like all other western polities outside Australasia, Sweden up to the democratic breakthrough at the end of the first world war had representative or parliamentary government, but as representation was limited by selective suffrage, they were not democratic in the sense we would understand today1 – a sense which insists on inclusive adult suffrage. The coming of inclusive representation in the social and political upheavals at the end of the great war in Europe menaced the liberal and conservative right, which now lacked the power to resist it any longer. How could it deflect the danger that liberal theory since James Mill had always perceived in democracy, the danger that the propertyless majority would move against the concentrated property of the minority? But the revolutionary left was equally menaced by the possibility that the bourgeoisie would continue to exercise such a cultural and attitudinal sway over the general population that democracy would simply embellish the legitimacy of the rule of capital by furnishing it with ostensibly democratic support for its continuation. For a number of political currents, then, political democracy was a mixed blessing indeed, and they went to meet it with hesitation, and sometimes with threats of putschist alternatives. 1

For an overview of the international democratic breakthrough see Therborn 1977.

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The constitutional crisis of 1917–1918 partly coincided with the SAP split and the emergence of a new left-socialist party, the forerunner of the communist party that the Comintern would foster with its own establishment in 1920. These domestic events reflected, and were fuelled by, the revolutionary upheavals in Europe at the end of the war. The new party in Sweden both challenged the SAP’s dominance of the labour movement and threatened insurrectionary activity. Ernst Wigforss himself was swept along with the sense of opportunity and danger of the time, and with mounting despair at the tactical passivity and programmatic unclarity of the SAP leadership, as well as its increasingly obsessive rejection of radical currents as dangerous deviations. These influences finally resolved Wigforss’s career dilemma in favour of full time political activism, and he agreed to take a seat in the reformed upper house of the riksdag on behalf of the Gothenburg branch of the party, to which city he returned in late 1918. His repeated criticism of the party leadership was by now a matter of concern to at least some of its members, and Värner Rydén, sitting education minister in the liberalsocial democratic government, went to some pains to thwart his candidature for the editorship of Arbetet, the flagship of the social democratic press, just a few months before. While the old leadership would continue to resist his ideas, they put no further obstacles in the way of his political career. The constitutional crisis provided Wigforss with a rare entrée into what Habermas has called ‘a dynamic understanding of the constitution as an unfinished project […] not […] a finished structure but a delicate and sensitive – above all fallible and revisable – enterprise.’2 What democratic aspirations did the democratic state represent, and what assumptions did it make about the kind of society and economy that sustained it and which it in turn moulded? As we shall see in the closing chapters of this study, this remains a central question for radical thought today. The new left-socialist party’s threats of direct action and its apology for insurrectionary violence prompted the search for a democratic response. In what circumstances could a duly elected and constituted social democratic government use force to deal with direct action and insurrection? 2

Habermas 1996, p. 384. Emphasis in the original.

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The party’s answer to bolshevism cannot be narrowly political, Wigforss insists in a letter to a close friend in the government, Östen Undén. It must carry on the present fight for universal suffrage, a unicameral system and a republic, but it must also broaden its immediate concerns to disarmament, a regulated working day, redistribution of subsistence goods, a ten-year plan for housing construction and phased socialisation initiatives in various forms. ‘With this programme would I stand up and without hesitation declare that any attempt by a minority to bring down the government with violence and replace the programme with its own private positions should be put down by all necessary means?’3 In an article in Tiden from 1920, ‘Democratic problems,’4 Wigforss fleshes out this cryptically expressed problem. The article celebrates a major turning point in the development of western polities. It also reflects the influence of a number of radical English commentators – above all Jerome K Jerome and Harold Laski – on modern democratic issues to do with the power of the press in a modern democracy. Especially when the press is controlled by capitalist interests and the working class itself has been denied the education to resist its manipulation of public opinion, the rights of minorities to effective self-expression and the moral basis of democratic legitimacy are subverted. A reader today would be struck by the convergence of Wigforss’s themes with those Antonio Gramsci would soon be exploring under his rubric of ‘hegemony’. The article challenges a widely held position in the SAP that democratisation is an unproblematic enterprise – the introduction of majority rule – that the removal of restrictions on the suffrage in 1918–1919 completed. Wigforss acknowledges the half-truth in the conservative and bolshevik fears about democracy. The former suggested that western society and economic welfare were based on the rule and prerogatives of property, and the enfranchisement of the propertyless majority (whatever its moral merits) would impose a disastrously incompatible form of government. The radical left, as we have seen, feared that the bourgeois domination of all organs of opinion formation would lead the ‘masses’ indefinitely to misrecognise their interests as congruent with capital’s. In answer to these objections to 3 4

Quoted in EWSU VIII, p. 103. Reprinted in EWSU I, pp. 15–33.

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parliamentary democracy, Wigforss insists on the necessary complementarity of social and economic democracy with political democracy. ‘Society rests to such a large extent on economic foundations that state power in the hands of the propertyless, while economic power remains in the hands of the politically powerless, must be seen as an anomaly and can be conceived as a transitional form only.’5 He is here urging the extension of political democracy towards democratisation of the economy (making it more substantive, less formal) and the dispersion of economic power away from the bourgeois minority. The only popular will that can claim democratic legitimacy is the one that arises out of minimal real conditions, not ones that simply meet certain formal criteria. These real conditions start with a high level of citizen education – and thus a drastic redistribution of cultural resources – to break the power of the bourgeois media to manipulate and distort public opinion. The specific argument for economic and industrial democracy refers back to the democratic state’s very claim to legitimacy. The state exists to further the welfare of all social groupings, minorities as well as majorities, and this requires us to jettison two widespread and related distortions, Wigforss suggests. The first is the idea that the democratic state simply embodies majority rule. On the contrary, the state has to guard not only the existence of minorities, but also further their interests in sensitive coordination with those of the majority. The second is the assumption of the state’s unlimited sovereignty. The democratic state is not the heir to the pretensions to unlimited sovereignty of the absolutist state, and its legitimacy cannot be based on a hobbesian social contract that might support such pretensions. Rather, this state’s legitimacy is based on its actual protection of each citizen’s integrity and freedom of expression, and of the rights of minorities to express their interests and to the greatest possible extent manage their own affairs. Wigforss is here anticipating subsequent debate over the relation between a democratic state and a developed civil society. In crystallising this latter point, Wigforss evokes the analogy of the deep concern expressed in the treaty of Versailles, the establishment of the League of Nations and elsewhere, for the protection of national minorities, even against majoritarian regimes. 5

EWSU I, p. 24.

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The working class, at least for the time being, is a comparable minority, Wigforss argues. The present refusal of capital owners to share their economic and organisational power, and their insistence on the political legitimacy of the present laws that guarantee their proprietorial absolutism on the basis of majority rule alone, is neither morally justified nor strategically advisable. The proprietorial power of big capital is not comparable to the proprietorial rights of farmers and artisans. The latter are resources to underpin these groups’ autonomy; but the former are means to deny that very same right of self-management (självstyrelse) to working collectivities, and to the working class as a whole to influence the economic factors on which its livelihood depends. Should big capital insist, against better democratic principle, on this winner-take-all view of the present institution of private property, it could find itself hoist with its own petard. Once a working class majority emerged in parliament it could use the same winner-take-all argument to abolish the proprietorial rights of capitalists altogether. Capital owners’ attempts to fall back on minority rights could then be dismissed as hypocritical; a dictatorship of the proletariat could logically be founded on their own political arguments. Neither insurrectionary politics nor the socio-economic rule of capital had any legitimate place in a modern democratic state. Wigforss thus saw the constitution of the democratic state as intimately connected with forms of association in economy and society, and the latter were in their turn moulded by their location in a democratic state. Retrieval of this critical insight, which in fact has roots in classical conceptions of ‘political society’, can go a long way to remedy the political directionlessness of much of what passes for radical thought today, as we shall see in later chapters. For Wigforss, democracy in any defensible sense depended not only on constitutional reform, but also on drastic redistribution of cultural opportunities and access to means of mass information and persuasion, and the empowerment of functional economic groups in those sites and around those issues that affected their security and livelihood. Only in this way could the ‘anomalous’ co-existence of universal suffrage and concentrated capitalist economic power be resolved, and a dangerously absolutist view of the prerogatives of the state be superseded.

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Action programme: the birth of socialist policy formation

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Shifting the issue of economic and industrial democracy to centre stage in this way sharpened Wigforss’s critique of the party leadership. The democratic project called for an action programme to concretise demands for the democratisation of economic and industrial life, a need for organisational creativity that the old democratic socialism’s development theory denied. As Wigforss reflects back on the issues facing social democracy at the time of the suffrage reform he writes: As long as one insisted that the forms of socialist economy matured in final form, as it were, in capitalism’s own womb, there did not seem to be any room for choice. If concentration into one or a few giant enterprises in a particular branch of industry is the final capitalist form, the small operation of substituting the owner was quite unproblematic. ‘The tiny minority of capitalist magnates’ could hardly be replaced by anything other than the people through the organ known as the state. But if one did not want to wait for maturation in this extreme sense, if people within reason could mould the economic preconditions for their associational life, if after going through the marxist rigmarole one again poses the question with a pinch of utopianism, what then? […] If one had some choice between different kinds of economic organisation, the next question was why one should choose the one and not the other. Organisational forms become means. Socialisation itself is perhaps only a means. In the final analysis it was human values that should be realised, forms of association that we had come to see as worth struggling for. The issue of the action programme rested on a much broader basis. We had to go back to the human demands for equality and freedom, for fraternity and solidarity, for welfare and security and autonomy, which in varying combinations had been advanced as part of the critique of bourgeois capitalism and as argument for the future socialist society. What it should look like, and how the action programme should be framed, could not avoid being moulded by what weight one gave the various demands in the balance.6

The party had to demote its development theory, and above all shake off its thraldom to the maturation thesis that this theory implied, if it was to develop a galvanising action programme ‘which could mobilise the imagination and feelings, while at the same time sticking to concrete and demonstrably sensible goals.’7 6 7

EWSU VIII, pp. 110–111. Our emphases. EWSU VIII, p. 113.

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The corollary of abandoning the maturation thesis was the abandonment as well of two key interwoven assumptions of the old democratic socialism (and of social liberalism): first, that capitalism has a progressive destiny as yet not fully realised; and second, that essentially unreconstructed capitalism – whatever its distributive and other moral weaknesses – remains the rationally optimal basis of modern production. Wigforss, as we shall see, was quick to realise the programmatic implications of this: industrial and economic democracy, as deviations from capitalist organisation, were not in themselves relatively inefficient nor part of an inevitable trade-off between democracy and efficiency. On the contrary, once the mind was cleared of marxist development assumptions and their replication in mainstream economic theory, the way was clear to raise efficiency arguments (as well as moral ones) for democratic forms of economic organisation. Wigforss constantly problematised the productive efficiency of capitalist enterprise in the 1920s, and he would broaden this attack on the allocative efficiency of unregulated macro-economic market mechanisms in the 1930s. Contesting the economic rationality of capitalism (and necessarily of economic liberalism) was destined to become a leitmotiv of the new democratic socialism. In particular, efficiency arguments against capitalism would become the heavy artillery it would deploy against economic liberalism from the thirties. In 1919 Wigforss drafted an action programme for the Gothenburg branch of the SAP as its contribution to the development of a new party programme at the 1920 party congress. The lines of a new approach to public economic management were already starting to emerge. The first section calls among other things for recognition of the right of all to work and to do so for wages appropriate to the occupation, and for the responsibility of society to uphold it. Section V requires a comprehensive inquiry into unsatisfactory advances in industrial productivity, and state intervention (including socialisation in appropriate cases) where this problem is found to stem from ‘monopoly or uneconomic organisation,’8 a phrase that is repeated in the programme and, with close synonyms, would become part of the working vocabulary of the new democratic socialism. As we

8

Quoted in EWSU VIII, p. 124.

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explain later, these are conundrums that have also preoccupied heterodox strands of economic analysis since the 1920s and 1930s. In the Gothenburg programme Wigforss envisages the state taking on a supervisory and co-ordinating role in the manufacturing sector in particular, with affected groups of workers and the union movement wielding influence wherever it is to intervene. Society must demand that the present owners and leaders organise production, that they combine, eliminate wasteful competition, specialise and standardise production and optimally exploit all technical possibilities. […] But this whole organisational question demands above all the workers’ active participation. Changes in production on the scale contemplated implies in turn major changes in the lives of large groups of workers, such as relocation from one place to another, from one job to another etc. These changes can be implemented harmoniously only if the workers and their organisations take a leading role in the remoulding task. Here we come to one of social democracy’s biggest and most important tasks of all, namely to make the worker actively interested in the development of production. We must avoid the danger that industrial workers will continue to feel shut out of this process and see work in the socialised industries and in those industries that will increasingly come into social ownership in the same way as they see work in today’s private capitalist firms. The goal for a democratic society must be instead to make the industrial workforce the bearer and leader of production. What must be demanded immediately in this regard is that workers and their representatives, through workers’ councils (arbetarråd) from the workshop up to the industrial unions, gain greater insight and growing influence over the technical and economic management of the enterprises.9

Although this draft was completely ignored by the party leadership when it prepared the new party programme for the 1920 congress, it represented a political thrust that Wigforss would not be deterred from, one that presaged a quite revolutionary change in the party’s potential for policymaking and mobilisation.

9

Quoted in EWSU VIII, p. 126. Emphases in the original.

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The efficiency problem in capitalist industry In a moment we will outline the contemporary intellectual influences on Wigforss as he developed this policy line. Before doing so, some brief theoretical pointers to the problemisation of industrial efficiency may illuminate the politics of contesting capitalism’s economic efficiency. Economic liberalism – and above all its attendant intellectual tradition, neo-classical economic theory – simply assume what they centrally assert, namely that unregulated markets and unfettered proprietorial and managerial prerogatives lead to the optimal satisfaction of human wants (given scarce resources) by allocating those resources in the best possible proportions. With today’s politics so dominated by economic liberalism, these assumptions appear as simple synonyms: ‘efficiency’ is taken to mean deregulation and privatisation as policy desiderata, commonly rendered as ‘reform’, and maximum power to management in the enterprise. Behind these key assumptions are still further assumptions about the absolute moral priority of maximising profits (which is assumed to be the same thing as maximising production, trade, commerce and ‘welfare’) and the purely individualised nature of satisfactions. But neo-classical theory – despite its formidable entrenchment in academic and journalistic economics and jealous claims to monopoly status – is just one of several discourses available to the analysis of economic processes. Because of its foundational assumptions and metaphysics, it is the one least likely to assist in the direct analysis of industrial efficiency. It does, however, arguably enjoy the more modest utility of providing a stalking horse for alternative approaches. Other traditions have produced two focuses on industrial efficiency – a broad societal one, and one more narrowly centred on the technological and organisational questions of manufacturing as a specific form of economic activity. As Michael Freeden’s excellent work on the ‘new liberals’ in Britain from the 1870s10 indicates, they generated the first of these focuses. They and their post-first world war successors were to exercise a major influence on Wigforss in the 1920s. They were the heirs of John Stuart Mill and as such questioned the earlier utilitarian assumption that 10

Freeden 1978. See also Greenleaf 1983, vol. 2.

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the sum of individual satisfactions should serve as the basis of calculating economic efficiency, and proposed instead that social utility constitute at least part of the rationale of an efficient pattern of industrialisation. They rejected outright the productivist measure of efficiency as maximum output irrespective of its social usefulness, social cost, and distribution. Pursuit of this measure led to the syndrome they observed in late nineteenth century Britain – ‘waste, war, and unemployment.’ Waste in particular was one of their major preoccupations and typified lower organisms: ‘the history of progress is the record of a gradual diminution of waste,’ as Ritchie put it.11 Waste in this broad sense led to unemployment, urban decay and other manifestations of the ‘social problem.’ In other words, efficient industrialisation, according to these new liberals, met social needs and aspirations, and provided for the welfare of communities, including in urban development, environmental conservation, and in social infrastructure to further education and community health and wellbeing. Social equity in the spread of high standards of living, housing and education were for them part and parcel of a properly functioning industrial society. In philosophical terms, they rejected the utilitarian idea that maximal gratification of basic appetites, and individual self-interested calculation based on it, defined the limits of human moral development. They saw industry as meeting other aspirations – for instance, for worklife that was actually life-enhancing and as free from risk, drudgery and monotony as possible. The worker had a citizenship claim to pursue on the shopfloor beyond those claims specific to the realm of national affairs. The new liberals thus invented the notion of industrial democracy that became current in Europe and America after the first world war. They overlapped happily with various strands of socialism, not least with the fabians with whom they united to develop state interventionist policies to promote socially and morally efficient industry. Together they approached the state as a vehicle of purposive human action that was not stuck in the rigid and timeless agenda of the nightwatchman role. One of its tasks was to oversee a socially efficient industrial development instead of one exclusively focused on abstract maximal output in the interests of national dominance. 11

Quoted in Freeden 1978, p. 132. Emphasis in the original.

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In short, one can extrapolate from the new liberals’ work a multifaceted concept of an efficient industrial development, one that problematised the composition and utility of output, the processes and relationships involved in its production, its social and environmental costs and benefits, and its social distribution. A number of them continued to write after the first world war when – at least during the 1920s – a new phase in British collectivist liberalism was ushered in, one that took up more industry-level organisational issues. Of these writers several, including J A Hobson, L T Hobhouse and Bertrand Russell would find an especially attentive student in Ernst Wigforss, as we shall see. In the 1920s British collectivist liberalism to an extent became part of a wider and more variegated approach to the technological and organisational issues specific to manufacturing. These issues are neglected by neoclassical economics, which is exclusively concerned with a pre-industrial problematic of allocative efficiency, not with what happens to ‘factors of production’ once they are ‘allocated’. The doctrine simply assumes that whatever happens ‘inside the black box’12 of the production process – so long as proprietorial prerogatives (and their subset, exclusive managerial control) are intact – will be ‘optimal.’ But problems of manufacturing decline and of starkly differential national industrial performances, especially as measured by comparative success in competition for markets in manufactures, have led many researchers from other intellectual traditions to analyse the technological and organisational factors that contribute to efficient production on more enterprise- and industry-specific criteria. The latter include the development of market shares in core products over time, and competition measured on the basis of both price and non-price factors (reliability, after-sales service and parts, customisation and so forth). In meeting these criteria, enterprises have to negotiate complex processes to do with technological innovation and diffusion, and constant mismatches of enduring industrial capacity to fluctuations in demand and output – to say nothing of industry’s dependence on often myopic or recalcitrant sources of investment funds.

12

The expression comes from Nathan Rosenberg’s (1982) highly relevant book of the same name.

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These inquiries have usually had a policy focus, but predictably the policy they seek to inform and promote – industry policy – is one that can make no sense in the neo-classical scheme of things. And since this policy relies on selective interventions, it is anathema to the economics profession and other economic liberals, since it flies in the face of unregulated market allocation of resources and unqualified managerial prerogatives. Industry policy proposals typically also collide with mainstream neo-classical theory: formally rational calculation based on purely financial criteria that governs private enterprise – proponents of industry policy suggest – often play a mischievous role in the management of manufacturing industry. The rationale for industry policy has been characterised elsewhere,13 and the present context justifies only a brief outline. The best starting point is Max Weber’s discussion of the growing contradiction between formal and substantive rationality in his Economy and society. Formal rationality orients economic activity and decisions to strictly monetary forms of calculation – in recent decades represented above all by short-term return-on-investment calculations. With the development of more and more refined accounting conventions for the assessment of investment projects, the latter have to meet formal profitability criteria that are short-term, uni-dimensional and assume the absolute priority of short-term profitability. With the increasing dominance of financial institutions and the buying and selling of manufacturing firms purely as speculative financial assets rather than as ongoing enterprises, formal rationality in the form of universally applied accounting conventions orient economic action more and more. This process tends to displace a substantive rationality based on elective goals (say, long-term maintenance and expansion of market shares for the enterprise’s core products, maintaining an advantage over competitors in both process and product technology, and gaining ground over time by developing higher quality or more customisable products) and pragmatic choice of means to serve those goals. From Thorstein Veblen’s classic The engineers and the pricing system of 1921 to present day discussions of manufacturing decline and its cures, 13

Higgins & Clegg 1988; Ewer et al. 1987, ch. 4; and, for a broader perspective, Reinert 2007, ch. 3.

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writers on industry policy have thus pointed to the inappropriateness of forms of calculation under a variety of institutional and national constraints as the reason for poor national industrial performance14. Many (if not all) of these problems of enterprise calculation come back to displacement of substantive rationality by formal rationality. Industry policy is fundamentally a re-assertion of substantive rationality by directly investigating and marshalling those multidimensional technological, organisational and financial factors that in fact contribute to sustainable manufacturing success. It is not a form of central planning and does not shift the responsibility for manufacturing strategy from the enterprise. Instead it requires public authorities to take responsibility for the manufacturing sector’s performance as a whole by creating conditions in which enterprises can form and pursue substantively rational manufacturing strategies. The political problem that this endeavour poses arises from the fact, keenly appreciated by Weber, that formal rationality derives from the way capitalist interests are socially constituted. Formal rationality, as embodied both in accounting conventions and in neo-classical economics, expresses precisely these interests. If the distortions of formal rationality are to be overcome, some other social or political interest has to constitute itself as the bearer of substantive rationality in the management of the national manufacturing effort and as the champion of its efficiency – a point we have already seen Wigforss anticipate in the Gothenburg programme. In essence there are only two contenders for this role. In Japan and the smaller ‘Asian tigers’ (South Korea, Taiwan and Singapore), a highly technocratic developmental state pursuing national dominance through industry policy, typically in labour-repressive forms and in the absence of democratic traditions, emerged under anti-orthodox auspices. The second is a labour movement in search of an efficient industrial sector for reasons – and on criteria – first enunciated by the British new liberals as outlined above. This is the interest that the new democratic socialism in Sweden crystallised, starting with the Gothenburg programme.

14

As Geoffrey Hodgson has pointed out, Veblen himself failed to pursue the apparent dichotomy; but the available avenues of industry policy development seem to be as we propose in the remainder of this chapter (see Hodgson 2004, chs 10 & 11).

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Intellectual influences on Wigforss in the 1920s One of the services Wigforss rendered the social democratic labour movement as a whole in the 1920s was as a conduit for foreign inspirations, mostly from the English-speaking world. Once again his linguistic abilities, voracious reading habits and tireless publicist activity – in both speaking and writing engagements – qualified him for the role. The main influences he mediated, in ascending order of significance, were the international ‘rationalisation movement’ (which also established a robust presence in Sweden itself ),15 English guild socialism and Anglo-American collectivist liberalism. If there were a canonical literature of the new democratic socialism, a large part of it would be taken up with Wigforss’s reflection on – and reviews and reworkings of – these intertwined currents. In essence he rummaged in all three for evidence of capitalism’s illegitimacy as the basis for continued industrialisation and for pointers to immediate institutional reforms that harnessed democratic organising principles in particular to the pursuit of economic efficiency. The rationalisation movement was a loose international network of progressive industrialists, production engineers, industrial psychologists and other functionaries who pursued technical efficiencies in large-scale, technologically advanced industries. Purely empirical studies of technical and organisational effectiveness at the enterprise level undertaken under the movement’s auspices revealed astonishing levels of waste of materials and labour time. A case in point is a series of such studies edited by Herbert Hoover called precisely Waste in industry. Veblen’s text mentioned above illustrates an incipient theme in the movement, the tension between accounting principles and technical-organisational ones in the long-term development of large-scale industry. The rationalisation movement by degrees attracted some interest from union leaderships, and for some union movements, like the Swedish one, it led to modest experiments in improving productivity through technological and organisational renewal in co-operation with management. These experiments, and early union interest in production policy in general, 15

See de Geer 1978.

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drew criticism from traditionalists within the movements concerned. The unions’ function, the traditionalists claimed, was limited to waging the struggle against capital on distributional issues, working conditions and job security. Advocates of union production policy rebutted this exclusive focus with the argument that only efficient and competitive industries could lay the basis for the successful pursuit of these traditional union goals. Production policy, they argued, must then be seen as a necessary part of union struggle, and in fact carried the socialist implication that capitalist management – left to its own devices and without the co-operation of organised labour – could not foster industrial efficiency. Like the other participants in the rationalisation movement, union activists lacked the faith in capitalist efficiency that their marxist mentors might (ironically) have encouraged. This attempt to find other organisational bases for economic efficiency thematically linked the rationalisation movement to the guild socialism movement in England (mainly in London and Manchester) in the years immediately following the first world war. Strongly supported and financed by local councils, building unions in effect became entrepreneurs in the planned expansion of housing stock. Their aim was to demonstrate a higher efficiency than capitalist enterprise, and to demonstrate that the way to greater efficiency lay precisely in the democratic empowerment of organised labour at the local level. LO showed strong interest in this British development and sent a delegation of five (which included Ernst Wigforss as the only non-unionist) in 1921 to study it. The movement was fairly short-lived, mainly because (like nearly all but the largest-scale producer co-operatives) it lacked adequate sources of external capital. Just how this model could be applied in more technology-intensive industry was also unclear. Nonetheless, it was a concrete model of industrial democracy which enunciated the aspiration to outcompete traditional authoritarian capitalist enterprise, and a clear alternative to notions of socialist economy as centralised state-owned enterprise.16

16

Wigforss himself made these points in his ‘A visit to English building guilds’ (EWSU II, pp. 28–57). See also his ‘Guild socialism,’ ‘The English “Building Parliament”’ and ‘The English building guilds’ – EWSU II, pp. 92–96, 102–106 & 107–112.

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Before his entry into parliament, Wigforss was well acquainted with progressive and radical social thought in Britain (including the new liberals), and to some extent in the United States as a subscriber to The New Republic. He (like Lenin!) developed an underconsumptionist understanding of unemployment partly under the influence of Hobson who, after the war, assumed the socialist mantle and joined the Labour Party – a symbol of the continuing cross-fertilisation between socialist and collectivist-liberal currents in Britain. Wigforss had also imbibed ideas from Hobhouse and from the Cambridge (and Bloomsbury) luminaries Lowes Dickenson, Keynes, Russell, Strachey and Woolf. He would remain a regular reader of The Nation and The New Statesman, and it is not surprising that he came to follow closely the further development of this intellectual tradition as it partially coalesced around the Liberal Summer School (LSS) from its inception in 1921, ironically under the auspices of the Manchester Liberal Federation. The latter had, however, become a centre of innovative thought on industrial democracy and modernisation, and already in 1922 Wigforss was reviewing Ramsay Muir’s Liberalism and industry (published by the Federation) in the pages of LO’s new journal, Fackföreningsrörelsen.17 Muir’s book emphasised the importance of experimenting in forms of industrial democracy to enhance worklife and the performance of industry, and Wigforss used it in Sweden to stimulate union interest in the organisational reforms it proposed. In its first few years the LSS had only a loose connection with the British Liberal Party, as Freeden’s study of this later phase of British collectivist liberalism shows.18 And its independence was not seriously compromised by its becoming the unofficial think-tank for that party from the mid-twenties. This change in fact bolstered its research resources. Only from around 1930 did its ties to the party, which was now in steep decline, dampen its creativity. Around this time Wigforss’s interest in it appears to have ceased. During the twenties its members included prominent Cambridge economists – dissidents within their profession – Keynes, Walter Layton and D H Robertson, and progressive industrialists and their advis-

17 18

Fackföreningsrörelsen vol. 1, pp. 156–157. Freeden 1986.

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ers like Ramsay Muir, E D Simon and Sir John Simon. A list of those who made occasional contributions to its life includes G D H Cole, R H Tawney, Eleanor Rathbone, J A Hobson and Harold Laski. By the mid-twenties the School’s annual conference was attracting around 900 participants.19 The British collectivist liberals’ open and experimental approach to generating organisational and policy responses to their country’s industrial decline exercised a formative influence on Wigforss’s politics and modus operandi in policy formation. By looking at the empirical malfunctions of British industry without presuppositions, and in proposing technically rational solutions to them, they pointedly overrode the nostrums of the liberal mainstream and neo-classical orthodoxy in particular. In presenting programmatic solutions of this alien kind the collectivist liberals developed the raw materials at least for a contestation of capitalism’s and economic liberalism’s productive rationality. Marxists held to an ultimate, abstract critique of capitalist rationality and postulated its eventual transcendence, but they had signally failed to translate their critique into concrete policy alternatives and political mobilisation around them. By contrast, collectivist liberal policy proposals in the twenties constantly challenged what they presented as unregulated, wasteful competition, private enterprise’s mismanagement of society’s productive resources and industrial base, the sectional orientation of owners and managers, the exclusion of labour from the management of industry, and the inequitable distribution of its product. In particular, the LSS radically redefined the role and tasks of economic management. As The Nation put it, a central principle should be that ‘an industry is not the property of an employer, but a form of national service undertaken by a body of persons, all of whom have a recognised and conscious share in its control.’ If this principle were to be institutionalised, Herbert Samuel had written in 1917, ‘the workman would become a citizen of the workshop as well as of the State.’ 20 ‘Industrial self-government’ was common coinage in these circles, and we have already seen an anticipation of it in the Gothenburg programme. In declaring political democ-

19 20

Freeden 1986, ch. 4. Quoted in Freeden 1986: 56.

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racy ‘impossible’ without industrial democracy, Hobson21 announced a theme close to Wigforss’s heart and one that would go to the core of the new democratic socialism in Sweden. The LSS’s so-called Yellow Book of 1928, Britain’s industrial future,22 represents British collectivist liberalism’s greatest interwar achievement. With its by-products – the 1929 liberal election manifestos We can conquer unemployment and Can Lloyd George do it? – it would be most enthusiastically reviewed by Wigforss, who in a 1958 interview identified them as the main inspiration behind the crisis programmes he would draft for the SAP in the early 1930s.23 The Yellow Book’s influence is thus clear in the onslaught the Swedish social democrats would launch against economic liberalism in the early 1930s. The book, which bears Keynes’s and Lloyd George’s signatures among others, sharply raises issues of economic rationality. Freeden correctly asserts the book’s character as a political tract24 (its own denial notwithstanding), and its politics of contesting the rationality of conventional capitalist steering mechanisms is sharply outlined. It advocates the virtual socialisation of the investment function under a Board of National Investment, an ‘economic general staff,’ and an overarching programme of selective interventions to restore the viability of British industry. It throws down the gauntlet to Labour and Tory bipartisan adherence to economic liberal policy. Historically, the Yellow Book foreshadows the more advanced industry policy regimes of the late twentieth century. In spite of the strictures it places on industrial democracy, the Yellow Book thematically integrates the problems of efficiency, social equity, and 21 22 23

24

Quoted in Freeden 1986, pp. 64–65. Liberal industrial inquiry (Layton et al. 1928); see also Moggridge 1992, ch. 18. Wigforss 1928 is his enthusiastic review article on the Yellow Book in Tiden. Shorter notices in a similar vein on the British Liberal Party’s 1929 election manifestos appeared in the same journal (no. 4 of 1929 pp. 255–256 and no. 5 of the same year pp. 313–314). Wigforss also presented themes from the Yellow Book among other places in Arbetet 4.3.28, 14.3.28, 10.4.28 and 27.4.28. The interview in question was conducted by Landgren (1960, p. 20) in 1958. The Keynes pamphlets (the second was co-written with Hubert Henderson) are published as ‘A programme of expansion’ in Essays in persuasion (1931, pp. 118–134) and as ‘Can Lloyd George do it?’ with Hubert Henderson (1928) in The collected writings of John Maynard Keynes (vol. XIX, part II), 1982, pp. 761–838. Freeden 1986, pp. 106–107.

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worker participation in management. It adopts Tennyson’s phrase ‘liberal discontents’ to describe five legitimate and progressive complaints of labour covering inadequate wages, job insecurity, subordination to arbitrary managerial power, lack of access to information about the enterprise’s affairs, and the inequitable distribution of the fruits of industry.25 To find satisfaction for these discontents is to remedy many of the ills of industry at the same time: equity and efficiency are co-dependent goals, in contrast to their irreconcilability in orthodox theory. Some of these problems can be addressed through a reconstitution of the joint stock company, one that to some extent prefigures Wigforss’s writings on this subject in the fifties and sixties. The Yellow Book espouses cartels and monopolies under state tutelage as an antidote to wasteful competition, and the emergence of a technically rational management not beholden to shareholders’ interests.26 But Freeden also observes the ultimate failure of the Yellow Book – symptomatic of a general problem in collectivist liberalism – to resolve the tension between individualism and collectivism. However salient the role of the state in its concrete proposals, the book ultimately relegates the ‘community to the role of regulator and co-ordinator of the actions of individuals,’ and the ‘essentially social nature of the individual and the distinct needs of the community’ in the earlier new liberalism had by now disappeared.27 This tension found expression in a growing division between emerging left and centrist wings of the LSS. The division later ended with Labour’s absorption of the liberal left, and the centrists crystallising a qualitatively weaker version of collectivist liberalism in the social liberal orthodoxy based on the later writings of Keynes and Beveridge.28 Significantly for their relevance to Wigforss’s politics, the collectivist liberals’ cohesion broke down on the question of the sanctity or otherwise of private property as the basis of allocating what were essentially society’s productive resources. Wigforss and the British liberal left held no brief for 25 26 27 28

Liberal industrial inquiry 1928, pp. 147–150. Liberal industrial inquiry 1928, Book 2, esp. pp. 99–100. Freeden 1986, p. 108. See Cutler et al. 1986 for a strong conceptual characterisation of British social liberalism (sub. nom. ‘liberal collectivism’) despite its neglect of the doctrine’s antecedents discussed here. We will need to revisit the complexities involved in this depiction in later chapters.

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private enterprise and shared the project summed up by Bertrand Russell as ‘combining liberty and personal initiative with organisation.’29 The growing scale, salience and integration of economic organisations in mature industrial capitalism brought the problem of their subservience to private interests and forms of calculation to a head. The lockean heritage of hallowed, pre-social property rights had to give way to an approach to property as a social institution, as a mechanism of social organisation. ‘If property is the economic basis of freedom and self-dependence,’ Hobhouse writes, ‘the possession of some property is desirable for individuals, and for any corporate body that has to direct its own affairs.’30 This would be the rationale behind Wigforss’s proposal for collective capital formation in the fifties and sixties: what is sauce for the individual goose is also sauce for the collective gander. As against the collectivist liberal left’s attempts to rework proprietorial interests in the face of new political demands and the greater scale of economic organisation, the centrists would eventually relapse into a classical liberal conception of property as the support for atomistic individualism and the presumed optimising alchemy of unregulated markets – an organisationless retrospect. Apart from this important issue of property, British collectivist liberalism posed another question for Wigforss: how to gain power to put reform proposals into effect. As the Labour Party became the major opposition to the Tories after the first world war, collectivist liberals pinned their hopes on their declining party gaining mass support by mobilising around universalistic ethical commitments, as against the ‘sectionalism’ of their rivals. Traditional liberal suspicion of unionism and Labour’s own uncritical attachment to economic liberal orthodoxy in economic policy in the twenties ruled out political alliance with the official labour movement. But the collectivist liberals’ brave refusal of a ‘sectional’ base rested on a naive rationalism and statism. Just as fine arguments alone were supposed to deliver the votes, ‘Social reform was first and foremost a question of putting items on the Statute-book,’ as Freeden summarises their political 29 30

Russell 1916, p. 71. Hobhouse 1922, p. 155. Our emphasis. He had made the same point at the turn of the century: ‘Every defence of the principle of private property is likewise a plea for social property.’ Quoted in Freeden 1986, p. 262.

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assumptions.31 For them organised labour as such was neither a constituency nor a bearer of the new economic rationality. These assumptions separated them from Wigforss as much as their unfortunate location around a party that historical happenstance would soon doom to eight decades of electoral insignificance. Contrary to the conventional history-writing of Swedish social democracy, as we shall see, by the end of the twenties Wigforss had taken from the British collectivist liberals all the ideas that would find a place in his political thought and that would find application in the statecraft of the new democratic socialism. Here the enthusiastic reviews cease. He would never be the conduit for keynesian social liberalism that his soft-focus profile of later fabrication would suggest.32

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‘Socialism as working hypothesis’ Wigforss himself made the link between equity and efficiency in a book on socialist theory he began writing in 1919 but laid aside before it was finished. A section of it, published much later (1971) under the title ‘Not by bread alone’33 indicates that he was focusing on the relationship between equity, democracy and efficiency in economic life by the time he entered parliament. Capitalism’s economic inefficiency and its social inequity mutually condition each other, he argues. A highly skewed distribution of income drove actual output well below the technically possible by reducing spending power and thereby demand – a hobsonian underconsumptionist argument. ‘Economic disorganisation’ thus reduces national wealth, ‘but only the socialists treated the problem on its own terms, while their opponents see only the businessman-entrepreneur with his demand for profit and unrestricted freedom.’34 In his work on indus31 32 33 34

Freeden 1986, p. 285. Landgren 1960 provides the authoritative confirmation of this point, and explicit refutation of the conventional tingstenian account. Reprinted in EWSU VII, pp. 7–91. EWSU III, p. 44.

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trial democracy a little later he would strengthen the link between inequity and inefficiency, but even at this point his rebellion from the maturation thesis stands out. His call for the immediate reform of the productive apparatus potentially shifted the whole thrust of social democratic politics away from an exclusive focus on distributional issues and ameliorative reforms, to encompass production issues and transformative reforms. Despite his intensifying criticism of the old party leadership, Wigforss’s intellectual grasp of issues in daily politics made it difficult for Branting, who formed his first ministry in 1920, to pass him over in policy committee work. Wigforss thus joined an inquiry set up in that year into industrial democracy, and some time later became its chairperson. He was intensively engaged on this issue until he delivered the final report in 1923, and his pioneering work around it is commonly acknowledged as the doctrinal basis for the worklife reforms in Sweden in the 1970s. It gave him the opportunity to elaborate the relationship between equity, democracy and efficiency. In 1920 he published a small brochure, Industrial democracy, when the enquiry began. Though it ostensibly deals only with democratising socialised industries, its rationale deals more with the need to transform capitalist industry. Right from the first page, he presents industrial democracy as going to the heart of the socialist project: ‘To gain freedom, autonomy and responsibility for everyone who works in industry is a socialist goal. It can only be qualified by other tasks and other interests which, from the socialist viewpoint, must be acknowledged.’35 He soon warms to the theme of capitalist inefficiency, and now sees its roots in an irrational motivational structure, forms of calculation and the exclusion of the expertise and enthusiasm of the great majority who work in industry. His target is clearly economic liberalism. If the prospect of gaining limitless wealth is such a necessary incentive for production, existing society has alienated that incentive in the case of both the rich heir, who no longer wants for anything, and the great mass of the poor, who have no hope of wealth. Moreover both wealth and poverty cause in their own ways the worst waste of society’s productive resources. That opulence and extravagance increase poverty

35

EWSU II, p. 7. Emphasis in the original.

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and misery by steering production into useless areas and by diverting a lot of labour from productive callings are old truths […]. But the shrinking of society’s ability to produce caused by mass poverty must be even more significant. The greatest economic resource a people owns is in the last resort its labour power, and when poverty stops the great majority from getting the best possible education for its economic activity, that is macro-economic waste for which the socialist has every right to hold existing society accountable. However, labour power (even as presently constituted) is further squandered in enormous quantities under competitive pressures and in the relative planlessness of [existing] productive organisation. Factories and machinery get built that are only partially utilised. A disproportionate amount of the existing manpower gets diverted to just selling the output. That is often the big problem, not production itself. Labour and capital are frittered away on poor raw materials and the cheapest ‘luxury’ items instead of producing durable quality goods. Often natural resources on which future welfare depends are wilfully squandered. Yet the root of all this obviously lies in the fact that our existing society places the whole leadership of economic life in the hands of mutually competing individual entrepreneurs whose only goal is to grab the biggest profit possible for themselves. It is against this anarchy in production that the socialist counterposes the idea of a conscious organisation of economic life, where society itself takes leadership and directs all production towards its actual task – the satisfaction of human needs.36

As we shall see, this microeconomic argument translated well into macroeconomic ‘disorganisation’ as well. Later in the brochure, Wigforss broadens the themes to take in the now anachronistic argument about property being the only possible basis of freedom and self-determination. Having accepted that this may have been so in a past era of small production units, he continues: For the worker, large scale industry has put an end to that dream of becoming an independent entrepreneur. The 100 workers in a factory cannot individually become the owner of the factory. But can’t they do so together? We have the idea of industrial democracy right here.

He thematically ties the ownership and control question in industry to the spread of democratic political reforms in Europe since the war’s end: But why should the democratic order be limited to political life, why should it come to a halt before it reaches industry and its hereditary leadership when it did not 36

EWSU II, pp. 11–12. Emphasis in the original.

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come to a halt at royal power and the hereditary aristocracy – that is something very hard to explain to the worker. He knows that the power of the prince was once just as unlimited as the private employer’s before any union had begun to undermine the patriarchal system. He knows that popular representation has step by step pushed princely power aside by taking over successive tasks that the prince once performed. He must wonder if the private entrepreneur’s and the private owners’ tasks are so remarkable that workers and employees in the enterprises could not learn to fulfil them.37

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The democratic revolution and the industrial revolution were now brought into a specific relationship with one another. ‘The worker no longer wants to be just a vassal (undersåte) in industry […] since he is no longer a vassal in the life of the state – he is a citizen instead.’38 These ideas played a powerful part in Wigforss’s agitation. In his own memoirs, Tage Erlander recalls from his student years in Lund his first encounter with it: The first time I heard Wigforss was some time in 1923. He talked about industrial democracy. We went to the meeting out of a sense of duty. Without interest. It seemed like a boring topic which had nothing to do with us academics. But as nearly always when you listen to Wigforss, things happen. He unravelled a thread which we could not resist following. His speech was very simple. This is roughly what he said: There has to be something wrong with a system which prevents a mass of talented, bright people from engaging in a constructive endeavour at their workplace and which forces them to find outlets for their creative imagination in their free time only. Wigforss described a shopfloor worker who has no right to comment on the shopfloor. He isn’t given a say in how his work is to be performed. He earns his living, but others think for him. Others give orders about how he will work and what he will do. But when the working day is over this worker goes to the municipal chambers. There he takes the chair of the Council Finance Committee, listens to speeches on major issues, decides on the acquisition of land worth tens of millions, takes decisions on large public projects. He makes up his mind on very complicated questions, ones that affect his city’s citizens now and in decades to come. And Wigforss put the question again: ‘Is this a reasonable system?’39

37 38 39

EWSU II, p. 17. EWSU II, p. 23. Erlander 1972a, pp. 100–101.

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The promotion of industrial democracy was part of a wider modus operandi Wigforss picked up from the British collectivist liberals. ‘All social change is social experiment’40 announces a heading in his important 1925 essay, ‘Socialism – dogma or working hypothesis?’ – a polemic against both those who saw the forms of socialist organisation as pre-ordained and those who pursued totalised, blueprint utopias of socialist society. For him the ‘working hypothesis’ of all desirable intervention is socialist in the sense that it seeks to replace undemocratic and poorly performing organs of capitalism with rational arrangements tailored to the predicament in question – solutions that are collectivist and democratic in nature and cumulative in their effect. Socialist transition boils down to this voluntarist and piecemeal re-organisation on democratic principles, as the demand for industrial democracy exemplified. In the essay Wigforss relates this experimental style of reform to a highly specific notion of the utopian moment in socialist politics. For reasons that the inertia of the old democratic socialism had demonstrated in the years before this essay was penned, a utopian vision of a very different kind was essential to mobilise mass support and enthusiasm for the socialist project and for effective social democratic government. The leadership’s utopia was both unattractive and indefinitely postponed – an ‘inactive utopia’ in Bauman’s term.41 In its pre-ordained character it left no room for creativity. For Wigforss a galvanising utopia has to be ‘provisional’ – to anticipate his much later answer to Karl Popper’s critique of utopianism per se.42 A provisional utopia has to illuminate and seek support for an immediate solution to a pressing felt predicament in the here and now. The solution has to crystallise and exhibit the fundamental moral values that motivate it. Once the solution is in place a new provisional utopia can arise out of the policy solution to the next most pressing problem. Socialism itself, then, is not some final, completed terminus, but a dynamic movement in which fundamental evaluations gradually unfold and find firmer and more accentuated expression in conscious social reconstruction. 40 41 42

EWSU I, p. 182. Bauman 1976. ‘On provisional utopias’ (1958) EWSU I, pp. 274–313.

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Wigforss makes this point right at the end of his 1925 essay, under the voluntarist heading ‘We make our contribution now:’ Failures and miscalculations are unavoidable. They are part of the experimental nature of social reconstruction. But one more point should be added. It would be a pointless play on words if we began to use the term ‘working hypothesis’ but still tried to preserve the rigid nature of ideas, principles and social ideals. There is no paradise at the dawn of human history and there is none at its end. We are not here to prepare for a society to come in so many decades or centuries from now, one in which people will at last be happy. Every future eventually becomes a now, and it can’t have any value either if the present we inhabit seems worthless. Each generation has to solve its own problems, and other powers than we ourselves will determine how things develop after us. That doesn’t mean we should sacrifice the interests of the future for our own convenience. It means simply that we understand our own limitations and direct our efforts where they can be useful. We exercise our real influence on the future by changing the reality that confronts us now. We dig double the number of trenches we need right now for our successors’ sake. We broaden the foundations and lay more bricks on the wall so that our successors can build their society higher and wider. Our concept of the future thus won’t become one of those ideals that demoralise us because it seems impossible to realise. That divide us into those absorbed in immediate small and trivial purposes on the one hand, and dreamers about the future on the other. It won’t ever be the idea of a terminus which we can only approach little by little and in endless struggle. Instead it will be a guiding star to set our course by, a means for finding the best way forward from today’s difficulties. But it also establishes us as part of humanity’s wider context, it imbues our daily efforts with a deeper content and our lives with a richer significance.43

As we shall see towards the end of this study, Wigforss’s concept of utopia has striking affinities with today’s radical thought, not least that emanating from political economy. When the road into industry democracy and other micro reforms appeared temporarily blocked, as we shall see below, Wigforss would apply the same modus operandi of social experiment and socialist working hypothesis to macroeconomic issues – a matter that we take up again in the next chapter. Here, too, there would be obstacles, but more tractable ones.

43

EWSU I, pp. 201–202. Our emphases.

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The eclipse of the old democratic socialism The winning of universal suffrage in 1918 confirmed for the party leadership the wisdom of ‘left co-operation’ (vänstersamverkan) – its long alliance with the liberals, with whom it formed the coalition government of 1917–1920 – even though the association had cost compromises and a general moderation of social democratic politics. In hindsight it is clear that the Swedish liberals had no further progressive projects to fulfil, and the SAP leadership’s obstinacy in continuing to appeal for liberal co-operation, even after the constitutional reform, watered down its politics even further. But its lack of an action programme – of a ‘positive, socialist’ programme in Wigforss’s idiom – made it extremely malleable in the tactical demands it met in the intricacies of parliamentary life when no party had a majority, and consequently no stable, majoritarian government could be formed. In the absence of a clear political line, the SAP leadership was driven by three obsessions – maintaining the liberal alliance, occupying governmental office (or at very least keeping the conservatives out), and defeating left challenges to the social democrats’ dominance in the labour movement. In the absence of any higher political logic it fell prey to a pattern of secret negotiations with other parties, and to the king-making, deal-making and venality that accompanied the unstable minority and caretaker governments of the early twenties.44 As we have suggested, its underlying passivity was in a sense a matter of principle – the maturation thesis – but the principle did not spare the social democrats the political price of this ineffectualness. For Wigforss universal suffrage and participation in government brought new opportunities, but their perils were more immediate. In December 1918 he suggested in a letter to Östen Undén (as noted earlier, a friend and a member of cabinet) that he could well imagine ‘many workers regarding the tactics of the leadership as a whole as conscious fraud’. Subsequent voting trends would indeed point to electoral disillusionment. Three months later, commenting on his acceptance of a place in the upper house, he ruefully tells Undén, ‘I don’t see much chance of catching up 44

Gerdner 1946 and 1954 accounts for this syndrome in dispiriting detail.

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with our exalted party leadership in all its tactical subtleties.’ After his first experience of a meeting of the social democratic members of parliament after his election he writes to Eva Wigforss: ‘I have no sense at all of belonging to a party of social revolution. […] But I certainly have a growing feeling that there must be clearer socialist [policy] lines and that co-operation with the liberals is coming to an end.’45 The years 1920 and 1921 saw an acute post-war depression – unemployment peaked at 31 per cent – in the face of which the party leaderships supported economic liberal explanations and responses. In general it accepted strictures against government spending, both on social relief and public works. It also remained passive in the face of a blatantly labourrepressive and anti-union Unemployment Commission which – as the decade wore on without unemployment dipping below ten percent – adopted the tactic of directing the unemployed to act as strike breakers on pain of being cut off from relief altogether. The Swedish labour market itself was highly conflict ridden at the time. Already wretched working, living and housing conditions stagnated under the weight of mass unemployment, while Swedish capitalism (the export sector above all) enjoyed what economic historians generally hail as a ‘new golden age’. The danger which Wigforss anticipated was that his party’s constituency would – rightly – see its leadership as colluding in the very anti-labour policies and institutions that were at the seat of its misery. Such was the political outcome of ‘wavering between a day to day policy of dubious value and Sunday outings to Utopia.’46 As we have seen, the party leadership, though conscious of Wigforss’s dissidence, could not afford to sideline his exceptional grasp of policy issues and publicist skills once he was in the riksdag – still less when the party itself was in government. He was soon sitting on the party executive, which he told in October 1920 that the party was ‘incompetent to govern’ since it lacked a positive economic policy of its own.47 It was to become his constant refrain.

45 46 47

Citted in EWSU VIII, pp. 97, 109, 133. EWSU VIII, p. 112. Minutes of the SAP executive 13.10.1920.

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In October 1924 Branting formed his third and last minority government, with the veteran Fredrik Thorsson as treasurer. He brought Wigforss into the government as consultative minister – ‘it could be seen as a mistake,’ Wigforss notes drily in his memoirs.48 But three months later both Branting and Thorsson fell terminally ill, and a new generation of leaders was suddenly thrust into the most senior posts of the government. The second-generation party notable best known to Wigforss, Rickard Sandler, took over as caretaker party leader and prime minister, while Wigforss himself succeeded Thorsson as treasurer. The other prominent second generation figures in the cabinet – Gustav Möller and Per Albin Hansson – were also by then well-known to Wigforss, and it was this trio above all that would figure in the social democratic offensive of the following decade. In his memoirs Wigforss provides a characteristically generous profile of Branting, but the reservations in it indicate the distance he felt from the old democratic socialism that Branting personified: I have not hidden my contradictory reactions over quite a number of years. They rested at least in part on my approval of his reformism and his refusal to abandon his socialist commitment, but at the same time I was dissatisfied with his passivity in building bridges between the present and the future. Was it uncertainty about what such a policy would look like? Was it a realistic understanding that the time for such a policy had not come? […] It sounds strange to use a word like passivity about a life as filled to the brim with action and work as Branting’s. And if there was a word for both activity and waiting, I would use it. Part of the marxist heritage was precisely the sense of the overwhelming power of the historical process, and of the people as its midwife when the time came. Naturally this sense was stronger in Branting than in a somewhat younger generation. Such a marked bent for waiting in his view of social process appeared to arise from his very personality. Not to push on. To observe the forces at work, mediate and consolidate.49

It would be some time before Wigforss would be able to put another version of socialist statecraft in place. In the meantime he was part of a government still carrying the burden of the older conception, and in particular economic liberal policy and the myth of ‘left co-operation’ with 48 49

EWSU VIII, p. 211. EWSU VIII, pp. 216–217. Our emphasis.

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the liberals. A hostage of the anti-socialist parliamentary majority and of his own colleagues’ suspicion of hasty new directions in economic policy, Wigforss framed his first budget. In the disgusted judgment of its author, it demonstrated ‘social democracy’s ability to manage [the state’s] finances to the satisfaction of the bourgeois majority at least as well as a government from the latter’s own ranks.’50 After further unpalatable compromises and defeats, this social democratic government fell in May 1926, having refused to buckle any further to the bourgeois majority’s pressure on issues of principle. Wigforss wanted it to fall. It, too, was ‘incompetent to govern’ for the same reason as its predecessors – its lack of a positive economic policy. But this negative experience reinforced Wigforss’s sense that it was politically self-destructive folly for social democracy to accept governmental responsibility in the absence of sufficient parliamentary support to allow it to effectively pursue its own priorities. ‘It is not the possibility of governing that should decide the action programme,’ he wrote pointedly in Arbetet the following year, ‘it is the action programme that must decide if we can govern.’ 51 The winning of an electoral majority for a radical social democratic action programme came to centre stage in his statecraft. In 1928 Wigforss himself, apparently unwittingly, put paid to the myth of ‘left co-operation’ with the liberals, and thus with the party’s inhibitions against launching a much more radical political line. Wigforss had a developed interest in tax reform and its redistributive uses, and had even sought to interest the liberals in the idea. He had given a talk at the liberals’ political club (Frisinnade klubben) ‘where John Stuart Mill was of course referred to and quoted,’52 but had met with a distinctly frosty reception. He introduced a cautious bill into parliament seeking to establish an inquiry into an inheritance tax, complete with a preamble citing Francis Bacon’s aphorism that wealth is like muck, all the better for being well spread. But it was an election year, and the bourgeois parties and press – with the liberals prominent among them – found it politic to overreact. They 50 51 52

EWSU VIII, p. 229. Quoted in EWSU VIII, p. 353. Our emphasis. EWSU VIII, p. 271.

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hysterically branded the bill a ‘confiscation’ and its author a ruthless bolshevik out to requisition ordinary people’s hard-won savings. It was Wigforss’s first experience of being the object of a campaign of personal vilification from these quarters, one that characterised him as a fanatic. But it was hardly the last. The ensuing election has gone down in Swedish history as the ‘cossack election’53 and saw a sharp swing against the social democrats. In one of his reflections on the Yellow Book in Arbetet,54 Wigforss poses the question why the social radicalism of a major section of British liberalism finds not the slightest echo in its Swedish counterpart. The answer, he finds, lies in the very different historical constituencies of the two traditions. Whereas British liberalism had retained a substantial workingclass base and thus an incentive to pursue social reform, the social democrats’ early dominance of this constituency in Sweden under conditions of late but very rapid industrialisation had cut the liberals off from any such progressive impulse. This ruled out a majoritarian reformist politics based on co-operation between the social democrats and liberals. On the other hand the backwardness of the local liberals increased social democracy’s opportunity to win a majority in its own right for distinctly socialist reform. In any event, when social democracy needed allies in the future, it would have to look elsewhere.

53

54

The grotesquerie of the bourgeois campaign can be judged by Jan Olof Nilsson’s (1994, pp. 297–297) description of the origin of this nomenclature in ‘four election posters which the conservative youth league published. The prototypes for the posters were ones published in 1918 by the German League for the Eradication of Bolshevism. The posters were the same size as a daily newspaper so they could be inserted loose into various papers. They were printed in three colours, with orange the dominant one, which perhaps was meant to create an association with a burning hell. On the posters you could see among other things cossacks riding in on Stockholm’s streets, and how Sweden’s young women sold themselves to a group of workers.’ Arbetet 14.3.28.

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The early travails of the new democratic socialism Wigforss’s hopes that the union movement would wholeheartedly embrace industrial democracy were premature. As we have indicated above, unions were pinned down in day to day struggles over wages, conditions and job security in a particularly conflict-ridden labour market permeated by mass unemployment. Institutionally they were ill-prepared at the time to undertake a share in managerial responsibility, and their leaders correctly feared that their participation in management under those conditions would make them mere ciphers and legitimatists of management decision-making. And despite Wigforss’s own best diplomatic efforts, as chairperson of the inquiry into industrial democracy, to get union and owner interests to unite around the aspiration to use participatory steering mechanisms to foster productive efficiency, the employer representatives refused to compromise managerial prerogatives in any way. LO’s delegate on the inquiry, Edvard Johansson, put a radical twist on his famous written reservation to its final report as he protested against its recalcitrance: ‘We went out to fell a tree to make a mast, and then we planed it down more and more so now there is only a matchstick left, and it is still too big.’55 Walter Korpi has argued that the later success of the social democratic labour movement depended on the logic of shifting the main arena of class confrontation from the point of production, where capital normally has the decisive power through complete control of the means of production, to the arena of national politics in a democratic polity. In the latter, the party of labour has a potential to mobilise greater support than capital. But this shift depends on the party articulating a political interest and an action programme that addresses the predicaments of the working class at least as well as union struggle could.56 This logic underlay Wigforss’s turn to macroeconomic issues once he realised that the way to democratic reorganisation of production was temporarily barred. We describe that turn in the next chapter. The policy he chose had the effect (among others) of 55 56

Quoted in EWSU VIII, p. 160. Korpi 1983.

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putting the union movement in a far better position to pursue industrial and economic democratisation in the future. Also of significance for the doctrinal future of Swedish social democracy was the announcement of what was in effect a rival strand to the new democratic socialism – an anticipation of social liberalism. Its founding text, Nils Karleby’s Socialism in the face of reality, appeared in 1926, just after its author’s untimely death from tuberculosis at the age of 33. Karleby came from the same social background as Wigforss, but was an autodidact turned journalist on the important party newspaper Skånska Social-Demokraten, of which he later became the editor. Also like Wigforss he was an iconoclast in relation to the party’s German marxist doctrinal forebears, but was far more abrasive in his open criticism of the old party leadership. Wigforss and Karleby were often seen as part of the same group of young Turks. With Gustav Möller they shared the editorship of Tiden between 1922 and 1924. Karleby, too, made a wide study of economic theory, but having noisily abandoned subservience to one German-speaking authority in the area (Marx), he fell for another – Eugen BöhmBawerk. Karleby’s book is an often crude polemic against marxist orthodoxy and traditional understandings of social democracy based on it. In their stead he asserts the scientific merits and modernising virtues of neo-classical economic theory. As a forward-looking movement, Swedish social democracy should ‘face the reality’ of the economic optimality of market mechanisms and capitalist production, Karleby insists. But the system will always require adjustment and upgrading – legislated reforms whose rationale will inexorably be forced on social democrats and bourgeois parties alike. Social policy and redistribution constitute the core of this ongoing reform agenda. Socialism is simply the name of that agenda, irrespective of which party implements the various elements in it. Cumulatively, the reforms in question will bit by bit alienate from the juridical entity of capital its ownership and control functions that are abhorrent to democratic sensibilities. They form a pattern of creeping socialism. Wigforss concluded his 1926 review of Karleby’s book – which was at the same time a generous obituary for its author – with the prophetic words: 132

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Karleby would not lead armies, and he knew that. But people of ideas have an advantage over those of action. They do not have to live in order to lead. And so Karleby himself marches forward into the future, way beyond the narrow boundaries of an individual life, to live and wield influence in the intellectual life of the Swedish labour movement.57

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Karleby in fact spawned a whole social liberal sub-tradition in the party. Intellectuals like Rickard Lindström were publishing the same themes in the party press soon after, and later and more magisterially, Herbert Tingsten and Torsten Gårdlund would do likewise. Gunnar Adler Karlsson’s still later theory of functional socialism58 systematised Karleby’s thought, and after Wigforss’s retirement from politics, Karleby’s star would rise slowly but inexorably as the source of the party’s true doctrine. When Tage Erlander and Björn von Sydow republished his book in 1976,59 it attained the status of the party canon. However muted Wigforss’s criticism of the book had to be under the circumstances of his 1926 review, he distances himself from Karleby’s denial of the need for the conscious democratic re-organisation of industry and the economy, and of the need for a distinctive socialist action programme in general. There is […] a problem which one would have very much liked to see Karleby deal with, namely the question whether it really is self-evident that modern social policy legislation constitutes part of a clear, simple and unbroken development towards a more ‘socialised’ society. Karleby assumes this throughout and adduces nothing that could be seen to contradict the assumption. But this seems to depend on the fact that socialism is seen above all from the viewpoint of distribution. It is distributional problems that are dealt with in the first instance and that offer such natural examples of the thesis about gradual socialisation without reverses or dead-ends. Karleby might perhaps be forgiven for not addressing the view that the state’s social policy hobbles production. But among the forces that have increased and continue to increase the working class’ share in social goods he counts not least the union movement. The question whether the unions’ policies on standard wage rates etc. are compatible with the optimal exploitation of productive forces cannot unproblematically be answered in the affirmative. And above all it is hardly out of the question that union policy based

57 58 59

Wigforss 1926, p. 147. Adler-Karlsson 1967. Karleby 1926.

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on the clash of interests between workers and private capitalists could lead to such destructive consequences for production that a solution could only be found in radical changes to the whole organisation of production – changes which significantly diverge from the schema of continuous and unremarkable transitions.60

Here Wigforss not only draws a line in the sand between his own political line and Karleby’s. He also draws attention to the central weakness of social liberalism – its assumption that political actors can exercise a wide choice in the pattern of redistribution they can impose on an essentially unreconstructed capitalist economy. This assumption fails to address the necessarily intimate link established in most economic theories (including marxism and neo-classical theory) between capitalist production and distribution relations. When redistributive policies are seen to interfere with the reproduction of capital, the latter ends up taking priority. Over time the boundary between social liberalism and economic liberalism thus tends to erode.

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Summary of the new democratic socialism We have argued above that the original political model of Swedish social democracy became untenable after the party had secured universal suffrage. Two contenders emerged to take its place as the political line of the movement – the new democratic socialism and social liberalism. We can account for the specificity of the former on seven points that also serve as a basis for contrasting it with its predecessor and its rival: 1. The core project of the new democratic socialism is a multi-dimensional citizenship based on rights of membership and rights of actual participation in all forms of association – political, social, economic and industrial. To adopt T H Marshall’s terminology,61 this new doctrine promoted civil, political, social, economic and industrial citizen60 61

Wigforss 1926, p. 143. Our emphases. Marshall 1963, pp. 73 ff. But the new democratic socialism’s conception of economic and industrial citizenship went well beyond Marshall’s.

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ship. It called for democratic re-organisation in all spheres of social interaction to express this citizenship, as well as for state provision of social security as the basis of individual autonomy. Democratic redesign across this spectrum has to be seen as interdependent. A society is necessarily defined by its political constitution, for the form of political authority moulds the socio-economic institutions it integrates and fosters. This insight is the corollary of the truism that societies generate the political arrangements that reflect their forms of association. Both the old democratic socialism and social liberalism fell well short of expressing the project of democratic citizenship in this way. In general they asserted only rights of membership but not of participation at the economic and industrial levels. Even these rights were hedged by a residual loyalty to capitalist production relations that in their pure form deny social, economic and industrial citizenship in toto. The concept of democracy endemic in these doctrines, then, was both partial and arguably unsustainable. 2. Only the new democratic socialism could posit the necessity of an action programme – of a positive, socialist agenda of transformative reforms based on open-ended socio-economic re-organisation to further elective moral values. The other two doctrines by contrast remained imprisoned in theories of historical development that presented socio-economic change as predetermined – as dictated by the unfolding logic of historical progress – and so not a matter for conscious political agency. 3. In overthrowing a metaphysical development theory, the new democratic socialism left itself free to contest the economic rationality of capitalism and its supportive politics of economic liberalism. In seizing this advantage it could frame a direct (if also gradual and piecemeal) challenge to capitalist institutions by confronting them with democratic and collectivist alternatives in the production process and in public economic management – alternatives in which the values of equity, democracy and efficiency could converge. The respective development theories, on which the old democratic socialism and social liberalism rested, privileged capitalist production as an exclusive expression of economic rationality and made 135

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4.

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5.

6.

7.

it the sine qua non of economic progress. Neither, then, could mount a socialist political challenge to the capitalist system, nor even to its distributional outcomes in the long run. For the new democratic socialism, flexible and non-totalising ‘provisional utopias’ provided the dynamic element in programmatic thought, policymaking and political mobilisation. This specific form of utopianism avoided two dangers – that of political ineffectiveness in the failure to be able to mobilise around an immediately relevant ‘galvanising alternative’, and that of the totalising utopia that constantly invokes instrumental coercion. But the respective development theories of the older social democratic model and social liberalism ruled out utopian projections. The present was capitalist because it had to be – it lay in the logic of history. ‘There is no alternative,’ in recent decades’ thatcherite idiom. To some extent the new democratic socialism and Karleby’s version of social liberalism shared a dissident view of socialism as a process of social change that crystallised certain moral values. We repeat Bernstein’s notorious expression, ‘The movement is everything, the final goal nothing.’ This contrasted with the older social democratic projection (and still probably the most common one) of socialism as a ‘terminus’ – as a concrete and totalised institutional form of a future society. But the new democratic socialism saw elective reforms framed under the influence of the utopian imagination as the stuff of this transformation process, whereas for social liberalism social change flows from the preordained logic of progress independent of purposive action. For the new democratic socialism the negation of developmental determinism made way for a political voluntarism based on normative rationality. It could assert moral priorities as the linchpin of its utopian imagination and programmatic thinking – priorities that could reflect an intersubjective moral stance in opposition to a manipulative instrumental reason. Developmental theory by contrast doomed the older model and social liberalism to fidelity to capitalism’s intrinsic ethic of instrumental reason. A major strength of the older model (as we saw in chapter 2) had been its balance between state socialism and movement socialism. The new

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democratic socialist programme heavily emphasised the role of unions and other grass roots forms of association as the bearers of democratic organisational reform, and so could strengthen this aspect of the labour movement. By contrast social liberalism, in acknowledging the sovereignty of capital and of the redistributive state, left no role for these forms or expressions of movement socialism in public and enterprise management. In chapter 1 we characterised the democratic revolution as the deepening and broadening of citizenship. Wigforss’s formulation of the new democratic socialism sought to deepen citizenship by asserting the interdependency of its political, social, economic and productive layers. It was less original in seeking to broaden citizenship to the working class and to the male paid workforce in particular. Like its predecessor (and of course its rival) it was gender blind in a highly gendered modern society. The female half of the newly enfranchised political citizenry was either altogether denied the precondition of social and economic citizenship in commercial society – an appropriate level of independent income – or accorded it only temporarily and under conditions of ascriptive subordination. An assertion of inclusive citizenship was discursively available to Wigforss’s new democratic socialism, but he failed to avail himself of it. As we shall see, this remained the great if also remediable weakness of his heritage.

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5. Statecraft, employment and welfare in the 1930s and 1940s

Only the best is good enough for the people.

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Gustav Möller

When Wigforss realised in the late 1920s that the Swedish union movement was not yet in a position to act as the bearer of enterprise democratisation, he began to apply one of the main underlying premises of this enterprise – capitalism’s economic irrationality – to a contestation of economic liberal public policy. This turn became the vehicle for his search for a social democratic electoral majority – a search that his experience of the perils of minority government had made a matter of urgency for him. Under his influence the Swedish social democrats would soon become the first and only major electoral party in the world to launch a head-on challenge to economic liberalism. The devastation it wreaked on this quintessential politics of capitalism indicates the brittleness and vulnerability that belies the latter’s perennially resilient image elsewhere in the west, above all in the English-speaking countries. It is an extraordinary irony that much of the political weaponry the social democrats initially deployed so successfully against economic liberalism in Sweden in the 1930s was forged in England in the 1920s. The social democrats would consolidate an internationally unique hold on power in a democratic polity from the 1930s, and many and varied were the political currents that proffered their services in what contemporaries sensed was a new heroic age of social reconstruction. The new democratic socialism itself attracted major new contributors, and some false friends. The primary focus of this chapter is on new democratic socialist statecraft, with special but not exclusive emphasis on Wigforss’s own practice. In the first instance we use statecraft in the traditional, ‘machiavellian’ sense of a political actor’s strategy and skill in gaining, wielding and defending state power, in a competitive struggle with determined opponents, 139

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in order to advance its own cause. But there is another aspect of statecraft that Anders Ehnmark’s suggestive study of Machiavelli1 brings up – the civic-republican aspect. His insightful extrapolation from this classical source on statecraft reveals not one but two projects that the left has to undertake – the liberatory one of overthrowing a tyranny, and a quite separate one of establishing the preconditions of citizenship and freedom. The one requires the liberating political actor to concentrate power to overthrow an existing powerholder in a battle for supremacy; the other requires it to establish dispersed sources of power to allow freedom and self-rule to flourish and to avoid the danger of the liberator becoming a new tyrant. Ehnmark leaves this problem of two at least partially conflicting projects as an abstract paradox. But in the concrete struggle between the new democratic socialism and the economic liberal bourgeois majority, Wigforss wielded the democratic leading edge of his doctrine as both sword and ploughshare, one might say. He ruthlessly prosecuted the ‘democratic class struggle’ – to adopt Korpi’s felicitous phrase2 – against an opponent whose whole socio-economic power rested on quintessentially anti-democratic bases. But the strategic objective in gaining and wielding state power was to empower associational forms of the labour movement in particular outside the state sphere, and to create socio-economic conditions supportive of citizen autonomy and power in economy and society. To use another metaphor, democracy was to be both the solvent of capitalist social relations and the fertiliser of a free and effective citizenship. This chapter first outlines Wigforss’s statecraft (moulded as it was to the task of defeating economic liberalism), the social democratic breakthrough and its political aftermath. Then it will selectively go into the main trends in social reconstruction to evaluate them in the light of new democratic socialist tenets.

1 2

Ehnmark 1986. The ‘democratic class struggle’ is the title and leading concept in Korpi 1983.

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‘Can we afford to work?’ Towards the end of the last chapter we noted Wigforss’s alarm and disapproval at the political dynamic that resulted from the social democrats’ assuming governmental responsibility when they had neither an action programme of their own nor a majority with which to implement any progressive measures at all. Under these circumstances they became hostages of the bourgeois majority, taking on themselves the odium of the unpopular measures the majority desired but did not want to shoulder the electoral responsibility for. This dynamic could only erode the social democrats’ electoral support, in Wigforss’s view. Despite disapproval from Per Albin Hansson, who would assume the party leadership at the 1928 party congress, Wigforss managed to win a ‘moving and almost total unanimity’ at that congress for a resolution that ‘the precondition for taking governmental responsibility should be the possibility of realising a positive if also limited programme.’3 Here he began to draw another line in the sand. The bourgeois majority, though it lacked coherence and cohesion on all else, was united around the implementation of economic liberal public policy and the mission of preventing the social democrats challenging its parliamentary dominance. Through their programmatic hiatus and overdeveloped taste for compromise, the social democrats themselves had abetted both of these endeavours. Wigforss was now steering the party into a more polarised stance that would make the gulf between socialist and bourgeois politics quite clear to the actual and potential social democratic public. As the linchpin of bourgeois politics and the first defence of capitalist society, economic liberalism became the obvious strategic target. In the late twenties the new party leadership as a whole was, in any event, coming under increasing pressure from the union movement to find a policy response to the mass unemployment that economic liberal policy perpetuated.4 This pressure made Wigforss’s colleagues in the party leadership at last receptive to a clear alternative. 3 4

EWSU VIII, p. 354. See Unga 1976.

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Economic liberalism and its neo-classical world view were enjoying one of their grand revivals in the 1920s in Sweden as elsewhere, as world trade grew steadily under the influence of the ‘second industrial revolution’ based among other things on electrical goods, cars and chemicals. The expansion of American industry and economy appeared to be fuelled by its domestic economic liberal policies and its support for a return to the gold standard and freer trade. But for a potential opponent, economic liberalism and its economic theory had a vulnerable side. In countries like Britain and Sweden economic liberal policy regimes presided over mass unemployment that never sank below ten percent even in boom time. In other words liberalism was keeping living standards unnecessarily low. The leading intellectual apologists for economic liberalism in interwar Sweden had usefully reduced its legitimacy to a single claim – that it provided for the optimal disposition of society’s productive resources. On this claim it would stand or fall. So confidently did they lay this claim that they were prepared to jettison the lockean and manchesterian baggage about the sacred, pre-social rights of private property. Eli Heckscher, who with Professor Gustav Cassell were the most significant economic analysts pleading the economic liberal cause in the interwar years, specifically disavowed the manchesterian legacy in his Old and new economic liberalism of 1921. Heckscher presents private capital units as the mere ‘trustees’ of society’s productive assets in a private enterprise system. Where owners and managers fail to achieve optimal outcomes they should attract the same sanction of removal from office – dispossession – as conventional trustees would.5 Wigforss would return to precisely this problematic in the 1930s, as we shall see. The arcane theoretical underpinnings of neo-classical theory – Say’s law, equilibrium theory – made this situation unthinkable except where ‘externalities’ like union wage campaigns obstructed the maximising, selfregulating functions of the market. In political discourse the cumbersome and counterintuitive reasoning of neo-classical theory had to give way to folksier Judaeo-Christian platitudes about the evils of (working class) greed and the virtues of (capitalist) saving, as well as the need for all to commit

5

Heckscher 1921, pp. 58–60.

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themselves to thrift, hard work and self-denial in order to overcome unemployment. Special emphasis was placed on ‘saving:’ if entrepreneurs could only ‘save’ enough (that is, post sufficiently high profits) the ensuing investment would soak up the unemployed. Then and now, the eternal refrain of neo-classical analysis in the face of economic malfunction is that wages are too high or (what is the same thing) inflexible downwards. If wages and taxes could only be pushed down far enough the market-clearing magic of the system would work for the labour market as well. Public money spent on unemployment relief doubly frustrated the only possible cure by drawing on savings and keeping wages artificially high. (In the last quarter of the twentieth century this argument was once more repeated endlessly.) Wigforss was well versed in neo-classical theory which he had long seen as a ‘defence system for an existing economic order,’6 even if dissidents within the tradition like Wicksell could on occasions deploy its concepts critically. Wigforss’s own understanding of unemployment, as already indicated, drew on Marx’s and Hobson’s underconsumptionist theory.7 Its cure was to be found in the state assuming a supervisory role over the economy as a whole and industry in particular, roughly along the lines envisaged in the Yellow Book. Ideally state indicative planning and selective interventions in this mode would be complemented by unions and shopfloor organisations joining in and even leading the rationalisation and modernisation process. But the more immediate task was to spread another view of the causes of unemployment and all that accompanied it – poor working and living conditions, and social insecurity. In 1928 Wigforss published ‘The saver, the spendthrift and the unemployed’ in Tiden. It drew on the socialist and collectivist liberal heritage of underconsumptionism to attack the economic liberal claim that spending on unemployment relief ‘crowded out’ productive investment by re-

6 7

EWSU VIII, p. 117. This is the view that a capitalist economy systematically fails to generate sufficient income to ensure that all production is consumed (sold). In addition to the marxian account, there is a keynesian version of the argument. The former attributes the underconsumption to ‘disproportionality’ between sectors (involving over-production); the latter attributes it to insufficient investment. See Desai, 1983, pp. 495–498.

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ducing ‘savings’. The neo-classical assumption that all savings are invested in job creating enterprise disguises the fact that a lot of saving, not least in a depression, ‘is nothing more than putting money in the bottom of a trunk’,8 thus actually depressing demand and reducing employment. Instead, public authorities should supplement inadequate private consumption and investment by commencing useful public works to generate new economic activity and soak up the unemployed. This cure, of course, was the polar opposite of what the bourgeois parties and the economics profession were recommending. Thematically the essay continues a line of argument in a number of his preceding essays on inheritance and wealth tax to the effect that the accumulation of private fortunes did not necessarily lead to capital formation and a better allocation of productive resources. But its expression now prefigured the ‘keynesian revolution’ and the metamorphosis of unemployment from a public-administration issue to a central focus of economic policy. This essay was the first of a number of essays, programmes and election manifestos in the same vein from Wigforss’s pen, to say nothing of his lectures and talks. What is also striking about it is the simplicity and lucidity Wigforss could bring to this subversive economic analysis. For economic liberalism, the days of the Judeo-Christian truism were indeed numbered. So, too, were the days when leading academic economists like Gustav Cassell could without fear of contradiction use their lofty status to dismiss socialist economic analysis with facile argument.9 In 1930 Sweden’s export-dependent economy felt the first palpable blow of the great depression. On behalf of the SAP Wigforss introduced a bill into the riksdag which provided for a deficit-financed expansion of public works to soak up unemployment and stimulate the economy. The bill pursued the logic of his underconsumptionist analysis and contradicted many tenets of economic liberalism. In the face of the depression the economic liberals posited the need to balance the budget (whereby expenditure had to be cut to match falling revenue) and non-intervention into the market mechanisms that would ‘correct’ supposedly inflated wage rates, so allowing them to fall to a level where it would once more reward 8 9

EWSU II, p. 263. See ‘Professor Cassel and socialism,’ EWSU VI, pp. 167–182.

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capital to put on more labour. The bourgeois majority appealed to this time-hallowed analysis in voting the bill down. In the following year Wigforss published a long analysis of the depression’s causes in booklet form, The economic crisis.10 It was a careful review of the various analyses of the crisis being put forward and their explanatory power in the face of the forms the crisis was taking. He returned to his earlier theme that skewed income distribution so limited the working class’ spending power as to depress economic activity and national income. As Marx had pointed out, the origins of the crisis lay ultimately in the fact that wage workers received too little of the value of their own production to create sufficient demand for it.11 The bourgeois clamour that the country (meaning the working class) was ‘living beyond its means’ would lead to a policy of wage-cutting and restrictions on unemployment relief that would deepen the depression. The cure, Wigforss argued, lay in precisely the opposite direction: in maintaining working class buying power, in economic planning and expanded spending to make good the shortcomings of private enterprise which reveals itself incapable of mobilising available forces of production. This critique strikes at the very nerve centre of the capitalist system when it disqualifies the individual entrepreneurs’ calculations of profit and loss as the yardstick for what is advantageous from the point of view of society as a whole.12

This would become a recurring theme in his agitation in the thirties: how the systematically obfuscating forms of enterprise calculation obstructed the allocation of productive resources and disorganised production as a whole. 10 11

12

EWSU II, pp. 298–376. This argument became a key aspect of the Keynes-Kalecki theory of recession also. For Keynes it was intuitively obvious that unemployment increased income inequalities – by depriving some income-earners of their income. For Kalecki this implied that an upwards redistribution of income would in itself help to alleviate the effects of recession – by increasing the overall propensity to consume. For both, austerity policy which worsened inequalities would worsen unemployment and policies which worsened unemployment would worsen inequality. See Kalecki 1971; also Robinson 1957. EWSU II, p. 373. Our emphasis.

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As most of the party swung behind Wigforss in this line of analysis and agitation, he drafted a new social democratic crisis programme on which the party would contest the election in September 1932. Its principal points were to accelerate public works – financed by a deficit budget – and to fill the jobs thus created at standard wage rates instead of reliefwork pittances. The programme was thus aimed at raising the level of employment while putting a floor under real wages. The election campaign was polarised and hard fought; what the social democrats were seeking to do flatly rejected professional economists’ advice and the economic liberal contractionary response to the depression that it advocated. For the first time since universal suffrage the formidable mobilising resources of the labour movement were marshalled around a lucid and appealing alternative vision. As Leif Lewin observes in his classic work, The debate over economic planning: It is a completely different tone of self-confidence and sense of direction in the social democratic message in the 1932 lower house election than, for example, the party leader’s words of resignation from 1928, when he observed that the party entirely lacked an economic action programme of its own. Sometimes the explicit repudiation of the old paralysis in the economic-liberal fold can actually look like a polemic against their own party’s passive past, like a clear demonstration that social democracy had now put paid to its fatalism and arrived at an action programme.13

In his memoirs, Wigforss vividly recalls the sense of ‘something new and exciting’ in the campaign: Again and again we were struck by the sense that we social democrats, now perhaps for the first time, could link our explanations of our party’s economic policy to the clear interest of the majority of the population and express viewpoints on economic life which, without theoretical detours, addressed themselves to everyday common sense. […] Now we could let our agitation focus on the demands that people who wanted no more than to earn a living should be given the opportunity to do so, and the natural resources like forests, mineral deposits and waterfalls, as well as the capital people had produced and saved, should not lie idle. Against this simple common sense it was now our opponents who had to appeal to often incomprehensible theories about the economic context.14 13 14

Lewin 1967, p. 78. EWSU VIII, p. 372.

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To problematise the simultaneous paralysis of labour and capital in the face of great social need struck in particular at the heart of neo-classical theory that postulated the full and optimal allocation of productive resources by unregulated markets and unfettered managerial prerogatives over those resources. In May 1931 the relative orderliness of Swedish public life was shaken when a military detachment supporting strike-breakers in Ådalen fired on a peaceful workers’ demonstration and killed five people. In 1932 unemployment reached 22 percent of the workforce. As the sense of crisis grew, Wigforss published his most famous pamphlet, Can we afford to work? Its tough, ironic tone departs from his usual, more discursive and dispassionate style. It launched a withering attack on economic liberal nostrums. The obsession with ‘saving,’ he wrote, made nonsense of the fine old slogan ‘work and save!’ These two economic pieties were now in conflict, as the more the nation ‘saved’ by holding back public spending, cutting wages and sacking workers in the private sector, the fewer would be the opportunities to work. In theory and in practice economic liberalism leads to the fantastic conclusion that work is a luxury, that jobs for all is something which rich societies can afford, but which is well beyond the means of a poor country like Sweden, and in general of all countries hit by the crisis. The more serious the crisis becomes, the more unemployment grows; the smaller the incomes in society at large become, the more pressing the demand for saving becomes, and the more impossible it will become to create jobs. In the face of growing unemployment our citizens are bidden to tell each other, with concern but also resignation: we are too poor to be able to work. And the poorer we become, the less we can afford to work. No society still in command of its common sense could satisfy itself for long with an economic wisdom of this lunatic kind. If incomes fall, if poverty grows, it quite obviously means that we are not working as much as before, that we are not maintaining our productive activity, and the immediate task must be to create jobs and expand production.15

Rational saving had never meant simple abstinence, Wigforss argued, but rather making outlays on future production. Reducing consumption is not an end in itself, and is especially pointless when labour is already abundant. Returning to his theme from the previous year, he suggests there is 15

EWSU II, pp. 270–271.

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no shortage of savings; what was lacking was the enterprise in the private sector to mobilise the capital already saved. The state had now to provide the enterprise, and the imaginative flair, that the private sector so demonstrably lacked. The bourgeois majority, Wigforss went on, expounds the golden rule of profitability as the only trigger for economic activity, and blind acceptance of market outcomes. But this form of calculation takes no account of social costs and benefits. When firms ‘save’ by laying off workers, society has to bear the cost of their support. Profit also decrees allocation of resources to destructive products while neglecting socially essential ones. Whereas bourgeois spokespeople ‘preach in effect a humiliating subservience to an economic mechanism that nobody controls,’ social democracy demands that humanity rule over its tools of production and not be enslaved by them.16 The social democrats also began to prepare a major upheaval in the pattern of class alliances. They sought support for their programme among the rural poor who were thrown into the crisis by the drastic falls in the prices and demand for agricultural products. The agrarian league (Bondeförbundet) articulated the interests of this large social group. (In 1930, 38 percent of the economically active population still worked in forestry and agriculture).17 But the league had strong traditional ties with the conservative party and thus furnished the bourgeois majority with a vital part of its electoral support, especially since the achievement of universal suffrage. There was another reason of growing significance for social democratic moves in this direction: the disaffected rural poor in other parts of Europe constituted a major part of fascism’s mass base. Wigforss’s encounter with the prewar antecedents of nazism (which we saw in chapter 3) and a brief visit to fascist Italy in 1923 underscored the need to provide the rural population with a progressive political orientation and so pre-empt fascist agitation. Thanks largely to the success of this project, Swedish fascism as it emerged in the thirties remained marginalised, an idiosyncrasy confined to the country’s old social establishment.

16 17

EWSU II, pp. 278–287. Hadenius et al. 1978, table 6B.

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Thus in 1932 we find Wigforss tuning his message to the small farmer in ‘Workers and farmers in the crisis’:

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Compare, for example, the state’s position on unemployment to that of the individual farmer. We must imagine a farmer who, together with his household, for the moment has labour that is not fully employed. Should he prefer idleness for one or several household members? Or is it better to find something useful to do? If the family prefers idleness, it is because it regards itself as so well off that it can afford to be idle. The poorer it is the more it needs to work. For this farmer’s household it would sound like a joke to ask ‘Can we afford to work?’ The only question that should be taken seriously is ‘Can we afford to avoid working?’ The same goes for society in general.18

The new line that Wigforss stood for once again broke with fatalistic development theories of both economic liberal and marxist provenance. While he was joining battle with economic liberalism, the orthodox left in his own party criticised a crisis programme that appeared to it designed to save capitalism from its long awaited terminal crisis – history’s ultimate guarantee in the orthodox schema – and to duck the issue of socialisation. It thus propounded a view which replicated the thinking behind the MacDonald government’s passivity and fidelity to economic liberal policy in Britain.19 In ‘Crisis and socialism’ published in the social democratic youth movement’s journal Arbetarungdomen in 1932, Wigforss takes issue with this view. He strongly asserts capitalism’s capacity to survive depression conditions indefinitely. Socialists should not ask what is going to ‘happen’ but rather what they should be trying to make happen. The social democrats’ traditional demand for the right to work now clearly collided with the private control of capital, and that indicated the positive task ahead. In terms that seem to directly address Heckscher’s problematic referred to above, he argues: If the owners of capital have the right to control the means of production, this gives them the obligation to create jobs for those classes who cannot live without being able to put those means of production to use. When the owners of capital no longer carry out that duty, the only reasonable basis for their control of production disap18 19

EWSU II, p. 292. Emphasis in the original. See Skidelsky 1967, which also presents a handy point of comparison to the Swedish development as the policy of the MacDonald government was the typical one for western governments of all stripes.

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pears. Society has granted economic power to individuals through legal institutions. It must take that power back into its own hands.20

Wigforss is here referring to effective control over production, not to juridical ownership. As the ‘socialisation question’ was debated within Swedish social democracy in the thirties, Wigforss would thus argue – as he implicitly always had – against the traditional equation of socialisation with nationalisation, in favour of more democratic approaches to society ‘taking (economic) power back into its own hands.’ His major contribution to the 1932 party congress on the socialisation question defended his activist line explicitly against the influence of two scientistic traditions that had paralysed the movement in the past – marxism and economic liberalism. His grouping them together underscored their historical convergence – the fatalism of the former ‘has left us relatively passive on the sidelines of events’ when the party should have been taking a proactive line. But it was economic liberalism that had really moulded the party’s earlier policy and ‘regularly obstructed any attempt to give the party a positive direction in economic policy.’ Both traditions had left the party in the ‘extremely regrettable situation’ of lacking a coherent action programme. Opponents of a positive programme in the party now resorted to radical rhetoric to urge passivity, claiming that positive steps were possible only under socialism and that socialisation was a matter for co-ordinated international action only. All this points to the risk ‘that social democrats inwardly quake at the idea of intervention, and use internationalism as a weapon against practical action.’21 This was certainly the time, Wigforss told the congress, to bring the demand for socialisation forward. But instead of the inadequate old notion of enterprise-by-enterprise nationalisation, social democracy must aim for a much broader, macroeconomic control through indicative planning. The former could never ‘pull our economy out of the free market and its chaos’: We could socialise one branch of the economy after the other. But we are plugged into a larger economic liberal system with free price formation on the market as the deciding 20 21

EWSU II, p. 384. EWSU II, pp. 402–403.

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factor. […] The further we come along that road, whereby society controls industry branches one after the other, the more necessary and obvious it will become that we must try to arrange things so that these parts are tied to a wider social context. But even socialists react against the idea of trying to intervene in order to control the market.

These inhibitions must now be overcome. Socialist co-ordination had to replace ‘free market forces’.22

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‘A government of struggle’23 The lower house election of September 1932 resoundingly vindicated the social democrats’ new offensive line. The social democrats received 41.7 percent of the vote to win 14 new seats, and the two parties to its left received together 8.3 percent, which meant that the socialist parties together had won a bare electoral majority. The major bearers of economic liberalism, the liberals and conservatives had together lost 23 seats, while the agrarian league had also moved forward with nine new seats. But thanks to the vagaries of the then electoral system, the bourgeois bloc retained a majority of six seats in the lower house, and preserved an even greater one in the other chamber from the 1930 upper house election. Had the social democrats followed their praxis from the twenties, they might have tried to negotiate a compromise position in order to take government. But the decision at the 1928 congress, to accept governmental responsibility only if there was a prospect of pursuing a positive programme, now ruled out that option. They formed a minority government, but one determined to follow the new programme and to use it to divide and conquer the bourgeois majority. As treasurer, Wigforss introduced the budget proposal incorporating the crisis programme. It was now accompanied by Gunnar Myrdal’s tightly argued appendix which justified the countercyclical fiscal policy and deficit budgeting. The budget also offered subsidies and tariffs to benefit the rural poor. 22 23

EWSU II, pp. 404–405. Wigforss’s own characterisation of the 1932 social democratic ministry: EWSU VIII, p. 376.

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The caricature of Wigforss as an unprincipled tactician rests to a large extent on the machiavellian adroitness with which he managed the budget’s passage through the riksdag. A draft budget normally went through a lengthy committee process, during which it could be considerably watered down, before it faced the crucial vote in the house. According to paragraph 44 of standing orders, ministers could not sit on the committee in question. But Wigforss and others in the party leadership short-circuited the committee process by making direct contact with younger agrarian parliamentarians to sell the budget to them, despite the league leadership’s clear disapproval of the latter. It was a war of nerves as the social democrats left the ‘fermenting process’ (in Wigforss’s phrase24) in the agrarian league to take its course. It came to a dramatic climax with a leadership spill and the election of a new agrarian leadership that clinched the famous May 1933 ‘cow deal’ (kohandeln) in support of the budget. The agreement initiated an enduring ‘red-green alliance’ between the two parties. It was an extraordinary coup that left the social democratic government with a parliamentary majority for all the essentials in its programme – the first majority government in Sweden in democratic times. Many writers have pointed to the decisive importance for Sweden’s subsequent political development that this new class alliance between workers and farmers would have for the next quarter-century.25 In hindsight both Wigforss and Myrdal observed that the crisis programme itself erred on the side of caution and could have provided for even greater public spending.26 It would have had to do so to have become the major factor in the steep recovery that the Swedish economy now began to exhibit. Caution was due to the programme being the world’s first countercyclical expansionary response to a depression, and orthodox economists were shrilly and unanimously condemning it as a recipe for disaster. The actual stimulus from public spending was probably overshadowed by the breakdown of the international economic liberal order in the form of 24 25 26

EWSU IX, p. 36. See Nyman 1944 for a blow-by-blow description of the manoeuvring that led to the ‘cow deal’. For example Esping-Andersen 1985, 1989; Therborn 1983/4; Ryner 2002, ch. 3 and Berman 2006, ch. 7. EWSU IX, pp. 56–65 and Myrdal 1982, p. 168.

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the gold standard’s collapse in 1931. This stopped the export of capital, stimulated domestic investment, and led to the drastic devaluation of the krona which prompted a modest but dynamically significant expansion of exports. Whatever its origins, strong and sustainable economic growth under social democratic auspices in the thirties marks the transition from ‘poverty Sweden’ to ‘welfare Sweden’.27 In machiavellian terms the recovery could be seen as fortuna smiling on the successful strategy and tactics of the social democratic victors. It certainly helped them complete the disorganisation of the bourgeois bloc. In 1934 the liberals, too, split and an influential minority led by Bertil Ohlin also became part of the parliamentary majority now supporting the new economic policy. But the worst damage to the economic liberal and bourgeois cause depended on the social democrats’ exploiting the Achilles heel of economic liberalism itself. It is an old marxian insight that capital is at base a social relation of subordination and domination, and that social relation depends essentially on the periodic recurrence, or even maintenance in the long run, of mass unemployment.28 As a political programme dedicated to the maintenance of the social relation in question (that is, undemocratic relations between employers and employees, mediated by market relations and straitened by bourgeois control in the production sphere), economic liberal policy generates unemployment by inhibiting the growth of production. It buys social dominance at a high economic price for industrial capital in particular. An expansionary economic policy thus has the potential to divide capital politically between those of its representatives who privilege social dominance in the long term and those who privilege immediate prospects of growth and enterprise expansion. Korpi has insightfully characterised the class politics of this period in terms 27 28

See Koblik 1975. This is a definition with very contemporary reference. Capital should be seen as neither a sum of money nor an inventory of productive capacity, technology, equipment etc. Rather, these things are just money or machines until inserted into the social relations which allow them to be used productively and which allow the transformations that thereby come into being. The social relations can, of course, be exploitative. And the productive circuits may not always lead to the generation of surplus. Discussion and debate over social capital since the 1990s have encouraged the realisation that there are ‘non-economic’ components of capital too.

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of growth strategies,29 and the perceived ability of social democratic economic policy to stimulate growth and provide home market industries in particular with extraordinary opportunities for expansion (not least in stimulating housing construction) subverted bourgeois cohesion around economic liberalism. This subversion was most damaging in the employers’ federation (SAF) itself.30 From the start Swedish employers had been determined to take advantage of massive unemployment to sharply reduce wages, and for them the worst aspect of the social democratic programme was not deficit budgeting but its avowed intention to use the expansion of public-sector employment to support wage levels. The campaign against wages was particularly close to the heart of the big export-sector firms that normally dominated SAF’s executive. But the devastation the depression visited on export industries saw them lose control of SAF itself to home market interests led by Gustav Söderlund. He was convinced from the start that the events of 1932–1933 represented a fundamental shift in Swedish politics, which the social democrats would dominate for the rest of the century, and Swedish employers should make the best of the situation by co-operating with both government and union movement in expanding the economy. He steered SAF’s political course in the thirties accordingly. It is tempting to speculate to what extent his previous experience as head of treasury during Wigforss’s earlier (1925–1926) stint as treasurer had helped him towards his prophetic insight. SAF’s new ‘corporatist’ politics met the energetic opposition of a lobby group established by the biggest export sector firms – the so called Directors’ club – which attempted to re-marshal bourgeois politics around economic liberal tenets. But this group, despite its considerable financial resources, remained isolated even among employers. Together with the economics profession, the conservatives and what was left of the old liberal party, they were all that remained of economic liberal politics. The latter had now been intellectually discredited in open debate and its sup29 30

Korpi 1983, pp. 46–50. This is an extremely interesting point for the analysis of capitalist austerity in any period; it was first expressed explicitly in post-keynesian thought by Michal Kalecki (1943). See Söderpalm 1976 and 1980 on which the following account draws.

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porting institutions and electoral base dismembered. The only basis of bourgeois political cohesion was now essentially out of the running. Of all the economic liberal political actors, the ideologically compact economics profession sustained the least damage to its cohesion. Villy Bergström’s study of the profession’s attitude to the labour movement’s major economic policy initiatives from the 1932 crisis programme on – a study ironically written for the professional body’s centenary in 1977 – reveals its recurring hostility and predictable prophecies of doom (which subsequent developments invariably falsify). Himself a leading economist, Bergström proffered a simple explanation for this pattern. An economist is someone with a PhD in liberalism, and the ‘labour movement has of course developed as a cure for the consequences of liberalism. It is not especially peculiar that the occupational group that has studied liberalism as a profession collides with the political power which in all possible areas intervenes in, and in part destroys, the liberal economic system.’31 But even some prominent economists broke ranks in the thirties. Apart from Myrdal’s active involvement in the budget, other members of the Stockholm School – a local wicksellian heresy that anticipated the ‘keynesian revolution’ – like Erik Lindahl and Bertil Ohlin lent support for social democratic public economic management. The main keeper of the orthodoxy, Gustav Cassell, himself made the occasional concession in the press. For his part, Wigforss organised discussion evenings at home with dissident economists under the auspices of the social democrats’ discussion group, the Marx society (Marxsällskapet).32 In 1934, when the economic recovery was clearly established, liberals and conservatives tried to argue that, whatever the merits of the original crisis programme, the crisis was over and could no longer provide the pretext for the continuing ‘financially unsound’ interventionism. Wigforss responded by providing interventionism with a partly new and permanent rationale, one that would gradually extend its ambit from remoulding fiscal policy and its institutions to indicative planning and state-led rationalisation and restructuring of industry.

31 32

Bergström 1977, p. 155. EWSU IX, p. 21, and Myrdal 1982, p. 144.

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Certain aspects of the crisis programme, like heavy state borrowing, were temporary, he wrote in his 1934 (upper house) election pamphlet, Crisis policy, big spending and thrift. ‘But measures taken against remaining unemployment, which arises from permanent changes in the economy, must from now on form part of economic policy. One can call this change of emphasis in crisis policy a new orientation in economic policy.’33 He returns to the theme that the state’s responsibility is to make the economy run, in one of his favourite phrases, ‘at full bore’ ( för full maskin) in order to minimise unemployment and maximise social wealth. The new orientation rejected economic liberal notions of ‘sound finance’ and ‘saving’ at the expense of working-class living standards. Until economic output reached its technically optimal level, Wigforss continued, it was nonsense to suggest, as economists did, that expansionary economic policy and sustained wage levels were making the country ‘live beyond its means’. Once again Wigforss confronts the strained logic of economic liberalism with common sense: Whatever we can produce in this country by our own efforts determines the standard of living of the Swedish people. However much food our agriculture yields, that is how much we can afford to eat. It is not extravagance and it is not unsound economics. However fine the dwellings we can build with our own materials and our own hands, these are the dwellings we can afford to move into. We can afford to consume that quantity of clothing, footwear, furniture and household items, roads and bridges, railways and telephones and gramophones and radio installations, cinemas and theatres and concert halls and sports grounds, as much of whatever belongs to life’s necessities, conveniences or luxuries, as we ourselves can produce. And it is madness to suggest otherwise. All this is permissible, but not all of it is useful. That is a different question, which the Swedish people itself must decide. How much of our productive resources should serve the one or the other of our various needs depends on our own judgment, but as well on what we think is a reasonable distribution of income and buying power in our society.34

Economic expansion and the rapid fall of unemployment enormously bolstered the social democrats’ political fortunes, which rose in an unbroken line during the decade. In the 1938 election they reaped their own 33 34

EWSU II, p. 502. Emphasis added. EWSU II, pp. 510–511.

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first absolute majority (50.8 percent), and two years later they were up to 53.8 percent. (They would retain power until 1976. From 1932 to the present day they have been out of office for only thirteen years – an unbeaten record for any electoral party in a democratic polity.)35 Wigforss and his colleagues began the long and arduous task of displacing the organs of economic liberal policy. The old, highly discriminatory Unemployment Commission was marginalised by the fall in unemployment (partly stimulated by the doubling of public expenditure during the decade) and the introduction of union-controlled unemployment insurance – the Ghent system. Public inquiries were set up to make policy recommendations on unemployment, a longer-term budget, an indicative planning body, industrial relations and industrial rationalisation. All this (and interventionism in other areas we touch on below) stimulated a major new arena of class conflict – in research capacity and the ability to formulate policy initiatives – as the organisations of labour and business vied with each other to shape future interventions. Social democratic experts on policy committees used them as vehicles for proposals that the state intervene to supervise investment and industry restructuring. Following such recommendations the government made management liable to disclose investment plans and introduced investment reserve funds as a means of influencing the level and timing of private sector investment.36 For Wigforss, with his strong syndicalist leanings, these outcomes were in a sense secondary to what was achieved for working people as a whole – and in this regard rising living standards and bringing unemployment down to nine percent during the decade were major successes – and for the union movement in particular. In one of his last interviews, in 1972, Wigforss declared that the labour movement for him had always meant in the first instance the union movement.37 Thanks to the increase in employment and its basking in the prestige of its affiliated party in government, LO doubled its membership during the thirties, even though at the beginning 35 36 37

Though the party lost badly again in 2010, recording its lowest share of the vote (31 percent) since before the first world war. Wickman 1981, ch. 3. EWSU VI, pp. 366–367.

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of that decade, it already enjoyed the western world’s highest level of union organisation – a position it retained until recent times.38 Its level of ambition rose to the point where it could contemplate co-ordinating wage negotiations nationally in order to pursue its own social priorities at the expense of the existing and inequitable market-driven wage structure. This development, and the fact that the social democratic hold on government ruled out anti-union action by the state, led SAF to recognise LO as an equal negotiating partner in the attempt to find a far-reaching modus vivendi with organised labour’s new power position. The result was the famous Saltsjöbaden ‘frame agreement’ in 1938 which ratified joint regulation of all labour market issues. In the long term, the future of the new democratic socialism would rest to a large extent on the union movement, and that is a story we return to in chapter 7. As the basis of government policy, the new democratic socialism was facing a more complex situation in the late thirties. Many reforms were in train by the 1936 election, including the all-important construction of the welfare state, to which we return below. Despite their own growing support, the social democrats decided to clinch the red-green alliance – and institutionalise the split in the bourgeois bloc – by bringing the agrarian league into government as a junior coalition partner. This isolated the liberals and conservatives still further and meant that, even if they forced a joint vote of both houses on any issue, the government would have a clear majority (as opposed to a tied 190–190 vote if the social democrats had been isolated). As no new initiatives were just then on the agenda, the coalition appeared to be politically inexpensive. There was undoubtedly a ‘reform pause’ in 1938 due to two additional factors. One was the institutional lag in LO that meant it would take time before it was able to involve itself more directly in policy-making and -implementation. Yet its involvement was necessary to maintain the balance between state and movement socialism. The other was the political lag in the party itself. As subsequent events would show, Wigforss was more effective popularising his political line with the grass roots of the labour movement and the social democratic public as a whole than with 38

Kjellberg 1983, table 1 and 2007. See also Visser 2003, pp. 402–403, and Barratt 2009.

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his immediate associates. At this time he was convinced, he writes in his memoirs, ‘that neither the party nor the government were ready to pursue a policy which, in an older party-political parlance would have been called socialist.’39 A more radical policy had yet to be formulated concretely, let alone digested and accepted by the leadership and rank and file of the labour movement. Under these circumstances Wigforss took an initiative of a different kind. In November 1938 he gave a speech entitled ‘Co-operation between the state and private enterprise’ to the Gothenburg Stock Exchange Association (Börssällskapet) in which he invited big business to enter into voluntary co-operation with state economic supervision. The social democrats had only weeks before chalked up yet further gains in the upper house elections, and he hinted broadly that his audience should adjust their political assumptions to the former’s long-term political dominance accordingly. ‘Those who hold sway over larger or smaller areas of private enterprise,’ he said, ‘should not base future actions on the assumption that present trends in government are transient or that a political reversal is going to take place in the near future.’40 The government saw it as its responsibility to ensure that social resources were efficiently mobilised, and private enterprise would do well to co-operate with public interventions to this end. The speech, which in effect invited big business to enter into negotiations with government to establish appropriate forms for the co-operation suggested, was generally well received. It led to formal contacts in the following year, though the outbreak of war and the drastic change to war economy overtook and accelerated the developments Wigforss was driving at. In his 1967 essay ‘Ideological lines in practical policy’ – a contribution to a debate on the intentions that lay behind the social democrats’ stance towards private enterprise in the thirties – Wigforss comments on this incident: For a reformist social democracy it has never seemed out of place that the social transformation it sought could be advanced by a policy of increased efficiency in the private sector. […] 39 40

EWSU IX, p. 93. EWSU III, p. 297.

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The reformist marxist could also agree that capitalists should be their own gravediggers. But it was not necessary that this be an article of faith among the capitalists themselves. On the contrary, it was much closer to a bourgeois understanding that one could expect a deathblow to socialism from increased welfare.41

Wigforss’s immediate motive was probably to find a shortcut to the slower and more laborious root of institutionalised co-ordination in order to get a state-led industry policy up and running. But the Söderlund line in employers’ politics also created the opportunity to keep this group out of the economic liberal fold and thus cement the disunity of bourgeois politics. As a consummate practitioner of statecraft, he could hardly neglect it.

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Modernism, technocracy and the ‘woman question’ Even before its political breakthrough in September 1932, Swedish social democracy was becoming a magnet to a new wave of modernist thought and culture. The latter made a symbolic entrance in the Stockholm Exhibition of 1930 that launched functionalist domestic architecture in Sweden, a trend which in turn became the basis of a collective house movement – a radical new paradigm of ‘modern living’. It was the beginning of a period of mutual intoxication between the modernist avant-garde and key individuals and institutions in the social democratic movement. At the centre of this development through much of the thirties were two energetic intellectuals, Alva and Gunnar Myrdal.42 Their academic qualifications lay in social psychology and economics (after a short legal career) respectively. They returned to Sweden in 1931 – to immediately join the social democratic party – after sojourns in America and Switzerland. Their luggage was crammed with American sociological and behaviourist psychological texts, and they proffered their services to public policy under the self-description as ‘social engineers’ – a term coined in America in the 41 42

EWSU III, p. 480. Jan Olof Nilsson’s (1994) study of Alva Myrdal’s career in this period gives a fascinating cultural sociological account of Swedish modernism’s intellectual ingredients and social milieu.

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1920s. The ‘craft’ of the social engineer distinguished itself by drawing on several disciplines, above all sociology, social psychology, economics, health sciences and architecture. The Myrdals’ first and most important contact in the party was Ernst Wigforss, both on an official and a personal level. The reasons for their mutual attraction are clear. Wigforss found in Alva Myrdal an intellectual whose errant interests in such areas as sociology, psychology and anthropology were as broad as his own: ‘Alva and Ernst Wigforss had no lack of topics of conversation when they met,’ Jan Olof Nilsson comments.43 Gunnar Myrdal’s economic analysis lent influential support to Wigforss’s own, and as we have seen, the latter recruited him to crucial work around the budget. The Myrdals’ experimental reformism converged with his own cultivation of this style in the twenties and provided him with a counterweight to the caution and inertia he often met in other members of the party leadership. Wigforss joined the little coterie around the Myrdals (which included among others the radical architects Uno Åhrén and Sven Markelius) that developed the first plans for collective houses.44 As Treasurer he provided Gunnar Myrdal and Åhrén (after a refusal from the Social Security Minister, Gustav Möller) with the research funds to investigate housing conditions in Sweden. The book that came out of this project, Alva and Gunnar Myrdal’s Crisis in the population question of 1934, ‘landed like a bombshell in the political debate,’ Nilsson notes.45 The Swedish people was dying out, was its brutal message – one underpinned by a formidable empirical data base. The birthrate was just 70 percent of that required to maintain a stable population. In sociological and economic terms the data revealed why this was so in incontrovertible terms. Private capitalism’s ‘economic disorganisation’ had so subverted production and a sustainable distribution that the working population was living under intolerable conditions – not least housing conditions. Among households, 41 percent were living in ‘miniscule’ flats consisting of only one room, dwellings which for the most part were overcrowded and lacking in ventilation, sanitation and running 43 44 45

Nilsson 1994, p. 304. Nilsson 1994, p. 246. The first of these was completed in 1935. Nilsson 1994, p. 211.

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water. Rents were high, as were the speculative incomes of landlords, while working class household incomes did not extend to an adequate diet for medium-sized families. Employers upheld the practice of sacking women who married or became pregnant, and the country lacked even elementary health- and child-care. The simple addition of one child to a family could force it to move to even cheaper, more crowded and unsanitary accommodation, and worsen its diet. For women, marriage and motherhood under these conditions meant total (and usually permanent) loss of independence, poverty and a stultifying housewife’s existence, which in turn created a suffocating, mentally unhygienic situation in which children would grow up. These conditions created such a strong motivation for women to avoid marriage and child-bearing that no amount of moralising and draconian measures against abortion, sex education and contraception – the church’s and the right’s classic ‘cures’ for the population problem – would have the slightest chance of avoiding the impending demographic catastrophe.46 Until the book’s publication, the population issue had indeed been a right-wing asset, and the Myrdals’ book had a devastating effect on both the moral right and the economic liberal cause. ‘We had stolen the population question from the bourgeois reactionaries,’ Gunnar Myrdal boasted towards the end of his life.47 The terms of the economic critique could well have been written by Wigforss himself, and bolstered his interventionist line. But the book had public policy implications far beyond economic policy. It rushed in to fill several vacuums in Swedish intellectual and policy traditions. Sociology as a discipline was unknown in the country’s universities, and the book’s primarily sociological underpinnings were thus a largely unanswerable weapon. More importantly, it foreshadowed family policy as a wholly new arena of policymaking beside traditionally conceived social policy (which referred mainly to social insurance and labour market issues). This new policy arena, not least as it appeared in the Myrdals’ work, had far-flung and ill-defined frontiers. The population question, as they saw it, provided them with a licence to enter, investigate, and in the name of objective scientific knowledge to ‘put right,’ not only many areas of 46 47

Myrdal 1934. Myrdal 1982, p. 187.

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public policy, but also private aspects of the life of the citizen. Their concrete goal was to remould, normalise, rehouse and provide goal-oriented social infrastructure for the Swedish family so it would produce at least three (ideally four) children ‘of better quality’. Society’s ‘human stock’ (människomaterial) had to be both increased and improved. ‘The family is to be made over’ is the title of one of Alva Myrdal’s articles in the social democratic women’s league journal Morgonbris (of which she was the editor) in 1933.48 And in Crisis the authors declare:

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Bad habits must be corrected, the uncomprehending must be enlightened, the irresponsible must be woken up. There is room here for a comprehensive state organised campaign of mass education and propaganda. If it is to bear fruit where it is most needed, it must be intensive and insistent and exploit all kinds of channels to get to parents who otherwise might have only the most tenuous connections with the wider social world.49

Here, then, was a technocratic ambit claim of unheard-of proportions in a democratic polity, and the Myrdals would personally press this claim in the work of the ensuing Population Commission and its myriad supplementary inquiries, as well as a very large number of detailed reform proposals. The claim rested on the philosophical underpinnings we referred to earlier – Bentham’s calculus about the maximum happiness of the greatest number, a totalised utopia legitimating coercive instrumentalism, 48

49

Morgonbris 12/1933. Beside the article can be seen an extraordinary symbol for the new ethos of scientific openness and hygiene. It is a photograph of a radiant, particularly athletic young woman standing naked in front of a washbasin. Nilsson (1994, plate 8) reproduces it, and observes that at an earlier time it would have been seen as pornographic. But in the new setting it is the direct opposite. ‘This is a naked human being, part of nature, who is exposed in all her naturalness. No secrets are kept here. Everything stands out, and everything should stand out. But not because the woman in the picture is forced to it, as in the older health inspections. The woman stands there undressed because she wants to, she wants to reveal her truth. A naked body can never be false. It is freed from adornment. And in the picture the woman is freeing herself from the only ‘falsity’ that can detract from her body – dirt and sweat. […] Morgonbris presents a picture in which not even the sex organ is something private that can be violated. Sex and the sex drive are no more secret than anything else’ (p. 265). Myrdal 1934, p. 226.

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and the overweaning claims of science to a privileged knowledge which trumps democracy – both conscious moral starting points and discursive reason.50 This immense policymaking effort has now borne its one unambiguously healthy fruit – a pointed study of technocracy and its profoundly anti-democratic character by Yvonne Hirdman: Putting life right (Att lägga livet till rätta).51 Its title comes from the final report of the first Population Commission and typifies the authoritative idiom both it and the Myrdals constantly resorted to. It should be said at once – and as Hirdman herself points out52 – that many of the proposals were firmly rejected by Gustav Möller, the Minister most directly involved, who had a chestertonian sensitivity to the integrity of the individual and the illegitimacy of technocracy. A clear case in point was his refusal to countenance paternalistic proposals that benefits be given in the form of goods chosen by welfare experts instead of cash. A citizen of commercial society, as Möller well understood, must have discretionary cash income. As we shall see in the next section, he laid the foundations for a quite different welfare state than the one the new breed of social engineers had in mind. But the latter retained their hold on many associated policymaking commissions throughout the forties and so established their own counterculture in the interstices of the democratic state. Although their work had little to do with treasury, it would seem that Wigforss 50 51

52

In the light of the Swedish experience in the thirties it is indeed ironic that Popper (1945) approvingly counterposes social engineers to totalitarian utopians. Hirdman 1989. It was published at a high point in the economic liberal revival in Sweden (as in the west in general) and was pressed into service as a cudgel aimed at social democracy, as if the technocratic dreams of the thirties exposed therein represented the essential and abiding truth of what social democracy stood for. Needless to say, the elective affinities of these excesses with economic liberalism’s own scientism, utopianism and coercive instrumentalism went unremarked. Hirdman 1993 corrects in passing some of this tendentiousness. See Hirdman 1994a and 1994b for shorter by-products of the main study in English. Hirdman 1989, p. 129 and pp. 157–158. See also Rothstein’s (1994: ch. 7) critique of Hirdman for supposedly suggesting that the history of this technocratic trend accounted for the history of welfare state building in this period. While his chapter helpfully summarises important aspects of Swedish welfare state construction, the polemic against Hirdman misunderstands her research object.

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to some extent dropped his own chestertonian guard against their technocratic modus operandi. His habitual distraction from gender politics may well have had a lot to do with this failure. Habermas has more recently suggested that the welfare state has a tendency to ‘colonise the lifeworld’, even though social security is a vital support of citizenship. He calls for the welfare state’s ‘reflective continuation’; that is, its continuation with its colonising tendencies recognised and neutralised. It is thus worth dwelling a few moments on just how this well documented colonisation attempt in the thirties was conceived, before turning in the next section to what the democratic socialist alternative was. The lifeworld the Swedish social engineers imagined and sought to colonise in the first instance was a formulaic one that social democracy had only just acquired from a rather unlikely source. But it was one which would serve many of its publicists from then on as the raison d’être of its welfare state and arguably its most enduring slogan ever – ‘the home of the people’ (folkhemmet). Social democracy had inherited a highly conventional and orderly ideal of domestic bliss (male breadwinner, housewife, disciplined children) from one of its early feminists, Ellen Key. But the term folkhemmet itself was coined by a conservative and nationalist professor of political science and parliamentarian, Rudolf Kjellén – a very early influence on Gunnar Myrdal. For Kjellén (political) science should determine the constitution of the state, and the state should in turn supervise the life of the family.53 Folkhemmet is conspicuous by its absence in Wigforss’s working vocabulary, and apparently in Möller’s as well. But it was the party leader Per Albin Hansson’s stock-in-trade. A particular model of domestic bliss became a metaphor for the kind of society he envisaged social democracy building. He unfurled it in 1927 in Morgonbris, with its traditional gender roles explicit: We have come so far as to be able to start to prepare the great home of the people (folkhemmet). We will create comfort and wellbeing, make it cosy and warm, light and happy and free. For a woman there should not be a more attractive task. Perhaps she only has to glimpse it to get the inspiration – for her to bring to it all her zeal and enthusiasm.54 53 54

Nilsson 1994, pp. 133–134. Quoted in Hirdman 1993, p. 11.

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A year later came Per Albin’s classic formulation. The gender order is now assumed in a protective, patriarchal utopian vision:

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The foundations of the home are togetherness and a sense of belonging. The good home knows no privileged or disadvantaged members, no favourites and no stepchildren. No one looks down on anyone else, and no one tries to gain an advantage at anyone else’s expense; the strong do not oppress and rob the weak. In the good home equality, care, co-operation and helpfulness reign. Applied to the great home of the people and the citizenry this requires the breaking down of all social and economic barriers which at present divide citizens into privileged and disadvantaged, dominant and dependent, rich and poor, well-to-do and desperate, plunderers and plundered.55

Whatever the faults of this model, the empirical underpinnings of Crisis make clear the contrast between it and the social and domestic reality of the time. The case for reform was unanswerable, but the social engineers used this fact as a pretext to try to completely rewrite the domestic utopia of folkhemmet in utilitarian and scientifically instrumental terms that entirely displaced the earlier, sentimental ones. In the social engineers’ own idiom the family and the home it lives in now become the one legalised ‘reproductive institution’ (fortplantningsinstitution) and a ‘dwelling machine’ (bostadsmaskin) respectively.56 Both are to be designed, rationalised and instrumentalised in fine detail by experts to serve their policy goals. The primary goal, as we have seen, was to produce ‘more and better children’, which required high, scientificallydefined standards of both physical and mental hygiene. (A secondary goal was to stimulate the housing industry and to ‘guide’ the consumption of manufactured consumer durables, both in the interests of hygienic living and of creating the right kind of demand for industry policy – a connection that Wigforss strongly supported). What all this expressed was – in Hirdman’s term – a ‘veterinary attitude’ to human reproduction and its social and environmental preconditions, an attitude that one can trace back through the masculinist utopian literature to Plato. In this instrumental, veterinary world, science and its incontrovertible truth claims are both the source of authority and the way to effectively 55 56

Quoted in Therborn 1984, p. 46. The following account draws on Hirdman 1989.

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pursue desired outcomes – simultaneously the social engineer’s ‘legitimation card’ and ‘magic wand,’ as Hirdman puts it.57 The scientific culture reiterates its unchanging message: there is no alternative to the good life as it itself defines it, and so there is no point in submitting it to a democratic, deliberative process. The public inquiries consisted in ‘experts’ (sakkunniga) and not representatives of those whose lives were under review. Very few women sat on these inquiries because they were largely excluded from university education. Women have a natural monopoly over childbirth (an economist might say), and at the time they had a monopoly over midwifery as well; yet no woman was expert enough to sit on the first public inquiry into obstetric services.58 Public inquiries ended up probing people’s sex lives, linen cupboards, diets and sleeping patterns, and recommended house inspections and the keeping of detailed notes from regular checks on the physical and mental health of individual children. They established norms for how many sheets, towels, saucepans and so forth a family of a given size should have. The factory and the army provided models of the rationalised processing of everyday life.59 The public inquiry into sexuality exemplified this approach to social engineering, and Gunnar Myrdal’s participation in it came out in the hardedged, economistic language of its final report. It gave short shrift to traditional sexual mores and moral conservatives who saw sex as negative and preached self-control both before and within marriage as the key to orderly reproduction. Sex was now healthy and life-enhancing, and not something to be kept secret as if it was shameful. The most pressing policy problem was to discourage ‘Stockholm marriages’ – casual relationships – and to stabilise the only family structure that could produce three to four quality children. Marital sex had to stabilise this structure, and so in this

57 58

59

Hirdman 1989, pp. 148, 152. As Rothstein (1994, pp. 227–231) notes, the result was the grossly violating and objectifying treatment of women in obstetric practices (in line with western trends as a whole, it should be added) until a midwife, Signe Jansson, began her reform efforts in the seventies. Alva Myrdal presented some of the Swedish experience somewhat watered down for an English-speaking audience in Myrdal 1945.

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‘function’ it had to ‘outcompete’ casual sex in the quality of the pleasure and happiness it delivered. This frank, instrumentalised discussion of sexuality, Hirdman notes, spawned Sweden’s international reputation for loose sexual morality. ‘The truth was actually the precise opposite.’60 Hirdman theorises the profoundly antithetical character of this social engineering to the cause of democracy, and to the individual autonomy that is the hallmark of citizenship, in its four key tendencies – regimentation, elaboration, transformation and violation (inordning, utbredning, omvandling, kränkning). Regimentation works under the cover of a softsell consensus on the primacy of the search for happiness and its now scientifically revealed preconditions, on the basis of which technocracy can appeal to an implicit social contract. Elaboration refers to the lack of discernible limits to the areas of social and personal life that policy can probe and intervene in. Transformation is the actual intrusive process of ‘putting life right’ according to the goals, premises and imperatives of the powerholder. Violation refers to the breach of the individual’s and the collectivity’s (above all women’s) integrity in the intrusion process, and the stigmatisation of their existing ways of life as wrong and inadequate. In sum, the citizen (and the female citizen above all) is the object of instrumental calculation and policy manipulation, not the subject of the political process and her/his own life project. In spite of its undemocratic character, the social engineering of the thirties could certainly flaunt its seductions to unwary progressives. Many of its arguments and specific reform proposals were unambiguously positive. They included the critique of economic liberalism as the source of poverty and inequality and the discrediting of the moral right’s penchant for oppressing and demonising women. Likewise some of the social engineers’ reforms that were implemented – provision of social infrastructure such as clinics, child-care, income support and so forth, as well as the outlawing certain labour-market practices that discriminated against married and child-bearing women – would in time become uncontroversial. Moreover the Myrdals at least asserted the right of all women, including married ones and those with dependent children, to a paid

60

Hirdman 1989, p. 223.

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worklife.61 They thus re-issued the classical socialist vision of the heterosexual couple as two equal, gainfully employed comrades. The social democratic women’s league became a launching pad for the new ideas, as the myrdalian version of modernity appeared to be unambiguously woman-friendly. Yet as Hirdman shows, women as a prime focus of the thirties and forties social engineering ended up with some very mixed blessings. Modernisation of itself does not mean liberation, as a male norm prevailed both at home and at work. And when the Myrdals returned to America in 1938, the ongoing social engineering project around family policy rejected the working wife and returned the housewife to the now rationalised and modernised home. As housekeeper and mother, however, she was herself to be ‘modernised’, to no longer work autonomously according to a traditional women’s culture, but according to the norms and under the supervision of the state’s scientific elite. This added a new dimension of subordination and loss of integrity to her continuing dependence on a male breadwinner. Whatever benefits the social democrats’ flirtation with technocracy in the thirties may have brought women, socio-economic citizenship was not one of them. And as we shall see in chapter 7, equality and autonomy would also elude those who found their way onto the unreconstructed labour market. In terms of the second aspect of a radical statecraft we referred to at the beginning of this chapter – the creation of the preconditions of social citizenship and civic self-determination for all – social engineering was counterproductive. By contrast its nemesis – Gustav Möller as the redoubtable minister for social security 1932–51 – would exemplify this aspect of the new democratic socialism’s statecraft and so win his own place on its roll of honour. 61

As Britta Lövgren (1994) points out, only some social democratic women and a few individual men at the time rejected the general view – which even previous social democratic feminists had espoused – that a woman’s life should revolve around domestic work and the home. In the same volume Margareta Lindholm (1994) draws out the thought-provoking contrast between the two leading feminists in social democracy at the time – Alva Myrdal and Elin Wägner. The former saw women’s emancipation as best achieved through their integration in the public sphere of economy and politics. Wägner suspected this would lead to new forms of subordination, and that women should instead increase their social influence in a more solidaristic reorganisation of their separate spheres.

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Beginnings of a socialist welfare state As Bo Rothstein’s work62 in particular has shown, Möller was the key innovator, both in policy lines and administrative arrangements to give effect to them, in producing the kind of welfare state that Sweden was to become famous for, including the administration of important labour market functions. Gøsta Esping-Andersen also acknowledges him not only as the ‘architect behind the construction site of the social democratic welfare state’, but probably the one who coined the term ‘welfare state’ in a significant electoral manifesto in 1928. ‘The state should not only be […] a nightwatchman state but a welfare state as well,’ he wrote, and specified the latter in terms of ‘a responsibility, an absolute duty, to create guarantees for the citizens’ welfare in all respects, so far as that is possible.’ 63 This conception of the welfare state implied a clean break with existing relief systems, public – and private – charities with their demeaning, stigmatising and manipulative aspects based on a discrimination between the deserving and the undeserving poor. Social security was to be a guarantee and a right of citizenship, not simply a matter of relief of social distress. Esping-Andersen has elsewhere theorised the analytic implications of this departure in terms of the decommodification of labour,64 an important concept in understanding the relationship between social security and socialism. In chapter 1 of this study we noted Polanyi’s discussion of how economic liberalism created the ‘fictitious commodities’ of land, labour and capital. The commodification of labour depended on socio-economic and institutional conditions that the economic liberal political programme sets out to create: a large population cut off from direct access to a livelihood (through ownership of means of production or otherwise) and thus forced to sell its capacity to labour on an oversupplied labour market. In the original British version this meant dispossession of the rural poor in the Enclosure Acts, mass unemployment and the destruction of all but the

62 63 64

In English: Rothstein 1985 in the first instance (but see also 1996 and Rothstein & Trägårdh 2007). In Swedish, see Rothstein 1994, ch. 7. Esping-Andersen 1989, pp. 228–229, from whom the quote is taken. Our emphasis. Esping-Andersen 1985, pp. 31 et seq and 1990, ch. 2.

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most rudimentary and manipulative relief systems. Thus the individual’s life chances and claims on income in market society depend on his or her saleability (and relative price) as a commodity. Under the contrasting principle – social security and decommodification – an individuals has a claim on an equitable share of society’s income, wealth and amenities in his/her capacity as a citizen.65 If for the time being we leave aside the delivery of welfare services (that dramatically expanded much later) and look only at income support, the Swedish social democrats were not to achieve a welfare state capable of meeting this institutionally and financially demanding ambition until the 1960s, when the ‘universalist’ or ‘encompassing’ welfare model matured.66 Long before that, however, Möller had begun to unpick the older liberal relief model and replace it with one that served the citizenship principle. According to a widespread view, the Swedish welfare state was inspired by Beveridge – a view that is even less convincing than the one that Wigforss’s major contribution to Swedish politics was as the importer of keynesianism. Möller expressed his own predilections in welfare principles long before the publication of Beveridge’s definitive White Paper of 1944. As Esping-Andersen lists them, Möller’s reforms include establishing the later world-famous labour market board (Arbetsmarknadsstyrelsen – AMS), the old age pension, unemployment insurance, preventive health and social care, child endowment and rental subsidies. Although social security benefits were not universal in Möller’s time, his approach to eligibility was to make it as broad as possible, culling the very rich from eligibility for benefits rather than singling out the very poor to receive them. In this way he sought not only to end the stigmatisation of welfare recipients, but also to build the broadest possible political support for the welfare state he was building. The latter’s focus on the whole citizenry’s social security (trygghet), as Sven E. Olsson’s account indicates, distinguished itself from both liberal relief systems and bismarckian social insurance for the working class alone.67 65 66 67

On the general importance of social policy in the ‘democratic class struggle’ see Korpi 1983, ch. 9. ‘Universalism’ is Esping-Andersen’s (1990) typology; ‘encompassing’ is Korpi & Palme’s (1998). Olsson 1990, pp. 93–97. Also Rothstein 1985, p. 157 and 1994, pp. 209–216.

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The other side of Möller’s contribution to socialist statecraft was his creativity in making the institutional forms on which his reforms depended actually serve the new political aspirations. Rothstein lists five basic ‘administrative strategies’ that he applied in this endeavour.68 The first of these – the provision of general instead of specific benefits that we have already seen – was more a moral and political imperative than an administrative strategy, although general benefits bring the added advantage of simplifying and cheapening a welfare administration no longer so burdened with case-by-case decisions on eligibility. Möller’s second strategy in this list is entrusting local and popularly based organisations with detailed delivery, including testing eligibility where this was unavoidable. His third was the corollary of this: to the greatest possible extent withdrawing discretion over eligibility decisions from the regular bureaucracy. He sought popular empowerment by delivering welfare to the people via the people, one could say in lincolnian terms. The same consideration dictated the fourth strategy of replacing old relief institutions with new ones. More subtly, Möller used the tactic well-known to organisational theorists as institutional outflanking – establishing a new institution beside an older one that cannot for the moment be abolished outright, but setting up a dynamic whereby the new one progressively marginalises the old. In this way Möller outflanked the old, notorious unemployment commission which the terms of the ‘cow deal’ with the agrarians did not allow the social democrats to abolish outright. Its marginalisation was ‘Möller’s greatest achievement’, in Rothstein’s view.69 Fifth, Möller recruited union cadres as ‘street level’ bureaucrats for the new ‘reform bureaucracies’ – bureaucracies that departed from the classic weberian model and were much more amenable to the elective goals of policy and managerially effective in attaining them.70 The labour market board mentioned above was to develop into the historically most significant of these as the bearer of the postwar active labour-market policy. Möller thus pioneered the antithesis of technocracy. The most important 68 69 70

Rothstein 1985, pp. 156–164. Rothstein 1985, p. 161. See Rothstein’s major work (1986) deals with this innovation. And see the considerably revised English-language version (1996).

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distinguishing feature of the latter is its use of institutional power to pursue its own pre-given political agenda. But the reform bureaucracies were pliable instruments of democratically determined priorities, instruments with deep roots in popular forms of association. It was a peculiarly effective way, too, to bring state socialism and movement socialism into a balanced relation with one another. Wigforss and Möller held their respective senior cabinet posts simultaneously in the 1925–1926 period, and for the very long stretch from 1932 to 1949, when Wigforss retired.71 Their mutual relations were sometimes tense, and the institutional and temperamental reasons for this were clear. Möller’s ambitious reforms were often unavoidably expensive, while Wigforss as treasurer was determined to maintain the probity of the government’s fiscal administration – outside of his own deficit-budgeting heresy – while he looked for opportunities to broaden the tax base. In these circumstances Möller’s and Wigforss’s judgements could collide over what could be spent on social policy without giving hostages to political fortune. Beyond that, Möller came close to the archetype of an organic intellectual, emerging as he did from a particularly poor and disrupted background. His commitment to his class was visceral, his socialism and sense of social justice passionate, and his marxism unmixed with other major traditions. Both his personal life and political career bore the marks of his impetuosity, and stand out in stark contrast to Wigforss’s own. Per Albin Hansson as prime minister until 1946 managed to maintain the working relationship between them nonetheless. Wigforss even delivered one of the main speeches in Möller’s honour – a warm but not uncritical tribute – when the labour movement organised a lavish sixtieth birthday party for Möller in the Stockholm town hall in 1944.72 On Hansson’s sudden death in 1946, however, Möller felt he was the natural successor as party leader and Prime Minister. This prospect unnerved Wigforss among others, and Möller would later blame Wigforss in particular for the defeat of his candidature and the election of Tage Erlander in the tense manoeuvring in the party leadership in the week following 71 72

See Nine Christine Jönsson & Paul Lindblom’s (1987) lively biography of Möller, from which the following is drawn. Reprinted in EWSU IX, pp. 306–307.

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Hansson’s death.73 No political difference can be read into this conflict. Their enormous individual contributions, as we suggested above, constitute two sides of the one new democratic socialist coin – democratic socioeconomic re-organisation and the creation of social citizenship. In particular, Möller and Wigforss – as well as Gunnar Myrdal – bore powerful witness to one of the central tenets of this political tradition: the mutually reinforcing relationship between the goals of social equity and socio-economic efficiency. Möller would resign in 1951 in some bitterness over cabinet’s refusal to support his own desired pace and direction of reform in his own area. The same disappointment would gradually overtake Wigforss in retirement.

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Postwar reconstruction The outbreak of the second world war in September 1939, and of the Russo-Finnish war closer to home two months later, led all major parliamentary parties in Sweden to form a national coalition government to face the emergency. The three major figures in the social-democratic government, Per Albin Hansson (prime minister), Ernst Wigforss (treasurer) and Gustav Möller (minister for social security), retained their portfolios during the war. But the continued advance of peacetime reform policy was largely out of the question as the government grappled with the severe disruptions that the virtual cessation of trade visited on Sweden’s exportdependent economy, and with the nerve-racking business of managing the country’s traditional neutrality so as to forestall a German invasion. In Sweden, as in the western combatant democracies that avoided enemy occupation, the war economy nevertheless became an unpremeditated experiment in drastic economic re-organisation. National emergency 73

For an eye-witness account by a non-protagonist see Andersson 1980, pp. 276–289. The circumstances were evidently more complicated, and the misgivings over Möller’s candidature more widespread, than the latter’s scapegoating of Wigforss acknowledges. See also Jönsson & Lindblom 1987, pp. 489–496.

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spirited away the obstacles that reform in the thirties had confronted – capital’s perennial reluctance to accept state regulation, the traditionalism and independence of the normal state bureaucracies, and their unwillingness or incapacity to encroach on the autonomy of the private sector. The new wartime bureaucracies, by contrast, were thoroughly subordinated to ministerial control. Efficiency and flexible pursuit of policy goals – rather than the mere administration of rules – became universal principles of public administration. As Friberg74 has graphically described, private sector and state were welded together in a centralised ‘organisational mosaic’ of crisis commissions from the 1930s, regular bureaucracies with new emergency wartime responsibilities, 157 new central government wartime bodies, 960 regional ones and some 100,000 at local level. The allocation of resources became a state function during the war, and trade union and private organisations entered into corporatist bodies to facilitate the state’s new role. The state directly organised the labour market, established important new enterprises and took over responsibility for 80 to 90 percent of housing finance. This wartime apparatus gave the Swedish labour movement its first taste of full employment and an economy operating ‘at full bore’. It sorely tempted socialists to see it as a more promising starting point for socialist transition than a return to peacetime private enterprise. This temptation made itself felt as the labour movement began preparing its plans for postwar reconstruction. In 1944, in anticipation of the war ending, the SAP developed a new party programme. At the same time the wider labour movement adopted the more high-profile Postwar programme of the labour movement. Wigforss took the leading role in drafting both. He also pressed the research capability of the wartime apparatus into service by setting up in his own department a commission for postwar planning under Gunnar Myrdal’s direction. The new party programme represented the first revision since 1920, and its principal author’s imprint is unmistakable in its shift in emphasis from a focus on overcoming ‘exploitation’ to one on universal ethical positions as the basis of labour politics, and from nationalisation to democratic planning and re-organisation as the appropriate forms of socialism.

74

Friberg 1973, ch. 6.

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Anticipating the inevitable bourgeois attack on planning as ‘totalitarian’, the programme stated that the working class’s superior democratic and cooperative morality, rather than its immiseration, made it the bearer of socialism. Wigforss defended these changes on behalf of the leadership – against an orthodox critique pressed by Branting’s son, Georg Branting – when the proposed new party programme was debated at the party congress. He said it was time to

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emphasise more clearly than we have in the past that we are not just the supporters but the most determined defenders of citizens’ rights and political freedom. […] We hear bourgeois voices saying that social democracy, because it wants to transform economic relationships, will increasingly limit freedom in all possible respects, and finally make political democracy impossible. […] In fact, it was a strong labour movement that won political democracy in this country. Without the labour movement, democratisation would have been impossible, for it came only through bitter struggle against the same bourgeois groups that now dress themselves up as the defenders of freedom. I think there is reason to emphasise that it is due to the labour movement’s contributions that a firm foundation has been laid for civic rights and political equality.75

Returning to a now familiar theme of his from the twenties, Wigforss argues that private property is only appropriate to small-scale production, and the ‘rights of property’ had now to be adjusted to meet the changed historical circumstances of large-scale industry. To reunite the workers with the means of production, Wigforss urged, social democracy must now ‘go straight to the goal of collective property rights’.76 The labour movement’s postwar programme highlighted planning, efficiency and social and economic democratisation in pursuit of its central strategic goal – an institutionalised commitment to full employment. It focused on the immediate tasks of postwar reconstruction and assumed that wartime planning would have to be continued to combat an imminent, severe depression that most experts were predicting at the time.77 In keeping with Wigforss’s conception of economic management from 75 76 77

EWSU I, p. 211. EWSU I, p. 213. Not least Gunnar Myrdal himself: see Myrdal 1944.

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the thirties, ‘planning’ went far beyond ‘bastard keynesian’78 prescriptions for fine-tuning (monetary and fiscal policy). Wigforss’s conception rejected autonomy for private investment calculations – which orthodox versions of keynesianism defended – as a guide to the stable and socially efficient allocation of resources.79 The uncoordinated nature of investment instead appeared as the central problem of economic policy, Wigforss told the 1944 party congress, and its disorganisation could only be overcome with a ‘general plan for investment in society’ that harmonised public and private investment. Again, the inspiration of the Yellow Book of 1928 is clear. Nationalisation took its place as just one of the measures that any plan may prescribe in specific cases. Efficiency in the interests of full employment and social equity now demanded economic democracy and overarching indicative planning. Having experienced the efficiency of the wartime economy, the labour movement would no longer tolerate a ‘capitalist economy that works at half speed (för halv maskin) for long periods’.80 In Wigforss’s eyes, the labour movement at the end of the war would have both the instruments and the tactical advantage to accelerate change and could place itself on an offensive footing as soon as the war emergency ended. Confrontation, he notes in his memoirs, was deliberately written into the postwar programme: If the social democrats had wanted to hold the opposition to a discussion of its less controversial goals […] the postwar programme could in many respects have been formulated differently. But we were determined to do battle all along the line. For a long time we had had an interest in making clear what we meant by socialist policy, and in getting rid of the interpretation, cherished by our opponents, that socialism meant state enterprise. For this reason, such a form of socialisation did not play a

78

79 80

This is the term later used by Joan Robinson to describe orthodox economists’ emasculation of Keynes’s understanding that a ‘somewhat comprehensive socialisation of investment’ would be the only way to control the fluctuations in a normal capitalist economy. As ‘post-keynesians’ have been arguing ever since, neither monetary policy nor fiscal policy can be expected to avert the disruptions of structural change, nor to do the job that industry policy and incomes policy were designed for. See Joan Robinson et al. 1945. LO-SAP 1944, p. 79. EWSU I, p. 254.

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prominent part in the programme. But it deliberately began with the declaration: ‘To put this programme into effect is to give the economy a new organisation and to transform society in a socialist direction.’81

In Gunnar Myrdal’s famous expression, the reconstruction period was to be the labour movement’s ‘harvest time’ (skördetid). In the 1944 elections, the socialist bloc (social democrats and communists) reaped 57 percent of the vote which, given the communists’ support for the postwar programme, gave the latter a clear parliamentary mandate. The rapid advance in the communist vote (from 5.9 to 10.3 percent in two years)82 registered working-class resentment towards the reduction of real wages during the war and underlined the need for social democracy to take the initiative if it was to hang onto its traditional base. But the Prime Minister, Per Albin Hansson, personified a nascent centrist tendency in the party, one receptive to the suggestion from bourgeois sources that the wartime coalition government should continue into the postwar reconstruction period. In the party executive he expressed anxiety over a possible bourgeois backlash if the social democrats abandoned the coalition. He argued for a strategy of either preserving it as it stood or governing in a more selective coalition.83 This would inhibit a bourgeois attack on, and even lock the bourgeois bloc into support of, the postwar programme which – Hansson liked to remind his colleagues – ‘is not a socialisation programme’.84 In spite of the recent electoral experience that a socialist majority was achievable, and only achievable on the basis of a socialist action programme, old electoral insecurities were resurfacing. With them reappeared the perennial assumption of electoral pragmatists that centrism – ideological self-effacement – represents the royal road to a stable electoral majority. Wigforss and Myrdal, in successfully opposing the argument for preserving the coalition government, rejected the possibility of bourgeois support for the postwar programme if the latter was to be pursued ‘seriously’. A coalition would constitute a self-defeating inhibition on social demo81 82 83 84

EWSU IX, pp. 298–299. See also Ohlson 1958. Hadenius et al. 1978, table 1c. Minutes of the SAP executive 5.11.44 and 18.6.45. Minutes of the SAP executive 9.12.45.

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cratic policy and propaganda, and the party would continue to lose support to the communists.85 As Wigforss commented to Myrdal, ‘now is the time for governing, not collaborating.’86 In that spirit, the first purely social-democratic majority government took office in July 1945. On the surface, the political drama of the postwar reconstruction period in Sweden developed according to an international pattern: the left’s brief attainment of a new zenith of prestige and political power before succumbing to the unforeseen and unpredictable upheavals of the reconstruction period and an internationally co-ordinated right-wing counteroffensive. But thanks to the exceptional nature of democratic socialist politics in Sweden, the labour movement there would demonstrate a unique ability to avoid the tragic denouement. In almost all western democracies, the end of the war saw an upsurge of radical social aspirations that delivered electoral majorities and governmental office to parties of labour. They were elected on platforms of planned postwar reconstruction that revolved around institutionalising permanent full employment. Keynesianism, the experience of wartime planning and selective nationalisation appeared to provide all the tools necessary to meet an expected postwar depression.87 It was precisely the falsification of this historical assumption in immediate postwar developments that proved to be the downfall of organised labour’s postwar advance on the basis of ambitious interventionist programmes in the west. In the immediate postwar reconstruction period the international economy was characterised, not by the depression that the economics profession anticipated, but by overheated demand and shortages of capital, consumer goods and labour. Above all, western countries apart from the USA had such small foreign reserves that inflation and trade imbalances would quickly plunge them into crisis. Western labour movements’ new policy armoury contained no answers to these problems and, despite Keynes’s efforts at Bretton Woods, an internationally orchestrated resurgence of economic liberalism rushed in to take advantage of left-wing governments’ embarrassment. Within a short time almost all left 85 86 87

Minutes of the SAP executive 5.11.44 and 18.6.45. Myrdal 1979, p. 66; also 1982, p. 227. See Apple’s (1980) survey.

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governments would beat disorderly retreats from radical programmes back to private enterprise and free-market solutions – now laced with state-led wage restraint that exacerbated social inequality as non-wage incomes rose on the inflationary wave – pending their savage electoral executions in the late forties and early fifties. Throughout the fifties and early sixties parties of labour would be excluded from central government throughout the west with just one exception: Sweden.88 In that country an organised economic liberal revival that came to be known as ‘The resistance against planning’ (Planhushållningsmotståndet – PHM – the name Per Albin Hansson gave it) brought together a temporarily reunited and frenetic bourgeois opposition to the social democratic government. Globetrotting laissez-faire ideologues like John Jewkes and Friedrich von Hayek were imported to bolster the local hue and cry over ‘totalitarian planning’ and ‘socialist muddle’. As the architect of the postwar programme and the country’s treasurer, Wigforss throughout this period was singled out for unprecedented personal vilification as the main villain of the piece. Retreat, however, was not on his agenda. His personal contribution to ‘harvest time’ consisted in supporting the unions’ wage drive when wartime wage control ended, and in guiding through parliament comprehensive tax reforms – including substantially increased company tax, wealth and inheritance taxes – to pay for the huge increases in spending on pensions and social insurance that the postwar programme called for. Wigforss’s postwar tax reforms were of a qualitatively different order to his tentative step in 1928 in the same direction that triggered the ‘cossack election’. The new reforms amounted, in his opponents’ rhetoric, to a ‘plot against the country’s economy’ by a ruthless doctrinaire out to destroy the co-operative tradition of Swedish social democracy, even ‘Swedish decency’ itself. The leading liberal broadsheet Dagens Nyheter commented in May 1947: Now or never. Before Wigforss retires he wants to draw a broad line across the Hansson government’s co-operative policy for social reform and replace it with a revolutionary intent – and the goal must be reached at any price and at the double. […] Old true social democrats are tormented by evil dreams at night.89 88 89

Apple 1980. Quoted in EWSU IX, p. 370.

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One such prominent ‘old true social democrat’ – Torsten Nothin – himself described the tax reforms as a ‘confiscation’. But as he was at the time in charge of the Stockholm police, his role in the affair was to place a personal guard on the treasurer in the face of repeated death threats.90 ‘Swedish decency’ was more honoured in the breach than in the observance during the frenzied taxation debate. The bourgeois press threw the most basic ethical rules and professional standards to the four winds as it cast vulgar aspersions on Wigforss’s intentions and sanity. Eskilstuna Kuriren compared him to Adolf Hitler, at the time of recent memory. 91 Vecko Journalen presented him under the rubric ‘The outsider’ as a cold and inhuman Robespierre:

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No one can doubt that, in this man, dogma has entered into an alliance with a welldeveloped megalomania. For all we know it is a fateful combination. In the eerily artificial atmosphere in which Ernst Wigforss seems to move as a politician, if not also as a person, we observers at least look in vain for those checks that could prevent dogma and power from running amok in each other’s company.92

With these attacks bourgeois political interests and the PHM allowed itself to be distracted from the issue on which their fellow rightists abroad were achieving spectacular success – the attack on interventionist economic policy as a matter of principle. There was nothing principled about either the conception or the implementation of this defence of existing economic privilege against progressive tax reforms in Sweden. In short, the right allowed itself to be decoyed away from an issue on which it was strong

90 91 92

Nothin 1955, pp. 282–298. 7 February 1947. Vecko Journalen no. 12, 1947. These and many similar outbursts have been clipped out – presumably by Wigforss himself – and later placed in his papers at the labour movement’s archive and library in Stockholm. The otherwise standard-conscious bourgeois broadsheets in Sweden have continued this practice of periodic campaigns of vilification – for instance against Olof Palme (social democratic prime minister 1969–1976 and 1982–1986), Rudolf Meidner, and the LO leadership during the wage-earners’ fund controversy 1976–1982, and more recently against feminist publicists.

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towards one on which its prospects – not least against an energetic publicist and wily tactician like Wigforss – were far less promising. The bourgeois campaign galvanised the labour movement and the social democratic public around their most basic value – egalitarianism – of which Ernst Wigforss now became the living symbol. The labour movement agitated around the slogan ‘The people’s interests before big capital’s!’ and Wigforss himself campaigned tirelessly for his tax reforms. As Ny Tid reported from the celebration of Wigforss’s birthday in January 1948:

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No one could mistake the warmth in the tributes which inundated Ernst Wigforss yesterday at the Gothenburg party branch. It was a homage to the man and his achievement of a sincerity and strength that, more than many words, bore witness to what the name Ernst Wigforss means for Swedish workers. For more than two decades Ernst Wigforss has been Sweden’s most reviled figure. It has not made the slightest impression on him. He has worked for the goal and has never taken his eye off it. This is why the Swedish worker has come to love him. The grosser the attacks on him have become the more tightly Swedish workers have closed ranks around him. They have felt that the attacks against him are ultimately aimed at them. With each new attack Swedish workers have sensed what Ernst Wigforss means to them.93

In the papers he left to the labour movement’s archive in Stockholm there are a considerable number of strongly-worded messages of support sent to him personally during the tax debate by organisations within the labour movement. According to a typical one, ‘Behind you stands the great majority of the Swedish people – a majority which is certainly larger than you yourself imagine.’94 In his memoirs Wigforss, ever the agitator, comments laconically on this period: I think many politicians are divided in their reaction to personal attack. One feels flattered by respect from one’s opponents, perhaps mostly from them. But if one cannot get praise, it is better to get insults than silence. Bernard Shaw tells of an English criminal lawyer whom all the worst offenders hired. He was the most famous. No one had had as many clients hanged as he. An agitator wants an audience, as many of the unconverted as possible. Many who would not otherwise have dreamt

93 94

Ny Tid 28.1.1948. Letter from Nässjö Västra Arbetarekommun, 7.4.1947. EWA 17.

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of coming to a socialist meeting came to my speeches out of sheer curiosity, to see and hear a politician who was said to be ruining both the state’s finances and the country’s wellbeing.95

The tax reforms duly passed through the riksdag in the autumn of 1947. In allowing itself to be decoyed into making Wigforss’s tax reform its main focus, the PHM sealed its own fate. When the social democrats retained government at the 1948 election, the PHM dissolved and the business lobbies and the agrarian league each made their separate peace with the victors. The PHM provided another illustration of the contradiction in bourgeois politics between furthering immediate economic interest and giving priority to preserving the longer-term bases of the capitalist order. When it collapsed, bourgeois politics slumped back into its fragmented and directionless prior condition for almost a decade. In June 1949, at 69 years of age and after his eighteenth budget, Ernst Wigforss retired as treasurer. (He retired from the riksdag five years later). ‘I left the government because what a treasurer now had to do others could do as well, in part better, and because freedom beckoned,’ Wigforss writes in his memoirs. ‘That is roughly the whole truth.’96 As subsequent passages make clear, the freedom in question was to resume his role as agitator and theorist (including writing his memoirs) without the distraction and inhibition of his portfolio and cabinet membership. He left unresolved the problem of institutionalising full employment and reconciling it with price stability in a growing, peacetime economy. But as we shall see in chapter 7, LO was well on the way to developing its own democratic-socialist solution to this problem, and a sense of its own direct role in implementing this solution. From the point of view of Wigforss’s own principles, such a solution in which the union movement had a direct role was to be preferred to one based on the power of the state alone.

95 96

EWSU IX, p. 379. EWSU IX, p. 399.

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Some provisional conclusions on the new democratic statecraft

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We will return to the issue of statecraft in chapters 8 and 10 after a number of new desiderata have been added to the problem of reconciling its two tasks – liberation and freedom. At this stage, by way of summary and extrapolation from the experience of the thirties and forties in Sweden, the following points may be useful: 1. The politics of explicitly contesting the rationality of capitalism focuses the socialist challenge on programmatic issues that can underpin successful electoral mobilisation and mould initiatives for reform capable of improving socio-economic outcomes for a broad popular constituency. A number of those outcomes – such as higher rates of employment, better conditions for union mobilisation and employment or income security – have a direct bearing on deepening social and economic citizenship. 2. Any democratic politics in the west will normally find itself pitted against economic liberalism, and the former’s best chance of gaining the upper hand lies in splitting the latter’s main institutional bearers and mass support by focusing on its central weakness – its recurrent contractionary economic effects. In particular, a coherent interventionist programme in aid of more efficient production – for instance, in the form of industry policy – can separate productive economic interests from the economic liberal cause. This kind of politics complements that of criticising the moral failures of economic liberalism, above all its degradation of work, its generation of social exclusion and its random inequity, urban decay and environmental destruction. 3. A democratic challenge to economic liberal dominance necessarily polarises political life, and the democratic challenger has nothing to gain through political appeasement and ideological self-effacement. The social democrats’ most significant electoral victories, those of 1932 and 1948, occurred in highly polarised campaigns, and this pattern would be repeated in the elections of 1960 and 1968. From the fifties, most elections would by contrast be less polarised as the social demo184

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crats’ politics would tend to become more centrist, and they would correspondingly have greater difficulty mobilising support. 4. Technocratic approaches and methods in wielding state power are counterproductive and continue the capitalist tradition of treating individuals and social groups as objects of instrumental calculation and bureaucratic manipulation. On the other hand, administrative creativity can facilitate a meshing of state capacities with the democratic aspirations and organisational vitality of popular forms of association in implementing reform programmes that are genuinely liberatory and deepen socio-economic citizenship. 5. Despite the problematisation of women’s position in society and economy in the thirties, little was achieved in ending their exile from socio-economic citizenship. This failure points to two central and interrelated democratic problems: a) the failure of forms of industrial and political representation of basically male workers to articulate a genuine – and so universalist – democratic sensibility; and b) the tendency for policy makers to fall from universalist grace through attending only to those (male) social interests that have achieved a high degree of political articulacy and clout. 6. The new democratic socialism in this period was able to make considerable progress in deepening socio-economic citizenship for those its organisations represented – men already entering or established in the paid workforce. But it had not advanced far on the other axis of the citizenship problem – that of spreading and universalising citizenship in ‘employment society’ where a citizen’s autonomy and freedom normally depends on secure access to an adequately paid job.

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6. Citizenship and the social question in the postwar period

The Nordic labour movement has chosen the way of democracy. It has perhaps not seen clearly from the outset the whole breadth of the programme which is implied in the words democratic socialism. Step by step we have been led closer to the insight about the deep changes it requires to outer circumstances and in people’s view of their interaction. We don’t believe it is possible to summarise this whole endeavour in a single word, even if that word is as big as freedom. We know we must seek a freedom that does not clash with equality and solidarity, and that is at the same time compatible with the productive efficiency which provides the material underpinning for all aspects of our human life. What we have to solve is a problem of co-operation which, in a democratic society, grows out of the effort to give as much freedom of movement as possible to individuals and their organisations. It is a crucial problem for democratic socialism, and how it solves it becomes a touchstone of its viability. Ernst Wigforss

Wigforss’s writings in the three years leading to his retirement from the government in 1949 reflect a change in bourgeois politics in this period above and beyond the grotesquerie of the PHM and the campaign against tax reform. The economic-liberal revival of the latter forties was not as fundamentalist as the one today. The liberal party under the social liberal leadership of Bertil Ohlin was making rapid gains at the expense of the conservatives, and the bourgeois bloc as a whole was affirming the ‘social state’ – the state provision of basic social security. For instance, even the conservatives supported the extension of the old age pension in 1946. At the same time bourgeois publicists were using the battle-cry of freedom to forestall any attempt by the social democratic government to intervene in or regulate the economy beyond the minimal keynesian fiscal and monetary ‘fine tuning’ that by this time had also become relatively uncontroversial in western countries. 187

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Wigforss sensed the allure this development would have for the social democratic leadership to run dead on the difficult and controversial part of the party’s socialist project and official programme – economic re-organisation – and become the bearer of its immediately popular and relatively unproblematic social security aspect alone. As the party consolidated its power it would become a magnet for those who saw it merely as a career path and had little feel for its founding ideals. The new ‘grey’ social democrats (as they would come to be called) would tend to remould it as a social-liberal party which expressed the consensual politics of maintaining the ‘social state’ and which had a uniquely institutionalised mass base in its supporting movements, above all the union movement. Herbert Tingsten’s tendentious but influential study of Swedish social democracy’s ideological development,1 which he had published in 1941, claimed this metamorphosis had already come to pass. What Tingsten’s thesis lacked in historical accuracy it might make up as prophecy. In the late forties, then, Wigforss took time out from the demands of the treasurership and of meeting the PHM’s histrionic attacks to frame a critique of the drift into social liberalism. He would reiterate and elaborate two fundamental objections we saw foreshadowed in his critique of Karleby’s work in 1926. The first was the moral one, that such a line of retreat would betray the quest for citizenship where people (or at least men) were most active and most often present – in their worklives. This retreat meant the abandonment of ideals of freedom, equality, democracy and community in this primary arena of life itself. The second objection was that the welfare state, which was required to achieve real social security and egalitarian redistribution, would rapidly find itself frustrated by the constraints of an economic system under oligarchic control which demanded tolerance of 1

Tingsten 1967. As noted in chapter 4, Tingsten had been one of the intellectuals of the SAP’s nascent social liberal right in the 1930s. He became a convert to economic liberalism after reading Hayek’s The road to serfdom and resigned from the SAP in protest against its socialist leanings, which presumably can be seen as some sort of admission that his own thesis about the party’s turn to liberalism was untenable, or at least premature. He thereupon made his matchless talent for ideological bluster available on radio and in the press (inter alia as the editor of Dagens Nyheter) to the antisocial democratic cause. In this capacity he found his most formidable sparring partner in Ernst Wigforss.

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the most drastic inequalities to function at all. In the long run capitalism would prove to be not so much the supportive economic platform of the welfare state as its procrustean bed. Welfare state development could be ensured only if the capitalist economy was transformed. Wigforss’s writings in his retirement largely elaborate on the themes that he established in his last years of office. The former include the massive work of retrieval of the moral bases of democratic socialism presented in the three volumes of his memoirs.

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Freedom and economic order: Wigforss in the late forties Wigforss happily joined issue with bourgeois publicists in the latter half of the forties as they pounded their favourite theme: freedom. As early as 1946 we find him liberally quoting Rydberg’s poetry in Tiden – in ‘Personal freedom and economic organisation’ – to establish how the socialist conception of freedom in commercial society overlapped but also went well beyond that of its bourgeois critics. The common elements were (and here it is clear that Wigforss had not been permanently influenced by the social engineers): One wants to use one’s income as one finds appropriate, thus consume what one chooses, save if one so chooses, choose where to live and work and what occupation to pursue, marry or separate, have children or decide not to, be a loner or a mixer, entertain whatever religious or economic or political or other opinions one sees fit, propagate them in speech and print, assemble likeminded people in organisations and parties so as to seek support for one’s attitudes and further one’s interests through co-ordinated action.2

So far so good. Even the new bourgeois line accepted ‘that the labour movement’s struggle up to now has led to increased freedom for large social groups.’ But the arguments begin with the question of economic organisation: the changes that the social democrats now have in mind, bourgeois publicists claim, will destroy the basis of the old conceptions of 2

EWSU IV, p. 214.

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freedom and will impose a quite different ideology.3 Without unregulated private enterprise one cannot have political and intellectual freedom, according to this claim. Wigforss is evidently pleased that his opponents themselves make the connection between freedom and economic organisation; they thus provide him with the pretext to remind his own comrades that ‘the socialism being discussed here wants changes in economic organisation precisely in order to create the conditions for a freer human life.’ Further,

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freedom in our discussion does not just have the negative meaning of freedom from restrictions, external or internal. It also has a positive content in that it implies an active development of the human being’s ‘natural’ capacities. This development takes shape in the interaction between these capacities and the natural and social context. It can thus be facilitated or obstructed by the surrounding circumstances, and a conscious moulding of these circumstances therefore forms part of the endeavour to widen human freedom.

As in his previous work, Wigforss reminds his reader that earlier democrats had to fight the same battle against oligarchy ( fåtalsvälde) in the political order that socialism was now preparing in the economic order. The aristocracy resisted political democratisation in the name of freedom, as today’s economic oligarchy does. When the democratic state emerged, Wigforss points out, it did not simply take over the same unlimited and oppressive power of the aristocracy, but rather popular rule took the form of a limited constitutional state that witnessed an ‘effort to limit society’s power over the individual, an effort to secure the individual’s freedom against the collectivity.’ Accordingly, ‘for social democracy it has always been obvious that our ideas about personal freedom […] are integral to the re-organisation of economic life.’4 Just as the development of a strong constitutional state brought greater personal freedom, the growth of the collective sector of the economy can now do likewise. ‘But even more significant is empow3

4

EWSU IV, p. 125. The bourgeois argumentation reviewed here would have a rerun in apocalyptic terms during the wage earner funds campaign 1976–1984 (see chapter 7), and the discussion in this section can be seen as a civilised forerunner of that rancorous debate. EWSU IV, p. 126.

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ering as many individuals as possible to make their contributions, explore new ways and take their own initiatives under the technical conditions of large-scale production.’5 The essay ends on a topical note. Just as Wigforss had in earlier writings bracketed marxism and economic liberalism/neo-classical theory, he now brackets American capitalism and Soviet communism as simply two forms of economic oligarchy whose apologetics consist in denying the compatibility of democracy and efficiency. Western Europe should avoid both. ‘Social democracy […] on the contrary has the task of showing that it is possible to unite the search for justice and equality, co-ordination and efficiency with the demand for all the civic freedoms which the western democracies quite rightly regard as essential.’6 Two years later, in a subsequently published contribution to a radio debate, he presents freedom and equality as not just compatible but as inseparable. The context for their relationship is again the constitutional state. Some degree of freedom for all can be found in a society without it being the freedom we call for. Some freedom for all can be found in dictatorships and in aristocratic oligarchies. In a democracy one cannot evade the demand that the rule of law protect everyone’s freedom equally because everyone is taken to have an equal right to freedom. It is a large demand that rests in the final analysis on belief in each person’s equal human value. One could raise the objection that I am in this way smuggling the demand for equality into the demand for freedom. It is unavoidable. In any society the one person’s freedom is limited by the other’s, and if they are not to have equal rights, one has to find some other measure to compare them by. Such measures certainly exist. Aristocratic societies of different kinds have had theirs. In our society power and thus freedom in the economic sphere are very unevenly distributed. This is justified on the basis that large fortunes and concentrated economic power in certain private citizens’ hands is the only way to secure economic efficiency. Communists answer from their corner that the elite of the class-conscious workers must have power to rule because it understands best what is in the best interests of the working people. Being a social democrat for me means rejecting both these lines of defence of privileged social groups.7

5 6 7

EWSU IV, p. 131. EWSU IV, p. 132. EWSU IV, pp. 142–143. Our emphasis.

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Here Wigforss even more explicitly brackets capitalism and communism as two oligarchical forms whose appeal to rationality and efficiency is so much special pleading for immunity from democratic demands. He is also making a vital point about the essential equality of a free citizenship in a democratic state that T H Marshall would make perfectly explicit in his famous essay ‘Citizenship and social class’.8 Citizenship is necessarily equal, Marshall insists. Civil citizenship implies equal civil rights and liberties. Political citizenship demands one person-one vote. Social citizenship calls for equal access to a materially and culturally civilised life. Wigforss is simply applying the same underlying principle to economic and industrial citizenship: it must empower the participants in these spheres equally. He goes on to enumerate the freedoms – extensions of existing civic freedoms – that should be sought in the re-organisation of the economy. They can be seen as the desiderata of a free and democratic commercial society, and they include leisure, disposable income, choice of occupation and workplace, job security and satisfaction, and ‘some form of freedom and influence over the undertaking we are employed in’.9 These cannot be won without social intervention to secure full employment.10 The real questions about the relationship between freedom and economic organisation did not concern the individual’s right to seek a sense of freedom and independence by starting his or her own business, which the social democrats had no intention of interfering with. The big questions are instead these two. Firstly, how is the popular wage-earning majority to get a stronger sense of freedom and independence in its work? Secondly, how can we stop the controllers of big industrial and financial capital following an economic policy which obstructs the one that the popular majority has chosen through its elected representatives as the most fruitful?11

8 9 10

11

Marshall 1950. EWSU IV, p. 143. In reviewing this list of civic-economic freedoms for workers it should be remembered that the great majority of women at the time were not part of the paid workforce. To win these freedoms would thus have widened the gap between the quality of men’s and women’s citizenship, all in the name of equality. EWSU IV, p. 144–145.

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The oligarchy’s claim to superior knowledge – be it capitalist or communist – is self-serving and unconvincing, Wigforss concludes. Social democracy firmly holds that economic democratisation will not only further freedom, but economic efficiency as well.12 A reading of his other writings in the same vein leads to a sense that Wigforss was not only appealing to the social democratic public, but also trying to pin some reluctant colleagues in the leadership down to the party’s socialist project. In an election pamphlet from 1948 he pointedly inserts a heading ‘Increased democracy in the economy’ and quotes from the party programme (which he himself had drafted, of course):

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Social democracy wants to reunite the workers and ownership. It wants to let the workers share in the right of ownership over the means of production on which their living depends. Where the conditions exist for a role for small business, the reunion in question can occur in the form of private enterprise. But where the technical preconditions make large-scale production necessary, collective forms for participation in ownership must be created. […] [A] primary concern here is also the demand not only to preserve, but also to strengthen, a spirit of enterprise and freedom of movement that can be threatened by both public and private bureaucracy – a spirit of enterprise that is a precondition for vibrant production.13

Again, it is the ‘problem of freedom’ that drives this democratisation, which is certainly not synonymous with nationalisation. Democratic re-organisation of the economy requires experiment in different forms of participation in shared ownership and control according to the variable requirements of particular branches of the economy.14 In August 1947 Wigforss took time out from the mudslinging over his tax reforms to present a long and searching address to the Nordic labour movements’ congress in Oslo on the whole gamut of important programmatic issues facing them. It was published the following year as a booklet with the pregnant title Economic democracy.15 In 1928 Per Albin Hansson had schematised the socialist transformation of society in three 12 13 14 15

EWSU IV, p. 145. EWSU IV, pp. 170–171. EWSU IV, pp. 171–172. Wigforss 1948.

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successive stages of democratisation – political, social and economic. These stages referred respectively to universal suffrage, open access to social and cultural amenities and the building of the welfare state, and to the democratic re-organisation of the economy around an at least implicit concept of economic citizenship. In 1976 LO would launch its wage-earners’ funds proposal, to which we return in chapter 7, under the rubric of economic democracy. Wigforss’s booklet was not published by the party press. Astonishingly, the editorial committee omitted it from Wigforss’s selected works. This is despite the facts that it published them in 1981 when the battle over LO’s version of economic democracy was raging, and that the booklet’s problematic was of burning relevance to the latter debate. The booklet reveals its author’s increasing use of the term ‘democratic socialism’ instead of social democracy, as the quote at the top of this chapter – the booklet’s concluding words – exemplifies. Here Wigforss re-issues the critique of social liberalism we noted in his review of Karleby’s book. He makes it clear that socialists may have to tolerate a measure of inequality to provide incentives in economic life. That does not mean they can accept the measure of inequality private enterprise demands. It is hardly probable that the labour movement, in its search for economic equality, will call a halt at that point where this equalisation policy in fact runs the risk of coming into conflict with the capitalist economy’s dependence on high incomes and huge fortunes to propel it. […] For my part I persist in the view that a levelling out of existing inequalities is an essential element in a socialist transformation of society.16

There are no easy solutions to this dilemma, such as unlimited rises in the level of progressive taxes. The bourgeois critique that redistributive measures of all kinds soon obstruct private enterprise contains a grain of truth, and to the extent that the bourgeois critique is true it forces the labour movement to a choice between conforming to the demands of a capitalist economy on the one hand

16

Wigforss 1948, pp. 16–17.

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and more collective forms of enterprise which are compatible with the pursuit of a redistributive policy on the other.17

The next step in this argument contained a prophetic reference forward to the wage-earner fund campaign: It is another side of the same issue when we take up the question of capital formation in the sense of saving. To the extent that capital requirements have previously been met from bigger incomes, especially coming from accumulated wealth, that source of savings has to be replaced by the saving of the many. That is just a simple inference from the general thesis that if large social groups want to take over the power of the few, they must also take over the latter’s useful social responsibilities.18

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Socialists should not be beguiled by the bourgeois parties’ lipservice to social policy while they defend the existing economic order if the former do not want their democratic aspirations ‘to be dammed up within arbitrary boundaries.’ In an implicit reference to the democratic revolution, Wigforss notes: Those old opponents of political democracy who declared it would be the entry point for socialism had an accurate sense of the revolutionary (omvälvande) implications of accepting the principle of equal political rights. That does not mean that the demand for redistribution should be pushed without regard for other values. But the limits to any endeavour which expresses democratic aspirations can only be set by other demands with their roots in the same democratic ideological complex.19

This last important point in no way compromises the requirement of productive efficiency, which must be pursued pragmatically and experimentally, Wigforss continues. The state can take direct measures to further efficiency, but it can also support union organisations’ efforts to participate in the management of enterprises as a means of furthering both economic democracy and efficiency. Here Wigforss emphasises the open-ended, experimental nature of the democratisation process.

17 18 19

Wigforss 1948, pp. 18–19. This issue is addressed more fully in chapter 8; suffice it to say at this point that the orthodox equation of high taxation with constraints on enterprise and incentive has been massively over-stated. Wigforss 1948, pp. 19–20. Wigforss 1948, p. 21. Our emphasis.

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But it won’t be intelligible if one doesn’t first free oneself of the idea that modern social democracy possesses a readymade blueprint of a future model society. The democratic transformation of society is an historical process in which we now stand at a certain point with given economic forms, in the throes of our own development under the influence of technical, economic and psychological factors.20

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In this spirit he goes through the kinds of instruments that democratic socialism can have flexible recourse to – nationalisation, regulation, indicative planning – without becoming identified with any one of them. He rules out only central planning, which is incompatible with entrepreneurial and labour freedom: ‘the choice is not between total systems’ reads one heading.21 Nor does he baulk at a sensitive issue for his audience – that of the division of labour and the need to keep a cap on wages in any economic system. ‘We should not hide the fact that this involves one of economic democracy’s most difficult problems.’ Capitalist economy solves these problems through market forces. Brutally but in a sense effectively through unemployment and misery. If we scrap these forces in a democratic economy, they must be replaced by others. It would not be true to claim that social democracy already clearly sees the way forward to a solution. But it does see the need to find that way, which avoids both the crises of capitalist economy and the dictatorial administration of a central authority. Voluntary agreements both on questions of wages and labour mobility is the way of economic democracy. It’s easier to point out this way than to proceed along it. But it is inescapable if it’s going to be feasible to stick to full employment policy.22

As we shall see in chapter 7, the young LO economists Gösta Rehn and Rudolf Meidner were at the time beginning to grasp the nettle precisely in these terms. Later in the booklet Wigforss makes clear that this ‘voluntary co-operation between different citizen groups’ is not simply a pragmatic question, but a crucial and permanent mechanism for a social democracy dedicated to freedom.23

20 21 22 23

Wigforss 1948, p. 25. Wigforss 1948, p. 41. Wigforss 1948, p. 40. Wigforss 1948, p. 60.

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Wigforss explicitly defines economic democracy as consisting in two lines of development: ‘increased authority of the democratic state over economic life,’ and ‘broader rights for workers at their workplaces, in their enterprises and in various branches of the economy.’ Later chapters show that Wigforss is here prefiguring today’s discussion of the complementarity between a strong democratic state (a ‘self-governing republic’) and a robust civil society. In democratic socialist terms, socialisation means democratisation. ‘All forms of economic activity in which work proceeds under democratic forms, with a democratic distribution of the product of labour and therewith in practice a sort of common ownership, can claim to be in a certain sense socialised enterprises.’24 Before we leave this text we should note Wigforss’s formulation of the meaning of citizenship in a democratising commercial society (as opposed to an oligarchic and unregulated market society) under the heading ‘The individual and the market’: There is one sense of freedom which consists in individual adaptation to the situation on a market. But there is another kind of freedom which consists in being able to tame the market. The basic idea in a co-ordinated management of all society’s resources can be said to be to avoid dependence on the free market’s capricious powers. People’s sense of freedom has increased through winning greater mastery over the natural contingencies under which they live through scientific discoveries and technological inventions. In the same way it would be a step towards greater freedom not to be subordinated to fluctuations in economic life which the individual experiences as if they were natural forces.25

A prime but not exclusive sense in which people can win this new freedom, one might add, is through their own decommodification in a functioning social security system (as we saw in the previous chapter), as well as in a democratic re-organisation of the economy that empowers its participants rather than subordinating them as powerless, commodified ‘inputs.’ Earlier in that politically overheated summer of 1947 Wigforss had also taken time to address the social democratic youth camp near Malmö on the primacy of the elective moral goals of the movement, and

24 25

Wigforss 1948, pp. 45, 47. Wigforss 1948, p. 42.

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of political voluntarism in realising them – not least when the labour movement is no longer preoccupied with the sheer physical survival of its members. What is affluence for? Just as we have seen Wigforss reject a faith in progress based on a grand theory of economic development, so we find him here rejecting a theory of inevitable moral progress. The youth of the movement has a special responsibility to cultivate its moral ideals as the basis of its participation in the ongoing political class struggle. A primary ideal here is the valorisation of work itself in the context of a democratic process of community. Earlier societies have had their ideals of the good life, Wigforss points out, such as the Spartan ruler, the Athenian citizen, the knight, the monk, the gentleman and the entrepreneur. But now ‘the wage earner as well is forming her/his own ideas of human values which depart from the knight’s, the monk’s, the gentleman’s and the bourgeois entrepreneur’s.’26 He then makes an implicit claim that this aspiration of wage earners fits four-square in the western tradition. We no longer resist the thought that the work of the majority can be something like that of a scientific research team – that it can be part of a life in a community in which each gives according to his abilities and does not parsimoniously work out how much he should take out so it matches what he puts in. Is this really something that the bourgeois world must reject – that the working class seeks to use both its union organisations and its political influence to explore new forms for a worthwhile life? Instead of rejecting this endeavour as socially destructive, should it not realise that it is inescapable in a society which has seriously adopted political democracy, and so look for an accommodation with these historically given ideals?27

In failing to rise to this challenge in a creative vein, we suggest in the next chapter, the opponents Wigforss is addressing here place themselves outside the positive development of the western tradition.

26 27

EWSU IV, p. 137. EWSU IV, p. 138.

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The social-liberal temptation Wigforss’s output after his retirement would display an increasingly evident thematic unity. Having achieved political democracy, and apparently being well on the way to achieving social democracy, the social democratic party was in great danger of forgetting the culmination of this democratisation of society – economic democracy. If democratic socialism meant anything in the era of welfare capitalism, it meant pushing the reformist agenda into the area of democratic re-organisation of the economy. The necessity of taking this step is the nub of Wigforss’s writings in retirement. The problem was already surfacing, as we shall see, when Wigforss retired. Swedish social democracy was hardly insulated from ideological influences from other western countries, where liberal and conservative governments were taming the new socio-economic aspirations and harnessing them to their own system-preserving agenda. In these countries, ‘keynesian’ policymakers had forgotten Keynes’ problematisation of the investment function and its influence on the level of employment. The long boom – a spontaneous and historically contingent upsurge in economic activity28 – sustained the illusion and the rhetoric that permanent full employment rested securely on now well known techniques of macro-economic stabilisation, or fine tuning of aggregate demand through monetary and fiscal policy, from time to time complemented by state-led incomes policy. Keynesianism appeared to obviate the need for selective state interventions into the economy and any interference with private enterprise’s normal managerial prerogatives, structures and forms of calculation. If any basic economic problem could still be said to exist, it was the perennial one of checking working-class ‘greed’ in the form of wage rises that threatened price stability and profit levels. In hindsight it’s clear that for capitalism’s basic functions, nothing had changed beneath the sheen of welfarism and spontaneous, temporary full employment.

28

See for example Matthews [1968] 1983 and Stevens 1984.

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Welfare and full employment, however, spawned the powerful myth in western countries that capitalism had been transcended – an alibi that covered labour reformism’s retreat into social liberalism. So complete was labour reformism’s identification with the ‘keynesian compromise’ that labour leaders often claimed to be its authors and even asserted socialist credentials for it.29 The latter rested on a presumed abolition of poverty in ‘affluent society’ and representations of a brave new world of ‘welfare capitalism’ from which privilege, inequality and poverty had been exorcised. In this celebration, the unaddressed concentration of economic power disappeared from view, and the socialist mission to democratise economy and industry vanished from the political agenda. ‘Capitalism has been reformed almost out of recognition,’ C A R Crosland asserts in his influential book from 1956, The future of socialism, which urged socialists to abandon their now anachronistic concern with economic arrangements and to turn their energies instead ‘into more fruitful and idealistic channels’.30 In such hands socialism lost its distinctive profile. It was merely one of the victors in the western triumph of affluence and consensus over a barbaric prehistory of unemployment, poverty and class conflict. Although social democratic government in Sweden survived the bourgeois counter-offensive of the latter half of the forties, the party leadership would gradually succumb to these international currents. Wigforss discerned and attempted head off the tendency to ideological retreat in ‘The socialism in social democracy’, an article he published in 1949, the year of his retirement. How has it gone in this country? Has the trend been towards a dissolution of the original socialist ideas, so that only certain expressions remain to separate social democracy’s socialism from the socially coloured liberalism which may nowadays be taken to characterise the bourgeois position? Or are there still alive within social democracy, however reworked, those ideas which led to demands for a fundamental reconstruction of society along socialist lines?31

29 30 31

In chapter 8, we present a more nuanced account, more alert to conflictual and unresolved elements – both intellectual and practical – in keynesianism. Crosland 1956, p. 517. EWSU I, p. 258.

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His target is of course Tingsten, whose basic error Wigforss sees as reducing marxism to a mere deterministic prophecy. In an implicit reference to the revisionist debates, Wigforss points out that social democracy had essentially abandoned this aspect of marxism as early as the turn of the century. The revision had left the really vital elements of Marx’s thought on foot: the individual parts of the marxian conception are tested, accepted, modified, rejected. Under highly critical scrutiny much of the realistic vision of the driving forces in social development are preserved. […] The connection between economy and polity, economy and ideology have seldom been lost from sight. It has allowed social democracy to see its task in a longer perspective; it has given the party’s policies continuity and increased its ability to resist temporary changes in public opinion.32

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Wigforss would press this view even harder when the debate was rekindled in 1967 by the publication of Leif Lewin’s important survey of Swedish debates over economic planning.33 His 1949 essay affirms his life-long values, but also begins to tentatively explore the direction in which economic re-organisation has to move in order to achieve socialism’s basic values: In discussions about socialism it is often forgotten that socialist thought not only consists in demands for order and planning, which can bring forth a state socialism with markedly centralist characteristics, but equally a passion for the freedom of the individual which threatens to explode all forms of collectivism apart from a purely voluntary co-operation.34

That freedom and voluntary co-operation find their realisation only in democratic organisational forms which depend on the individual’s active participation. In an implicit critique of mere welfarism, that serves individuals’ rights to a passive consumer portion of social goods, but not their right to actively participate in social processes, Wigforss declares: Social democracy has always given democracy a wider and, in my view, deeper meaning. Political democracy is not the fruit of a revelation that has since dressed itself up in dogmatic forms. Nor is it just a practical form of arriving at decisions through

32 33 34

EWSU I, p. 260. Lewin 1967; EWSU III, pp. 471–484. EWSU I, p. 262.

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‘counting heads instead of kicking them in’. It’s an outgrowth of a much more fundamental position, a belief in a universal human worth which should express itself in the human community and how it is ordered. Its purpose is not the mere passive sharing of all in the material and spiritual values which increase and are created, but also participation in creating and preserving them. Political democracy is a form in which we seek to realise this purpose. If it appears inadequate and attracts criticism, it is because it only imperfectly meets the demands of a fundamental democratic conviction.35

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Economic re-organisation of the ‘human community’ can make good this inadequacy only ‘if it’s followed up by an internal democratisation, which creates feelings of belongingness between enterprises and employees, and thereby liberates formerly fettered energies to the benefit of both production and enjoyment at work.’36 Even the comparatively modest goal of job security, Wigforss argues, is not only a precondition to an effective social policy but also demands ‘society’s decisive influence over economic life and a significant measure of collective property and enterprise.’ That security is a part of freedom ought to be just as self-evident as the fact that it’s not all that freedom consists in: we also tie the word freedom to independence, mobility, the possibility of making active inputs and taking initiatives.37

Positive freedom leads to the demand for collective ownership – not necessarily a centralised collectivism, but certainly a form that reunites the workers with the means of production. The democratic socialist has never felt satisfied merely with the raising of living standards that people receive passively. Social policy is a form of socialist egalitarianism which achieves its purpose only when it leads to a greater will and ability to actively participate in social development. Hence social policy is not enough. The politics which goes no further than offering people a future with yearly improvements in standard of living as long as they leave the existing economic order untouched by disturbing interventions and dangerous experiments – that politics conflicts not only with socialism, but also with what democracy fundamentally implies.38 35 36 37 38

EWSU I, p. 264. EWSU I, p. 265. EWSU I, pp. 266–267. Emphasis in the original. EWSU I, p. 272.

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As precisely this politics of welfarism slowly gained the upper hand in the party, Wigforss’s oppositional role as a speaker and writer became clearer in his retirement. The civic-republican emphasis on active economic citizenship, as against the passivity of the affluent worker with a purely instrumental view of work, would grow. But before he went much further in his critique of his own party’s swing to social liberalism, both sides found themselves responding to (or merely reacting against) a type of thinker we have already seen Wigforss warm to – a radical conservative.

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An Atlantean moment of reflexivity The radical conservative in question was Tage Lindbom, a well known intellectual in the social democratic movement at the time and director of the labour movement’s archive and library (a post he retained until 1965). His years of affiliation with social democracy were, however, a staging post in a personal political odyssey which started in the communist movement in the early 1930s and ended in his adopting a religiously inspired conservatism much later. In 1951 he published After Atlantis, a formidable critique of postwar western civilisation that came to the most pessimistic conclusions about the prospects of a democratic socialist development. The book is erudite, forcefully written and situates its critique of the European social democratic labour movement’s development in a wide sweep of intellectual and political history. It pointedly raised the problem of welfarism, and a number of points in Lindbom’s social critique would prove quite prescient. For these reasons it is worth sketching his argument. In the first part of After Atlantis, Lindbom points to deep-seated tensions in socialism’s antecedents. He presents a detailed discussion of the contents of the major utopian projections since Plato, particularly those usually attributed to socialism. Most are distinctly totalitarian (with some honourable anarchist and syndicalist exceptions), and they exhibit few common evaluations except the affirmation of rationality and belief in progress. Then Karl Marx transforms the intellectual landscape of socialism. He replaces the utopian ‘dreams’ of order and rationality with a com203

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plete faith in a capitalist development and its material fruits, a faith that makes all projections of a desirable future society irrelevant. Future society will inherit whatever capitalism builds for it. The original psychological mainspring of the mass social democratic labour movement that rested on these marxist foundations was class hatred and burning resentment of social injustice, Lindbom continues. The movement spoke of democracy, but since it was engaged in a class war it developed a quasi-military organisation and cultural model. It was hierarchical, divided between officers and foot soldiers, and its organisational culture was strikingly masculinist.39 With the development of a sophisticated reformist trend within this labour movement, however, a second psychological mainspring made its presence felt – the search for social security. The class struggle had no longer to be driven to its apocalyptic conclusion, Lindblom wrote. Ironi-

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39

Given that this would turn out to be the blue collar union movement’s major mole of nature when women qualitatively increased their participation in the paid workforce, it is worth recalling Lindbom’s (1951, pp. 182–183) description: War is a masculine undertaking. That becomes especially evident in the labour movement’s imagery of struggle. One is introduced into a masculinely heroic world. It is the ‘manly’ characteristics which attract praise, one becomes blood brothers, one marches in step, one despises weakness and cowardice. Women are completely absent from the hard life at the front. The battle songs are about the sons of labour. It is brothers who will fight and win. […] A book of poems published by the Norwegian workers’ party includes a poem by C Jeppesen, ‘My mistress’, but it is not about any woman. The poet’s mistress is the revolution. In the labour movement’s symbols the same materialistic and masculine characteristics stand out. The demonstrations – the militarily tightly organised ranks – are a warlike, masculine spectacle. On the old banners and placards you see men who hold out their hands to each other in a brotherly handshake, and there are often dragons and other terrifying monsters, symbolising the enemy, who are facing a humiliating death or defeat. The victory is often symbolised by a female figure, a goddess of victory, one moment carrying the palm leaf of peace in her hand, the next a naked slashing sword. It is the old warrior symbol, the object of erotic desire reworked for the celibacy of the battlefield and disguised as the class struggle’s goddess of victory. Masculinism was, of course, not a monopoly of the social democratic labour movement. Aggressiveness towards women was integral to the masculine identity of the syndicalist revolutionary in Sweden – see Blomberg 1995.

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cally, the extreme materialism that marxism bequeathed to the labour movement, as well as its mass proportions and penchant for military hierarchy and order, established the preconditions for an eventual disciplined accommodation with capitalism and the modern centralised state. As Bernstein had observed, ‘a materialist is a Calvinist without God.’40 Liberal capitalism also developed in the same materialist, centralist and gigantist direction. ‘The uninhibited forces of free competition and struggle did not lead, as liberalism believed, to Freedom, Truth and Light, but rather to Centralised Power,’ Lindbom suggests.41 Gigantism, and the technocratic organisational forms that Lindbom saw this feature inevitably bringing forth even in a popular movement like unionism, crowded out both democracy and living community: One of the most important starting points in a comprehensive social debate must be to question existing forms of community […] One of the primary preconditions to setting up a reasonable order in western industrial society is that we find smaller communal forms to live in. Communal forms that are not so big that people cannot relate to them as a whole, participate in the discussion of the issues which affect their common interests and feel that their vote really means something both for them, their families and their surroundings. Social innovations in which opinion is formed democratically by the people, and not as they are now, by chiefs of staff and the state elite, which thereafter dish up readymade opinions to the people as so-called information and education.42

The deterministic assumptions aside, we can recognise here the same search for active citizenship to underpin a democratically reconstituted living community as the one Wigforss was conducting in the twenties. And so in the postwar period, Lindbom went on, the ‘Grand Coalition’ of capital, reformist labour movement and the state has come to rule over western society. Socialism as such, with its romance of a new Atlantis – a different, democratic community built up on human values – now finds itself rotting in a ‘Babylonian captivity.’ The chains of this captivity tie socialism to conformity to a technocratically-steered, mindless productivism in large-scale industrial processes, 40 41 42

Quoted in Lindbom 1951, p. 253. Lindbom 1951, p. 255. Lindbom 1951, p. 275.

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and to an associated heartless consumerism. Socialism is doomed by its marxist roots which kept it too dependent on the system it was supposed to overcome. There the socialist movement stands today. In the first place it must realise that socialism cannot be built in our modern industrial states in any but authoritarian forms. Democratic socialism is an impossibility in these societies. In the second place it must realise that socialism represents a solution to only part of the problem. Capitalism’s deficit is big. It is vastly bigger than the marxist socialist and communist social critique indicates. The marxist critique of capitalism is actually quite mild and limited. Those areas where capitalism created the greatest devastation or at least has aided and abetted the process are the ones marxism has not detected or on the contrary placed them in the credit column. Capitalism broke down old solidarities without putting new ones in their place. It destroyed primary collectivities and left others to create secondary ones which are now in turn dissolving – among them the popular movements’ organisational life. More than any other factor during the last 150 years capitalism has contributed to careerism, competitiveness and aggressiveness, which has led to the situation where the whole world lives under the shadow of the unrelieved threat of war. Capitalism meant an industrial and technical development which constantly brought new droves of people into cities without them being brought into new organic communities. A constantly intensifying vocational specialisation increased human rootlessness. Capitalism led to a previously inconceivable rise in the standard of living at the same time as it contributed to an aesthetic impoverishment of people’s lives and in general ignored all those psychological problems that must arise when the belly is full and people no longer have to hunt. Socialism and capitalism have deep down worshipped the same gods. They have appeared to fight each other to the death. But the fight has been over details, mostly ownership and distribution. Otherwise the consensus has been striking.43

We can recognise here an exposé of the fanatical faith in humanity’s secular (that is, consumerist) salvation that we saw Polanyi point out in chapter 1 – as well as the new left critique based on the work of Herbert Marcuse and others that would come a couple of decades later. For Lindbom this godless Calvinism in both its capitalist and socialist guises inevitably crushes the active and creative human spirit. Given the scale of modern industrial processes and the need to market their output, an undemocratic centralism, hierarchy and a passive conformist consumerism are unavoidable.

43

Lindbom 1951, pp. 273–274. Our emphases.

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At the time the cold war was in full swing and there was a brisk trade in socialist turncoats who could bear witness to the evils of their former delusions and to the virtues of reformed postwar capitalism. But as Alf W. Johansson’s survey 44 of the subsequent ‘Atlantis debate’ in Sweden shows, Lindbom’s style of apostasy was hardly a saleable item. Liberal anti-socialist crusaders could hardly be expected to buy a critique of socialism based on its similarity to capitalism! Both social democratic and bourgeois leaders and publicists pronounced their more or less florid anathemas over Lindbom’s book. With one exception identified in Johansson’s account, and by Lindbom himself in a more recent interview – Ernst Wigforss.45 In his long review of After Atlantis Wigforss appears positively grateful to Lindbom for exploding the ever-narrowing parameters of the official debate between social democracy and the bourgeois opposition. He readily admits that socialism had impoverished itself by replicating marxism’s acquiescence in the organisational forms of capitalism. As we have seen, Wigforss himself had been pointing this out for many years. Like him, Lindbom had a strong sense of the utopian dimension socialism needed if it was to produce a more advanced western civilisation. This utopian element had to be predicated on open-ended democratic processes, not preconceived total blueprints that called for totalitarian implementation. Both writers drew strongly on syndicalism for their democratic inspiration. The essential difference between them, however, is Lindbom’s determinism. His position here is not unlike Chesterton’s choice between soapboiling and brotherhood that we touched on in chapter 3. Like Chesterton, Lindbom believes one may have to choose between soap-boiling (largescale, technically advanced production) and brotherhood (democratic working community), as the former by its nature demands oligarchic forms of organisation. But for Wigforss oligarchic organisation is not a function of the scale and technical character of production, but of the social system in which production takes place. The former he sees as well-nigh essential, the 44 45

Johansson 1990. Johansson 1990, pp. 145–146; interview with Tage Lindbom in Dagens Nyheter 2.8.96. Wigforss 1951 is the review in question.

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latter far from it. One could and should find an accommodation between ‘the necessity to co-operate in giant organisations’ and ‘the demand for freedom and community in the smaller groupings which have always been the seeding bed of democracy.’46 In his review he invites Lindbom (and any other contributor to the discussion, presumably) to focus in on the possibilities of democratising large-scale production units.

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[I]f Lindbom does not believe that anarchism’s message to our own time can lie in the dissolution of large-scale production or of nation-wide and international organisations, then we may nevertheless have a common basis for discussion. It would not deny the risks in the development towards centralism which now impinge on us, but at the same time would not assume that freedom can [only] be sought outside the framework of those productive and social forms which modern technical development seems to prescribe.47

Unfortunately, as Johansson notes,48 Lindbom eventually terminated the Atlantis debate with two articles which made it clear that he now regarded himself as having definitively vacated the socialist tradition, and so he saw no point in going into details about how it might still be possible to realise its values in contemporary society. But one can see the traces of the debate in Wigforss’s subsequent writings as he looks for ways to democratise the large-scale heartland of the modern western economy. He refused to allow himself to be satisfied with increasingly peripheral, small-scale sites for democratic organising principles.

46

47 48

Wigforss 1951, p. 28. Even in organisation theory today this stark choice is often posed by a ‘radical’ school that simply assumes that democratic organisational principles cannot be applied to large organisations. It thus accepts the major premise of the ‘weberian’ orthodoxy it seeks to challenge: Clegg & Higgins 1987. Wigforss 1951, p. 28. Johansson 1990, p. 146.

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Sharpening the profile of the new democratic socialism In a booklet published in 1952, Socialism in our time, Wigforss questions how a socialist programme for the postwar era could be compatible with social liberalism. In stark contrast to his celebration of certain aspects of the progressive liberalism in the 1920s, Wigforss now concentrates on the superficiality and contradictions in its stunted successor. Social liberals postulate – on barely disguised economic liberal assumptions – an artificial antagonism between equality and freedom, he suggests. Far from being at odds, these values are complementary: freedom exists only when individuals can no longer concentrate their economic power so as to run roughshod over the rights of others, for there is a clear causal link between concentrated economic power on the one hand and unfreedom and lack of choice on the other. Wigforss then extends his critique of the bourgeois notion of freedom to again pick up a fundamental weakness in its original liberal conception. The latter only amounts to freedom from personal domination, and is quite compatible with (and indeed celebrates) the tyranny of blind market forces. For Wigforss, of course, freedom has a positive content and implies real choices pursued by active subjects, rather than the mainstream liberal concept of mere absence of interference in the private enjoyment of whatever wealth and income an individual may happen to gain a legal claim on. Hence freedom is for Wigforss an organisational issue in large-scale industry, one that points to the need for access to decision-making power. ‘It is a curious blindness,’ he writes, ‘not to see that the question of economic organisation is at the same time a question of managerial structure.’ It is not good enough to excuse the present structure by appealing to its dubious claim to efficiency which supposedly benefits the employees. Under modern conditions there is no such thing as a benevolent dictatorship.49 Freedom is also an organisational issue in a macroeconomic sense. Wigforss recapitulates his earlier theme that the exercise of freedom presupposes personal economic security. The welfare state cannot provide this security in the absence of full employment, and only social supervision of 49

EWSU V, pp. 63–64.

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market mechanisms can ensure permanent full employment without inflation. The union movement is the only agent which can intervene directly to re-organise the enterprise so as to enfranchise employees and, at the macro level, co-ordinate an interventionist full employment strategy. In both cases, the project goes well beyond the parameters of social policy and is quite incompatible with both the existing private form of property rights and their unequal distribution. Even the liberal affirmation of such a modest aim as ‘equal starting points’ problematises the distribution of material and cultural assets, the unequal distribution of which among parents creates a pattern of inequality that no egalitarian education policy can erase.50 Socialism in our time is not only interesting for its clear and timely delineation between a socialist and a social-liberal programme. It is also a lucid reassertion of Wigforss’s basic theoretical approach. He tackles the ongoing programmatic confusion in social democracy by returning to first principles. What are the ultimate aspirations of socialism in terms of human values? If we are to work towards them, in what direction must we strike out from our present location? The utopian imagination and the scientific investigation of possibilities help us clarify these two questions. But neither can be allowed to take over, since socialism is neither utopia nor science. It is not utopia in the socialist system-builders’ sense, not science as marxism understood the word. What the socialist aims towards is a society where certain human values find better and more complete expression than in bourgeois or capitalist society. But just what this sort of society would look like cannot be displayed in advance or for all time. We start with immediate predicaments and seek ways to overcome them. Socialism thus becomes not the name for a particular form of economic organisation but rather a summary of guidelines for social transformation, and not least, of course, economic re-organisation. It looks simple and natural. We get away from blueprints of a future society. We also get away from a social-philosophical system which makes the posited nature of things and people the basis of a fatalistic development. The socialism that lives today in social democracy builds undoubtedly on the conviction that this liberation is possible. It doesn’t have to imply that liberation is simple, nor that we forget what both utopianism and marxism have taught us.51

50 51

EWSU V, esp. pp. 33–35, 39–40 and 48. EWSU V, p. 101.

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The political method of feeling one’s way forward guided by a concept of provisional utopia is clearly expressed here. Before leaving this text we should note also its dark, prophetic hint that the old-style economic liberalism may undergo a revival.52 One could not, after all, sensibly delineate social liberalism and economic liberalism in the way one could delineate socialism and social liberalism. In spite of contrasting rhetoric and concepts, both liberal streams owed ultimate allegiance to existing basic economic arrangements. On the other hand, the major issue socialism raised with both liberalisms was ownership and control, not market mechanisms. In his discussion of planning, Wigforss advocates the latter’s retention within a planning framework:

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The strength of an economy with a ‘free market’ lies precisely in its ability to register the consumer’s need and the producer’s possibilities, which cannot otherwise be predicted or calculated. Since I assume here that the market will continue to play this role, we need not preoccupy ourselves with a more far-reaching planned economy. The extent of the planning I have described cannot exceed the expertise and capacities available in the economy we know.53

Socialist economy presupposes neither the end of market choices and indicators nor a revolutionary change in human behaviour from egoism to altruism. What is evidently required of citizens and their chosen negotiators is the ability to see one’s interests in a longer perspective, Wigforss suggests. This implies the capacity to relinquish immediate benefits in the not always absolute assurance of compensation later; willingness to see the legitimacy of others’ wishes as well as – and integrate them with – one’s own; the ability to co-operate under one’s own elected leadership and generally accept democratically arrived at decisions even when they go against one’s own opinion.54 Here is a recipe for democratic community that rounds out rather than excludes a concept of individuality – a nice counterpoint to the irredeemably infantile greed and egotism that economic liberals 52 53 54

EWSU V, p. 45. EWSU V, p. 138. EWSU V, p. 138.

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solemnise as ‘human nature’. In terms of the collision in today’s political theory between republican ‘civic virtue’ and liberal ‘civil privatism,’ Wigforss plumps emphatically for the former. This point relates to a final theme we need to note in Socialism in our time, one that would eventually (as we shall see in chapter 7) precipitate a momentous political struggle between the labour movement and capital’s interests, and within the labour movement itself. Wigforss notes the decline of the family company in favour of the big management-controlled corporations with ‘anonymous’ shareholders. This process provides new ways of ‘reconciling the demands for both equality and efficiency’. One such way was to convert share capital into loan capital in the corporation to cut off the authority of the former owners outside the organisation and democratise the organisation itself.55 Wigforss is here working towards a notion of collective capital formation that in turn supports an economic democratisation well beyond the parameters of conventional industrial democracy. In 1954 we find him reflecting at the end of his memoirs, on the enduring salience of economic democracy to the socialist project: I have never hidden my commitment, since my early youth, to a democratic organisation of the economy, where wage-earners exercise a direct influence through their union movement. The idea found its way into the Gothenburg programme of 1919. It was developed in the introduction to the report on industrial democracy [of 1923]. When plans were worked out for an attempt at co-operation between the state and private enterprise at the end of the thirties, we intended to include the unions in the renegotiations. And if, after all the past years’ experiences and changes in living standards and living conditions, I now seek anew to express my vision of the socialist movement, its tasks and possibilities, I should perhaps even more than before tie my uncertainty and hopes to the development of wage earners’ ideas about their interests and role in social development. How they come to interpret democratic ideas of freedom and equality, independence and co-operation. What conclusions they draw about concrete forms for the economic activity that provides for their livelihood and takes up an essential part of their lives. What has endured most of my youthful influence from marxism has been the conviction that a society in which wage-earner groups have come to constitute the vast majority of the population cannot in the long run

55

EWSU V, pp. 41, 68–69. This is a proposal that John Kenneth Galbraith made again in the 1970s (1977, p. 278).

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preserve the organisation, the forms of ownership and control of the material foundations of social life, which we have learnt to call bourgeois.56

In fact wage-earners were not at the time the ‘vast majority of the population’ as married women still had a low participation rate in the paid workforce. Thereby hangs a tale of democratic deficit. Nevertheless, it was this concern with spreading economic power in a re-organisation of the economy that made Wigforss the main critic of Swedish social democracy’s postwar slide into social liberalism. He took these themes further in a series of articles published in Arbetet between 1954 and 1956 which was later consolidated and published separately as After the welfare state. Typically, Wigforss develops his own ideas in the framework of a long review of recent literature in English, in this case taking in G D H Cole, J K Galbraith, J M Clark and J A Schumpeter. Of these, Cole is the most important. The latter had somewhat abruptly resigned from the chairmanship of the Fabian society and published Is this socialism? – a scathing attack on the British Labour Party and its equating the welfare state with socialism. Cole argued that the welfare state failed to satisfy the basic aspirations of socialism, above all that of a classless society. While Wigforss sees a lack of tactical judgment in Cole’s ‘frontal attack’, he expresses at some length his sympathy with the latter’s rejection of the ‘director-controlled welfare society’ and frustration with the tendency of small reforms to consolidate existing society. He knows better than most that we are simply faced with a repetition of the old problem that oppressed groups, once they have had their burdens lightened and their most easily understood interests requited, thereby become converted to a more or less marked social conservatism. It is a dilemma that reformist socialism has not been able to avoid and has certainly never ignored.57

In an inversion of Schumpeter’s thesis, Wigforss suggests that it is not capitalism that faces a mortal socialist threat in its own success. Rather, it is socialism’s initial success in the area of redistribution that threatens the labour movement’s commitment to the wider socialist project. Read as an

56 57

EWSU IX, pp. 429–430. Our emphasis. EWSU V, p. 160.

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interpretation and prediction of the SAP’s own postwar development it is pointed indeed. For Wigforss, the way out of this strategic dilemma is to bring socialist aspirations and analysis to bear on the core issues of public and private economic management. The context of his remarks here is highly significant. As we elaborate in chapter 7, LO had by this time proposed a complete alternative to the conventional ‘keynesian compromise’ in the form of the Rehn-Meidner model – an alternative that ascribed to the union movement a direct role in policy formation and in a more interventionist public economic management. This aspect in itself contrasted with the conventional keynesian arrangement which excluded the movement from any such role, except possibly as the signatory to a voluntary, state-defined incomes policy. After four years of resistance, the social democratic party leadership had grudgingly accepted the LO model in 1955. Wigforss was much more enthusiastic about LO’s initiative. On the other hand he was critical of the government’s temporary, apologetic use of compulsory saving to dampen excess demand before the LO model came into effect. It was his starting point for another prophetic line of argument on capital formation. It is not just a matter of anti-inflationary policy. We cannot avoid the question of saving and capital formation, its sufficiency or insufficiency, nor the question of individualism or collectivism, when we try to discern our long-term economic future. We have every reason to do away with prejudices against co-operation and collective measure in this area as well as others. […] If full employment has a stable tendency to create excessive demand, then collective measures to soak up the excess become a constant requirement. Instead of hiding behind the word ‘temporary’, why not say what we believe – that from now on this is the way we must go?58

Wigforss was once again working the contradiction between the preserved reign of private investment calculations on unregulated markets on the one hand, and the collectivist preconditions to economic rationality. The need for greatly increased public saving had been a feature of LO’s model, but Wigforss’s argument about capital formation went beyond the aims of stabilisation policy to take in the bedrock aspiration of 58

EWSU V, p. 198.

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equality. While historically capitalism had expanded rapidly at the cost of immiseration and massive inequality, this had never prevented social democrats protesting that the price was too high and

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that an extremely unequal income distribution has increasingly shown itself to be a wasteful method of securing a desirable level of savings. There should be more reasonable solutions than to keep in power a class of high-income earners for whom saving could be called automatic because it did not require any sacrifice of attractive consumption. When incomes and living standards also rise in broader social groupings, saving should become customary here as well. But the possibility remains that voluntary saving under these changed conditions of income distribution could be lower than the citizenry in a collective decision-making process might see as appropriate. And decisions on collective saving in one form or another have appeared to be both a natural and a democratic solution.59

Egalitarian policies thus highlighted problems of capital formation that had always been endemic to capitalism. Wigforss’s remarks here anticipated Swedish social democracy’s last great political offensive, its successful three year battle from 1957 to establish a universal and contributory supplementary pension scheme, the accumulated contributions to which would come to account for 40 percent of the organised credit market. But After the welfare state clearly postulates institutional changes in capital formation that go well beyond the supplementary pension scheme ‘to the even greater questions of capital formation and capital management.’ Though the social democratic government seems so far to have assumed that the state would take charge of the new funds, ‘other solutions are also possible’ and could raise in acute form the issue of whether socialised capital should be centralised or decentralised.60 In the latter case, new forms of capital formation could complement the modest steps thus far taken towards industrial democracy, even to the point where the direct producers made the investment decisions. Such collective capital formation, Wigforss argued, would avoid the pitfalls of liberal profit sharing schemes – particularly the breakdown of solidarity between workers behind the mere ‘appearance of democracy’ that they implied – and lead to ‘democratised enterprises’ in which ‘a real shift in the balance of power’ takes place. 59 60

EWSU V, pp. 205–206. EWSU V, p. 208.

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The new balance of power would be between capital owners (now demoted to suppliers of loan capital), the state as the expression of democratically arrived-at social priorities and co-ordinator of the macroeconomy, and employees as the immediate decision-makers in the new ‘self-managing social enterprise’.61 Wigforss is at pains to emphasise how corporate development itself had laid the basis for this reform:

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The big enterprises whose democratisation or socialisation we are talking about here have not retained their character as private firms in the original sense. They are in reality already social enterprises. Their investments, their pricing policies, perhaps their export policies, distribution of their earnings between capital owners and employees are so significant for society as a whole, that the real question is how this social interest is to be secured.62

On the other hand, Wigforss proposes this analysis as the basis for unity between blue- and white-collar workers around an effective strategy of social transformation, not in the form of a blueprint for future society but as a ‘provisional utopia to steer by’.63 A problem should be noted in passing about the form of Wigforss’s suggestion for collective capital formation. He here reveals his syndicalist leanings in assuming that it is the wage-earning collectivity that should provide the democratic constituency. As we shall see in chapter 8, both democratic principle and political strategic considerations could be seen to point to a better choice of constituency – the electorate as a whole. As we indicated in chapter 4, Wigforss developed his notion of ‘provisional utopia’ in 1958 in an essay ‘On provisional utopias’ – a spirited defence of marxism against Karl Popper’s broadside in The open society and its enemies. As against Popper’s accusation that marxism crushed the human will and militated for passivity in the face of ‘historical inevitability’, Wigforss writes:

61 62 63

EWSU V, pp. 211–212, 222. EWSU V, pp. 220–221. Our emphasis. As noted, this was also an observation Schumpeter had been making since the 1920s. EWSU V, p. 224.

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There can be no doubt that marxism’s founders never tired of repeating that history is the work of active people, that the real conditions which in each conjuncture determine their actions are the result of forces which include their earlier actions and that ideas therefore have an incontrovertible significance.64

Wigforss rekindled his appreciation of marxism in later life, and Marx now tended to appear as the ally rather than the reluctant co-belligerent of the utopian reformer. The main point of Wigforss’s essay, however, was to defend the whole project of utopian reform from Popper’s manichean opposition between visionless piecemeal ‘social engineering’ (a term he used in innocence of the Swedish experience) and utopians whom he supposes to carry the virus of totalitarianism. Wigforss reserves the term ‘utopia’ for:

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images of conceived social conditions essentially different from existing ones. The presentation will argue that we need these thought images as goals or guidelines in a conscious, practical mission to change a given society. The added ‘provisional’ indicates that utopias adequate to their task cannot be inflexibly prescribed, but must rather be capable of substantive reassessment as preconditions change.65

Wigforss can be seen here as prefiguring Bauman’s concept of ‘active utopia’ as the sine qua non of successful mobilisation for real social change.66 But the former eschews any totalising function for his utopias. They are rolling, partial futures that can illuminate attainable reforms and re-organisations in one area of social practice after another. As Wigforss’s use of the concept elsewhere shows, its function is to establish a clearer bridge between tasks in hand and the long-term aspirations of socialism. We have already seen him use it in this way in the discussion of capital formation and ‘self-managed social enterprises’. But he soon used it in a wider critique of social democracy’s lack of strategic direction – a critique that constantly returned, as it had done in the twenties, to the relationship between day-to-day policy (dagspolitiken) and utopia. The most significant of his writings here is, perhaps, his booklet Can the deadlock be broken? from 1959. The deadlock in question was the 64 65 66

EWSU I, p. 285. EWSU I, p. 274. Bauman 1976; cf. Tilton 1984.

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tied lower house of the riksdag after the extraordinary election of 1958 over the fiercely contested supplementary pension scheme. The bourgeois parties opposed the enormous build-up of capital in the hands of the state that the scheme implied. This issue had the year before ended the renewed social democratic-agrarian coalition government that had been formed in 1951. Typically, social democracy’s electoral base had eroded during the early and mid-’fifties when it had pursued only centrist policies acceptable to the agrarians. While the supplementary pension issue had driven the agrarians back to the bourgeois fold, it had also restored the fortunes of the socialist bloc, which was now just one seat short of a controlling majority. The situation once more accentuated social democracy’s perennial dilemma: should it retreat into centrism and compromise with its opponents, or should it maintain its political profile and step up its mobilisation to win a majority for its own programme? Wigforss confronts the advocates of centrism and of a ‘wait and see’ strategy with a masterly survey of the policy issues raised by what was universally recognised as the central task of public policy: guaranteeing stable full employment with price stability. These issues – inflation, international competitiveness, productivity, capital formation and income distribution – he presents as inexorably interwoven with each other and with the basic antagonism between democratisation and private managerial prerogatives. When wage-earners arrive at a clearer insight into their interests […] they are presumably going to ask this question: when they contribute to the desirable saving in the enterprise through their wage restraint, why should the resulting increase in the value of the firm’s assets end up in the hands of only one side of the production process – the providers of external capital? […] If there is a kind of inflation that derives from wage policy, and if one way to prevent it is sought in some form of wage-earners’ participation in the management of capital invested in the enterprise, we have touched on the owners’ right to the surplus and thus on an arrangement which is seen as fundamental to private enterprise. We cannot duck the question of whether the big enterprises can be democratised without changing ownership.67

67

EWSU V, pp. 301–302.

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In particular, Wigforss continues, one cannot sidestep the issue with individualistic profit-sharing and worker-shareholder schemes, which neither spread power nor create a sense of equality.68 Wigforss thus returns to his provisional utopia, now oriented towards ‘social enterprises without owners’ (samhällsföretag utan ägare). Wage earners’ directly expressed influence in such enterprises would equip them ‘with a management that obviously and expressly shoulders the task of administering a part of the country’s productive resources’. Otherwise, existing directors incur divided loyalties – to the enterprise on the one hand and external shareholders on the other. At the same time, wage claims could be settled much more easily if employees fully appreciate that whatever could not be taken out as wages would be used to make production more efficient. Finally, the democratised enterprise would resist the concentration of economic power (that was especially marked in Sweden) and wageearners, too, would not have to have recourse to the state so much to serve their ‘interests’. The self-managed and self-owning enterprises would constitute a surer defence against an undesirable centralisation than the existing private enterprises.69 If the deadlock is to be broken, Wigforss concludes, ultimate socialist values must find clear expression in immediate policy. Wigforss rejected the party’s practice of expressing ultimate aims in vague terms in its programme and then dealing with policy issues in a purely pragmatic spirit. This practice – apart from frustrating the socialist project – simply encouraged scare tactics in bourgeois propaganda which delighted in inventing its own unsavoury dystopias to concretise vaguely expressed social democratic projects. If the party specifies its socialism in policy proposals it chokes off this propaganda and at the same time rallies those who might be won over to socialist values. What the party needs is a new action programme that spells out what it wants to do to further these values when they are thus concretely exhibited.70 The wheel has now turned full circle. Wigforss criticises the party leadership in 1959 for precisely the same paralysing inability to link the 68 69 70

EWSU V, p. 303. EWSU V, pp. 308, 310. EWSU V, pp. 311–312.

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present with the future, policy with ultimate values, that distressed him in the early and mid-twenties. During this period in his life Wigforss was an active critic in the party press,71 commenting on many current intellectual fashions that tended to enervate the radicalism of organised labour in Sweden and abroad – above all technocratic keynesianism, welfarism and the ‘end of ideology’ thesis. In Deadlock, for instance, he attacks the thesis that workers were becoming ‘bourgeoisified’ as their material living standards rose. The bourgeoisification thesis rested on the premise that workers took an ‘instrumental’ view of their work, not objecting to its monotony and meaninglessness and their own disempowerment, so long as they could enjoy the material rewards outside the factory gates.

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That for most people work is in the first instance a means to earn a living does not exclude it becoming more than that. Not only a necessary sacrifice for a desirable life outside the workplace, but also a foundation for self respect and others’ respect which comes from one’s fulfilling an essential task in social life.72

When the Swedish union movement began to energetically pursue industrial democracy from the beginning of the seventies, it did so on this ethical basis. ‘Worklife’ came to be seen by organised labour in Sweden as part of life itself, and workers can on this view demand the same stimulation, personal development and ambit for creativity from their worklife as from other facets of life. In 1959, the same year as Wigforss published Deadlock, his relations with the party leadership reached something of a nadir. The latter was moving towards a decision to develop a Swedish atomic bomb. Wigforss published a series of articles in Arbetet vehemently opposing this move, articles he consolidated into his debate pamphlet Atomic weapons (1959).73 As with his much earlier World war and world peace, dispassionate argumentation concealed a passionate opposition. On Erlander’s account, 71 72 73

See for instance ‘Ideological lines in practical policy’ (EWSU III, pp. 471–484), ‘Welfare policy and socialism’ (EWSU V, pp. 361–374) and ‘The life and death of ideologies’ (EWSU V, pp. 321–360). EWSU V, p. 315. This idea, too, had been expressed in a famous essay ‘The instinct of workmanship and the irksomeness of labour’ by Thorstein Veblen in 1898. EWSU VI, pp. 36–69.

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Wigforss later told him that he considered resigning from the SAP for the only time in his life. Erlander names this issue as the hardest he himself faced as prime minister throughout the fifties and sixties, and he feared it would split the party. Wigforss’s opposition drew widespread sympathy, and had he left the party, Erlander surmises, ‘he would certainly not have done so alone’.74 In the end the party leadership backed away from the bomb – its last decision over which Wigforss had a significant impact. The leadership’s refusal to venture beyond the boundaries defined by social liberalism and its confining its socialist commitments to purely ceremonial occasions meant that his relationship with the leadership as such never really recovered. His occasional writings throughout the sixties and early seventies, and his longer piece Are you a socialist? (1962)75 continued to point up the lack of connection between government policy and the socialist project enshrined in the party programme. He constantly recapitulated the need for an action programme that would make this connection and prefigure the democratic re-organisation of the economy. This referred in particular to integrating attempts to foster capital formation on the one hand and industrial efficiency, equality, freedom and community on the other.

Curtain fall Although Wigforss never parted from his lifelong dispassionate style of argumentation to engage in an open polemic with the party leadership, the tone of his critical comments in interviews during the last years of his life was increasingly sharp.76 Correspondence deposited in the labour movement’s archive after his death witnesses to his role as father confessor to the party’s rebellious young Turks, who evidently felt free in their letters to him to comment on government members and measures with the utmost 74 75 76

Erlander 1974, pp. 77, 98. See also Lindblom 1977, pp. 222–229. EWSU I, pp. 313–370. See in particular ‘Aren’t we demanding society’s total transformation?’ (1967 – EWSU VI, pp. 366–377) and ‘Economic power should be transferred from capital to labour’ (1974 – EWSU VI, pp. 378–384).

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candour. More publicly, he was rediscovered in the 1970s by a radicalising LO, which found in his work going back to the 1920s the doctrinal inspiration for its push for industrial democracy, and then economic democracy through its wage-earners’ fund scheme.77 Appropriately enough, Rudolf Meidner, Anna Hedborg and Gunnar Fond – the authors of the fund proposal – drove the considerable distances to the 94-year-old Wigforss’s summer cottage in Vejbystrand on the west coast to present him with the original published version when it came off the press in 1975. Wigforss was clearly delighted and supportive – but also astonished. ‘Do you dare to go so far?’ he asked.78 For its part, the SAP leadership lionised Wigforss in his last years without in any way confronting his increasing impatience with the party’s political passivity. He was already on his way into the pantheon of social democratic superheroes, icons whose original doctrinal profile would be increasingly blurred. On Wigforss’s 90th birthday in January 1971, for instance, the prime minister (Olof Palme), his predecessor (Tage Erlander), the treasurer, foreign minister, minister for social security and LO’s chairman presented themselves at the head of a small army of colleagues and journalists at the door of the Wigforsses’ two-room flat in Lund (over 500 kilometres from the national capital) to congratulate the elder statesman.79 None of this appears to have deflected Wigforss’s discontent, as Erlander openly admitted immediately after Wigforss’s death: In February 1975 I sat in Ernst Wigforss’s home in Vejbystrand. His thoughts revolved incessantly around economic democracy, exactly as they had fifty years earlier. He was glad that the labour movement now wanted to present the demand for economic democracy as practical policy. But he also displayed a touch of melancholy, almost bitterness. Why had it taken so long? I could understand his impatience. He had contributed to massive reforms which had transformed society. But it had not solved those problems which were central to socialism and which could be summarised in the words freedom, equality, collective responsibility.80 77 78 79 80

In particular see the interview with Rudolf Meidner in Fackföreningsrörelsen 19, 1975 on the first launching of the funds proposal. Meidner mentions Marx and Wigforss as its most important theoretical forebears. Fackföreningsrörelsen 19, 1975. Arbetet 25.1.1971. Arbetet 4.1.1977.

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In August 1976 Ernst Wigforss fell from an apple tree while picking the summer harvest. He never recovered from the head injuries he sustained, and died in Vejbystrand on 3 January 1977 – just three weeks short of his 96th birthday. His was the first non-royal funeral shown on national television – a matter which drew his way the last shafts of bourgeois truculence in the riksdag. But the assembled labour movement lowered him into a hero’s grave in Ängelholm. The funeral orations captured the spirit of his politics well enough. In Olof Palme’s words, ‘The powerful experience of society’s injustices and an unshakable faith in people’s will and ability to take responsibility for social development made Ernst Wigforss into a democrat and a socialist, into a democratic socialist.’ But he was ‘always ahead of his time’. Tage Erlander also located Wigforss’s politics and style in a basic faith in human moral and intellectual capacity: He believed that people are reasonable beings. And it was important to put to the people what is true, what is right and what is meaningful. This was the background to his astonishing lecturing and writing activity. It explains why he took such great pains over every speech. If it was in front of seven people or 30,000 in Gärdet, it didn’t matter. Those who heard him understood that he thought it important that they understood him. If they understood, he was convinced that democratic socialism was secure. He was our most loved speaker. He was so because he trusted in people and they felt they could trust him.

However, it was LO chairman Gunnar Nilsson who, figuratively speaking, had the last word. Wigforss’s contributions and ideas, he said ‘are more current today than ever before’. In noting Wigforss’s approval of the wageearner funds proposal, Nilsson observed that ‘Ernst Wigforss placed his expectations and his hope on the union movement catching up with his thought.’81 When Nilsson spoke these words the battle lines had already been drawn for one of the great showdowns – over LO’s wage-earner funds proposal – in twentieth century Swedish politics. This proposal was a democratic-socialist offensive of distinctly wigforssian provenance, but while the union movement waged it Wigforss’s own party looked for ways to 81

Palme et al. 1977, pp. 3, 13–14, 16.

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extricate itself from it. As Walter Korpi would write five years after Wigforss’s death, ‘It is an observation for both better and worse when one says that Ernst Wigforss continues to be Swedish social democracy’s leading theoretician. A successor of like proportions is nowhere in sight.’82

82

Korpi 1982, p. 62.

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7. Union organisation as the bearer of productive rationality

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Social democracy has the task of transforming society according to principles that we can simply call democratic. We see ourselves as the bearers of the democratising tendency that has long characterised western societies, by which the great majority of the population has step by step won increased citizens’ rights, equality before the law and so forth. We have gradually achieved all that is called legal rights. It is now our task to ensure that even the remaining economic privileges which exist in our capitalist society disappear through the populace freeing itself from the power that private capital owners exercise, and itself claiming decision-making power over economic life, thereby creating a community of solidaristically working citizens. Ernst Wigforss The only thing that makes men likely to listen to women and take them seriously is women’s solidarity. Elin Wägner

Unions were essential to the implementation of social democratic political strategy, both as forms of mobilisation and as central institutions in the democratic reorganisation of economic life, as our review of the development of Ernst Wigforss’s thought and career has shown. Union organisations have always opposed economic liberalism. They rely on collective as opposed to individual bargaining so as to influence distributive and productive outcomes; they implicitly contest capital’s domination of the employment relationship; and they nurture a growing sense that labour’s centrality in a capitalist economy could empower it as a transformative social force. In this chapter we will see how LO and some of its affiliated unions over time have explored these possibilities. Of course, they did so in the context of immediate contingencies in the labour market more than in response to Wigforss’s doctrinal summons, although the latter exercised a growing influence on them in the postwar period. The ranking of these formative influences does not, we will suggest, detract from the political 225

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nature and mission of the union movement. To miss the politics of unionism is to fail to appreciate the convergence of LO’s strategy with Wigforss’s thought at the end of his life. In coming to grips with the politics of Swedish unionism we have to overcome a considerable intellectual obstacle – interpretations of unionism as apolitical. Certain currents of marxism, especially those in Kautsky’s, Lenin’s and Althusser’s lineages, lump unionism in with the reproducers of capitalist relations of production. More significantly today, the analysis of unionism (including Swedish unionism) has often fallen to sociologists, and thence into a determinism which has no place for distinctively political processes and aspirations.1 This intellectual tradition has often coloured attempts to grasp the highly politicised LO from the 1970s. Once this intellectual obstacle is overcome and the link between labour-market contingency and political process is restored to view, we can see a fascinating interaction between the two that goes to the heart of social democracy and its critique of economic liberalism. Not only can we rescue political analysis from the thrall of sociological reductionism, but we can restore one of the proper functions of sociology – the critical analysis of economic action. As we saw in chapter 4, Weber set an important example here. One of the frailties of the later sociological accounts, oddly enough, is their acceptance of mainstream economists’ nostrums, an acceptance that blocks a renewal of the sociological critique of the economic institutions that these nostrums sanctify. Before we explore some of the anti-economic-liberal implications of a weberian conception of political possibilities (which prioritises a politically derived substantive rationality over a formalistic accounting rationality), we will re-invoke the post-keynesian critique of postwar policy orthodoxy, for this is the analytical tradition that most closely presages LO’s economic democracy proposals. A ‘post-keynesian rationality’2 inheres in politicised unions by virtue of their demands for institutions capable of securing permanent full employment. Contrary to economic liberalism’s and employers’ 1 2

For one of the better examples, see Swenson 1989. Also describable as a ‘kaleckian-keynesian rationality’ for it was Kalecki who most explicitly formulated the view that capital’s prerogatives could not in themselves be rational (1943).

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assertions, this demand guides rather than derails the rational development of a mature and wealthy economy. And some labour movement achievements were more important than even Wigforss imagined. The union movement’s wage equity strategy contributed to Swedish industry’s rationalisation, and confirmed the capacity of elective labour policies to produce unexpectedly favourable economic spin-offs. What begins as a supposedly ‘anti-rational’ assertion of political priorities over economic calculation can morph into a productive – and democratic and egalitarian – development. This rationale legitimates a labour movement that steps outside its interest-group status to impose its own logic on the capitalist development process itself. A labour movement’s policy demands gain legitimacy only insofar as they honour and express a public interest in developmental and democratic terms. Such demands imply acceptance of organisational obligations, namely the responsibility to develop in-house macroeconomic and policy competences for advancing generally accepted objectives. In this context, the quest for economic democracy (a particular evolution from the ‘somewhat comprehensive’ public overseeing of investment that Keynes had seen as desirable) and LO’s solidaristic wage principles intersected to give Wigforss’s ideas their post-keynesian validation. As we shall see, LO’s strong point as a bearer of a principled social democracy has been precisely its contesting the economic rationality of capitalism. It has done this by pursuing a line of reform that seeks to replace unregulated market allocation of resources and untrammelled managerial prerogatives with more collectivist and democratic forms of economic organisation, ones which functioned more effectively and more equitably. In this aspect of its development LO exemplifies a central aspect of social democracy according to Wigforss’s own political prescriptions. At least until recent decades, however, it has not performed as well in overcoming the democratic deficit in the inclusivity and equality of its own organisational life. Furthermore, we will see that during the 1990s, Sweden’s social democratic party ceased to be a hegemonic party of government and lost touch with social democratic ideals.3 3

During controversy and public commentary over SAP leadership succession in the early 2000s, a generally-accepted depiction of statsbärande parti – a party whose influence over policy choices continues even when it is out of office – was reignited.

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The largely thematic historical overview presented in this chapter homes in on the dilemmas of applying an ambitious social democratic project. Not only is there an unsurprising convergence between LO’s activity and Wigforss’s politics, but there are also striking overlaps between practical developments in Sweden’s economic policy priorities on the one hand, and the demands for institution-building on the other – demands that have sporadically emerged from post-keynesian political economy since 1945. These intersections serve to explain the accomplishments of the former and vindicate the prescience of the latter. The criticisms of LO presented here should therefore be read in the wider perspective of the Swedish union movement’s development as the west’s strongest and most successful, and arguably its most radical.4

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The emergence of union production policy The development of LO and its manufacturing unions as a bearer of substantive rationality in industrial development (in the sense developed in chapter 4) depended crucially on its reformation in the late nineteenth century as a part of a social democratic labour movement, a matter we touched on briefly in chapter 2. In accordance with the original social democratic protocols, the union movement was very much a vehicle of socialist politics from the start, and its organisational starting points reflect this status. A brief comparison with unionism in the British and Australasian labourist tradition, in which political tutelage is absent from union formation, helps to pinpoint the operational peculiarities of social democratic unionism.5 In western countries unions first emerged on a craft (or occupational) basis as successors to medieval guilds. But the pre-industrial craft principle proved an unpromising basis on which to organise an industrial workforce. The multiplicity of ‘trades’ – thus of union organisations – at the workplace inflamed internecine jealousies and exclusivist hostility to 4 5

A designation progressively ceded since about 1985. See Higgins 1987 for a more extended version of this counterexample.

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all workers who lacked initiation into the ‘trade’ in question, while the typical trade union was spread over several industries and thus had little interest in, or insight into, the fortunes of any particular industry. As the Anglo-Australasian cases illustrate, the agenda of trade unions in the absence of political mediation consisted as much in the maintenance of monopolies over labour ‘submarkets’ – traditional wage relativities and organisational boundaries – as it did in winning better wages and conditions from employers. For this reason trade unions had little incentive or capacity to recruit broadly, especially among sections of the workforce that tended to be weakly organised. Nor had they any strong inclination to undertake united inter-union action, or to form effective peak councils that might have co-ordinated it. The doctrinally nebulous labour parties that formed on the basis of these trade-union movements tended to reflect rather than counteract their sectionalism, political directionlessness and divisiveness. At the same time, apolitical trade unionism could maintain a rigid division of labour whereby it took charge (after a fashion) of labour-market issues while the party enjoyed exclusive rights to policy formation. The evolution of Swedish unionism contrasts starkly with this pattern,6 as indicated earlier. The crystallisation of marxist doctrine and a social democratic political commitment preceded and inspired both party formation and the reformation of the union movement. Formal commonality of political purpose would bind the two institutions closely together at least until the end of postwar full employment in the mid1970s, while the division of labour between them would prove increasingly malleable. Collective class action in pursuit of political objectives, including social priorities, put a premium on co-ordination even before LO’s birth in 1898, in the midst of a series of conflicts over union demands for national industry-wide agreements and union rights to organise at the workplace. Unions were designed to recruit maximally to – and agitate for – the socialist cause, and this purpose converged with the need to establish class solidarity by bridging regional and occupational differences and by addressing the disadvantages of weaker groups of workers.

6

The following is based in part on Hadenius et al. 1978 and Kjellberg 1983.

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Only industrial (as opposed to trade) unionism could meet these requirements, and the struggle to impose this principle on older craft union structures began long before its adoption as a fundamental principle at the 1912 LO Congress.7 The relevant report condemned the tradition of trade unionism that confined itself to wages and conditions or that was otherwise apolitical, doctrineless and neutral on economic and social issues. Six years earlier the movement had largely wrung from employers the right to organise on the job and acceptance of industry-wide bargaining – albeit at the cost of acknowledging the employers’ right to hire, fire and direct the production process in accordance with paragraph 23 (later paragraph 32) of SAF’s statutes. In these early years, too, the key metalworkers’ union (hereafter ‘Metall’) had already started to pursue with some success a policy of compressing wage margins, thus anticipating the celebrated ‘solidarity wages policy’ which would gradually become a central plank of Swedish unionism. The union agenda naturally provoked open conflict with employers, in response to which the metalworkers again foreshadowed later centralised developments by establishing their own conflict and unemployment funds to aid recruitment and protect militants from employers’ victimisation, as part of a more deliberate offensive strategy.8 Union co-ordination, and especially centralisation, met considerable obstacles. LO’s defeat in the 1909 general strike, rearguard action by craft unions, and the LO leadership’s own reluctance to assume broader responsibilities slowed the process. But centralisation was driven by both politics and policy. Given the movement’s growing sense of political mission, the obstacles could do no more than temporarily retard progress. Before the 1920s, class action had prioritised issues of social equity and union effectiveness in the labour market. But in line with the zeitgeist of the new decade, represented as it was in production issues by Wigforss’s proposals for industrial democracy and the rationalisation movement, the unions found in production policy a motive for centralised action that overshadowed the earlier ones.9

7 8 9

Hadenius et al. 1978, pp. 133–160. Kjellberg 1983, pp. 167–169. This is Hadenius’ (1978) central thesis.

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We have already noted Wigforss’s intervention in production issues and the inspiration he gained for it from British collectivist liberalism and the rationalisation movement. He also played an important role in arousing interest in these issues in the union movement in particular, which he recognised as the ‘natural bearer’ of industrial reform.10 As we saw in chapter 4, his pamphlet Industrial democracy,11 published in 1920 as the public inquiry into that question got underway, is clearly directed to a union audience. It relates progress in the unions’ traditional aspirations over wages, conditions and job security to achieving more efficient production. He contributed articles on productive efficiency to Fackföreningsrörelsen,12 the union movement’s journal, in the early twenties, and LO included him in the five-man delegation it sent to England to investigate practical experiments in guild socialism. As we also saw also, Wigforss’s hopes that the union movement would wholeheartedly pursue industrial reform in the form of industrial democracy were premature. It was not yet organisationally equipped to pursue this particular road into the management of industry. But this circumstance by no means put an end to its interest in production issues. On the contrary, as mass unemployment remained organised labour’s dominating problem in spite of the relatively buoyant economic conditions of the mid-1920s, LO and the manufacturing unions developed an interest in production policy. In the first instance this interest took the form of support for rationalisation and technological renewal. More efficient production appeared to hold the key to fulfilling the more traditional union goals of job security and better working and living conditions. Production policy – a general readiness to intervene in public and private economic management – would remain a central feature of Swedish unionism. The rationalisation movement and its expression in ‘mondism’ (union-management talks and co-operation in aid of rationalisation and greater mechanisation in the 1920s) inspired the first wave of union production 10 11 12

EWSU VIII, p. 163. EWSU II, pp. 7–27. See in particular vol. 1, pp. 100–104 and vol. 2, pp. 538–541 – both in 1920, the first year of the journal’s publication.

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policy. In the conventional histories of Swedish industrial relations, we have here the beginnings of a long tradition – perhaps even of the ‘Swedish model’ itself – of ‘co-operation’ (samarbete) between more and more centralised representatives of labour and capital. The best examples of this school, such as Anders Johansson,13 clearly acknowledge that co-operation never symbolised a perceived identity of interest between labour and capital. Rather, it indicated a point of convergence between industrial capital’s original interest in competitiveness and expansion on the one hand, and labour’s interest in higher productivity as the precondition to higher levels of employment and improved living standards on the other. But the weak point in the conventional account, which Johansson also exemplifies, is its assumption of a single, uncontroversial rationality underlying industrial progress. In fact, the rationalisation movement itself falsifies the assumption by exhibiting an already palpable tension between a financial and technical rationality. Hans de Geer, in his definitive account of the movement in Sweden, makes the point that some contradiction between it and laissezfaire doctrine existed.14 The one pursued a notion of technical efficiency independent of financial criteria, and even sought ways to manipulate markets to make them more amenable to mass production and long-term investment. The other pursued maximal short-term profits and made market conditions the absolute arbiter of efficiency, even when this had a disruptive effect on technical development. Inasmuch as Swedish industry was at the time still owned and controlled by dedicated industrialists, the convergence of interest in an internationally competitive and expanding industrial base certainly left considerable room for agreement on industrial development. This was especially so given Swedish industrial capital’s propensity at the time to subordinate financial criteria to the pursuit of long-term market shares, and its tacit co-belligerency with social democracy against a pre-industrial, protectionist establishment. At the same time, the union movement was a raw beginner in public and private managerial processes. These circumstances tended for some time to disguise the divergence between rationalities of industrial 13 14

Johansson 1989. de Geer 1978, p. 17.

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development as well as the closely related issue of who was to control production and resource allocation. That Swedish labour and capital tended in the long run to promote contrasting rationalities of industrial management, however, renders the concept of a permanent commitment to ‘co-operation’ inapposite in pursuing the subsequent history of union production policy in Sweden. Korpi’s notion of an economic-growth strategy of class conflict,15 noted in chapter 5, is much more to the point. It acknowledges that union production policy was forged in an otherwise markedly conflict-ridden decade in Swedish industrial relations. It is incongruous to suggest that the union movement chose this time to capitulate to the logic of privately controlled industry. When the union production policy of the twenties merged with Wigforss’s distinctly combative production politics in the thirties and forties, we can see that production policy was not only potentially conflictual but also highly political in its ramifications. As in any well managed conflict of interest, a place for règle du jeu and compromises persists. The union leadership found them especially appropriate in the thirties, during the crisis of bourgeois political representation, the rapid expansion of unionism, and the SAF leadership’s conciliatory line. Union leaders entered the lists of public policymakers and, as we saw in chapter 3, they clinched the Saltsjöbaden agreement with SAF in 1938 to establish the principle of joint regulation of the labour market. The movement thus became a prime player in public economic management. The agreement was not so much the consummation of a ‘partnership’ as the co-operation school has it. Rather, it consolidated existing gains in the union movement’s legitimacy (above all in collective bargaining) and laid the basis for more co-ordinated union policy in the labour market in the future. It also imposed a central discipline on the employers. Henceforth SAF would prevent the more aggressive sectoral employers’ associations from pursuing their normal practice of using lockouts and other offensive actions against their employees.16 15 16

Korpi 1978, ch. 4. The previous conventional view that the Saltsjöbaden agreement represented a watershed in class relations has been considerably qualified by later research that has looked much more at its muted impact at the local level – see in particular Ekdahl & Johansson 1995 and Alf Johansson 1989.

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The union ascendancy in public economic management The only occasion when LO did subordinate itself to externally imposed goals and methods was during its institutional incorporation in the war economy. The latter, as we saw in chapter 5, temporarily fired social democratic imaginations over the long-term potential of an administered economy. But the union experience with the war economy was distinctly less inspiring. LO representatives sat on the commissions and panels responsible for the labour market, postwar planning, food and fuel provision, industry, and wage and price control.17 The experience proved negative for three basic reasons. First, it strove against the LO leadership’s ambition to stake out the labour market as its own territory where it could deal with SAF without political interference. Second, LO found itself embarrassed by its participation in wartime wage controls which saw a sharp fall in real wages. It was a salutary experience in having to take responsibility for policy while having little real influence over it. Third, as a measure of its then institutional immaturity, LO found itself entirely outgunned by employers’ expertise in the battle for influence and executive positions in the wartime administration. In the public authorities’ scramble to recruit existing financial and technical expertise, the proportion of posts and commissions that went to representatives of capital was overwhelming. The latter, writes Friberg, deployed a whole arsenal of organisational forms for channelling their expertise and more interest-oriented viewpoints.18 LO thus emerged from the war economy with a strong sense of the need for institutional and political independence, and for a qualitatively enlarged in-house policymaking capacity to underpin it. No one understood the lesson better than the young LO economists Gösta Rehn and Rudolf Meidner, who reacted in the immediate postwar years both to continued state interference in wages policy (which culminated in the stateimposed wage freezes of 1948 and 1949) and to the lack of a coherent stabilisation policy, without which the central aspiration of the labour 17 18

LO-SAP 1944, pp. 69 et seq. Friberg 1973, p. 338; see also Meidner 1948, p. 85.

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movement at the time – an institutionalised commitment to full employment – must fail. In the course of a prolonged debate, conducted both in public and in private with sections of the social democratic leadership, Rehn and Meidner developed a model for wage formation, stabilisation and industrial expansion in aid of permanent full employment that LO received at its 1951 congress.19 The Rehn-Meidner model was a stroke of genius both in its originality and in its lack of it. Its originality consisted in providing a comprehensive alternative – indeed, an inversion – of the conventional ‘keynesian compromise’ under which title social liberalism was establishing itself as orthodoxy in public economic management in western countries. But at the same time the model, far from being a rarefied technocratic concoction, wove together vital strands in the native union tradition – solidarity wage policy, production policy, full employment, and union movement autonomy – and so lent itself to grass roots mobilisation. Above all LO, in adopting the model, wrote a credible script in which it itself played a direct and more salient role in the forming and implementing of economic policy, where keynesianism would have excluded it. Conventionally understood keynesian elsewhere20 included state-led incomes policy to maintain price stability. In Sweden, its rejection rested on two major points. First, as we saw in the previous chapter, bastard keynesianism and the social-liberal tradition raised a bulwark against selective interventions which would trespass on the prerogatives of capital and the ‘free’ market mechanisms that potentiate and orchestrate them. The orthodox keynesian answer to unemployment thus restricted itself to episodic general stimulants to economic activity. For Rehn and Meidner, this approach ignored the segmentation of the labour market21 as well as 19 20

21

Erlander 1974, p. 47; Rehn 1977. For the official version of the model adopted by the 1951 LO Congress, see LO 1951. LO 1953 provides a shortened version in English. The story is updated in Erixon 2011a. See Robinson 1964, esp. pp. 98–99. She notes that despite Keynes’s ‘brilliant polemic’ and his ‘position within the orthodox citadel’, he remained overly optimistic; while Kalecki anticipated a ‘less agreeable’ future for public economic management. In the event keynesianism was dragged back in a conventional direction as sound finance, periodic unemployment and a ‘political trade cycle’ were reinstated. Rehn 1977, p. 213.

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the likelihood of inflationary pressures in areas of the economy subject to capacity constraints. Considerable unemployment in one sector could coexist with full employment or labour shortages in others, as was indeed the case in Sweden in the late forties. To apply expansionary policy in this situation would fuel inflation without addressing the real problem – the need for, but potential social dislocation caused by, economic restructuring. This ineptitude made conventional keynesianism an implausible basis for institutionalising full employment.22 The second point in Rehn’s and Meidner’s critique of the conventional keynesian compromise was even more fundamental. Beveridge had grafted onto keynesianism the idea that union leaders must themselves put a brake on the increased power of organised labour in the full employment labour market by policing their members’ wage demands.23 He thus reproduced the economists’ age-old assumption that wage formation is the central problem of economic policy, and disciplining labour is always the solution. Rehn and Meidner argued with considerable cogency that, if union leaders were to police rather than lead their members’ wage claims, they would frustrate the raison d’être of the union movement and thus discredit it.24 The ‘inflation gap’ endemic in the full employment economy between supply and demand ought rather to be problematised in terms of a shortfall in supply – in other words, in terms of private enterprise’s failure to uphold effective production – rather than excess demand. The increase in demand arising from wage increases simply represented morally justified adjustments to income distribution that full employment put on the agenda. For Rehn and Meidner, then, capital formation, not wage formation, was the central problem of the economy. The point had a distinctly wigforssian ring. It was the investment practices of capital – rather than labour’s attempts to maintain wages – that needed discipline, and this became the mission of the Rehn-Meidner model. Essentially, the model provided for this discipline in the form of a profit squeeze induced by wage rises in line with solidarity wage policy 22 23 24

For a detailed comparison of the Rehn-Meidner and keynesian models, see Erixon 1994a, 2004, 2008 and 2011a. Beveridge 1944, p. 200. Rehn 1948; Meidner 1948.

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and a generally contractionary economic policy (as opposed to orthodox keynesianism’s expansionary one) through recurring budget surpluses.25 In itself, an effective solidarity wage policy would serve Swedish unionism’s traditional goal of a more rational and egalitarian wage structure that the movement imposed on recalcitrant ‘market forces.’ But like other labour market reforms stretching back to the eight-hour working day, this wage policy enjoyed the additional merit (in the social democratic interpretation) of forcing employers to restructure and introduce efficiencies. Low-wage workers subsidised inefficient industries, Rehn and Meidner’s analysis suggested, and accelerated wage rises in them would hasten rationalisation. At the same time, budget surpluses would facilitate public saving and investment to complement and guide private investment and uphold full employment.26 By re-orienting counter-cyclical policy towards the specific problems of investment in specific industries rather than the general, untargeted level of aggregate demand, Rehn and Meidner were in fact observing an injunction that subsequently became a cornerstone of the ‘post-keynesian critique’ of bastard keynesianism – the failure of the latter to concern itself with the content of economic activity.27 Budget surpluses would eventually put the onus for perpetually seeking the ‘full employment level of investment’ back onto the public sector. A cornerstone of the model was active labour market policy to ‘dig canals’ between under-employed and over-employed segments of the labour market. This adjustment mechanism was especially necessary in the rapid restructuring that the model was designed to induce. From the employees’ point of view, occupational mobility – including retraining and relocation on financially acceptable terms – ideally meant both job security and recurring career choices and upgrading of skills. Labour market policy underscored the selectivity built into the model, especially in its propensity to influence investment behaviour. It thus grossly breached social-liberal niceties. 25 26 27

For a discussion of its theory, practice and comparative significance, see Higgins & Apple 1983. Note that budget surpluses do not indicate constraints on public spending if the overall level of taxation is high and discretionary spending commensurately low. Robinson 1972.

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Even worse from a liberal perspective was the fact that LO’s official version of its model, its 1951 report, also raised the question of union and governmental participation in enterprise and sectoral rationalisation and industrial renewal – in other words, it contained a call for an industry policy.28 It thus attempted to reawaken interest in proposals to this effect that had come from Wigforss in particular in the thirties, and were prominent in the Myrdal commission on postwar reconstruction as well as in the labour movement’s postwar programme mentioned in chapter 5. Industry policy was thus part and parcel of its original model for institutionalised full employment. But it was a difficult time to pursue this aspect of its agenda, given the then fairly recent failure of the Myrdal commission to usher in enduring institutions for industry policy, and the political eclipse of the postwar programme. Moreover, Swedish industrial development for nearly two decades after the development of the Rehn-Meidner model – during the long boom – created the impression that capital itself, under the general discipline of the stabilisation aspects of the Rehn-Meidner model, could be left to develop its own devices in managing the restructuring and modernisation process. For these reasons, the call for an industry policy was destined to disappear from Swedish public economic management. When ‘industry policy’ made a temporary and somewhat ignominious return to the political agenda under social democratic auspices in the late sixties, it would not go beyond limited financing arrangements.29 Historically, then, the operative aspect of the Rehn-Meidner model boiled down to stabilisation policy. The model met with little enthusiasm from a social democratic leadership already leaning towards social liberalism. Wigforss’s successor as treasurer, Per Edvin Sköld, described the Rehn-Meidner model as the ‘stupidest thing I have ever read,’ the work of ‘playful kittens’ which should

28 29

LO 1951, pp. 59–91. Svenning 1972, chs 8 & 9. Pontusson (1992, chs 5 & 8) uncharacteristically exaggerates the success of these initiatives, mainly because he did not measure their modest ambitions against those conventionally associated with the term industry policy internationally, especially as it has been informed by the Japanese, South Korean and other East Asian experiences.

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be consigned to the wastepaper basket.30 Moreover, it was neither a party nor a government product, and enhanced the importance of unions in public economic management at the expense of state policy. But neither the party nor the government had an alternative to it, and the social democratic leadership accepted the consequences of this situation by formally adopting the model – although with significant lapses in practice – as the basis of public economic management from 1955. Bit by bit it was implemented from the late fifties. The Rehn-Meidner model was a landmark in LO’s emergence as a political agent. In generating and winning acceptance of its model for public economic management, it took advantage of the dispersal of the Swedish right in the 1948 election and seized the initiative in policy creativity from its own affiliated party, an initiative it would retain for three decades. When the party at last overruled LO on economic policy from 1982 under Kjell-Olof Feldt’s treasurership, it would be to re-introduce major elements of economic-liberal policy. More particularly, the Rehn-Meidner model was a turning point in the evolution of a union version of social democracy. As Wigforss had done in the interwar period, LO’s model contested the economic rationality of capitalism, and this contestation led to social intervention in the two core institutions of the system, the labour and capital markets. Union delegates constituted the majority of the Labour Market Board, and when it expanded to become the country’s largest bureaucracy, it recruited a large number of union activists.31 From the latter half of the fifties, centralised wage bargaining between LO and SAF – necessary to implement solidarity wage policy – reinforced LO’s direct role in the joint regulation of the labour market. Mainly under the inspiration of the model, an ad hoc system of sticks and carrots grew up to guide investment into socially productive channels. This system included in time (in descending order of direct union influence) policy attention to the overall distribution of income between capital and labour, as well as a wage structure determined in bilateral centralised bargaining; active labour market policy; supplementary pension 30 31

Quoted in Rehn 1977, p. 214. Rothstein 1980, 1985 and 1986, ch. 6.

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(ATP) funds’ dominance in the organised credit market; investment reserve funds (to encourage countercyclical investment); regional policy; and a highly selective taxation structure that strongly rewarded productive investment against unproductive placements and dividend payouts. A strong causal connection between this social regulation of investment and Sweden’s impressive industrial performance emerged in the first decade or so of the model’s implementation. Low profit rates went hand in hand with high levels of industrial investment and rapid growth in industrial output and productivity.32 Lennart Erixon has theorised the effectiveness of the model’s discipline on capital, in hastening restructuring and productivity growth, in terms of the concept of transformation pressure (omvandlingstryck),33 a concept first developed by the prominent Swedish economic historian Eric Dahmén. Clearly this pressure represented an economic rationality above and beyond that of unregulated markets and ‘free’ private enterprise, and one whose imposition required social regulation. In chapter 6 we noted Wigforss’s approval of LO’s problematising of capital formation as a political counterfoil to the social democratic party’s retreat into social liberalism. A strong affinity between Wigforss’s disavowal of an overemphasis on state socialism, and the union movement’s preference for keeping the state at bay while routinising its own direct influence and intervention into socio-economic affairs, also exists. The Rehn-Meidner model was in fact the postwar standard bearer of ‘movement socialism’. The union movement itself thrived on both the new policy challenges and its capacity to realise its social responsibilities, above all a more egalitarian wage structure.34 Its capacity to formulate policy and represent organised labour on a large number of tripartite policy bodies grew apace, while the level of union density in Sweden (the proportion of

32

33 34

Bergström 1969 and 1979, Pratten 1976 and Erixon 1987. For a comparison with the British experience see Higgins & Apple 1983. For an argument for the model’s continuing and even enhanced validity in the 1990s and beyond, see Erixon 1994a and 2004. Erixon 1994a. See Erixon 1991, 1994b and 2007 for further theoretical elaboration of ‘transformation pressure’. Ohlsson 1980.

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the civilian workforce unionised) had reached 85 percent by 1980,35 and, although it is no longer at saturation level, it has remained a world leader ever since (over 70 percent in the 2000s with little difference between white-collar and blue-collar rates).36 However, as we also saw in chapter 4, Wigforss directed his own emphasis in the fifties and sixties to two issues of economic reorganisation – enterprise democracy, and socialised capital formation. In largely neglecting these institutional aspects and the control issue they pointed to, LO’s democratic socialism had yet to ‘catch up with’ Wigforss’s version, in the terms we saw the LO chairman put the matter at Wigforss’s funeral. On the other hand, Swedish industry throughout the fifties and sixties showed in its performance a continuing receptivity to the substantive industrial rationality that LO demanded. At least until the end of the sixties LO lacked both the stimulus and the pretext to pursue the control issue through democratic reforms in work life and collective capital formation.

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The pursuit of a democratic economy For the LO leadership a dramatic large-scale wildcat strike in Kiruna in December 1969 and subsequent unrest on the labour market ended the moratorium on major new reform initiatives. Steps to democratise work life now featured on the agenda. In the years that followed two further contingencies – destabilisation of solidarity wage policy by international economic impulses, and a decline in industrial investment – demanded a union response, which in the event took the form of a radical proposal to collectivise capital formation through wage-earners’ funds. The seventies 35

36

Kjellberg 1983, table 1. See in general Higgins 1985b. Implementation of the model, together with the expansion of industry, led to a dramatic increase in female participation in the workforce. The far-reaching effects of this development on gender relations in worklife and private life became an issue of public debate from the early sixties, but LO failed to integrate this perspective into its political agenda. This deficiency will be dealt with below. See Kjellberg 1997, pp. 20–21; Kjellberg 2008, p. 15; Visser 2003, pp. 402–403; and Barratt 2009, p. 49. See also Table 10.2.

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became the decade in which the Swedish union movement at last ‘caught up with Wigforss’. During these years, LO launched two offensives, for industrial democracy and wage-earner funds respectively. In both cases, assertion of substantive industrial rationality against a new finance-oriented managerialism provided the guiding thread in the practical attempt to realise the third and final stage of the 1928 formulation of the social democratic mission noted in chapter 6 – economic democracy. In the late sixties LO had co-operated with SAF, in a throwback to the mondism of the late twenties – experimenting with socio-technical worklife reforms which involved an element of consultation between workers and management while leaving the prerogatives of the latter intact. These prerogatives in the event became the focus of union frustration, which found clear expression in the key report adopted at LO’s 1971 Congress, Democracy in the enterprise.37 Management-imposed rapid rationalisation and technological change had led to redundancies, marginalisation of skills, new physical and psychological work hazards, and their consequential absenteeism and labour turnover. Such was the background to the new campaign. However, in the contractionary economic climate of the seventies in which it was waged, the unions’ renewed concern to democratise worklife raised even more fundamental issues.38 The dominant one was the lay-offs and plant closures that followed from the new ascendancy of financial over industrial criteria in managerial decision-making. Conglomerates swallowed up industrial enterprises in the merger boom, and capital fell for the far greater temptations and opportunities to redirect investment into purely financial placements or to close down operations in Sweden as part of transnational manufacturing strategies to exploit lower wage rates and poorer working conditions elsewhere. The next most important issue that arose in the course of the industrial democracy campaign concerned the managerial assumptions built into new technological systems that became the basis of the re-organisation of whole work processes, such as newspaper production. Activists objected not 37 38

LO 1971. Broström 1982 explores the central issues underpinning the industrial democracy campaign. See Higgins 1985b for an overview of industrial democracy initiatives and the themes that emerged in the conflicts they unleashed.

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to productivity-enhancing technologies as such, but rather to the way manufacturers of computerised process technology packaged and programmed it to exclude the skill and discretion of on-line workers in favour of reinforcing ‘management’s right to manage’, which clearly enjoyed a higher priority than optimal technical efficiency. The campaign, and the union movement’s strategic choice to launch it through legislation after the traditional method of bilateral negotiations with SAF failed, signalled a turning point in Swedish union politics in three respects. First, union organisations intervened directly to re-organise work processes, ending over six decades of explicit acceptance of managerial prerogatives. The optimal means for doing so proved to be the development of an autonomous corporate planning capacity in local union organisations, which could thus generate constructive alternatives to management’s planning as the basis of mobilisation and negotiation. Second, the decision to call for legislated rights indicated the now limited nature and circumstances of the convergence between the rationalities capital and labour bring to the pursuit of economic efficiency. Swedish unionism had outgrown the Saltsjöbaden agreement, which it formally rescinded with the passage of the co-determination act through the riksdag in 1976. Third – related to this point – organised labour’s direct intervention into the production process necessarily downplayed its own centralised organs in favour of its local organisations. The pursuit of industrial democracy, then, inaugurated an intensification of movement socialism. At its 1981 congress LO adopted an extraordinarily searching theoretical and empirical self-analysis, The 80s report ,39 in terms of its own goals, methods and level of mobilisation at the shop floor level. The report is an exemplary democratic manifesto, both in its openness about the actual state of its own organisation and in its level of democratic ambition. It explicitly returns to social democracy’s doctrinal roots and defines the labour movement as a democratic opposition in a society that will remain profoundly oligarchic and authoritarian so long as private ownership and control of industry continues. Its sharp polemic against the triviality and formalism of the liberal conception of

39

LO 1981a.

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democracy – formal head-counting – has an unmistakeable wigforssian resonance. Democratic criteria are only fulfilled when workers and citizens take an active and informed part, not only in the formal procedures, but more importantly in the informal processes, which determine their living and working conditions, and when the social content of decisions and outcomes gives each individual an equal chance to shape her/his life. Moreover, a ‘democratic movement is a goal in itself. Not only do we want to accomplish different things to our opponents, we also want to be different – a social alternative, a counterculture.’40 The empirical data in the report bear witness to the galvanising effect of the industrial democracy campaign on a union movement that had by now long maintained the west’s highest union density. Industrial democracy had qualitatively increased demands on the time, energy and competence of shop floor union organisations. The majority of LO’s 2,600 local sections and 10,000 workplace branches originated the campaign for industrial democracy in the seventies, and it now had 50,000 full or parttime organisers and a greatly increased corps of shop stewards.41 The struggle to empower organised labour in the enterprise, however, came up against the barrier of proprietorial prerogatives exercised in conglomerate head offices and financial institutions remote from the enterprise and the workplace itself. If the union movement was to effectively pursue a wider economic democratisation, it had to complement its activity in the enterprise with intervention into resource allocation on the capital market. This role would fall to LO’s wage-earners’ fund scheme. In 1973 LO’s executive established a committee of three – Rudolf Meidner, Anna Hedborg and Gunnar Fond – to work out a response to the destabilisation of central wage negotiations by fluctuations in international export prices. Instability on international commodity markets was reverberating in the form of uneven profit rates between the various sectors of the Swedish economy. They made it difficult for LO’s central wage negotiators to hold an orderly line in wage movements, since windfall profits fuelled militancy and wage-drift in some sectors, which in turn undermined solidarity wage policy and led later to inflationary wage catch40 41

LO 1981a, pp. 31–48. The quote is from p. 39. Emphasis in the original. LO 1981a, pp. 44–45.

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ups in other sectors. LO’s wage-earners’ fund concept that emerged from the committee’s work was highly reminiscent of Wigforss’s politics: a malfunction in the capitalist system gave rise to a provisional utopia – the transformational reform of collective capital formation. And as we saw in chapter 6, Wigforss had repeatedly pointed to the need for collective capital formation after his retirement. Unfortunately, as we shall see, LO lacked the political leadership to refine the scheme and so use it as the basis of successful mobilisation. In the original version presented to the 1976 LO congress,42 the troublesome excess profits in medium-size and large firms were to be sterilised by being retained as working capital in the firm, while the latter was to be compelled to issue equity shares to the value of the retained surplus to new financial institutions (wage-earners’ funds). The funds would exercise the voting rights attached to these shares in the interests of wage-earners. In this way, excess profits would no longer be available to be claimed by either shareholders or local militants, so dampening inflation and returning authority over wage movements to central negotiators. At the same time the mechanism would boost industrial investment (the decline of which was seen on all sides as a major problem for the Swedish economy at the time). It would also counteract the alarming concentration of capital ownership, which was more extreme in Sweden than in any comparable economy. And if shares and voting rights were managed in wage-earners’ long-term interests, the capital they represented would stay at home in productive placements calculated to promote industrial renewal, employment and enhancement of skills and careers. The similarity between the collectivisation of share ownership in this scheme and Wigforss’s ‘social enterprises without owners’ is clear. While these motives were not particularly controversial, compulsory share issues and the long-term effect of the scheme on power in the capital market certainly were. On one scenario wage-earner interests would have acquired 52 percent of the issued capital in the affected firms within twenty years. Private capital’s power and control over the social resources repre42

LO 1976. For an English translation see Meidner 1978. One of the best analytic and contextualised accounts of the issue in English is in Pontusson 1992, esp. ch. 7. See also Higgins 1992.

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sented by the private sector would have been marginalised. The proposal thus triggered the bitterest and most protracted political conflict in Sweden’s postwar history. The gales of political invective have done much to muddy the analytic waters both in appreciating the doctrinal origins of the scheme and (surprisingly) even in seeing it as political at all. For instance, Erik Åsard suggested, in the earliest full-scale academic analysis published,43 that the scheme’s ideological lineage went back to late nineteenth century liberal suggestions for profit sharing in the form of small individual share issues to employees. However, the subsequent course of political conflict showed how irreconcilable collective capital formation is with the liberal notion of employees’ individual shareholdings which, because of their disorganisation and negligible size, would have actually reinforced the relative power of major shareholders. Peter Swenson later spirited away political tradition and determinants altogether to explain the funds scheme, not in terms of the specifics of the Swedish labour movement’s own political history, but in terms of a general logic of unionism. In his account, ‘radical’ ideas become attractive to traditionally conservative union leaders when economic changes undermine their institutional standing.44 It is worth noting, then, the inspiration claimed from the beginning by the authors of the scheme and the union press (and by implication the LO leadership). The three authors of the proposal drove the considerable distance to Vejbystrand to personally present the then 94 year old Ernst Wigforss with the prototype when it rolled off the LO presses in April 1975. A more pointed acknowledgement of doctrinal indebtedness could hardly be imagined. The same number of Fackföreningsrörelsen that reported this visit also carried an interview with Rudolf Meidner where he takes the social democrats to task for having neglected the question of the ownership of industry: We seek to deprive the old capital owners of that power they exercise by dint of their ownership. Experience indicates unambiguously that influence and control are not enough. Ownership plays a decisive role. I want to refer to Marx and Wigforss: we cannot fundamentally transform society without also transforming ownership. In my emphatic view, mere functional socialism cannot deliver a thoroughgoing social 43 44

Åsard 1978. See Öhman 1985 for a rebuttal. Swenson 1989.

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transformation. If the labour movement wants to solve the problem of the injustices of ownership, then wage-earners’ funds constitute one method. But if we don’t move on ownership we will be stuck forever with outrageous injustices in power over production and people.45

Not only does Meidner specifically cite Wigforss, but his rationale converges with the latter’s, as the quotation at the top of this chapter shows. Subsequent issues of Fackföreningsrörelsen carried sophisticated analyses that continued to problematise the unequal distribution of social power and the severe limitations of liberal political democracy. In particular Bernt Öhman, under the rubric ‘A democratic decision-making structure – even for industry’, points to the narrow compass of liberal democracy which denies most people any input into the economic decisions that affect their lives on many levels. The paradoxical but unambiguous sense of powerlessness in a formally democratic polity, he argues, can only be overcome by a democratic decision-making process in industry that can hardly be expected to leave the distribution of ownership unaffected.46 The most active polemicist among the co-authors of the proposal, Anna Hedborg, made the distribution of social and political power the focus of her contributions to the debate in Tiden,47 contributions in which Wigforss’s lineage is repeatedly invoked. But while Wigforss’s inspiration was clearly present among those who had conceived the funds, his political judgement and clarity were conspicuously absent in the LO leadership. In Björn Elmbrant’s account in his biography of the then SAP leader, Olof Palme,48 communication between the party and LO leaderships had become more and more attenuated, and jointly and severally they approached the preparation of this explosive issue with astonishing ineptitude. The LO chairman, Gunnar Nilsson, did not consult the party leadership because he saw wage-earners’ funds as self-evidently a ‘union matter’ to be pursued in bilateral negotiation with SAF, as if the phasing out of capitalism were an everyday item for labour market bargaining! There can be little quarrel with Elmbrant’s 45 46 47 48

Fackföreningsrörelsen no. 19, 1975, p. 17. Fackföreningsrörelsen no. 23, 1975, pp. 15–22. See also Jan Lindhagen’s analysis in the same number. See for instance Hedborg 1976, 1978a and 1978b. Elmbrant 1989, pp. 178–186.

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view that this failure of political judgment was ‘indefensible’.49 The LO leadership neglected to give Meidner and his colleagues any political guidelines for the construction of the version of the scheme that was to receive the tacit imprimatur of the 1976 LO congress. Nor did it itself assume the political responsibility to refine the scheme in preparation for the political collision it was bound to cause. For its part, the SAP leadership (and Olof Palme as leader in particular) had plenty of time before the congress in which to make representations to LO, but did not do so as it seriously underestimated both LO’s determination to proceed with its proposal and the political consequences when it did. ‘It went further than I had believed in my wildest imaginings,’ Palme commented, when the 1976 LO congress predictably adopted the proposal.50 Had the LO leadership set out to gain party support for this transformative reform in the vital early stages, it would certainly have been swimming against the tide of the party’s by then long-standing – but still de facto – conversion to social liberalism (or ‘functional socialism’ in party parlance) which left private ownership of capital sacrosanct. Palme in particular appears to have equated the traditional social democratic goal of economic democracy with industrial democracy, understood as industrial relations reform. LO would have had to forcefully remind the party of its electoral dependence on the union movement, and its historical (and continuing formal) commitment to a socialist transformation of society. As it was, the ideological gap and political tension between the LO and party leaderships, the latter’s unspoken hostility to the fund proposal as well as its public vacillation, allowed the employers and the right to seize the political initiative. The conspicuous absence of the wigforssian heritage in statecraft made the right’s task singularly easy. It staged a fullblown revival of cold war scare tactics and shrill vilification. Events moved inexorably towards the Swedish labour movement’s first major setback since the 1928 ‘cossack election’. The setback included open disunity – which ushered in a long period of LO-SAP tension known to the media as the Wars of the Roses (Rosornas krig) after the red rose logos of the belligerents – and in September 1976 the SAP’s first loss of government since 1932. 49 50

Elmbrant 1989, pp. 185–186. Quoted in Elmbrant 1989, p. 185.

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Underlying the labour movement’s maladroit handling of the funds issue was a failure to resolve a theoretical dilemma that first found clear expression in a classic debate between G D H Cole and Sidney and Beatrice Webb: should power over production devolve onto the direct producers, or onto the wider citizenry? Since it was LO that incubated the fund proposal, it is not surprising that it did so as an expression of the ‘rights of labour’. Anna Hedborg forcefully defended this syndicalist position in the debate in the party,51 and it received influential support in Bengt Abrahamsson & Anders Broström’s timely book The rights of labor in 1979.52 This argumentation addressed the doubts raised by socialists within the social democratic party about whether the ‘rights of labour’ constituted the appropriate basis on which to democratise the economy. In spite of Hedborg’s claim that the choice still lay between a workers’ ‘council socialism’ and a citizens’ ‘state socialism’, some support for basing collective capital formation on a broader constituency than union members, in the form of ‘citizens’ funds’ that maintained the same distance from the state as wage-earner funds was emerging. In his retrospective summation of this debate, Walter Korpi – a prominent exponent of the citizens’ fund notion – comments: The funds’ starting point in union wage policy led to a number of ideological problems. No distinction was made, for instance, between which groups should own the enterprises and which should lead and administer them. This led to some old syndicalist themes suddenly turning up in LO, when it demanded that the unions control the funds. Some old leninist flotsam floated up to the surface when LO wanted only wage-earners to control the funds. These sorts of conclusions and demands naturally arise if we see the funds primarily as a complement to union wage policy, but the consequence was probably an unnecessary contradiction between the people, who are the foundation of all democracy, and wage-earners in enterprises. Failure to resolve this contradiction meant that the funds could never be effectively promoted as a step towards economic democracy. It meant that the labour movement could never pose the question in terms of the basic democratic principle, one person-one vote. Its opponents could link wage-earner control to unions and ‘union bosses’. The battleline did not go between the people and the minority of prominent wielders of economic power, but rather between the people and the unions. The labour movement thus lost the initiative in the development of public opinion around 51 52

Hedborg 1976, pp. 224–225, 1978a, pp. 159–163. Abrahamsson & Broström 1979 (note also the English version 1980).

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economic democracy. The battle over the funds turned out to be one step forward and two steps back in its effect on public perceptions of economic democracy.53

Clearly, the virtues of producers’ versus citizens’ democracy could hardly be divorced from an analysis of the opponents’ resources and the strategic terrain on which the battle for economic democracy had to be fought. In an attempt to remove the funds from public debate, the returning social democratic government in 1982 moved to establish minor and innocuous financial institutions called wage-earners’ funds. Resemblance to the original scheme did not go much further than the title. They still afforded the centre-right government that took office in 1991 the symbolic triumph of abolishing them. Edvard Johansson’s log had once again been whittled down to a matchstick – which was still too big for the resurgent right.

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Solidarity work policy At the time, the defeat of the wage-earners’ fund proposal and the damaging disunity between LO and the SAP contributed to an international pattern of economic liberal revivalism, the ideological self-effacement and electoral eclipse of the various brands of labour reformism in the west, and the political fragmentation of labour movements. The latter constituted part of the still wider ‘crisis of socialism’ spectacularly represented by the collapse of the ‘actually existing socialisms’ in eastern Europe, as well as the debilitating globalist discourse of the ensuing decades. The international right wing wave also washed over Swedish politics, with economic liberalism once again coming to dominate the terms in which public policy was debated.54 Social democratic governments in Sweden had never been entirely faithful to the Rehn-Meidner model – as Rudolf Meidner himself had often noted55 – in that they habitually failed to impose restrictive economic policy in boom time, which was a precondition to wage formation 53 54 55

Korpi 1986, p. 43. Our emphasis. See Korpi 1982, pp. 63–72 for an example of his advocacy of citizens’ funds. Boréus 1994. For example, Meidner 1994, p. 341; see also Erixon 2004, 2010.

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under the model and thereby central to its anti-inflationary thrust. This failure put the cost competitiveness of Swedish industry in jeopardy. But the social democratic government that returned to power in 1982 abandoned the model’s protocols even more fundamentally, seeking to adjust for previous policy mistakes through a drastic currency devaluation to boost exports, and thereafter adopting a deregulatory economic policy (labelled, at the time, the ‘third way’, though unrelated to the subsequent GiddensBlair appropriation), which engendered high profits in enterprises, something that the Rehn-Meidner model was designed to prevent. As a result, the rationalising discipline and the transformation pressure that the model had imposed on industry were relaxed, and enterprises reaped high profits at the expense of industrial renewal.56 From 1983 SAF played its part in undermining the model by attempting – with at least partial success – to decentralise the wage-fixing system. The cumulative result of this retreat from ‘corporatism’ and into ‘market solutions’ was inflation, disorganisation and a serious deterioration in the competitiveness of Swedish industry.57 In this adverse ideological and policy climate Metall launched a new union strategy – ‘solidarity work policy’ – that soon became the centrepiece of LO’s reform strategy.58 It reflected the conviction of many western scholars that the period of ‘fordist accumulation’ – mass production based on scale intensity and standardised products, and a large semi- and unskilled industrial workforce whose wages sufficed to absorb these products – had come to an end. On one view, the whole social democratic ascendancy in postwar Sweden rode on fordist accumulation, the erosion of which had farreaching implications for organised labour’s postwar political strategy.59 56 57 58

59

Erixon 1989. The evolution of Rehn and Meidner towards advocacy of restrictive macroeconomic policy can be seen followed in Rehn 1987 and Meidner 1988. Meidner 1994, p. 341; Erixon 1989; see also SAF’s Färväl till korporatismen (Goodbye to corporatism) 1991. A somewhat different take is offered by Erixon 2004 and 2005. The major programmatic documents behind the new strategy were Metall 1985 and 1989 and LO 1991. Berggren 1989 provides a concise statement of what organised labour had to gain from the new strategy; more updated and expanded versions can be found in Brulin & Nilsson 1995 and the essays in Sandberg 1995. For a politically contextualised discussion see Mahon 1994. For example Ryner 1994.

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Fordist production based on taylorist principles degraded work, but was ‘progressive,’ in social-liberal terms at least, in that it was amenable to a commitment to full employment with rising levels of labour market participation, rising living standards and egalitarian distribution policies. Solidarity work policy seeks a progressive exit from taylorism by enhancing the skill, initiative and power of labour in the production process. Whereas Swedish unionism’s model of industrial democracy in the seventies attempted, on the basis of legislated and negotiated rights and guarantees, to institutionalise organised labour’s influence on all levels of decision-making in the enterprise, the new strategy aspires to re-empower labour much more organically into a ‘flexibly specialised’ production process. In overcoming taylorism’s radical dichotomy between mental and manual labour and extreme dismemberment of the labour process, the new strategy builds upon a more broadly skilled workforce – and with it restored rewards and dignity to labour. It is not only an alternative strategy for the democratisation of work life, its advocates claim, but also for the achievement of solidarity between workers. Instead of underpinning the latter with compressed wage differentials, the new strategy puts its faith in equal access to career development. Moreover, capital in the eighties was honing its own post-fordist industrial programme of toyotaism or ‘lean production’60 that intensifies the fordist degradation of labour under the more ‘flexible’ conditions of labour-market deregulation. A progressive alternative to lean production was a strategic necessity for the union movement. The Swedish car industry provided a laboratory for Metall’s (and soon LO’s) ideas on ‘enriching work’, (det goda arbetet).61 In 1974 Volvo had opened its then futuristic car assembly plant in Kalmar, which abolished the assembly line in favour of relatively autonomous small work teams whose members were at liberty to exchange work tasks, and it provided the original model of ‘post-fordist’ work organisation. In 1989 it was overshadowed by the same firm’s ‘dream factory’ in Uddevalla. Volvo invited Metall to make a significant input into this greenfield project right from 60 61

Womack et al. 1990 is the locus classicus of the managerial strategy. This was the title (literally ‘good work’) – which clearly refers to the life-enhancing experience of the new job design – of Metall’s first major report on the subject; see Metall 1985.

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the design stage. It was this plant that became the flagship of the new strategy to humanise and democratise work life in ways that indeed enhanced the skills and enriched the working lives of those working there. It did so by offering varied work, constant upgrading of skills, and considerable ambit in which the small working collectivity could run itself. It became the object of serious scholarship,62 both Swedish and international, in search of a civilised, European competitor to the thinly masked industrial savagery of Japanese-American ‘lean production’. Anticipations of Uddevalla underpinned Metall’s further development of its strategy in a 1989 report, Solidarity work policy for enriching work.63 That said, however, a number of problems and limitations with the whole post-fordist conception remained, particularly with its role in LO’s definition of the socialist project. First, the post-fordist thesis itself – and above all the assumed supersession of mass production – attracts scepticism.64 Flexible specialisation would seem to have a limited application across the range of contemporary workplaces to the extent that mass production and taylorist job design persist in more or less disguised forms in many sectors. Second, the new policy includes a retreat from the ambition of the older solidarity wage policy to compress wage margins in that it accepts ‘individual wage development’ according to skill enrichment in the new, at least partially decentralised collective bargaining system.65 It thus colludes in the employers’ deregulatory undercutting of organised labour’s previous egalitarian gains. And it does so in a period of rising unemployment when the equalising tendency of a fully employed labour market has faded. Third, even in those labour processes where a solidarity-work policy is applicable, it is no substitute for a broader manufacturing strategy in the enterprise and a macro-level discipline on capital. We have suggested throughout this study, in accordance with Wigforss’s ideas, that the former task has to be borne in the first instance by organised labour in the enter62 63 64 65

See in particular Berggren 1992 and Sandberg 1995. Metall 1989. See, for instance, Williams et al. 1987, and the same authors’ (1992) devastating critique of lean production. For a systematic critique of post-fordism as the basis of a strategy for labour, see Hampson 1994 and also Williams et al. 1994. Brulin & Nilsson 1995, pp. 135–139. This work, in its uncritical view of the ‘flexibility’ theme, makes considerable concessions to the lean production agenda.

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prise – as the earlier initiatives in industrial democracy were intended to do. In the Swedish case above all, organised labour has shouldered the political responsibility for maintaining a model of public economic management designed to impose industrial rationality on capital. As social democratic governments progressively resiled from that model from the 1990s, capital was relieved of any such discipline.66 Solidarity work policy in itself does not provide organised labour with any leverage into managerial decision-making, let alone into the rationalisation of the manufacturing sector as a whole. The Uddevalla plant’s place in Volvo’s wider operations and its subsequent history exemplify how the new union strategy remained hostage to management interests and calculations. Volvo started planning it in the late 1980s when it was experiencing recruitment problems. At the same time it maintained the commitment to taylorist assembly lines at its large assembly plant at Torslanda near Gothenburg, in its component and subassembly plants, and in its Belgian operations which built nearly half the larger Volvo cars. When the international downturn of the early nineties reduced demand, Volvo peremptorily closed down its showpiece plants – Uddevalla and Kalmar – in 1993. After considerable public outcry, Uddevalla re-opened in 1995 in response to a better economic climate, but it was later scaled down, reduced to producing customised luxury cars. The absence of an industry policy in the Swedish case meant that no social interest taking responsibility for the national manufacturing effort had been developed. Unregulated investment behaviour on the one hand, and the ‘post-fordist’ effort to reduce the labour component in what substantively rational production remains, on the other, were destined to cement high levels of unemployment. Apart from attempts to save a flourishing welfare state and therewith a high level of public-sector employment, LO has little answer in its new strategy to the perceived emergence of a ‘two-thirds society’. In such a society the workforce is divided between the two-thirds of the population comfortably established in the charmed circle of efficient flexible specialisation on the one hand, and the other third – whose contribution to labour market ‘flexibility’ consists in remaining unemployed and marginal most of the time – on the other. 66

See Meidner 1994.

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A crucial and longstanding weakness of LO’s version of the socialist project compounded this latter problem, as well as vitiating the progressive credentials of solidarity work policy as such, as we shall see. That weakness lies in its gender politics.

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Socialism in one sex? In the1990s more than three-quarters of Swedish working-age women participated in the labour force, and it was among the west’s highest rates. The rates for both women and men declined for the next two decades but, with other Nordic countries, remain high in the developed world.67 (Current figures as well as 1994 as a comparator are shown in Table 7.1.) Also in the 1990s, when the social democrats were still politically dominant, women’s wage rates in manufacturing industry were almost 90 percent of male rates – dropping slightly by the late 2000s.68 These were crucial Swedish achievements given the importance of individual autonomy (including financial autonomy) in a democratic and egalitarian commercial society, and ones that LO’s contribution to public economic management – the institutionalisation of full employment and solidarity wage policy under the Rehn-Meidner model – made possible. A measure of LO’s success and legitimacy as representative of organised labour is the uniquely high level of union membership among blue collar workers, with the female rate at 87 percent actually surpassing the male rate of 84 percent in the 1990s.69

67 68 69

See OECD Employment Outlook 2010, p. 273. The rate was 82.5 % in 1990 (compared with 56.4 % for the OECD as a whole). According to LO, women’s wages were 87 % of men’s in 2008 (for LO members, who accounted for about 35 % of the workforce). The gap was considerably higher in the private sector considered alone. See LO’s website: . NORD 1994, pp. 3, 48, 56; LO 1994, p. 5. Though the union membership figure had declined to 71 % by 2008, it was still the world’s highest (ahead of Finland, Denmark and Norway). The OECD average was then 33 % – see Barratt 2009, p. 49 (derived from OECD data).

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Table 7.1: Labour force participation rates compared (%). Females Iceland Denmark Switzerland Norway Sweden Canada Netherlands Finland New Zealand Germany UK Australia Austria USA Portugal France Spain Japan Ireland Czech Rep. OECD av. Belgium Luxembourg Slovak Rep. Poland Greece Hungary Korea Italy Chile Mexico Turkey

2009 82.0 77.3 77.3 76.5 76.4 74.4 73.5 73.5 72.0 70.4 70.2 70.1 69.6 69.0 69.0 65.9 65.7 62.9 62.9 61.5 61.3 60.9 60.7 60.6 57.8 56.5 55.3 53.9 51.1 46.6 45.2 28.4

(1994) (79.1) (79.8) (68.0) (70.9) (77.0) (67.8) (57.3) (69.1) (64.6) (60.9) (67.1) (62.8) (61.3) (69.4) (60.0) (59.3) (46.3) (58.3) (45.8) (64.4) (57.5) (51.2) (47.0) (61.2) (62.1) (43.2) (52.7) (50.8) (41.9) (-) (36.1) (33.2)

Males and Females 2009 Iceland 85.3 Switzerland 82.6 Denmark 80.7 Norway 79.0 Sweden 78.9 Netherlands 78.8 Canada 78.1 New Zealand 77.8 UK 76.6 Germany 76.4 Australia 76.3 Austria 75.3 Finland 74.6 USA 74.6 Spain 74.0 Japan 73.9 Portugal 73.7 Ireland 71.3 OECD av. 70.7 France 70.2 Czech Rep. 70.1 Luxembourg 68.7 Slovak Rep. 68.4 Greece 67.8 Belgium 66.9 Korea 65.4 Poland 64.7 Mexico 62.8 Italy 62.4 Chile 62.3 Hungary 61.6 Turkey 51.7

Males 2009 Iceland Switzerland Japan Netherlands Denmark New Zealand Australia Mexico UK Germany Spain Canada Norway Sweden Austria USA OECD av. Ireland Greece Portugal Czech Rep. Chile Korea Luxembourg Slovak Rep. Turkey Finland France Italy Belgium Poland Hungary

88.8 87.9 84.8 84.1 84.0 83.9 82.6 82.3 83.2 82.2 82.2 81.8 81.4 81.3 81.0 80.4 80.2 79.6 79.0 78.5 78.5 78.1 76.9 76.6 76.3 75.2 75.8 74.7 73.7 72.8 71.8 68.2

Source: OECD Employment Outlook 2010, pp. 271–273.

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But behind these figures lurked another reality: a heavily gender-segregated labour market generated and preserved a proliferation of inequities. As well, the gender division of labour overlaid the public-sector/private-sector divide, as roughly two-thirds of all women employees work in public institutions where wage developments have been relatively unfavourable and employment insecurity greater in recent times. Women’s average income in the 1990s was only 66.1 percent of the male average, a gap that is partly explained by drastic differences in supplementary pension entitlements – 36 percent of retired women depended entirely on the basic pension, but only 4 percent of retired men were so limited, and the varying supplementary pension (ATP) entitlements in themselves reflected earlier gendered differentials in wages and occupational opportunities. But today’s levels of women’s part-time work and their concentration in lowpay jobs play an important role in perpetuating the gender gap and tomorrow’s differential entitlements to retirement income. In the 1990s, 31 percent of women workers – as against 6 percent of men – worked parttime.70 Within LO male incomes exceeded women’s by 21 percent. In the labour market as a whole, female occupations attracted wage rates between 10 and 15 percent lower than typically male occupations.71 When we look more closely at women’s and men’s work life, the gender gap yawns even wider, in both quantitative and qualitative terms. The Central Statistical Office’s survey of men’s and women’s working conditions72 and the unions’ own research reports pointed to a markedly less favourable work life for women in the incidence of repetitive strain injuries and other health hazards, lack of personal freedom at work, lack of control over one’s immediate work situation, lack of training on the job, lack of career prospects and involuntary part-time status. In mechanised 70 71

72

NORD 1994, pp. 3, 83, 92. Kommunal 1994a, pp. 4–5. It should be noted, though, that the actual wage for female industrial workers rose dramatically (and quickly) from about 70 percent to over 90 percent of the equivalent male rate in the decades after the 1960s (see Hedborg & Meidner 1984; Meidner 1984, p. 187). The Guardian Weekly (22 October 2010) reported that, for the 2000s, Scandinavia has the world’s lowest gender gaps (pay, education, health, employment participation and political representation) with Sweden fourth after Iceland, Norway and Finland. Statistiska Centralbyån (SCB) 1991.

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production woman tended to remain – in Marx’s phrase – ‘appendages of a machine’, bound to a single machine and to repetitive, unskilled work. In metalworking, 82 percent of women (as against 35 percent of men) suffered these conditions, while only 51 percent of women (compared to 70 percent of men) could leave their posts for short periods of time at least half the time.73 Such data sounded a discordant note in this industry, the home ground of post-fordist sanguinity. In the municipal sector, with an 80 percent female workforce, only 22 percent worked full time and to normal working hours, while 37 percent of this sector’s part-time female workforce were frustrated in their desire to increase their working hours.74 The paradox in Swedish gender relations is that, as we have seen, women in Sweden suffer fewer inequalities on a number of indices than women elsewhere. They now occupy, for instance, around 45 percent of the seats in parliament and half the seats in the government.75 And yet the women’s movement itself had until the nineties been comparatively weak, and feminism still meets greater hostility in the media and academic world than in many other western countries. The key to this paradox, and to the patchy progress towards gender equality, is the extent to which this progress has been driven by gender-blind forces: a combination of demand for labour in periods of economic expansion, and LO’s general offensive against wage differentials. Lars Svensson has shown, for instance, that market conditions have had a surprisingly strong influence compared to union wage policy on movements in women’s relative wage rates.76 In a suggestive conceptualisation of how beholden progress towards gender equality has been to economic developments, Maud Eduards has indicated how the form of this progress has given rise to a ‘Swedish gender model’ based on ‘productivity, pragmatism and paternalism’. That is to say, organised capital and labour, in co-operation with an interventionist state, have re-jigged gender relations to plug gaps in the supply of labour; 73 74 75 76

SCB 1991, pp. 46, 48; Baude 1994. See Fürst 1989 for an investigation of how the basis of gender segregation in industry has changed over time, but remained equally effective. Kommunal 1994a, ch. 9. For the three national elections in the 2000s (2002, 2006 and 2010). The figure for the main conservative parties is even higher. Svensson 1995.

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they have done so in the interests of economic development and with negligible commitment to gender equality as such.77 In the 1990s climate of high unemployment and severe cutbacks in the public sector – a women’s labour market par excellence – this model of gender relations constantly boded regressive results for women’s job security, incomes, working conditions and life chances. The Swedish gender model is simply the local and visible variant of what Yvonne Hirdman has conceptualised as the ‘gender system’ – ‘the system and the process which constitutes social organisation, which orders the sexes into he and she, an ordering which underpins all other social arrangements and which has given rise to a superstructure of visible as well as invisible artefacts with strong normative and identity-shaping effects.’ This system, she suggests, has two supporting logics: the segregation of the sexes (for instance, on the labour market) and the male norm itself.78 LO is of course directly implicated in both the Swedish gender model and its systemic underpinning. The persistence of gross gender inequities in work life and incomes points to a signal breakdown in LO’s solidaristic ethos in routine union business both centrally and locally, especially given that women make up 46 percent of its membership. The organisational roots of this breakdown predictably lie in the severe under-representation of women in both union functions and representative positions. In the mid-1990s, for instance, only 32 percent of all elected union representative positions were held by women, and only 27 percent of shop stewards were women.79 As Christina Bergqvist’s research showed, the higher up one looks in the union hierarchy, the worse the problem becomes. At LO’s 1991 congress only 27 percent of the delegates were women, whereby women were just as underrepresented as at the 1971 congress. They constituted just 25 percent of the general council (Representantskapet) and 13 percent of the executive (Landssekretariatet). Indeed, it was not until 1989

77 78 79

Eduards 1991. Gunhild Kyle (1979) has argued that women in Sweden played the same role of flexible labour reserve that migrant labour played in many comparable countries. See also Baude 1992b, pp. 16–19. Hirdman 1987, pp. 197–198. For an elucidation of the male norm as such, see Wendt Höjer & Åse 1999. LO 1994, p. 7.

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that Lillemor Arvidsson become the first union chairwoman in LO (in the Municipal Workers Union) and thus the first woman to sit on the LO executive in that capacity. (Indeed, only one other woman, Margareta Svensson, had sat on it at all). It has proved harder still for women to gain union endorsement to represent the movement on external, so-called corporatist, policy bodies, with all that that implies for a skewed distribution of political influence.80 On a charitable interpretation, LO has played a negligent Hercules who has struck off two heads of the Hydra of gender inequality – barriers to labour market participation and discriminatory wage rates – only to walk away as the monster sprouted new heads in the form of the differential work life conditions reviewed above, while it fed on the marshes of labour market segregation. On a less charitable interpretation, men constituted themselves as a labour aristocracy (to use a classical socialist term) when women entered the postwar labour market en masse, and entrenched their sectional interest in the structures and working routines of LO and its constituent unions. Both interpretations find some support in the history of LO’s gender politics. But either way, there was a striking failure to model – let alone realise – the central socialist aspirations of equality and democratic inclusiveness. A convenient place to start a brief overview of LO and the Swedish gender model is in the 1930s when the role of women in modern society was first raised in political discussion. As we saw in chapter 5, Alva Myrdal’s feminist agenda was the traditional socialist one of integrating women into the ‘public’ sphere of the economy and politics, including the paid workforce. But her ideas, which typified the optimism of her age cohort, met with scepticism from older social democratic feminists. Elin Wägner, for instance, protested in her journal, Alarm Clock: My view has always been that this generation has presumed too much when it has believed that individual competence, loyal adaptation and friction-free co-operation with men would lead them to a so called equal footing in society. The only thing that makes men likely to listen to women and take them seriously is women’s solidarity.81 80 81

Bergqvist 1994, pp. 126–145. For an insightful historical overview of LO’s problematic relationship to its women members see Waldermarson 1992. Quoted in Lindholm 1994, p. 15.

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Reasons for this scepticism in women’s experience in the paid workforce at the time were not hard to find. When the question of women’s place in industry came before a public inquiry in the thirties, it was dealt with in the social engineers’ brisk economese:

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[F]irms could have an economic interest in a rapid turnover of staff. Training time is in general short and the work is increasingly mechanised and demands a speed and intensity which younger labour power can more easily achieve. Resignation upon marriage would therefore provide a natural occasion for replacement, which in this respect must be seen as advantageous. At the same time the proportion of older staff, who in general command higher wages and require pension rights, would decline.82

Behind this seamless instrumental rationality lay the reality of very high levels of industrial injury and illness among young women workers, to say nothing of other forms of subordination at the workplace. Just as we saw (in chapter 1) that at one stage in modernity’s progress it was instrumentally rational to confine women to the domestic sphere, now it had become expedient to bring them into another sphere of subordination – temporarily and for the limited purpose of easing the advent of fordist mechanisation. Since they were not destined to stay in the workforce for long, their high rate of injury implied negligible macroeconomic cost. As Ulla Wikander comments on this period, ‘there emerges a crass attitude, ratified by economics, to cheap, available and expendable female youth.’83 In their unreflected productivism and masculinist assumptions, the unions colluded in this crass view, and lower wage rates for women were provided for in LO’s wage policy until 1960 as a matter of course, despite social democratic lip service to the principle of equal pay since at least the 1920s.84 At the same time, few social democratic spokespeople after Alva Myrdal argued for all women of working age to have equal access to – and equal 82 83 84

SOU 1938: 47, p. 320. Wikander 1992, p. 54. See for instance LO 1946. In his memoirs Wigforss (VIII, p. 227) notes how the equal pay principle in the civil service was ingeniously expressed in the 1925–1926 Budget that Thorsson designed before illness forced him from office. Where women applicants were available to fill a particular job category, women’s lower wage rates should apply to it, whether it was a man or woman who actually received the appointment!

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status on – the labour market. The modern, scientific housewife remained the object of family policy and social policy more generally. But in the late 1950s a drastic shift was in the air. Like many western ‘affluent societies’, Sweden experienced a labour shortage which had to be made good either through the importation of guest workers or by admitting women en masse into the paid workforce. In association with Viola Klein, Alva Myrdal reissued her challenge to bring family and labour market policy in line with a major increase in women’s participation in the paid workforce.85 This time public authorities and LO responded accordingly. Suddenly the housewife vanished from the purview of public policy, which now embraced the socialist ideal of two equal working parents with completely overlapping domestic and breadwinning roles. This called for a dramatic increase in the caring services of the welfare state to partially replace women’s unpaid labour in the home in the care of dependants, not least children. LO and SAF supported the changes and formally abolished all gender-specific wage rates in the 1960 wage round. Instrumental rationality had taken another turn. As the historian Ylva Waldemarson relates: Once upon a time in the land of Sweden, in a particular historical conjuncture, the interests of the political and economic powers coincided. The labour movement and industry could unite around a policy of economic growth. This policy came to mean that the women of the land, both single ones and the mothers of small children, were needed on the labour market to a hitherto unheard-of extent. Of course, there had been women in paid work before. Some of them, but far from all, were members of an organisation called LO. Here they had fought hard and long for a greater say for women and equal pay for men and women – usually in vain. But then one day the affluence fairy waved her wand over the land of Sweden, and in the twinkling of an eye women became a scarce resource on the labour market. And lo! in the very next instant they could discuss equal pay and women’s issues, and it was not long before the state and LO were heard ringing out in chorus: Childcare for all! And that is the end of the tale of how the boom years and the Swedish model created an historic possibility for Swedish women to build a life of equality for themselves.86

As she notes elsewhere with equal bemusement, the heavy recruitment of the new female workers into LO made the latter a ‘women’s organisation 85 86

Myrdal & Klein 1957 (1958 in English translation). Waldemarson 1995, p. 15. See also Waldemarson 2000.

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of some significance;’87 and by the mid-nineties it had around a million women members who constituted, as we saw above, just under half of its membership (compared with under 20 percent in the early 1950s). Many progressives entertained the high expectations of these changes that they would usher in a society based on gender equality. A number of sociologists and union activists expressed these sentiments in 1962 in a landmark Swedish-Norwegian study, Women’s lives and work.88 LO’s policy staff and programme writers seem to have shared these perspectives, and they reacted when trends in women’s representation in union structures, wage levels and working conditions failed to follow expectations, as in The 80s report mentioned above.89 But LO’s leadership, negotiators and affiliated unions’ leaders followed the older agenda of economic expediency, masculinist organising traditions and jealous defence of the collective bargaining mechanism against attempts to use political means to introduce a measure of gender equity. In 1974 Gunnar Qvist published his critique of LO’s recalcitrance towards its women members, and centrally problematised their underrepresentation in union organisations. He notes that women’s proportional representation in union organisation had actually fallen in the twenty years leading up to his book. So far as gender relations were concerned, LO ranked ‘among our most conservative institutions’. LO was clearly enthusiastic over women as a recruitment base, but their severe under-representation in organisational positions, and virtual absence from the routines of collective bargaining, meant that ‘the LO leadership completely lacks initiative on concrete questions to do with women’s wages and working conditions.’90 What this entailed for women’s working lives was revealed in 1979 in the first major study thereof since their mass entrance into paid employment – Gunhild Kyle’s fittingly entitled Female guest-worker in male society.91 Women became substitutes for the guest workers whom other European countries used to plug labour shortages, she concludes, and they 87 88 89 90 91

Waldemarson 1992, p. 105. Dahlström 1962. LO 1981b, pp. 189 et seq. Qvist 1974, p. 97. Kyle 1979.

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receive precisely the same treatment – segregation in the lowest paid, least rewarding and highest risk occupations in the labour market. In spite of this, LO and SAF opposed the gender equality act that the then bourgeois government passed in the same year, as it undermined their power as the ‘social partners’ in the collective bargaining process.92 Thirteen years after Qvist’s study LO was again caught in the spotlight of a high-profile public inquiry for the severe under-representation of women in the union movement.93 This inquiry recommended that, unless LO’s organisations steeply increased female representation, the state should impose mandatory gender quotas on them. A follow-up inquiry in 1993 noted some improvement, but the remaining under-representation was too significant for the threat of legislative intervention to be lifted.94 In more recent years anecdotal evidence has revealed the forms of resistance women activists meet from male colleagues. It is a dispiriting catalogue that ranges from bald misogyny and unreflected sexism, to insensitivity to the gendered nature of the existing organisational culture and routines, and to a skewed domestic division of labour that hinders women’s activism. At the same time the labour movement did not tolerate women’s separate organisations which might have addressed the problems. Given the union movement’s democratic and egalitarian aspirations, it is a question of ‘men on holiday from their ideology,’ as one prominent union feminist critic, Ann-Sofie Hermansson, put it.95 The connection between women’s under-representation in key union functions, their status as an industrial reserve army (in Marx’s time-hallowed phrase) and their subordination in the labour market thus continued. The Swedish labour market remains extremely segregated, with women producing services (especially in the public sector) and men concentrated in the production of goods in the private sector. Male dominated occupations attract better status, pay and conditions, more training provision and career prospects. The ‘normal’ worker continues to be male. As Annika Baude, among many other researchers into women’s worklife, has shown, 92 93 94 95

Eduards 1991, p. 172; Acker 1992. Varannan damernas SOU 1987, p. 19, ch. 3. Eduards & Åström 1993. Hermansson 1993, p. 9; see also Eriksson 1995.

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gender and the gender system remains a fundamental organising principle on the Swedish labour market.96 Far from being left behind in the domestic sphere, the modern gender system and gender inequity have followed women into the labour market. Three working assumptions have prevented LO from developing a gender politics adequate to its socialist commitment. In the new age of solidarity work policy and post-fordist euphoria they are especially mischievous. The first is the one we saw Qvist touch on above – a narrow concern with women workers as a recruitment base only (and latterly to some extent as local shop stewards and safety delegates), a concern that neglects the need to address the inequities women face in work life. The corollary of this is a belief in a genderless class homogeneity and ‘solidarity’ that trivialises women’s under-representation as well, since it suggests that the gender of decision-makers and negotiators is not important. The second assumption is that gender inequities are mere survivals from a benighted past, infelicities that rationality and benign progress will erode. Metall’s Solidarity work policy was a case in point, for which it received an appropriately pointed rebuke in the public inquiry on power in Swedish society.97 No sense of a gender system which enjoys a distinctively modern provenance could be found here, nor the character of a living social principle that takes root in new institutions and practices.98 Thirdly, the above assumptions combined with an unexamined and traditional suspicion in the labour movement of women’s separate organisations and an accompanying sectarian stance towards the wider women’s movement.99 The latter problem emerged as a persistent subtext, for instance, in LO’s major response to the politicisation of gender relations 96 97 98 99

Baude 1989 and 1992b. Metall 1989; Wikander 1992, pp. 61–62. Also Baude 1994, p. 4. The concept of the gender system was developed by Yvonne Hirdman (1987) for the public enquiry into power in Sweden, and has since become an accepted starting point in gender research there. For the sake of clarity for a non-Swedish readership, the ‘women’s movement’ here is a collective term for all women and women’s formal and informal organisations working for gender equality. For the traditional resistance towards women’s separate organisations in the labour movement see especially SOU 1987, pp. 43–46 and Karlsson 1990.

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during the seventies – its report to the 1981 congress, Gender equality and solidarity.100 It repeatedly suggested that women should organisationally close ranks with LO men rather than with other women. Given these assumptions and lack of a concerted effort to change their organisational culture, LO and most of its constituent unions have unfortunately exemplified certain unwritten rules of gender power identified by Maud Eduards: the relationship between the sexes is to be seen as nonconflictual and inequities as due to mere prejudice and old-fashioned attitudes; exclusive women’s organisations were unwelcome; traditional leftright and public/private boundaries should be respected; and established centres of power should be insulated from women’s collective actions.101 Under the ‘paternalism’ aspect of the Swedish gender model, women should rest content with their client status vis-à-vis both the state and their union structures. The 1990s saw a resurgence of the Swedish women’s movement. It now challenged precisely these rules in its impatience with the limited results of the old liberal paternalism with its gender-neutral reforms.102 It placed heavy emphasis on the need for women’s separate organisations and action, and especially on the informal women’s networks that had sprung up in many different institutional sites in the nineties, not least in the union movement. Its threat to establish a women’s party in Sweden’s volatile proportional representation system converted most electoral parties virtually overnight to ‘layered’ electoral lists with alternating female and male candidates. These lists were designed to deliver equal gender representation in the riksdag, and their use since the 1994 election has led to the steep rise in women’s parliamentary representation. Tough critic that the new women’s movement has shown itself, it seems to have saved LO’s democratic socialist credentials. Faced with this new democratic challenge, LO initiated some painstaking renovations in its gender politics. 100 LO 1981b. 101 Eduards 1992, pp. 100–102. 102 For an extended account see Curtin & Higgins 1998. A Feminist Initiative, to contest the 2006 elections, was formally inaugurated in 2005 but dogged by unresolved controversies about the extent of its opposition to the other parliamentary parties.

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LO and its constituent organisations undertook a number of publicly funded projects to find ways to rectify the gender imbalance in union life in the wake of the inquiry into women’s under-representation. Both the official evaluation of these projects and Christina Bergqvist’s subsequent research into women’s under-representation were guardedly optimistic about the trend to narrow the representation gap in LO.103 In 1990 a group of women officials brought out in LO’s name two reports on gender inequities in working conditions and wages,104 Class and gender and Gender decides the wage, the very titles of which overthrew the old orthodoxy (first enunciated by Branting, as we saw in chapter 2) that ‘class comes before sex.’ In 1991 the reversal became official, as it were, when the LO executive recognised a women’s network, Tjejligan (‘the women’s gang’), that had formed within its organisations. LO undertook to finance the network’s upbeat glossy journal, Clara, with an initial grant of 12 million kronor, and to provide the network itself with administrative support. Tjejligan and its journal made a major impact on LO’s organisational life in focusing on women’s issues and supporting women officials and aspirants. Finally, LO published a series of booklets on social justice, some with a pronounced gender focus, including Ann-Sofie Hermansson’s critique of the union movement’s own gender politics – The labour movement and feminism.105 It seems unlikely that all this augured a fundamental change in the leadership, pores and interstices of LO and its constituent unions, rather than the isolated feminisation of LO’s head office. LO’s new work life strategy, to round out rather than subvert economic citizenship and democracy, remained unconsummated. For the lurch into the brave new world of flexible specialisation had the potential to put the gender system, along with other forms of fragmentation of organised labour, into overdrive. As Jane Jenson106 argued, the canonical texts of flexible specialisation – written by Piore, Sabel and their colleagues – clearly embedded the 103 Eduards & Åström 1993, pp. 9–12, 48–49; Bergqvist 1994, ch. 5. 104 LO 1990a and 1990b. 105 Hermansson 1993. For a longer account of the struggle for gender equity in LO and its sphere of the labour market, see Curtin & Higgins 1998. 106 Jenson 1989.

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new paradigm of productive organisation in a social world where unionism is irrelevant and where women are dependent wives who, along with migrant workers, constitute the peripheral, unskilled and semi-employed labour reserve. This projection arises not from the authors’ political idiosyncrasies but from the logic of the new industrial paradigm in the absence of political mediation. The central concept in the new paradigm is skill, Jenson suggests; but in the flexible specialisation school’s romantic retrospect to the pre-industrial craftsman, there is no analysis of the social construction of skill, nor historical sense of how this social construction fragmented the early industrial workforce into the egoistic trade unions we met at the beginning of this chapter. Moreover, skill has always been – and emphatically remains in the flexible specialisation literature – a gendered concept. It appeals to ‘nature’ in justifying a sexual division of labour. Thus men have skills, and these are important social achievements; women have talents (patience in the face of drudgery, for instance) which are given by nature. On this conventional view the multi-skilled and flexible secretary, preschool worker and nurse are not skilled at all, merely innately talented by dint of biological difference. The post-fordist notion of the broadly skilled all-rounder in a tightly knit work team with flexible working hours and a smooth career path – the hero of the flexible specialisation tale – rests on a gendered identity. Along with his workmates, the flexibly specialised core worker has no nonnegotiable domestic responsibilities. And as Cynthia Cockburn107 showed, the gender of this hero is often built into the process technology itself, as the construction of machines typically assumes specific male physical characteristics in their operators – for no good technical reason. Given that flexible specialisation, in Sweden as in other western countries, was advocated in an already highly gender-segregated labour market riddled with gender inequities, the need for an analytical focus on the gender system remained urgent, as the new paradigm provided that system with a veritable hotbed. Yet this focus was conspicuously absent from union policy documents as well as the academic advocates of the new

107 See, for instance, Cockburn 1985.

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policy.108 The new wage policy rested on a retreat from traditional solidarity wage policy in favour of reward according to skill level and career development, given supposedly equal, ‘solidaristic’ starting points. It had the potential to fragment the labour movement and polarise incomes, not least on gender lines. At the same time the failure to enforce rationality on the national manufacturing effort as a whole can replicate an Anglo-American and Australasian scenario of a two-thirds society. The latter is characterised by high permanent joblessness, or degraded employment in ‘junk jobs’ (or ‘McJobs’) in drastically deregulated labour markets, or a combination thereof.109 The inference we can draw from these problems is not that LO’s solidarity work policy was politically misconceived in itself, but rather that it needed to be strongly embedded in a comprehensive political and organisational strategy to make it compatible with economic democracy and citizenship. The strategy would have had to neutralise the gross social fragmentation and work life inequities that would otherwise flow from flexible specialisation; it would have had to work for a much more sophisticated welfare provision that would meet and mesh the domestic and work life aspirations of women and men, and take responsibility for the industrialisation process as a whole through an overarching and selective industry policy. It would also need to develop a more coherent response to the incessant pressures for renewed global competitiveness, with their propensity to extend the assault on solidaristic work back towards a generalised retreat from the attainments of the past. We will return to these institutional matters in the remaining chapters.

108 For example Brulin & Nilsson 1995. The exceptional academic analysts that have problematised the issues raised here, such as Wuoko Knocke (1994) and Rianne Mahon (1994), have been more circumspect in their advocacy of solidarity work policy. 109 Cf. Jenson 1989, p. 141.

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Modell Kommunal A compelling alternative version of solidarity work policy under LO’s own roof has existed from the 1990s, one that indicates how LO and its policy might have developed if its ‘solidarity’ had broken through its masculinist bounds. The remarkable development of LO’s largest union, the Swedish Municipal Workers’ Union (Svenska Kommunalarbetareförbundet, or Kommunal for short) since the 1980s exemplifies the scope for a democratic socialist.110 In the 1990s Kommunal had around 665,000 members, over 80 percent of whom were women in the caring services of the welfare state, and thereby in the lowest paid and worst situated occupational categories in the labour market. In fact, Kommunal organised around half of LO’s female membership, and this group’s conditions starkly illustrated the gender inequities in the labour market, from low pay, job insecurity, inconvenient work hours, lack of control over the labour process to high rates of industrial injury and enforced part-time status. Throughout most of the eighties, male dominance in the union’s structures perversely mirrored the female dominance of the membership: around 80 percent of its functionaries were drawn from the male ‘skilled’ occupations, such as fire fighters! In the eighties, too, this membership was singled out for attack by the new breed of technocratic welfare state downsizers, corporatisers and privatisers. The top-down, neo-managerialist cutting edge of this assault on the welfare state sought to ‘rationalise’ its operations in the traditional ways – sackings, replacing permanent positions with permanently temporary ones, and taylorising the work process in the caring services. What was at stake here was both women’s jobs and working conditions and, at least in part, the survival of the caring services of the welfare state. From the mid-1980s the union pioneered some at first modest experiments in pre-empting these assaults by using the labour movement’s traditional educational tool, the study circle, to unlock the ‘silent knowledge’ of the working collectivities, to diffuse and upgrade the existing skills of the workforce, and so explore democratic and equitable ways to 110 The following summarises the account of Kommunal’s transformation in Higgins 1996.

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deliver economies and improvements in the quality of services. Lennart Svensson’s democratic organisational flair, not least in the vulnerable area of home care, provided a major input into these projects.111 Politically, the union’s efforts were aimed at preserving the caring services as public services which affirmed the public as citizens with not only a right to quality services, but also a right to insight into and influence over how they functioned. This affirmation carried the important democratic possibility of users being able to interpret their own needs and advance their own needs claims. These aspects contrasted strongly with the traditional rationalisers’ commercialising approach which demotes the citizen public to a collection of isolated consumers with a mere right of supposed choice between pre-packaged options. The union’s later high-profile advertising campaign to defend and improve the caring services under the slogan ‘We have better solutions!’ was thus directed to all actual and potential users of caring services – in other words, to the public as such. The union was able to demonstrate that its methods outperformed those of the traditional rationalisers, and did so using techniques that engaged the enthusiasm and upgraded the skills of the workers, and avoided the degradation of work inherent in the new managerialism. On the basis of these experiences it launched two successive mass training programmes (Kom vidare i vården and Kom an då – ‘Come further in care’ and ‘Let’s get started’) to impart this approach to democratic work re-organisation to the rank-and-file. By 1995 the programmes had reached some 200,000 members. The union took the further step of incorporating its own consultancy, Komanco, to enter into direct agreements with municipal and county authorities to oversee the overhaul of municipal services and to crowd out the traditional consultants. By 1995 Komanco had signed contracts with around a quarter of the country’s municipalities, as well as with some county administrations and private firms. In contrast to Metall’s strategy, this gave the union and its rank-and-file considerable control over changes to work life. Political changes in Kommunal over this period were at least equally striking. In 1989 a nurse’s aid (coincidentally from Uddevalla), Lillemor 111 See Svensson 1986 and Svensson et al. 1990 for reflections on the democratic insights from the projects.

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Arvidsson, took over the helm, thus making the union the first in LO to have a woman leader. As the union in question was the biggest in the LO collective, she immediately took her place on both the LO and the SAP executives, but resigned a year later from the latter in protest against the social democratic government’s crisis package (which included a pay freeze and a strike ban).112 Arvidsson’s strong class and gender identification, and her plain speaking in defiance of the current bland and decorous style of the official labour movement’s leadership, made her extremely popular with both the union rank-and-file and the media. She also symbolised the feminisation of the union executive and its other organs and categories of functionaries. The conventional and ponderous style of meetings and procedures, which many commentators had identified with a masculinist organisational culture that discouraged women’s activism, were overturned in Kommunal in favour of informal procedures and smaller meetings based on working groups in which people knew each other. Women’s networks sprouted throughout its organisations and at the Stockholm head office, and the union broke with the labour movement’s traditional sectarianism by officially identifying itself with the feminist cause in its 1994 gender equality programme.113 The democratic motivation for these developments was made sufficiently clear to avoid any significant alienation of the male rank-and-file.114 112 Arvidsson resigned in December 1995, ostensibly for health reasons, and was replaced by Ylva Thörn. But there was speculation that her political conflicts with the social democratic government had a part in her resignation. Among other things, she branded as a ‘betrayal’ the government’s far-reaching agreement with the centre party (the former agrarian league) on the eve of May Day 1995 to support a sweeping austerity package (Dagens Nyheter 29 April 1995). 113 Kommunal 1994b, p. 10. 114 An opinion survey within Kommunal’s membership as a whole in 1993 found that 83 % supported efforts to have women proportionately represented in all posts, and only 12 % (including 26 % of male respondents) did not see this as important (Kommunal 1994b, p. 15). Interestingly, the Central Statistical Bureau’s opinion polling among LO’s membership as a whole indicated that 95 % of men and 94 % of women felt that gender equality was an important union issue, and around 75 % of each sex rated it ‘very important’ (LO 1993–94 I, diagram 5). This finding points to the strength of the democratic ethos among blue collar unionists, and reinforces the suspicion that the main internal resistance to progress towards gender equality comes from male functionaries – the bearers of the old masculinist organisational culture.

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Kommunal’s wage policy and campaigns exemplified the new women’s movement’s insistence on a gender perspective (as opposed to the liberal ‘gender-blind’ approach underpinning the older gender-neutral reforms). In 1993, for instance, it highlighted the fact that the average wage in all of the ten most common male occupations it covers exceeded that in each of the ten most common female ones. On this basis it sought targeted supplementation of women’s wages across the board. The union also initiated and participated in a number of work evaluation projects to expose the systematic undervaluation of skill levels in typically female occupations as a prelude both to more vigorous wage campaigns and job redesign on the basis of a gender perspective. These efforts successfully problematised the male norm in the conventional assessment of skill levels. In short, Kommunal represented a pure expression of the new democratic socialism, now rounded out with a gender perspective that overcomes the deficit in democratic inclusiveness that Wigforss himself left it with. The union presented a powerful counterfactual to the pessimism that commonly undermined the project of economic and industrial citizenship in the west in the closing decades of the twentieth century.

Conclusion The labour movement’s ambitions to politicise production, to secure equality and to eliminate market determination of employment and income levels, contravened basic economic liberal premises. By degrees these ambitions came to inform labour movement practice in Sweden, particularly that of the main blue-collar organisation, LO. As we have seen, however, the logical ambit of this anti-liberalism was never fully consummated in policy. The party leadership baulked at its more radical implications, and was able to stymie them. Despite some spectacular successes in compressing wage differentials, especially from the 1950s until the early 1980s, strategic failures and underdeveloped acumen also shaped social and economic outcomes. Nonetheless, even the limited achievements demonstrated to observers everywhere that income equalisation and high levels of productive activity were mutually reinforcing, a post-keynesian claim since 273

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the 1950s115. While formal capitalist rationality was being challenged, a new substantive labour movement rationality was emerging, however reluctant some parts of officialdom were to recognise and understand it. The capacity of labour, organised along industrial lines, to assert an electorally acceptable and economically responsible rationality had been demonstrated, if not fully implemented. LO’s role in the economy, even when its results fell short of its doctrinal ambitions, disproved conceptions of labour’s impotence in achieving politically-derived goals. We explore some implications of this experience in the next chapters. This chapter’s historical overview of LO’s development refutes the traditional argument that unions are essentially apolitical, and incapable of acting as the bearers of socialist politics. LO not only undertook that role for many decades, but in some ways reinvented Wigforss’s democratic socialism. It found its own way to tap the latter’s political strength by combining issues of economic rationality with democratic and egalitarian aspirations. Late in the 1990s, Rudolf Meidner noted that he was surprised by the speed with which liberalisation and deregulation had demobilised LO’s apparent successes ‘without any real debate’. Nonetheless, in observing that ‘it was easier for us’ (in the early years of the Rehn-Meidner policy development when postwar enthusiasm for policy experiment was at its height), he was alluding to the endless necessity to assert labour’s claims, to combat defeatism, including the suggestion that adverse political and economic circumstances would render these claims redundant or out-dated.116 In the 1990s Kommunal, LO’s biggest affiliate, modelled an exemplary social democratic unionism, and its methods seem eminently replicable in many areas of the labour market in an era of retreat from public responsibility across the OECD. In the twenty-first century LO, like labour movements elsewhere, is once again uncertain about its own role, and its political possibilities need once more to be restored to its agenda. Temporary defeat of defensible ambitions (full employment, equality, economic democracy) can never imply their permanent relinquishment. 115 See for example, Kalecki 1954 and 1971. 116 Meidner interviewed by Bertram Silverman, published in Challenge (1998). At this time, he affirmed ‘Eventually, even winning groups will discover that you cannot have a society with such dominance of capitalist interests’.

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The widespread claim in the ‘crisis of socialism’ literature, that the labour movement is now a marginal or irrelevant contributor to the socialist project, is wide of the mark. On the other hand, a socialist union movement like LO cannot go it alone either, especially when (as was the case during the social democrats’ return to government in the 1990s) its affiliated party survives as a powerful electoral machine wedded to liberal economic policies. The other insight of the crisis of socialism literature, that socialist politics will henceforth be coalition politics which includes social movements, would appear to be beyond challenge. Organised labour is no longer the ‘privileged subject of history’ that marxist theory identifed, and ‘movement socialism’ now depends on a plurality of popular movements. LO needs new friends, such as the women’s movement, environmentalists, and socialists to the left of the SAP. Among other things, such new friendships could enhance LO’s so far underutilised leverage on the SAP, as long as the latter’s electoral and institutional dependence on it prevails. But the new friends will need to see a reflowering of LO’s ideological receptivity and political creativity, not least in a cultural revolution against gendered structures and routines in LO itself – one in the spirit of its own aspiration announced in The 80s report ‘to be a social alternative, a counterculture,’ and of Kommunal’s feminist values. What that receptivity and creativity can clinch is a more vibrant democratic politics and a far stronger labour movement. Union movements like LO will also need to embrace macro-political institution-building responsibilities that labour movement activism hasn’t generally anticipated. And insofar as alliances are formed with other movements to advance the anti-economic-liberal project on democracy and equality, a divergence between the political goals that are imagined and those that are achieved is bound to re-emerge, as it always has in the history of politics, no matter how well formulated or tactically adroit the ambitions and activists are. It is to these institution-building responsibilities, implied by wigforssian democratic socialism, that we now turn.

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8. Comparative evolution of social democratic possibilities

The phenomena of growth and change are the most obtrusive and most consequential facts observable in economic life. Thorstein Veblen

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There is in economics, as also in political theory, a marked tendency to indignation when someone suggests that change has altered the substance of our economic and political life. […] But let no one be in doubt: where the world of affluence is concerned, reality and truth lie not with what was believed in the past but with what is compelled by the present. John Kenneth Galbraith

Economies are complex and dynamic systems. In producing goods and services, they certainly grow, but they also change qualitatively. As we will see, their political preconditions and political implications become more apparent over time, transforming in unheralded directions the social relations that initially defined them. Unanticipated political opportunities thus emerge as economies take on new functions; distinctive trends take shape and new characteristics evolve. Most pertinently for our discussion of social democracy, economic diversity amplifies political options as Ernst Wigforss understood. Further, as economies adapt and mature, they do so in diverse ways. This variation (from each other, from past performance and from any model of an ideal market system) is never independent of context; it depends on interaction – sometimes facilitative, sometimes constraining, sometimes contradictory – between economic and non-economic requirements. The contribution of social and political environments to productive arrangements is what establishes multiple determination, or what we will refer to as complexity. Nor are processes of production, growth and divergence ever politically neutral in their effects. The evolutionary principles that come into play unleash new causal processes that we will refer to as ‘emergent’. 277

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Consequently in this chapter we change gear, to consider not Wigforss’s own ideas directly but the contemporary empirical setting for social democratic development which has continued to unfold since his death in 1977. For the past four decades – contrary to some popular critiques – social, economic and institutional evolution in the countries of mature capitalism has attenuated the stranglehold of markets over politics and this has informed and nourished social democratic possibilities.

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The expanding possibilities of politics? Probably the most notable fact about modern politics – with indisputable implications for the theory and practice of social democracy – is the state’s expansion. Government activity accounted for about 10 percent of GDP in developed economies a century ago; in the 2000s it has been between 40 and 50 percent in the OECD countries, nearing 70 percent in some in the 1990s. A preliminary indication of the expanding possibilities of politics is given in Figure 9.1. As can be seen,1 the growth has occurred both where political fortunes have favoured social democratic development and where they have been hostile to it. Not only the size of the state in spending, taxing, income transfer and employment terms, but also the range of institutions, interventions and policy spheres burgeoned throughout the twentieth century (dramatically in the post-1945 era) everywhere. While some observers, noting ongoing private control of production, deny that enlargement of the public economy has seriously diminished the capitalist nature of economies, political influence over economic outcomes has demonstrably increased. To this extent the hegemony of the market has contracted. 1

Throughout this chapter, the following abbreviations have been used: Australia: Aust; Austria: Ö; Belgium: B; Canada: C; Czech Republic: Cz; Denmark: DK; Estonia: Est; France: F; Finland: SF; Germany: D; Greece: H(E); Hungary: H(U); Iceland: Is; Ireland: Ir; Italy: I; Japan: J; Korea: Kor; Luxembourg: Lux; Mexico: Mex; Netherlands: NL; New Zealand: NZ; Norway: N; Poland: Pol; Portugal: Port; Slovak Republic: Slov; Spain: Sp; Sweden: S; Switzerland: CH; Turkey: T; United Kingdom: UK; United States: USA.

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Figure 8.1: The expanding possibilities of politics: Growth of government 1870–2010 (Public spending as % GDP) in 7 OECD countries with 17-country* average.

[* Aust, Ö, B, C, DK, SF, F, D, I, J, NL, NZ, N, S, CH, UK, USA]

Sources: Vito Tanzi & Ludger Schuknecht, 2000. Public spending in the twentieth century: a global perspective. Cambridge University Press, pp. 6–7; updated after 1995 from OECD Economic Outlook no. 87, May 2010, Table 25, p. 347.

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The crudest measure of the growth of government (public spending as a proportion of the total economy) remains surprisingly illustrative; it has been a century-long phenomenon. Relentless and universal expansion of the publicly mandated share of total economic activity in advanced economies indicates that structural forces – that is, technical and demographic pressures in defiance of or beyond the volitional and democratic activities of political actors, as well as regulatory mechanisms in aid of accumulation – have played a significant part. Of course, Wigforss’s life work cautions against celebrating what seems to be a structural inexorability; nonetheless we show in this chapter that politicising trends do exist and do facilitate desirable forms of economic development, which enlarge social democratic options. We admit that a social democratic impulse dependent only upon happenstance and the moral priorities thrown up by mere circumstance is unlikely to be adequate to the deliberative politics we, with Wigforss, have in mind. Political and moral choices must still be made. Equally important, as a pointer to contemporary complexity, is the divergence between countries in the rates of growth of government, the welfare state ‘types’ that have emerged, the extent to which decision-making has assumed a ‘corporatist’ profile, the institutional preparedness to embrace public responsibilities, and the capacity of polities to resist globalising pressures. In these respects, political contingency has asserted its influence. The reason why unintended structural aspects of development seem to encourage and to facilitate particular forms of political intervention is that market relations are ‘constitutively incomplete’: the market system has always depended on extra-economic regulation – itself dependent on deliberate political action – to establish conditions that allow it to function at all. Even key parts of the marxist canon have now conceded that a distinction between structuralist and instrumentalist approaches to state activity is no longer tenable.2 The bulk of this chapter explains the transformation in empirical and interpretive terms. Of course, the political requirements of capital continue to constrain some political options, even when pursued strategically, as we will show. 2

Bob Jessop 2002, p. 226; also 1997 and 1990, p. 250. Jessop’s contribution to modern state theory, and therefore to the understanding of contemporary political economy, is discussed more fully in chapter 10.

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Figure 8.2: The expanding politicisation of consumption: Growth of social transfers 1900– 2005 – as % GDP). Welfare, unemployment benefits, pensions, public health & housing subsidies in 10 OECD countries with 21-country* average.

[* A, Ö, B, C, DK, SF, F, D, Ir, I, J, L, NL, NZ, N, Port, Sp, S, CH, UK, USA]

Sources: Peter H. Lindert, 2004. Growing public. Cambridge University Press, pp. 12–13 and OECD Historical Statistics 1970–2000. Paris 2001, p. 67 updated from OECD Factbook 2009 (Social expenditures statistics) 2010. [Note: intermediate data interpolated]

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While marxists now belatedly acknowledge the possibilities of politics as distinct from its limits, our understanding of the former also draws on non-marxian analytical traditions – as Wigforss would require. Put differently, we are obliged to consider the political economy of social democracy as politically open-ended. Because the growth of government has become the ‘unexpected result of conjunctural decisions which progressively generate irreversible […] and cumulative involvements’,3 the potential for progressive politicisation of formerly privatised decisions warrants analysis.4 The empirical information that follows presents evidence not only of a politicisation that challenges orthodox conceptions, but also of a diversity in political development that challenges radical pessimism. Later in the chapter we will survey explanations for this diversity to determine its evolutionary significance. As noted, government consumes a share of the economy unimaginable a century ago, both in big-government and in small-government countries. Sceptics may consider these developments functional for capitalism, but the registered growth cannot but have had intriguing implications for how we now understand politics, the state and collective regulation. Social democracy can scarcely be developed on the basis of a small state, nor even – given the demands on the polity from the economy that are accepted by all ideological positions – a stable state in public expenditure terms. 3 4

This initial recognition was forged by de Vroey (1984, p. 58). It is a key part of the evolutionary explanation of the extension of the public dimension of the still notionally private market economy. Whether considering the effects of the public sector narrowly defined or the emergence of ‘state capacity’ more broadly, it is important to note that the public sector may be defined or measured in terms of (a) the resources it uses or commands, (b) its spending (on consumption, investment and transfers), (c) its ownership of assets or property rights, (d) its control of economic activity (through regulation, protective mechanisms, trade restrictions or industrial relations law), (e) its share of total employment, or (f ) its production of goods or services (through public enterprises, commissions or departments). High levels of the extent of government on any one of these registers may not correlate with high levels on others and some dimensions of state activity not captured by the above measures – corruption or competence or strategic investment may be just as important determinants of actual outcomes.

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The charts show that although the relative importance of state activity has changed over the past century or so – Australia’s ranking has changed from trend-setter to laggard; Sweden’s from lowest to highest – in all rich countries, collective responsibilities have quantitatively grown.5 Perhaps the most striking of these charts displays the growth of social transfers (welfare, unemployment benefits, public health and housing subsidies) – that is, the part of government spending most abhorred by economic liberals, because it signifies a politicisation of private consumption. (See Figure 8.2.) The data show that, across the rich countries, almost a quarter of real income is now unrelated to the productive contributions associated with employment. Not only have the welfare state dimensions of the state expanded dramatically since the 1940s, but the decommodification of social provision has proceeded unabated, even in the period since 1974 when economic downturn, structural change and enthusiasm for neoliberal retreats from the policy norms of the previous three decades began.6 The few evidenced declines (both major – the Netherlands, and minor – Sweden) have occurred in countries with above-average social transfer expenditures. The changes in social spending experienced so far (over almost seven decades) are of sufficient moment to suggest that they are far from exhausted; a continuing dynamic is being provided by demands for more work-family reconciliation policies. In this case, decommodification of consumption may correspond with expansion of social investment.7

5 6 7

This, possibly a counter-intuitive position, has been argued in a collection edited by Francis Castles 2007. For the most part, the prime beneficiaries of this expansion of decommodified provision (including poor, disenfranchised, marginalised and politically inactive) have not been its agents. See Kimberly Morgan 2012. It is clear from her analysis that the pace-setting countries (e. g. Sweden) provide models for others (e. g. Germany and the UK) even though progress towards full determination of work-life balance by workers – in accordance their own preferences – is quite slow and uneven.

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Figure 8.3: Public sector spending 1960–2010, OECD + 7 countries (% GDP).

Sources: OECD Economic Outlook no. 87, May 2010, p. 347 (and earlier issues).

Figures 8.3 and 8.4 confirm that the relative position of the OECD countries in public spending and public revenues rankings has not changed appreciably over the past fifty years – with Sweden and the UK normally high and the USA, Japan and Australia normally low. No generalised windback of the state in recent times has occurred – Sweden lost its position as the highest taxing country in the 2000s (to Denmark) and Japan lost its 284

Dow, Geoff, and Winton Higgins. Politics against pessimism : Social democratic possibilities since Ernst Wigforss, Peter Lang GmbH, Internationaler Verlag der Wissenschaften, 2013. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/nyulibrary-ebooks/detail.action?docID=1 Created from nyulibrary-ebooks on 2021-08-01 12:56:53.

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Figure 8.4: Taxation receipts 1969–2010, OECD + 10 countries (% GDP).

Sources: OECD Economic Outlook no. 87, June 2010, p. 348 (and earlier issues).

position as the lowest-taxed rich country (to the more consistently economic-liberal Australia and the USA). Combined with the information in Table 8.1, these figures reveal that the country-spread (in spending and revenues) has increased somewhat and now warrants discussion of distinctive ‘modes of regulation’ or ‘varieties of capitalism’ (to which we will return later in this and the next chapter). 285

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Table 8.1: Size of government, 2010–2011 (% GDP).

Copyright © 2013. Peter Lang GmbH, Internationaler Verlag der Wissenschaften. All rights reserved.

Government outlays DK SF F S B UK NL Ö I Port H(E) H(U) D Cz Is Ir N NZ Pol Sp OECD av. L C J USA Slov Rep Aust CH Kor

59.5 55.6 55.3 54.6 53.9 52.1 51.9 51.6 51.3 49.9 49.4 48.1 46.8 45.9 45.8 45.5 45.1 44.5 44.6 44.1 43.9 43.3 42.2 41.6 40.9 38.7 34.3 32.7 30.6

Taxation revenues N DK S SF B F Ö I NL Port H(U) D Is H(E) UK NZ Cz C L Pol OECD av. Sp Ir Slov Rep J CH Aust USA Kor

55.6 54.7 52.9 51.9 49.6 48.3 47.1 46.4 46.3 44.0 43.7 42.5 42.5 41.5 41.4 40.9 40.7 40.0 39.1 38.0 36.9 36.7 34.8 33.4 33.3 32.4 31.8 31.5 31.4

Source: OECD Economic Outlook no. 87, May 2010, pp. 347–348.

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Table 8.2: Growth of government since 1974. Outlays of government (% GDP) 2006/1974 (Increases since 1974, ranked)

Tax receipts of government (% GDP) 2006/1974 (Increases since 1974, ranked)

Kor Port Sp SF J H(E) F CH I DK OECD Ö USA S Is L B Aust C D UK NL N Ir

Kor Port Sp I SF Is J F Aust H(E) N B CH DK S OECD USA Ö UK C D Ir L NL

32.4/13.3 = 2.44 46.1/24.6 = 1.87 38.5/22.7 = 1.70 48.5/31.2 = 1.55 36.3/24.1 = 1.51 36.7/25.0 = 1.47 53.7/38.1 = 1.41 35.0/25.5 = 1.37 50.1/37.6 = 1.33 51.1/42.5 = 1.20 40.4/33.6 = 1.20 49.1/41.2 = 1.19 36.4/30.7 = 1.19 55.5/46.9 = 1.18 41.4/35.6 = 1.16 40.4/34.9 = 1.16 49.0/43.0 = 1.14 34.1/30.2 = 1.13 39.5/36.1 = 1.09 45.6/44.0 = 1.04 45.1/43.4 = 1.04 46.7/47.2 = 0.99 40.6/43.8 = 0.93 34.0/42.2 = 0.81

32.5/15.3=2.12 42.2/23.0=1.83 40.3/22.8=1.77 45.6/30.6=1.49 52.2/35.7=1.46 46.7/33.0=1.42 33.9/24.5=1.38 51.2/38.4=1.33 35.5/27.7=1.28 34.4/27.0=1.27 59.9/48.5=1.24 49.1/40.1=1.22 36.2/29.6=1.22 55.3/46.2=1.20 57.6/48.8=1.18 38.8/32.8=1.18 34.1/30.3=1.13 47.8/42.5=1.12 42.2/39.9=1.06 40.3/38.1=1.06 43.9/42.8=1.03 36.3/35.2=1.03 40.5/40.2=1.01 47.2/47.0=1.00

Sources: OECD Historical Statistics 1970–2000, Paris 2001, p. 68 and OECD Economic Outlook no. 81, June 2007, p. 263 and p. 264.

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The current situation mirrors that identified by Gøsta Esping-Andersen more than two decades ago: the list is headed by a distinctive Scandinavian group of countries, with more conservative European nations clustering in the middle and the Anglo-American ones forming a small-government contingent near the bottom.8 Outlays and revenues are more or less commensurate with each other, the differences revealing atypical budgetary preferences. The most significant observation is that emphatic politicisation appears to have become permanent with government spending and taxation increasing by 20 percent and 18 percent respectively even in the three decades or so to 2006 (Table 8.2).9 The levels of between one-third and two-thirds of total economic activity attributable to the state would presumably (still) horrify economic liberals;10 but the accretion seems to have had no detrimental effect on overall wealth or wellbeing, nor on economic performance or on long-term political or fiscal capacities. The changes suggest that the unusual shrillness accompanying orthodox economic and social-policy rhetoric since the mid-1970s is more aberrant than the ‘structural’ expansion that has inspired it. But this agentless trend requires further investigation. Examination of Figures 8.1 and 8.2 reveals a widening of political possibilities in general beyond the point conventionally regarded as desirable in liberal-democratic regimes. Potentially they involve economic, developmental, infrastructural and administrative commitments by the public sector, but also a more contentious empowerment of the citizenry to exist independently of the market, through health, education, housing and welfare provisions. Thus consumption is now extensively politicised – provided or subsidised by the state. Changes in social-security transfers (defined more narrowly than in Figure 8.2) are shown in Table 8.3.

8 9 10

Esping-Andersen 1990; he has subsequently modified his argument in directions we find somewhat contentious (Esping-Andersen et al. 2002; see also Morel, Palier & Palme (eds) 2012)). For this comparative purpose, 2006 is chosen so as to not ‘contaminate’ the data with the extraordinary government injections and stimuluses of 2008. In 1976, Milton Friedman decried growth of government, citing 40 % (public spending as a proportion of GDP) as a ‘line we dare not cross’ should we value freedom.

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Table 8.3: Social security transfers – 1970s–2000s (% GDP).

Ö D F I H(E) Pol DK SF B S Port L N UK Cz

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OECD av. Slov USA Sp CH NL C J Ir Aust Kor Mex

1970S

1980S

1990S

2000S

15.4 13.1 14.9 13.3 7.6

17.9 16.5 17.0 14.7 13.5

18.8 17.8 18.1 16.7 15.2

11.0 7.5 12.2 12.0 3.8 14.7 13.2 9.0

16.6 13.1 18.0 18.3 10.8

18.9 20.0 16.3 20.7 12.2 15.3 15.7 14.3 11.4

18.3 18.0 18.0 17.0 16.8 16.4 16.0 15.9 15.5 15.0 13.6 13.6 13.1 13.0 12.8

9.3

12.9

13.2

12.5

8.3 9.2 8.7 18.3 7.2 4.9 9.6 4.1 0.8

11.0 15.5 13.4 26.7 10.3 11.0 15.5 7.1 1.4

13.6 12.6 15.0 10.9 19.2 13.1 8.5 11.3 8.5 2.5 1.3

12.3 12.4 11.9 11.9 11.3 11.2 10.7 8.8 8.5 3.5 1.7

12.7 13.3

Sources: OECD Historical Statistics 1970–2000, 2001, Table 6.3, p. 67; and OECD in figures 2008, pp. 56–57.

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Figure 8.5: Budget balances (surplus and deficits) (% GDP), OECD (+ USA, UK, Australia and Sweden), 1972–2011.

Sources: OECD Economic Outlook no. 51, June 1992, p. 188; OECD Economic Outlook no. 87, May 2010, p. 349.

Almost everywhere the figure has grown over the past forty years. And the diversity of final outcomes for the 2000s is quite apparent: contrast the liberal and social democratic polities, but note the rapid increases in even those countries known as meagre welfare regimes (the USA and Australia).11 A fascinating observation from the comparison of outlays and revenues is that almost all OECD countries are recording government budget deficits. Only Norway and Korea are exceptions. For the OECD as a whole, the deficits average more than 6 percent of GDP; in some major cases (the UK, the USA), it is much higher. Whether periodic or continuing budget deficits are a problem for the state is something that has been debated, acrimoniously and without resolution, for longer than capitalism has ex11

Thomas Cusack has examined the components of public expenditure in the major OECD nations and concluded the largest explanatory factor is general government spending, rather than, say, military or social transfers (2007).

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isted.12 However, they are ubiquitous in the contemporary era. Deficits have characterised the OECD economies for over forty years, as indicated in Figure 8.5. Prolonged experience with budget deficits is not sufficient to indicate a permanent imbalance between revenues and expenditures, or even a ‘fiscal crisis of the state’ because budgetary shortfalls are easily remedied by increases in taxation – which, as we have seen, do seem to be consistent – and they are sometimes explicitly defensible, on keynesian macro-management grounds. Deficits are sufficiently long-lived to indicate that they do not portend the calamitous consequences postulated by monetarists. The four-decade trend is to larger deficits in the rich countries, although in some (Sweden, Australia) there have been occasional returns to surplus, and all countries appear to be subject to similar general trends in this post1970 era. The most politically loaded orthodox presumption is that budget deficits are tantamount to public profligacy, are unproductive expenditure, increase the money supply and, thereby, cause inflation. These claims will be addressed later in the chapter. In itself, government spending, as a preliminary register of the impact of politics on the economy, obviously does not necessarily lead to budgetary imbalances. When such imbalances do arise, they might indicate deliberate policy rather than fiscal incaution. Post-keynesian political economy, for example, holds that the employment-generating capacities of capitalist market economies permanently, structurally fall short of their wealthgenerating capacities. So continuously recurring infusions of public funding into private sector activity is an inevitable requirement of responsible macro-management. (Conversely, refusal of such interventions can be seen as irresponsible – senselessly constricting economic activity.) Postkeynesians also argue that continuous growth of the public sphere, financed through taxation, is necessary for stable activity in a mature economy.13 12

13

In histories of political economy, taxation (public finance) and international trade (including financial flows) vie for status as the ‘original’ problems in political economy. Most debate initiated in the mercantilist period on these two issues continues through classical, keynesian and modern discussion. (See Charles Gide & Charles Rist 1917, book 1(II); Alexander Gray 1931, ch. 3; Robert Lekachman 1959, ch. 3; John Kenneth Galbraith 1987, chs 4 & 6.) L. Randall Wray 2008, p. 5. See also Madrick 2009.

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Table 8.4: Budget surpluses and deficits in 28 OECD countries – 2000s.

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Budget balance as % GDP 2011 9.4 7.8 7.4 7.3 7.1 5.8 5.5 5.4 5.4 4.7 4.6 4.0 4.0 3.8 3.6 3.5 3.4 3.2 3.0 2.7 2.5 1.6 1.2 1.1 0.8 0.2 0.1

⎫ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎬ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎭

deficits

Kor

+ 2.6

surpluses

N

+ 8.7

⎫ ⎬ ⎭

Ir USA J UK H(E) Pol F OECD Sp Port Slov Rep NZ B Czech Rep NL I DK Ö H(U) C D Is SF Aust L CH S

Average budget balances as % GDP 2001–2010 H(E) H(U) J USA Pol UK Port Slov Rep Czech Rep F OECD I Is D Ir Ö Sp NL B C CH Aust S L DK SF Kor NZ N

6.5 6.1 5.8 5.1 5.0 4.9 4.3 4.3 4.2 4.1 3.7 3.6 2.9 2.7 2.4 2.2 1.9 1.7 1.6 0.4 0.4

⎫ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎬ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎪ ⎭

+ 0.3 + 0.5 + 0.9 + 1.3 + 2.3 + 2.7 + 2.8 + 13.2

⎫ ⎪ ⎪ ⎬ ⎪ ⎪ ⎪ ⎭

deficits

surpluses

Sources: OECD Economic Outlook no. 88, November 2010, p. 281 (projections); OECD Economic Outlook no. 86, November 2009, Table 27.

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Table 8.4 provides further evidence of the ubiquity of deficit balances in the first decade of the 2000s. Many of the recent figures reflect decisions taken during the early years of ‘global’ financial crisis; but the decade-long budget outcomes indicate that surpluses are abnormal and, in light of continuing unemployment, likely to be iatrogenic – that is, to cause further economic harm. Sustained budget deficits do of course result in public debt which may – in the absence of productive re-investment in infrastructure or other national capacities – constitute a genuine problem for an economy. Evaluation of the recklessness (or otherwise) of public sector indebtedness is confounded by lack of agreement on the question of the optimal level of public debt. Recourse to debt to expand capacity (or to compensate for the output shortfalls that are routinely produced by the application of economic-liberal criteria) almost certainly aligns with social democracy; while its use to fund immediate consumption is undesirable on either liberal or social democratic grounds.

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Table 8.5: Public debt (gross government liabilities) – % GDP, 2010–2011. Japan Greece Italy Iceland Belgium OECD av. Portugal France USA Hungary

201.9 133.9 133.4 128.1 104.4 97.8 96.9 96.6 92.2 88.1

Ireland UK Germany Canada Netherlands Austria Spain Finland Poland Denmark

87.7 86.7 82.6 81.2 77.3 75.7 75.6 65.0 63.3 56.1

Sweden Norway Czech Rep Slovak Rep New Zealand Switzerland Korea Luxembourg Australia

56.0 54.0 52.1 47.1 42.4 41.4 36.8 27.3 24.7

Source: OECD Economic Outlook no. 87, May 2010, Table 32.

The situation in 2010 is presented in Table 8.5. A wide range of outcomes is revealed – from Japan’s (probably too high at twice current GDP) to Australia’s (probably too low given that country’s striking disinvestment in public infrastructures – in environmental protection, flood and fire prevention provisions, as well as under-developed health, education, water, energy, transport and urban-amenity systems and competences). 293

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Orthodox custodians of policy commonly consider current debt levels for the USA and the UK (close to the OECD average) to be excessive – ignoring the more relevant criterion of whether the debt is being used strategically to expand productive capacity. The social democratic sentiment does not propose that current consumption be subsidised by future generations; though it does endorse the proposition that future generations should partly pay for wealth-generating decisions concerning public investment taken now, but whose benefits will accrue into the future. Scandinavian countries rank somewhat below the middle of the range produced by the 28 countries listed in Table 8.5 – Iceland is an exception. There is no reason to conclude that this approximate level of public debt (55 percent to 65 percent of GDP, say) is sub-optimal or that much higher rates are always ruinous, and we would expect the levels to fluctuate cyclically with national economic circumstances. And levels above the OECD average probably indicate issues to be addressed, either nationally or regionally, only if current costs of debt-servicing exceed the expected future benefits from the infrastructures provided. Table 8.6 shows ‘wealth’ measured by per capita GDP (actually a measure of national income, not wealth) in 30 OECD countries and, for comparative purposes, six non-OECD nations. Debate has rightly raged, with research being conducted in recent years, about how usefully per capita income is as a guide to ‘wellbeing’ in rich countries or to their respective national capacities to deal with economic dislocation and the ongoing problems of mature phases of development.14 Nonetheless, the listing is informative: Norway is about 80 percent above the OECD average and Turkey about 65 percent below it; this indicates the increasing diversity of OECD members in recent times with some having been ‘mature economies’ for a century and others still undergoing problems of capitalist economic development from low starting points. The comparator non-OECD countries included in the table are sometimes surprisingly wealthy in GDP terms. The main point to be drawn from this information is, however, that while per capita GDP tells us something meaningful (and comparable) about different nations, it is only one of a myriad of meaningful bases for comparison. 14

Recent examples are Derek Bok The politics of happiness (2010) and Sissela Bok Exploring happiness (2010).

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Table 8.6: The ‘wealth’ of nations – 2010 (GDP per capita [PPP $US]) – and population in millions [30 OECD countries + 6]. Norway Luxembourg USA Netherlands Switzerland Canada Australia Austria Sweden Denmark Germany UK Belgium Japan France Finland Ireland Spain Italy Greece Korea New Zealand Iceland Czech Rep Portugal Slovak Rep Poland Hungary Mexico Turkey OECD av. [30] Liechtenstein UAE Kuwait Singapore Hong Kong Israel

58 800 51 100 47 100 40 700 39 800 38 700 38 700 37 100 36 900 36 000 35 300 35 100 34 900 34 700 34 300 33 900 33 100 29 700 29 600 27 600 25 900 25 400 22 900 22 700 22 100 21 700 17 800 17 500 14 000 13 400 31 800 81 100 59 800 55 700 48 900 45 100 27 800

4.9 m 0.5 m 317.6 m 16.7 m 7.6 m 33.9 m 21.5 m 8.4 m 9.3 m 5.5 m 82.1 m 61.9 m 10.7 m 127.0 m 62.6 m 5.3 m 4.6 m 45.3 m 60.1 m 11.2 m 48.5 m 4.3 m 0.3 m 10.4 m 10.7 m 5.4 m 38.0 m 10.0 m 110.6 m 75.7 m 1183.2 m (0.03) m (4.7 m) (3.1 m) (4.8 m) (7.1 m) (7.3 m)

[av. ≈ 40 m]

Source: UNDP. Human Development Report 2010: The real wealth of nations – pathways to human development, pp. 143, 184.

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Table 8.7: Differential indicators of ‘wealth’ and wellbeing in rich countries. GDP per capita 2010

Human development index 2010

Inequality-adjusted HDI 2010

Norway Singapore USA Netherlands Canada Australia Sweden Denmark Germany United Kingdom Belgium Japan France Italy New Zealand

Norway Australia New Zealand USA Netherlands Canada Sweden Germany Japan France Denmark Belgium Italy United Kingdom Singapore

Norway Australia Sweden Netherlands Germany Canada Denmark USA Belgium France United Kingdom Italy Japan * Singapore * New Zealand *

Source: UNDP 2010, p. 143 and p. 152. *Inequality adjustments for life expectancy only.

These days a Human Development Index and an ‘inequality-adjusted index’ are produced by the United Nations Development Programme (weighting income with measures of health and education achievements, and inequalities in each case) to provide more nuanced indicators. Table 8.7 contrasts the rankings that derive from the different measures. In this case, Norway tops all lists, but New Zealand’s relative position changes dramatically – thus reflecting the impact of non-economic contributors to quality of life (such as health and education) even in the face of relatively low national income. The UK’s HDI position drops noticeably and Singapore, not an OECD member, slips from very high to very low in the HDI rankings. Social democracy addresses its developmental goals towards more than GDP (or to growth in GDP); it asserts the right of citizens to have living standards measured in ‘human development’ terms – not just to include health, education, societal and civil standards in the measure, but to ensure these broader accomplishments match or exceed the conventional ones. 296

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Table 8.8: Unemployment in OECD countries (% of labour force). 1970s

1980s

1990s

2000s

1974–2004

2012

T 7.3 Ir 7.0 I 6.7 USA 6.5 C 6.5 Port 4.3 Sp 4.2 Kor 4.1 B 3.9 F 3.7 OECD 3.5 DK 3.5 UK 3.4 Aust 3.4 NL 3.3 SF 3.3 H(E) 2.4 S 2.2 D 2.1 J 1.6 Ö 1.5 N 1.5 NZ 1.0 Is 0.5 L 0.2

Sp 17.5 Ir 14.0 B 11.1 I 9.9 NL 9.8 UK 9.7 C 9.3 F 9.1 DK 8.1 T 7.6 Port 7.3 US 7.2 Aust 7.2 H(E) 6.6 OECD 6.6 D 6.1 SF 4.8 NZ 4.5 Kor 3.8 Ö 3.3 N 2.8 S 2.7 J 2.5 L 1.3 Is 0.7 CH 0.6

Sp 19.1 SF 11.6 Ir 11.4 I 11.2 B 11.2 F 11.0 H(E) 9.8 B 9.2 Aust 8.4 UK 7.9 D 7.8 NZ 7.7 T 7.4 S 7.4 OECD 7.4 DK 7.3 NL 5.9 USA 5.6 Port 5.4 Cz 4.8 N 4.7 Ö 3.8 Is 3.5 Kor 3.3 J 3.2 CH 3.1 L 1.9

Slov 15.0 Pol 14.2 Sp 11.7 T 11.1 H(E) 9.8 Chile 9.0 D 8.6 F 8.5S F 8.3 I 7.9 B 7.8 H(U) 7.5 Port 7.3 S 7.1 Cz 7.1 C 7.1 OECD 6.8 Ir 6.2 USA 6.1 UK 5.7 Aust 5.3 Ö 4.5 DK 4.8 NZ 4.8 J 4.7 L 4.3 Is 3.9 CH 3.9 Mex 3.8 N 3.6 NL 3.5 Kor 3.5

Sp 13.2 Ir 9.6 I 9.1 B 9.1 F 8.6 C 8.3 SF 7.4 UK 6.7 D 6.6 Aust 6.6 DK 6.6 NL 6.5 OECD 6.4 Port 6.3 USA 6.2 NZ 4.5 S 4.1 Ö 3.6 N 3.5 J 3.2 L 2.0 Is 1.9

H(E) 27.0 Sp 26.8 Port 16.8 Ir 14.6 Slov Rep 13.3 I 11.6 H(U) 11.0 F 10.8 Pol 10.6 Est 8.9 Port 10.2 T 9.0 UK 8.1 OECD 8.1 SF 7.9 USA 7.7 B 7.7S 7.7 DK 7.3 Isr 7.2 Cz Rep 7.1 C 6.8 L 6.7 NZ 6.3 NL 6.0 Aust 5.5 Is 5.2 Mex 4.9 CH 4.0 Ö 4.7 J 4.3 Kor 3.5 N 3.0

[* Not standardised]

[* Not standardised]

Source: OECD Historical Statistics 1970–2000 (2001), p. 42; OECD Economic Outlook no. 92, November 2012, Tables 13, 14 (and earlier issues).

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Figure 8.6: Unemployment 1960–2010, OECD + 8 countries (%).

Sources: OECD Historical Statistics (various issues), OECD Economic Outlook no. 87, May 2010, pp. 335–336 [unstandardised projections for 2010–2012].

Most comparative political economy, in attempting to link political preconditions to economic performance, examines differential unemployment rates in broadly similar (that is, OECD) countries. We intend to consider the three decades after 1974 as a coherent epoch in contemporary capitalism. It is in this period that the optimistic experiments that featured in the post-1945 long boom were abandoned and economic liberalism gained political ascendancy. Policy confidence faltered. Structural change (occasioned by globalisation, new technologies, the elevation of financial criteria and the off-shore movement of manufacturing from the major capitalist economies) changed the foci of policies and politics. And unemployment increased almost everywhere. We will show that the relationships between politics and economic outcomes, between the state and the market, be298

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tween the public and the private sector, or between deliberative institutions and individuals’ self-interested behaviour has been transformed in ways that render our understanding of capitalist economies overdetermined, and therefore more complex. The phenomenon of unemployment is depicted in Table 8.8. Figures for each decade since the 1970s are shown, as is an averaged rate for 1974– 2004 and the current figure (2012). The thirty-year average shows that unemployment has been much higher than in the 1970s (also shown in Figure 8.6). Although unemployment is higher now (column 6), due to the financial crisis since 2007 – itself a product of economic-liberal deregulation – these figures reveal that apparently intractable (policy-resistant) unemployment has prevailed continuously since 1974. Only six countries (Sweden, Austria, Norway, Japan, Luxembourg and Iceland) recorded less than mass unemployment (4 percent) for these three decades. Though some countries (the USA and Canada) experienced high unemployment through the 1960s, it was in 1974 that the surge occurred across the OECD, marking the beginning of a long period of economic crisis and policy abnegations – accompanied, as suggested above, by the globalisation of economies. The situation has not improved since 1974, despite increasing references during that time to ‘good times’ punctuated by occasional ‘technical recessions’. The data rather reveal one enduring recessionary period characterised by ups and downs in unemployment from a high threshold, something that could be seen as a ‘long recession’ following the postwar ‘long boom’.15 There is no doubt that the rich countries are rich; but equally no doubt that affluence is quite compatible with sustained high unemployment. Over the last two-thirds of a century, capitalist economies delivered ‘near-full’ employment less than half the time (and less than a quarter of the last 100 years). This has become a defining feature of mature economies: they grow but, left to their own dynamics, they do not generate sufficient employment. The fact that contemporary capitalism creates wealth more assuredly than it creates jobs has become one of the policy dilemmas of the age – with renewed discursive suggestions, of course, that the problem lies not with 15

Also argued by Robert Brenner 2006, chs 10 & 13; but see Boreham, Dow & Leet 1999, p. 109.

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policy at all.16 Instead, responsibility is deflected away from ideologically motivated policy choices, so as to accord with economic-liberal assumptions: ‘work effort’ is flagging, or opportunities for non-participation in the paid workforce are too extensive, or political and regulatory institutions actually impede the entrepreneurial impulses that would otherwise create appropriate levels of activity and employment. In short, the postwar commitments to full employment associated, in the English-speaking world, with Keynes and Beveridge and the idea of a ‘mixed economy’, were overruled.17

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Table 8.9: Unemployment in ‘good times’ 1994–2008.

Finland France Italy Belgium Germany Canada Sweden Ireland Australia 20-country av. UK

15-year average for 20 OECD countries* % 10.4 New Zealand 10.1 USA 9.2 Denmark 8.3 Austria 8.2 Japan 7.7 Netherlands 6.9 Norway 6.7 Switzerland 6.6 Luxemburg 6.1 Iceland 6.0

5.5 5.1 5.1 4.4 4.2 4.2 4.0 3.6 3.3 3.2

Source: OECD Economic Outlook no. 81, June 2007, p. 252. [* Note: Longstanding OECD members Spain, Portugal, Greece and Turkey have been excluded, as have Poland, Hungary, the Czech and Slovak Republics, Mexico and Korea]. 16

17

This issue, with its associated suggestion that overaccumulation, underconsumption, excess capacity and deficient outlets for profitable investment increasingly prevail, is what potentially united the marxian and post-keynesian critiques of contemporary political economy: it is pursued further in chapter 10. As discussed in chapter 10, Andrew Shonfield dedicated his 1965 book Modern capitalism to a ‘changing balance of public and private power’. It drew on Keynes’s and Schumpeter’s (divergent) views on how to avoid the problems of the 1930s to suggest ways towards a postwar organised capitalism, planning and étatism. Tragically, it is one of many examples of initially promising forms of knowledge production that were subsequently thwarted by much less noble intellectual developments. John Kenneth Galbraith broached similar themes in The affluent society (1958) but his was a discussion of pathologies rather than of developmental trends.

300

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However, the structural tendencies did not die away, as the data above reveal. Even while social democratic impulses were suppressed, the state still expanded, taxes increased, and consumption was decommodified through social transfers to all strata, not just ‘welfare recipients’. At the same time, the problem of where to locate new investment festered. Wealthy societies have become more politicised, but under economic-liberal ascendancy their prosperity masks a chronic inability to fully employ the available population. An implied contradiction is that more investment is needed (to generate economic activity) but less investment is called for by market forces (because of existing overcapacity globally in the private sector and they abhor public-sector investment). To some extent these incompatible elements in modern economies are being reconciled by the transformations we have documented (more economic activity is mandated outside market auspices). Herein lies a powerful clue to the conundrum of what is to be done: more public-sector-sponsored production of goods and services will be necessary to achieve full employment, to have economies running ‘at full bore’ and to restore human purpose to contemporary affluence. This strategy to enhance societal decency will be the likely social democratic route back to influence. And claims that further expansion of the public sphere will harm economies will remain as implausible and mischievous as they have proved in the past. Having considered the significance of unemployment to broad political economy, we now need to disaggregate the discussion somewhat. Table 8.9 presents unemployment not during the whole of the post-1974 period but for 1994–2008 only – it concentrates on years that have been regarded in popular commentary as a post-crisis period (a globalisationnurtured and financialisation-dominated post-stagnation period of unbridled greed18), implying that spiralling wealth in the wealthy societies was self-justifying. The table is intended to demonstrate that very high unemployment persisted even in these ‘good times’. In the period, apparently good performers and previously good performers (Australia and Sweden, respectively) performed badly (along with Finland which had its own economic

18

Jeff Madrick, 2011, ch. 19.

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peculiarities – disruption to its special relationship with the Soviet economies). Half the countries performed worse after 1994 than after 1974, and some of the formerly low-unemployment countries (Sweden, Austria and Japan) became mass-unemployment societies. (After 2008, of course, the situation worsened further almost everywhere.) We noted in chapter 7 that Sweden renounced its social democratic achievements during the 1990s; but conventional economic-liberal policy, sedulously applied, wreaked havoc generally. If, as we suggest, the fundamentals of capitalist economic activity can be discerned more reliably in times of dislocation and crisis (which, as noted, were normal rather than abnormal during the twentieth century), the data in Table 8.10 indicate why. It depicts unemployment and GDP growth rates for the two decades (approximately) after 1974 – to allow the relationship between the variables to be noted.19 Sweden and Switzerland both experienced low economic growth in this period, but simultaneous low unemployment; in contrast, Canada and Australia recorded reasonably high growth rates alongside high unemployment. The lesson drawn from these observations is that growth alone does not solve an unemployment problem and the absence of growth does not necessarily cause one. We must look elsewhere (to deliberative policies and institutions) to account for low unemployment. The first decades of the long recession show that low unemployment is achievable in ‘hard times’, though not via conventional economic-liberal policy. Note also that the high-growth economies tended to be high-immigration societies.20 We are claiming, then, that GDP growth is a not vital indicator one way or the other of economic success, particularly for wealthy countries. Wellbeing depends on other circumstances, including how resourcefully affluence can be diverted into infrastructure requirements (not just economic, but system-enhancing ones, as in health, education, administrative and protective capacities), sustainability, civility and equality-inducing processes.21 19 20 21

Growth figures are for 1974–1992 and unemployment figures for 1974–1997 to allow for the lagged effects of growth on unemployment/ unemployment. In both Canada and Australia, more than 20% of the population was born overseas (UNDP 2009, p. 143). Otherwise known as civic amenity.

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Table 8.10: Unemployment, employment and growth in ‘hard times’ 1970s–1990s, 16 OECD countries, annual rates averaged. Unemployment [%] 1974–1997

Growth * [%] 1974–1992

Switzerland Japan Norway Sweden Austria Germany United States Netherlands Australia Finland United Kingdom Denmark France Canada Italy Belgium

1.4 2.4 3.3 3.5 3.8 6.5 6.7 7.1 7.4 7.7 8.0 8.6 8.6 8.7 8.9 10.3

1.3 3.8 3.8 1.5 2.5 2.2 2.2 2.2 2.7 2.2 1.6 1.8 2.3 2.9 2.7 2.2

OECD average

6.7

2.5

On a per capita basis, GDP growth rates (averaged percentages for 1974–1991) were lower for most countries: Switzerland 0.9, Japan 3.6, Norway 2.8, Sweden 1.3, Austria 2.3, the USA 1.4, the Netherlands 1.3, Australia 1.2, Finland 2.0, France 1.9, Canada 1.5, Italy 2.0, Belgium 2.0, Luxembourg 2.3. The exceptions were Denmark (1.9%), Germany (2.2%) & the UK (1.7%). The OECD average was 1.9 percent. *

For the 1990s, OECD growth was higher for all countries except Japan, Germany, Italy and France. For the 2000s, growth was lower than the figures above for all countries except Sweden. OECD average growth was 3.0% for the 1990s and 1.7% for the 2000s.

Note: Unemployment for CH, J, L N, S & Ö since 2000 averaged 4.7% – ranging from 3.6% (N) to 7.1% (S). Sources: Labour Force Statistics1973–1993 and OECD Economic Outlook no. 59, June 1996 (and various later issues for updates).

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Table 8.11: GDP growth (yearly average percentages for each decade). 1970s Kor 8.6 Is 7.0 Mex 6.6 H(E) 6.0 Port 5.8 J 5.3 C 5.0 T 5.0 Ir 4.8 N 4.8 Sp 4.6 Ö 4.2 SF 4.1 OECD 4.1 USA 4.0 F 3.9 I 3.7 B 3.7 L 3.6 Aust 3.4 NL 3.4 D 3.2 UK 2.9 NZ 2.8 DK 2.6 S 2.1 CH 1.5

1980s Kor 8.9 Lux 6.0 T 5.1 J 3.8 Ir 3.6 USA 3.5 Port 3.4 OECD av. 3.3 Sp 3.2 D 3.0 N3.0 Aust 2.9 NL 2.8 C 2.6 Ö 2.6 UK 2.5 I 2.5 F 2.3 B 2.3 DK 2.1 CH 2.1 Mex 1.9 S 1.9 Is 1.7 SF 1.6 NZ 1.5 H(E) 1.3

1990s Ir 8.3 Kor 5.8 Pol 5.6 Lux 5.0 Aust 4.2 Slov 4.2 C 3.8 SF 3.8 N 3.8 T 3.8 NZ 3.8 Is 3.7 H(U) 3.5 Mex 3.4 USA 3.4 NL 3.4 UK 3.2 Sp 3.1 Port 3.0 OECD 3.0 DK 2.9 S 2.8 Ö 2.6 H(E) 2.5 B 2.3 Cz 2.3 F 2.0 D 1.8 I 1.6 CH 1.4 J 1.1

2000s Slov Rep 4.6 Kor 4.1 Pol 3.8 T 3.8 Cz 3.2 Aust 3.1 Chile 3.1 Lux 2.9 Ir 2.8 H(E) 2.6 NZ 2.6 Is 2.5 H(U) 2.2 Sp 2.1 Mex 2.0 C 1.9 USA 1.8 Ö 1.8 N 1.8 SF 1.8 S 1.7 OECD 1.7 CH 1.6 UK 1.5 B 1.3 NL 1.3 F 1.2 J 0.8 D 0.7 DK 0.7 Port 0.6 I 0.3 World growth: 0.8% p. a. (2007–2008) [1970s–2000s: 3.2%] [WDR figures]

Sources: OECD Historical Statistics 1970–2000, 2001, p. 48, OECD Economic Outlook no. 87, May 2010, p. 323 andWorld Development Report 2010: Development and climate change. Washington: IBRD & WB, pp. 378–385.

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Figure 8.7: OECD – Inflation 1970–2010.

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Sources: OECD Historical Statistics 1960–1995 and OECD Economic Outlook no. 87, May 2010, p. 340.

Angus Maddison has calculated that global growth in the richest twenty countries has halved since 1974 compared with the postwar boom, however it is still at approximately the same level as for the two centuries before that.22 In OECD countries, it is obviously lower than for the world as a whole, for Asia and even for Africa – yet another affirmation that wealthy societies can remain so despite low growth. The situation for the OECD is depicted in Table 8.11. For these countries the decline across the decades since the 1970s can be seen, with growth settling below 2 percent by the end of the 2000s, having stalled in the 2007–2008 period. Maddison’s prediction is that growth in the rich countries will continue at under 2 percent for the next two decades, but that higher rates in China and India will nonetheless redound favourably for the west.23 Especially contentious has been the politics of inflation in the past 35 years. Though inflation has declined steadily for forty years, the ‘stagflation’ of the 1970s and 1980s created some of the more bitter policy and institutional disputes of the contemporary era. Figure 8.7 shows that in 22 23

Maddison 2007, p. 381; 2003, p. 260. Maddison 2007, ch. 7.

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the OECD inflation was more than 10 percent in this politically damaging period, when labour parties and movements lost much of their policy leverage. In Australia and New Zealand, arrangements that had been in place for a century were dismantled in the early 1990s and 2000s because of their alleged role in facilitating 1970s inflation (and for the power they gave to organised labour). Inflation is a continuous rise in the general price level (not to be confused with specific rises such as oil price increases that usually do not have lasting inflationary effects). The economic-liberal, monetarist ‘explanation’ of inflation is that it is caused by increases in the quantity of money in circulation (the money supply): the cure is then to reduce the money supply (or government’s contribution to it) by cutting public spending. Liberals see budget deficits (excesses of spending over revenues) as inflationary. That is why Figure 8.5 is so important: we showed that deficits have been increasing for the same period as inflation has been falling. The failure of orthodox public policy to acknowledge this lack of fit is one of the scandals of economic policy orthodoxy in past decades. There appear to be no empirical grounds for monetarism. Nor are there plausible grounds for liberals’ oft-imposed preference for monetary policy as a means of controlling inflation.24 The non-liberal, post-keynesian or institutionalist explanation for post1974 inflation attributes it to sociological (or institutional) factors. Labour and capital both became institutionally powerful during the long boom and were able to make wage demands and achieve compensatory price increases often through corporatist or quasi-corporatist processes and without recourse to binding or significant market disciplines. As a result inflation was high and sometimes ‘out of control’. Post-keynesian commentary nonetheless never pinned responsibility for inflation on specific institutions – whether the organisations of labour or of capital – each polity did, though, need to develop ways through this intractable dilemma.25 Gösta Rehn’s and Rudolf

24 25

That is, post-1974 inflation was not for the most part demand-driven: ‘most of the real-world experience with inflation occurs in conditions of insufficient aggregate demand’ (Wray 2008, p. 7). See Joan Robinson 1976 and 1979.

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Meidner’s tireless (and ultimately unrecognised) struggles in Sweden throughout the postwar decades to establish labour-led arrangements with the capacity to combine full employment with egalitarian and anti-inflationary biases reflected this viewpoint, and pointed to the unorthodox nature of mechanisms needed to manage capitalism effectively.26 The heterodox (or anti-liberal) explanation is therefore that inflation is not a monetary phenomenon but a social, political and institutional one. To control social and class conflicts over the distribution of income, the obvious answer is incomes policy. Precisely these arrangements (themselves largely achievements of the post-1945 ‘settlements’) began to be dismembered everywhere from the mid-1970s.27 The high inflation of the 1970s and 1980s abated in the 1990s, remaining low subsequently (see Table 8.12) – partly due to the impact of China-sourced consumer goods on prices, and partly to the weakening of labour’s bargaining power (and its concomitant distributional effects). If inflation resumes in the west, as Chinese producers demand a fairer share of the value they are producing, the need for incomes policies will once more become apparent. The inflation pause in the meantime has fostered indifference and paralysis in policy to counter structural change and unemployment. 26

27

It should be noted that the Rehn-Meidner model was not an incomes policy – in that important objectives were to affirm that the state should not impose wage controls and also to ensure unions were not pressured into voluntarily endorsing wage restraint (as determined by the 1938 Saltsjöbaden agreement). An objective of the model was to limit inflation by limiting employers’ capacities to generate wage increases on their own terms (outside ‘bipartite corporatist’ agreements) as well as through other anti-inflationary elements – restrictive fiscal policy proposals and ‘transformation pressure’ (high wages that could be imposed on employers, forcing capital continuously to eliminate inefficient business activity). All these elements were intended to maintain labour’s hegemony over economic policy. But unions should never be expected to become complicit in the wage reduction efforts of their protagonists – which would in any case depress economic activity and therefore be counter-productive from a keynesian point of view (Erixon 2010, 2011a). Joan Robinson: ‘incomes policy is the only real remedy, but now the political setting in which it might have been introduced has long since been dissolved’ (1974, p. 220). Four decades later, we can see that the ‘political settings’ always need to be reasserted because the conditions which permit inflation (extra-market bargaining capacities) never wholly evaporate.

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Table 8.12: Inflation (CPI increases – %). 1980s 8.1 3.5 4.5 5.9

Australia Austria Belgium Canada Czech Republic Denmark Finland France Germany Italy Japan Luxembourg Netherlands New Zealand Norway Spain Sweden Switzerland United Kingdom United States 20-country av.

5.9 6.6 6.3 2.6 9.6 2.0 4.4 2.4 10.7 7.6 9.3 7.6 3.4 6.1 4.7

1990s 2.2 2.0 2.1 2.0 7.6 1.9 2.1 2.0 2.3 3.8 0.8 2.2 2.1 2.1 2.3 3.9 2.4 2.0 2.7 2.8

2000s 3.0 1.8 2.0 2.0 2.6 2.0 1.7 1.9 1.7 2.3 -0.3 2.9 2.3 2.9 2.2 2.8 1.6 0.9 2.1 2.4

4.3

2.6

2.0

Sources: OECD Economic Outlook no. 87, May 2010, p. 340 (and earlier editions). Figure 8.8: The stagflation period: Unemployment and inflation, 1974–1990, 17 OECD countries. High unemployment

Low inflation

D NL CH Ö J L

B I USA SF C Aust DK UK F OECD N S

High inflation

Low unemployment

Source: Compiled from data in OECD Economic Outlook 54, December 1993, Table A15, p. 140 (and earlier issues).

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One of the most cited relationships in economic policy in the post1970s period was the so-called Phillips Curve, which asserted a trade-off between unemployment and inflation.28 Figure 8.8 shows its inadequacy on empirical and explanatory grounds for the critical decade and a half after 1974. More than half the OECD countries experienced – as the concept stagflation prefigures – coincident unemployment and inflation after the onset of the crisis, defining the turbulence of those years. In fact every imaginable relationship between unemployment and inflation was evidenced in the OECD in the ‘stagflation decades’ – the majority of lowunemployment countries also had low inflation (Sweden and Norway were exceptions); the majority of high-unemployment countries also had high inflation (Germany and the Netherlands were exceptions). This means that, if the trade-off relationship were asserted, it would apply to only these four countries. Germany and the Netherlands may be said to have prioritised policies to fight inflation over policies to fight unemployment, while Sweden and Norway could be said to have prioritised policy to deal with unemployment over policy combating inflation. In these cases, orthodoxy was tempted to imply that a ‘little bit’ of unemployment could help quell inflationary wage pressures, while ‘a little’ unemployment was a reasonable price to pay for low inflation. Each of these suggestions could be used, with breath-taking cynicism, as means to redress the other. Fortunately the relationship is nullified not only by simultaneous unemployment and inflation in most OECD countries, but also by the existence of low levels of each in a handful (Switzerland, Austria, Japan and Luxembourg). As we have argued, the post-keynesian explanation for inflation during recession, though more provocative, was always more convincing – because it acknowledged both the enduring societal conflicts that underwrote the inflation, and the structural changes in production that gave rise to that form of conflict.

28

The theory derived from the observation of an empirical relationship between wagerate changes (a proxy for inflation) and unemployment in Britain from the 1860s to the 1950s, by LSE economist A. W. Phillips.

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The trend of things We now move to a consideration of the relations between political institutions and economic performance that have direct implications for the substance of, and political choices within, contemporary social democracy. Drawing on the experience of persistent unemployment and government growth during the ‘hard times’ after 1974, it is possible to discern distinctive configurations, each implying, for national political economies, characteristic tendencies for future development. The politically and socially divergent ‘modes of regulation’ revealed in Figure 8.9 are derived from categorisation of economic dysfunction (in this case, unemployment levels) and intervention (in this case, the size of the state) in 20 OECD countries during prolonged ‘hard times’ – that is, for the 20 years after 1974. Countries were ranked according to both economic performance and political practices, and four clusters were identified. Bob Jessop has insisted that these variations can only be ‘discovered’ by social investigation – signifying that they are the result of institutionalised responses to a variety of contingencies in capitalist activity. They are ‘emergent’, and therefore invite evolutionary and institutional methods of enquiry. They are usually unintended, unplanned, the provisional endproduct of agentless processes of development. They normally therefore have no defined ultimate purpose – their undesigned function is to control or regulate discordant and centrifugal capitalist tendencies.29 Such modes of regulation have also been labelled social structures of accumulation, social systems of production, modes of growth, modes of development, systems of economic organisation, national business systems, national innovation systems, macroeconomic management systems and governance systems, according to evaluations of their dominant ‘purpose’. Each embodies historically contingent institutional commitments – to markets, hierarchical authority, networks or solidaristic communities. Unintended or ‘agentless’ trends are inevitable in evolving systems such as mature economies because the properties and effects are unanticipatable by the participants who constitute them, as well, of course, 29

These might be best conceived as ‘functions without intended purposes’.

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as being unpredictable from market theory. Conscious action, even the conscious innovation associated with production-oriented economic activity, results variously in systemic properties that are not reducible to constituent decisions; they can cause crises or, alternatively, create structures and tendencies able, later, to be politically exploited. And both the trends and the systemic properties become resistant to voluntaristic reversal. Such ‘structural’ developments, particularly in well developed economies, nonetheless remain resistant to the materialist analysis typical of most strands of Economics.30 The system itself, in interaction with non-economic preconditions, develops such properties and potentials, not individual will. Consequently the figure identifies divergent ‘varieties of capitalism’ – which we have labelled ‘liberal failures’, ‘statist failures’, ‘social democratic corporatism’, and ‘corporatism without labour’. Other writers have deployed versions of these – respectively, liberal-market capitalism, dirigiste governed capitalism, coordinated capitalism (the negotiated economy) and authoritarian corporatism.31 The presumption among most contemporary schools of analysis is that the emergence of novel features from a common feature (market-driven capitalism) can lead to coherent characteristics (and adaptive potentials) that were nonetheless not predictable from the generalised pre-history of economies that can still claim the mantle capitalist.32 30

31

32

As was claimed even in the 1950s by Eugene Golob. Writing of ‘secular corporatism’, Golob speculated that ‘democratic capitalism is evolving in the direction of corporatism’ and that neither management nor government appeared capable of reversing the trend (1954, pp. 574, 583–588). Emerging tensions between the responsibility of industry to produce and its responsibility ‘to provide jobs’ are what gives the ‘question of organisation’ its urgency in the developmental trends (the pursuit of efficiency) within modern society – and whatever the eventual amalgam of statist growth, neomercantilism and democratic corporatism (1954, pp. 591–597). These unfolding postwar concerns for American conservatives (and western civilisation) echo well Wigforss’s earlier social democratic ones. Alternative depictions can be found in (among numerous others) Crouch & Streeck (eds) 1997, Boyer & Saillard (eds) 2002 and Jessop & Sum 2006. The ‘régulation approach’ and the ‘social structures of accumulation approach’ (see McDonough, Reich & Kotz (eds) 2010) describe the dominant research programmes. This is the meaning of the term ‘emergence’; see Hodgson 2000 and 2004, ch. 19. ‘Evolution can produce qualitative novelties, […] novelty is a result of systemic emergent properties, […] reality is […] a structure […] with distinctive and characteristic emergent properties’ (2004, p. 407). See also Hodgson & Knudsen 2010.

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Figure 8.9: Politics and markets in ‘hard times’: Politically divergent modes of regulation* (the institutional bases of economic performance) based on categorisation of unemployment and size of the state, 20 OECD countries, 1970s–1990s. big government

good economic performance

social democratic corporatism corporatism without labour **

statist failures liberal failures

bad economic performance

small government

Social democratic corporatism: Corporatism without labour: Statist failure: Liberal failure:

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*

**

S, N, Ö, Is, L J, CH D, F, I, NL, B, DK, SF, C, UK, Ir, NZ USA, Aust (& UK during the 1990s but not since)

‘Modes of regulation’ can also categorised as social structures of accumulation, social systems of production, modes of growth, modes of development, systems of economic organisation, national business systems, national innovation systems, macroeconomic management systems and governance systems. [They are usually unintended, unplanned; but nonetheless embedded and therefore non-transferable.] Also categorised as ‘authoritarian successes’, ‘creative conservatism’ and ‘creative defeat’.

Derived from data in OECD Economic Outlook (various issues) for the period 1974–1993.

Any strictly materialist understanding of developmental tendencies is seriously compromised by the phenomenon of emergence. The embeddedness of the market in the political conditions we have outlined, together with the interaction between these underlying conditions and their capitalist form at any one time, is what gives contemporary economies their analytical ‘complexity.’33 33

Social science discussion of complexity is expanding apparently exponentially. From across the disciplines and traditions, complexity is now considered one of the main factors militating against predictability and abstract understanding. Further treatment of its context and significance are given in Jessop 1997 and 2008, also Chesters 2005, Hodgson & Knudsen 2010 and Olssen 2010.

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If a distinctive social democratic political and economic ‘model’ can be observed in this empirical summary of post-1974 varieties of capitalist experience, it was neither premeditated, fully systematised, nor ‘lockedin’. Nor are its empirical features necessarily essential or replicable. Political choices, even if not made in freely chosen circumstances, have been made by labour movements, their more formal parties and often unassociated social movements – all influenced by demographic and democratic pressures, to which they respond. Economies, with particular histories and capacities, are products of both initial endowments and institutional strategies. We earlier noted Wigforss’s yearning for a social democratic movement inspired as much by principled collectivist reasoning outside the socialist tradition – most importantly, conservatism – as by doctrine formulated explicitly within the left. We can now appreciate that, as things have turned out, ideas and discourses produced by capitalist interests have directly influenced actual social democratic experience (for example, through the renewed – if ineffectual – public preference for monetary policy as a tool of macroeconomic management, that social democratic regimes also seem unable to resist). It is not so much that social democracy makes compromises that stymie essential goals, it is more the inevitability of mediation between deliberative action and extant bodies of sometimes hostile ideas. Thus, what Roberto Unger refers to as ‘restless experimentation’ in the social democratic project signals not indecision and retreat, but a fact of political life.34 All political projects are constrained by their historical settings. Public institutions embodying past choices, present political priorities and divergent governance arrangements together ensure that elements of the particularities between capitalist economies – even undesirable ones – are selected, adapted and replicated, albeit differentially. The four modes of regulation presented in Figure 8.9 are not just snap shots in time of established systems, but also condensations of evolving processes of selection, adaptation and replication – themselves always unfinished but with enduring forms that demarcate one from the other. For indeterminate periods, path dependency and cumulative causation

34

Unger 2005, p. 97.

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help consolidate ‘regimes of accumulation’ which, between moments of crisis, impart a ‘strong inertia in the economic dynamic’ securing the idiosyncratic productive and regulatory shapes that are experienced as normal.35 In each case, the structural requirements of capitalism are nurtured by non-economic conditions which, more often than not, deviate, with unpredicted effects, from conventional expectations. In Figure 8.10 we extend the time period for detecting these varying modes of regulation to the years since the early 1990s, in order to test their resilience. We noted earlier that these years are often regarded as a post-crisis era – stagflation and the disruptions of globalisation having been tamed, in the mainstream imagination, by orthodox strictures. In fact, as a coda to liberal insouciance towards unemployment, some previously good performers – Sweden, Austria and Japan – attained the status of mass-unemployment societies; and Canada and Ireland became small-government polities. Figure 8.10: Politics and markets in the ‘recovery’ years: stability of modes of regulation since the early 1990s, 20 OECD countries, 1994–2008.

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big government

low unemployment

N Is CH L

SF F UK I NZ B DK D Ö S NL C Ir Aust USA J

high unemployment

small government

Changes since the early 1990s: Sweden, Austria & Japan have become mass-unemployment societies (above 4%); Canada and Ireland have become small government countries; UK has regained big government status; unemployment has fallen in most of the 20 nations. Derived from data in OECD Economic Outlook no. 81, June 2007 35

These ideas are fleshed out in Robert Boyer 2002, ch. 30. See also chapter 10.

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Meanwhile the UK regained its big-government status, and unemployment fell in most of the twenty nations. For all this, though, the basic configuration of the post-1974 period remained intact, giving an observable coherence to not only the stagflationary period, but to the entire ensuing recessionary decades – close to forty years. The stability of modes of regulation expresses itself not only in economic outcomes but also in the attendant non-economic consequences. Perhaps the most obvious concomitant of recession and unemployment is the increase in inequality.36 Table 8.13 shows income inequality estimates for the 1960s–1970s, 1980s–1990s, around the year 2000 and for the decade after 2000. Columns 1 to 3 derive estimates based on the proportions of incomes earned by the richest 20 percent of income-earners, in the respective periods, compared with the poorest 20 percent; while column 4 uses the Gini co-efficient for 2001–2010. It can be seen that inequality is always greater in high-unemployment countries and that societies like Australia and New Zealand became more inegalitarian as their unemployment experience persisted from decade to decade (repudiating early social-policy reforms). In an interesting variation on the theme of social evolution, antipodean egalitarianism and path dependency do not appear to have survived the four decades of liberalisation, globalisation and financialisation. In recent times (the twenty-first century), the anglophone countries have been among the most unequal while, in terms of income distribution, Japan, Germany and Scandinavia have been noticeably less inegalitarian.

36

A feature of post-keynesian (especially kaleckian) political economy is its assertion that income inequalities are always greater in times of unemployment (when at least a portion of the workforce in not earning) – and vice versa: full employment acts to reduce inequalities. (See Kalecki 1954 and 1971.)

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Table 8.13: Income inequality, 1960s–2000s [Shares of income received by top 20% divided by share received by bottom 20 % – cols 1–3]. 1965–1977

1987–1995

c2000

F 10.9 USA 9.5 I 9.1 C 8.2 D 7.1 NL 6.6 UK 6.2 Aust 5.9 N 5.9 S 5.6 J 5.2

USA 9.4 Ir 6.4 CH 5.9 Aust 5.8 UK 5.6 F 5.6 C 5.4 Sp 5.4 I 5.1 NL 5. D 4.1 B 3.6 S 3.6 DK 3.6 SF 3.6 N 3.5 Ö 3.2

Mex 12.8 T 9.3 USA 8.4 Port 8.0 UK 7.2 Aust 7.0 NZ 6.8 I 6.5 H(E) 6.2 Sp 6.0 Ir 5.7 F 5.6 Pol 5.6 C 5.5 CH 5.5 NL 5.1 B 4.9 Kor 4.7 Ö 4.4 D 4.3 DK 4.3 S 4.0 Slov 4.0 N 3.9 Lux 3.9 H(U) 3.8 SF 3.8 Cz 3.5 J 3.4

2001–2010 (Gini coefficient) Chile Mexico USA Portugal New Zealand UK Italy Australia Spain Poland Greece Switzerland Belgium France Canada Korea Slovenia Netherlands Hungary Ireland Austria (Ö) Germany Finland Slovak Rep Czech Rep Norway Sweden Japan Denmark

n = 29

(Range: 24.7–40.8)

n = 11

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n = 17

[non-OECD countries: Hong Kong 9.7, Singapore 9.7] [Note: ranking is almost the same if top and bottom 10% is used.]

Sources: Human Development Report 2007–2008 (p. 281) also Human Development Report 2010: The real wealth of nations New York: UNDP & Palgrave Macmillan (p. 152) [col.4]; and World Development Report (various issues).

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Table 8.14: Manufacturing decline, 20 OECD countries from 1974 to 1995 (Manufacturing employment in 1995 as ratio of manufacturing employment in1974 – each as % total employment). Korea Denmark Portugal Ireland Finland Japan Italy Germany Spain Canada New Zealand

1.35 1.04 0.92 0.90 0.84 0.83 0.80 0.75 0.73 0.71 0.70

USA Austria France Sweden OECD av. UK Norway Netherlands Switzerland Australia

0.68 0.69 0.67 0.67 0.67 0.64 0.63 0.61 0.59 0.54

Source: OECD Historical Statistics 1960–1995 (1997, p. 43). Industrial employment (% total) OECD: 31 % (1970) → 27 % (2000)

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Services employment (% total) OECD: 63 % (1970) → 66 % (2000) Source: OECD Historical Statistics 1970–2000 (2001, p. 41).

Table 8.14 and Figure 8.11 reveal other crucial aspects of the phenomenon of contemporary structural change: the near-universal decline in manufacturing activity. The table compares the sector’s contribution to total employment in each country in 1995 with the figure 20 years earlier. Manufacturing decline has been a worldwide occurrence – for technological and institutional reasons; yet the impact has been unevenly distributed with Denmark’s performance as a manufacturer actually improving while Australia’s almost halved, from a low base. On average across the OECD, manufacturing’s share of employment after 20 years was at two-thirds the 1974 level; the table also shows the fall in manufacturing employment (and rise in services employment) over the decades from 1970. There is also a suggestion here that industrial employment is falling more rapidly than services sector employment can provide compensating job opportunities. 317

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Figure 8.11: Employment in industry 1970–2000 (11 OECD countries – % of total employment.

Source: OECD Historical Statistics 1970–2000. Paris 2001, p. 40.

The situation is affirmed by the chart (Figure 8.11) which shows not only the decline across all rich countries, but also that commitment to industry was maintained at about one-third of total employment in some countries (Germany, Italy) while it has fallen to about 20 percent in others. 318

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Table 8.15: Industry and manufacturing. Employment in industry (2000) Cz 40.0 Slov 37.3 Port 35.3 D 34.5 H(U) 34.5 J 31.2 Sp 31.0 Pol 30.8 Ö 30.6 Ir 28.6 Kor 28.0 SF 27.6 OECD av. 27.1 Mex 26.9 DK 26.4 CH 26.4 UK 25.4 S 24.6 T 24.6 F 24.5 L 24.0 B 24.0 NZ 23.2 USA 22.9 C 22.6 Is 23.0 H(E) 22.5 Aust 22.0 N 21.9 NL 21.3

Employment in manufacturing (2000) Cz 27.4 Slov 25.7 H(U) 24.7 D 24.1 I 23.6 Port 22.2 Pol 22.0 Ö 20.6 J 20.5 SF 20.1 Kor 20.1 Mex 19.5 DK 18.9 Sp 18.9 S 18.3 OECD av. 18.3 CH 18.0 Ir 17.6 F 17.4 UK 17.1 B 16.9 NZ 15.8 C 15.3 Is 15.3 USA 14.7 NL 14.6 H(E) 14.1 N 13.0 L 12.6 Aust 12.6

Source: OECD Historical Statistics 1970–2000. Paris: 2001, pp. 40, 41.

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Table 8.16: Industrial employment (% of total).

Cz Slov Rep H(U) Pol I D Port J Mex T Sp Ö Kor OECD av. SF B CH Ir L H(E) Aust NZ Is F C N S UK DK USA NL

2010

[2001]

38.7 31.4 31.4 30.1 29.5 29.3 28.4 26.4 25.8 25.3 24.8 24.8 24.4 24.3 23.9 23.4 22.9 22.1 21.4 21.1 20.9 20.8 20.8 20.6 20.3 20.2 20.1 19.6 18.8 17.6 16.6

[40.0] [37.3] [34.2] [30.8] [32.4] [33.7] [34.8] [31.2] [27.0] [24.0] (↑) [31.2] [30.6] [28.1] [26.9] [27.6] [26.3] [25.7] [32.4] [23.1] [22.6] [21.0] [23.2] [23.0] [22.2] [22.5] [21.9] [24.6] [25.2] [26.4] [23.0] [20.2]

[Declines during 2000s decade: 0–10% points] Source: OECD.Stat (accessed December 2010).

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Enthusiasts for globalisation will insist that globalisation and deindustrialisation are equally unstoppable, driven by the imperatives of technology as well as by the logic of accumulation. And capitalism would not be in crisis if alternative employment- and activity-generating activities were discovered at appropriate rates and in the right locales. So changes in industrial structure in the mature economies over the past three or four decades have altered the structure of the economy and the quality of employment in ways that are difficult for normal public policy to counteract. Table 8.15 shows the difference between industrial and manufacturing employment (the former includes construction, utilities and transport) for the year 2000, while Table 8.16 shows the 2010 industrial employment figure (noting also the decline in the decade of the 2000s). At a quarter of the total, industrial employment is healthier than manufacturing (because of its composition) but the continuing declines remain substantial. At least one tradition of contemporary political economy (neomercantilism) maintains that the loss of manufacturing capacities, especially if policy-assisted, is equivalent to the loss of hard-won lessons of development. It makes no sense – the renaissance-inspired mavericks argue – to disregard or to scorn the effects of clusters of industrial activity and associated synergies out of obeisance to an economic doctrine which never understood the historical origins of wealth anyway.37 The modes of regulation (and varieties of capitalism) literature contend that regulatory systems – which in themselves imply different historical and institutional preconditions one from the other – should perform differentially and produce dissimilar industrial competences.38 In 37

38

Erik Reinert 2007, ch. 4; his own preferred nomenclature for neo-mercantilism is the ‘other canon’. It is worth noting that the neo-mercantilists’ denunciation of Adam Smith’s assault on the ‘mean and malignant expedients of the mercantile system’ is their starting point today. Predating Smith’s focus on markets and exchange was Antonio Serra’s 1613 production-oriented conception of wealth creation and nation building, since lost to classical and modern economic knowledge. (See Sophus A Reinert’s new edition of Breve trattato 2011.) In most anglophone nations public capacities are limited by the orthodox, non-interventionist preferences of treasuries, finance ministries and central banks. They lack the industry policy, state investment strategies, official linkages between financial and industrial sectors, collaborative arrangements between public and private sectors

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Figure 8.12 the effects of these regulatory differences can be seen. Manufacturing’s contribution to total economic activity (GDP) and to employment is depicted for three nations, representing three modes of regulation (in accordance with those presented earlier in Figure 8.9). The histories of industrial capitalism over the twentieth century are reflected in the interplay between manufacturing’s share of GDP and manufacturing’s share of employment for each economy. Britain, originally the workshop of the world, experienced the passage from the nineteenth century to the twentieth with the largest manufacturing sector – more than a third of the economy and more than a third of all employment. Manufacturing at this time was nonetheless quite inefficient, with a somewhat higher contribution to employment than to the economy; by the time the country entered into recession from the 1970s, however, this situation was at first redressed, then reversed. Once manufacturing’s contribution to the economy began to exceed its contribution to employment, it had become, by the 1990s, rather more efficient. Another way of putting this, of course, is to note that, since the 1970s, with manufacturing decline, politics and policy in Britain have been unconcerned with employment. In Australia, the situation is similar, with respectable manufacturing (however measured) being achieved only in the immediate postwar years, and long-term decline ensuing thereafter. (or even within the private sector), and institutionalized involvement of labour in policy-making. These all take root more comfortably in statist and social democratic polities. Integration of different spheres of public policy is rarely thought necessary. Poor national-level performance (high unemployment) reflects productive weaknesses (uncompetitiveness or immaturity) in private organisations but can be attributed to weak or non-existent public competences as well as to official political insouciance towards certain types of economic transformation. Using somewhat different terminology from that adopted here, Robert Boyer claimed in the 1990s, for example, that ‘Market capitalism is geared to basic research and patented innovations, especially in the areas of biology, computer programs, and the leisure industry. The middle-range corporatist model seems more suited to develop new products for mass consumption, such as electronics, consumer goods and new means of transport. As for social-democratic capitalism, its strengths have to do with the invention and development of new collective goods linked to education, health, problems of an ageing population, but also the protection of the environment. Finally, state-powered capitalism can innovate in the area of collective infrastructures: very fast trains, space industry, telecommunications etc’ (1998, p. 99).

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Figure 8.12: Manufacturing since 1870: contributions to GDP and to total employment under three modes of regulation (Sweden, Britain and Australia).

Sources: Angus Maddison Dynamic forces in capitalist development: a long-run comparative perspective (Oxford: OUP, 1991), Ingvar Svennilson Growth and stagnation in the European economy (Geneva: United Nations Commission for Europe, 1954) and OECD Economic Outlook (various issues since 1980s).

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Table 8.17: Industry policy in OECD countries, 1974–1992. Japan Austria Norway Germany France Finland Sweden Italy The Netherlands Belgium Australia Denmark Canada UK USA

8.0 7.3 7.1 6.3 6.0 5.5 4.4 3.7 1.9 1.8 1.4 1.2 1.1 0.7 0.5

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Industry policy rankings determined by scores for each of the following 6 components (max. score: 9) To give the national polity influence over (private sector-led) structural adjustment 1 planning & developmentalism 2 sectoral policies To provide a political framework for industrial development 3 public enterprises 4 public institutions To develop policy mechanisms which allow the implementation of policy preferences 5 finance policy 6 research & development policy Source: Rachel Parker. 1997. The indeterminacy of globalization (PhD thesis). Dept of Govt, The University of Queensland.

Sweden’s experience is one of late development to a high commitment to manufacturing by the 1940s and then into the post-1974 period at a high, stable and relatively efficient level. The truncated and ineffective statism of Britain for most of the period since 1974 has been noted above; but it is worth noting that overall regulatory modes seem to mould outcomes, since 324

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Sweden’s startling performance on this score was achieved without a serious engagement with industry policy (noted in chapter 7), albeit with an arguably effective substitute in LO’s solidarity wages policy and the transformation pressures it exerted.39 Australia and the UK scored very low in their respective commitments to industry policy in the post-1974 years with no effective substitutes. Industry policy – sometimes seen as the unrealised part of the keynesian revolution 40– has since the 1970s become even less popular with policy elites than it was then, although it now takes the form of networks and research cartels between companies and within industries – themselves largely illegal in liberal polities. A comparative ranking for the initial period of restructuring is presented in Table 8.17. The most important indicator of the impact of politics and the state (though not of its growth) is the level of public sector investment – a proxy for the state’s commitment to infrastructure provision, one which registers, in important ways, the non-economic foundations for economic activity. By this measure, state capacity – defined as the ability of the polity to effect outcomes which would not be achieved otherwise, in accordance with a deliberative, rather than a market logic – ranges from about 0.5 percent of GDP in the UK to about 6 percent in Japan and Korea, the average being around 3 percent. Table 8.18 provides a ranking for 2005 in most of the OECD economies. Independent research for the 1970s– 1980s indicates that public investment of between 2 and 4 percent of GDP would have been sufficient to bring levels of unemployment over 10 percent down to low levels (under 4 percent).41 For the decades after 1974, the low-unemployment countries (Japan, Austria, Norway and Sweden) all allocated above the then average of 3 percent to public investment. 39 40

41

See Erixon 2007. Industry policy does not aim to preserve inefficient manufacturing but to assist ‘capital deepening’, to enable multiplier effects and to underpin productivity growth. Advocates assert that markets enable too many incentives for relocation, are indifferent to the problems of producers and unnecessarily facilitate policy-induced crises. See Boreham et al. 1999, pp. 135–142. The same study showed that private sector capital investment was far less effective in reducing unemployment than public – about 10 pecentage points of additional investment would be necessary for the same result, compared with 2 percentage points (of GDP) for public capital investment – presumably because public infrastructure investment fed through more rapidly to enhance opportunities for all private participants in economic activity.

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Table 8.18: Public sector investment (% GDP), 2005. Korea Japan Czech Rep Luxembourg Hungary Ireland Spain Poland France New Zealand Iceland Portugal Greece Netherlands

Sweden USA Canada Norway Finland Switzerland Italy Slovak Rep Belgium Denmark Mexico Germany Austria UK

6.0 5.7 4.9 4.5 3.9 3.7 3.6 3.5 3.5 3.3 3.1 2.9 2.9 2.9

2.8 2.6 2.5 2.5 2.5 2.4 2.3 2.1 1.8 1.7 1.7 1.3 1.0 0.5

[28-nation average: 2.9%]

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Source: Elsa Pilichowski & Edouard Turkisch. Employment in government in the perspective of the production costs of goods and services in the public domain. OECD 2008, p. 10.

Low levels of public investment these days are probably the analogue of ostentatious consumption, which has increased noticeably in the anglophone countries in the past decade.42 Insistent counters to the idea that politics is becoming more influential have clustered around the idea of globalisation. There are many dimensions of globalisation – most prominently, the growth of international trade, the growth of multi-national investment and production, and the ubiquity of cross-national financial (currency) flows (usually disassociated from trade or investment). Few dispute the force of the contemporary argument; and it is undeniable that trade is now expanding much more quickly than production – implying that an increasing proportion of global economic activity focuses on the ‘global economy’ rather than the nation. 42

Australian Bureau of Statistics (Cat. 1305.0), February 2009. See also the popular disquiet over the ‘distortions’ in the contemporary activities expressed, e. g., by Chrystia Freeland 2011.

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Table 8.19: Trade 2005 (Imports + exports as % GDP, OECD countries). Japan USA Australia Italy France UK Spain New Zealand Canada Finland Germany Portugal Norway Iceland Switzerland Sweden Denmark Austria Netherlands Ireland Belgium Luxembourg

(11 + 13) (15 + 10) (21 + 18) (26 + 26) (27 + 26) (30 + 26) (31 + 25) (30 + 29) (34 +39) (35 + 39) (35 + 40) (37 + 29) (28 + 48) (45 + 32) (39 + 46) (41 +49) (44 + 49) (48 + 53) (63 + 71) (68 + 83) (85 + 87) (136 + 158)

OECD av. OECD trade (as % GDP) in 1990s World trade growth – in 2010 OECD economic growth – 1970s–2000s:

24 25 49 52 53 56 56 59 73 74 75 76 76 77 85 90 93 101 134 151 172 294 91 % 40 % 10.6 % 2–4 % p. a.

Sources: Human Development Report 2007–2008 New York: UNDP, p. 286 and OECD Economic Outlook 83, June 2008, p. 6 (& no. 87, May 2010, p. 323).

However, as Table 8.19 illustrates, this particular source of political ineffectiveness may be overstated. Involvement with the ‘rest of the world’ through trading arrangements is much greater in countries with close neighbours and contiguous economies and societies (Austria, the Netherlands, Belgium, Luxembourg). For some of the ‘big’ participants in global interaction, the trading sector is a surprisingly small part of the national economy 327

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(Japan, USA) – though the level for the OECD as a whole is still increasing (Figure 8.13). Some economies, especially small trading economies, have developed modes of regulation that have evolved to harmonise their welfare regimes with their external vulnerability – though not, as previously noted, as a matter of explicit design.43 Certainly trade, measured by adding imports and exports together as a share of GDP, has become more important than in the immediately preceding decades: it has grown at more than 10 percent globally, and between 2 and 4 percent for the OECD, compared with just over 3 percent for world economic activity as a whole and under 2 percent for the OECD. However, as a proportion of GDP, OECD trade has increased during the past decade by only about 20 percent. It has actually stagnated for some (for example, Canada – see Table 8.20). Clearly the diversity of the international trading (and economic integration) experiences in rich countries is sufficient to raise eyebrows towards repeated claims of impoverished political capacities. Given the trends already unearthed in this chapter it would be folly to imagine that the prolonged machinations over recent decades aimed at establishing, for example, the WTO’s rules-based trading regime,44 were unrelated to the political capacities of nations with political ‘interests’ – themselves rooted in dominant liberal discourse – rather than spontaneous eruptions of purely marketdriven phenomena. At issue here is whether internationalising liberalism is responsible for the great advances in material wealth and prosperity, or whether the causality ought to be reversed, as William Ashworth has suggested: the ‘creation of an international economy was the necessary accompaniment of the rapid development of the world’s wealth’ (which preceded it).45 43 44 45

See, for example, Peter Katzenstein 1985; extended to a more general argument by Francis Castles 1988. Readable accounts are available in most textbooks on global political economy; an example is Bill Dunn’s Global political economy: a marxist critique 2009. William Ashworth A short history of the international economy 1850–1950 (1952). Worth noting is the OECD’s suggestion that a 10 % increase in trade openness can be expected to increase GDP percapita in OECD countries by about 4 % (Swaim 2007, p. 2): yet, as we have seen (footnote 19), the increase in trade over the last 50 years (Figure 9.13 reveals about 15 percentage points per decade) has been associated with growth of only 2 % – it reached 4 % only during the long boom after the second world war; since then it has halved in the rich countries (Maddison 2007, p. 380).

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Table 8.20: Increases in trade in the 2000s, Imports + exports as % GDP, OECD countries 1999–2008. Japan Poland Germany Czech Rep Austria Denmark Luxembourg Slovak Rep Switzerland Hungary Korea Sweden Turkey Finland Italy USA Belgium Netherlands Iceland Portugal France Spain Norway UK Australia Mexico Greece New Zealand Ireland Canada

(34/19) (73/66) (88/58) (155/112) (113/83) (102/76) (330/249) (168/127) (103/79) (161/127) (90/71) (101/80) (49/39) (84/67) (58/47) (29/24) (175/146) (141/122) (81/72) (73/66) (55/50) (101/80) (76/71) (56/54) (43/42) (58/58) (55/55) (59/62) (148/164) (67/87)

OECD average

1.79 1.56 1.52 1.38 1.36 1.34 1.33 1.32 1.30 1.27 1.26 1.26 1.26 1.25 1.23 1.21 1.20 1.16 1.13 1.11 1.10 1.07 1.07 1.04 1.02 1.00 1.00 0.95 0.90 0.81 1.21

Source: OECD.Stat (Macro Trade Indicators) July 2009.

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Figure 8.13: Changing importance of trade since the 1960s, Exports plus imports as % GDP (OECD + 9 countries).

Sources: Human Development Report 2007–2008, New York: UNDP, p. 286 and OECD Historical Statistics 1970–2000, Paris 2001, p. 71.

Trading successes and failures imply political or social strains in individual nations which politics and policy are called upon to resolve. The problems are manageable only to the extent that political and institutional capacities are well developed. Potent indicators of such challenges are the ever-present trade imbalances between countries. Table 8.21 shows them for the decade 2001– 2010. Clearly some nations have chronic difficulties which cannot be redressed by globalisation, but only exacerbated by it – as seen in the familiar failures of development for economies such as Greece, Portugal and Spain. 330

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Table 8.21: Current account balances 2001–2010 (Yearly averages, % GDP). Is H(E) Port H(U) NZ Sp Aust Slov Rep USA T Pol Cz Ir UK I Mex

–12.3 –10.1 –9.2 –6.9 –6.7 –6.4 –5.4 –5.3 –4.8 –4.1 –3.9 –3.6 –3.2 –2.3 –1.7 –1.6

OECD av F C Kor B Ö DK J D SF NL S L CH N

–1.2 –0.2 +0.9 +1.3 +1.4 +1.7 +2.3 +3.6 +4.6 +4.9 +6.3 +6.5 +8.9 +11.1 +14.7

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Source: OECD Economic Outlook 84, December 2008, p. 299.

There is simply not enough economic activity in these locations to make ‘everyone a winner’ and conventional attempts to deal with insufficient trade or insufficient employment (austerity policies, cutbacks to public benefits) only worsen the problem. Even notionally wealthy countries such as the USA and Australia face versions of this very capitalist dilemma. Meanwhile most of the manufacturing success stories (Sweden, Germany and Japan) have large and continuing trade surpluses. Though the problem was recognised and discussed at Bretton Woods seven decades ago, a satisfactory, development-focused resolution has never been achieved, mainly because Keynes’s preferences (for integrating full employment with internal development and external balance as multiple objectives of international regulation) were subordinated to the US government’s insistence on free trade.46

46

See footnote 4 to our introductory chapter – the incipient debates from 1944 continue.

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Sustained trade problems only unreliably generate high national debt; any correlation is weak, contingent upon other causes of indebtedness: compare the above imbalances figures with Table 8.22 which shows total debt (public and private) for 16 OECD countries in the mid-2000s.

Explaining state growth and economic evolution As our claim here has been that the expansion of the state implies an expansion of political possibilities generally and social democratic ones in particular, we need to understand the ways in which the growth of political capacities contributes to qualitative change in and evolution of the relationship between politics and markets.

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Table 8.22: External debt [private + public] (16 OECD countries, % GDP). Ir UK NL CH B Ö F DK

D SF N I Aust USA C NZ

625 353 289 284 268 184 155 147

134 120 113 107 82 76 55 44

16-country average: 190% Source: CIA World Factbook (accessed December 2010)[data for 2004–2008]

Fortunately, an early contribution to this endeavour was made by Adolph Wagner, the conservative German historical school economist committed to organic conceptions of social progress (and to empirical methods of analysis). From the 1870s to the 1890s, Wagner argued that state activity increased inexorably with industrialisation, modernisation, urbanisation and social complexity, because of the simultaneous expansion of social problems requiring public responses, on the one hand, and public finances 332

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and general affluence providing official means, on the other.47 High standards of living (not high rates of economic growth) would generate publicsector growth. Though there has been a steady stream of unconvincing criticisms,48 the structural explanation for what is largely a universal encroachment of public onto private provision has been affirmed by the data above – in defiance of the official preference in liberal capitalism for weak and insubstantial states. At the very least, the observed transformations indicate that the state can and does develop capacities that are rarely acknowledged in liberal views of the proper role for government. Growth in publicly provided services continues, in accordance with Wagner’s reasoning, even when growth in GDP slows. In fact, as the OECD admitted some decades ago – though more in fear than in celebration – low economic growth in countries with well developed economies, and democratic and demographic pressures and already large public sectors, could cause public expenditures to exceed 70 percent of GDP by 2025.49 It is obviously no refutation of Wagner’s argument that mature economies (with high and secure living standards but low growth) would continue to face structural pressures for the state to take on more functions, especially in times of downturn (structural change) when private investment contracts or is misdirected. Wagner seemed to appreciate that liberalism insufficiently encouraged a permanent shift from private consumption to public investment, an insight that now features prominently in post-keynesian thinking.50 As we have noted, limits on the capacity of private-sector decisions to generate private-sector employment at a sufficient rate exist even in the absence of extraordinary financial crises. A similar explanation of the tendency for a growing proportion of the economy to develop outside the market was provided in the postwar years 47

48 49 50

Wagner 1883, p. 8; see also commentaries, for the most part sympathetic, in Musgrave & Peacock 1958, p. xviii; Musgrave 1985, pp. 8, 20; Maddison 1986; Reich 1987 and Gemmell 1993. Wagner’s approach was largely shared with (the earlier) Friedrich List and (the contemporary) Gustav Schmoller, all three contributing to the German historical school. For example, Tanzi 2009 (which is also a critique of the ‘wagnerian’ trends if they persist); Tanzi & Schuknecht 2000, pp. 6–7; see also Cameron 1978. OECD 1990, p. 69. Wray, 2005, p. 5.

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by the French sociologically oriented political economist Jean Fourastié, but the central dynamic in this transition was the sectoral shift from industrial to service sector activity, something which is no longer conterminous with a private-public shift. 51 If pressure for public capital formation (rather than public consumption, which is less discretionary) emerges with sufficient force, these trends are likely to continue. Joseph Schumpeter recognised this in his 1918 essay ‘The crisis of the tax state’.52 Wagner’s critique of liberal capitalism was romantic and latently authoritarian; nonetheless, we can detect a social democratic element in the expansion of state activity. First, material development has been shifting the structure of national production towards goods and services that can less easily be provided privately, irrespective of overt demand. Second, the shift in the balance of total social provision reflects a prior increase in state capacities, as demonstrated in increasing public concern with social capital, urban amenity and welfare provision. Third, the conflicts implied by the shift from a liberal to a post-liberal regime are the conflicts familiar to and embraced by social democracy; its universalist principle overrides the user-pays principle. There will always be political conflict over the growth of a public sphere, as there is a recurrent gap in democracies between the technical potential of state activity and its actuality, between elite enthusiasm for market modes of regulation and popular hostility to them. Even when the economic structure or the objective requirements of population growth provide a substantial rationale for public activity, politics matters, sometimes hampering progressive outcomes. Wagner understood that the consolidation of private property in the nineteenth century was inevitably shadowed by ‘another great principle’ – the transition from individualist to collectivist mandates for production.53 51 52

53

Fourastié 1949; see also Meidner 1983, pp. 22, 30–38 and Bourdieu’s critique (in Lane 2000). Schumpeter 1918 (1954). In normal circumstances, Schumpeter does not really see any crisis (though there may be limits set by the effects of taxation on incentives): ‘Taxes […] helped to create the state. […] [which] is still the expression of the most creative forces […] [and which is able] to counteract the very stimulus to waste’ – that is, to recapitalise a society following war or catastrophe (1996, pp. 93, 96, 112). Wagner 1883, p. 8 and Polanyi 1944; see also Riha 1985, pp. 88–90 and Milonakis & Fine 2009, ch. 5.

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So our claim that much of the state’s activity is ‘indispensable to the whole economic life of the community’, and that a ‘great many things have to be done otherwise than in private enterprise’ is hardly a novel one.54 Developmental trends detected by conservatives can be exploited by social democrats, as with the transition from the bismarckian, systempreserving welfare state to the social democratic decommodifying one. As well, unexpected divergences emerge between private and public financing principles. The former are constrained by market demand and voluntarily yielded revenues; the latter by the state’s capacity to levy taxes. The level of public activity can be decided independently of the means that need to be solicited to finance it. It is more than the existence of taxation-financed services that distinguish public provision; it is also the public determination of societal objectives. As Wagner put it, the ‘state is free to define its own tasks, the manner of their discharge and thus the amount and kind of services to be provided for the people, without reference to their demand for these services’. ‘The desire for development of a progressive people will always overcome […] financial difficulties’. The ‘economic principle’ loses its pertinence, to be replaced by a ‘proper organic view’ of how states ought to evaluate the prudence or otherwise of assuming new and maintaining old responsibilities.55 Public policy in fact will assert, as an inherent purpose or principle, interference with and regulation of individual decisions and behaviour, especially as individualistic political rights, established in an era when the ‘relative order of private income and property are sacrosanct’, begin to be supplanted by a ‘social period’ characterised by ‘new economic ideas, new political views and a new direction for practical life’.56 Wagner’s explanation of public sector expansion implied a critique of the liberal state. The state was a result of organic social development – a creation of and consequence of the past – not just a guarantor of property rights. In addition to the state’s capacity to improve the pace of material economic development, it bore moral obligations, especially in the light of liberalism’s commodification of labour power, the inequities of which 54 55 56

Wagner 1883, pp. 2–5. Wagner 1883, pp. 5–8. Wagner 1883, pp. 8–15; see also Dawson 1890, pp. 1–13.

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justified state intervention. Wagner’s ‘law of expanding state activity’ was only partly an attempt to outline the logic according to which rich societies benefit from larger states; it also asserted the principle of state benefit: ‘such measures as conduce to the moral, intellectual, sanitary, physical, economic and social advancement of the mass of the people’, ‘so far as may seem necessary and expedient’.57 And the potential scope for state action to strengthen the supply side of an economy and to serve staatsräson was amply demonstrated by the social and regulatory policies that followed. In the 1920s, furthermore, German sociologist Rudolf Goldscheid extended Wagner’s idea and elaborated its fiscal significance. He foreshadowed the responsibilities of social democracy. ‘As feudalism broke down and the people gained control over the state, it came to be in the interest of the propertied class to render the state impotent. As a result, the state became impoverished. If the state is to be rendered a useful instrument in the hands of the people, the lost wealth must be reconstituted to the state, so that it can meet its welfare functions’.58 The liberal state became one which was intentionally ‘poor on principle’,59 and it was this struggle against extended state activity, increased taxation, and constraints on the autonomy of producers that gave the capitalist state its class distinctiveness. Even at this time, it was clear that conservatives preferred a state that was ‘to some extent politically and economically strong’. So the postulation of a social democratic state (and associated social democratic institutions such as cooperatives) was always as much a struggle against weaknesses (and antidemocratic impulses) in politics as one for progressive political openings. It was at about the same time, before abandoning its civic-republican aspirations, that Oliver Wendell Holmes ( Jr) in the USA remarked that ‘taxes are what we pay for a civilised society’.60 57 58 59

60

Wagner 1887, pp. 156–157. Musgrave & Peacock 1958, p. xviii. Goldscheid 1925, pp. 204, 207; the idea has been repeated and updated for the modern era by Luiz Carlos Bresser-Pereira: ‘The goal [of post-1974 deregulationists] was a weak state […] both in the wealthy countries and in developing ones. […] The neoliberal violence against the state was […] against the most advanced form of state that mankind has been able to build thus far: the social democratic state’ (2010, pp. 60, 76). Marke 1964, p. 212; Musgrave 1985, p. 25.

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In an important premonition of what is currently termed economic rationalism, Goldscheid identified a key aspect of liberal governance – the emergence of the ‘state within the state’, that is, parts of public bureaucracies committed to preventing the state from assuming functions that, nonetheless, are technically within its capacity. By recourse to doctrines such as free trade or balanced budgets, elite sections of government impose distinctive rules and requirements on the state proper that have the effect of pre-empting its charter, of stunting public responses to changing circumstances. Insofar as the state is thereby prevented from consolidating its own economic resources, it becomes unnecessarily inconsequential, a ‘caricature of the state’ and, for that reason, the site of continuing tension between two potential paths to community development: ‘capitalist economy and socially productive public economy’.61 In wealthy societies the capacity to provide (that is, the capacity to pay for) increased levels of public services has long been more significant than the demand for them, according to Wagner’s formulation; and this is so whenever restructuring occurs – for economic, demographic or technological reasons. So, contrary to public-choice formulations, Wagner’s law is the reverse of a ‘demand-side’ explanation for the growth of government. At some stage, societies reach a level of development where decommodified (or non-market) production, as well as regulative and protective and redistributive activities, become more imaginable. Once basic needs have been met, a rising proportion of societal income becomes available for frivolous and non-essential deployments (many of which contribute to social capital and may be less inessential than at first thought).62 Though there is very little public debate or formal recognition of the matter, even in social democratic circles, enhanced societal and state capacities can facilitate public provision independently of an expressed public demand for it. Modern societies, and modern public sectors, are now in a position where serious consideration of how excess economic capacity (overaccumulation) and long-undeveloped political potentials can be reconciled. Just as technological possibilities allow new privately provided

61 62

1925, pp. 211–212. Gemmell 1993, p. 106.

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goods and services in advance of demand for them, political institutions should be able to transform civic amenity in surprising directions. The task of those political forces which want to effect social democratic change, therefore, is twofold: to ensure there is a fiscal capacity to meet politically imposed costs, and to ensure there is an institutional capacity to activate and implement the political demands (despite any political resistance) in the first place. But these are independent requirements; they do not need to be linked, as they would be if private suppliers were responding to market demand. These are the legacies principled conservatism has bequeathed to social democracy. We note a corollary, expressed in the contemporary literature on the growth of government and of importance for social democratic development: it problematises the low productivity of some public services. Those concerned to explain the costs (and extent) of government have sometimes claimed that higher rates of productivity improvement in manufacturing industry (largely private) than in service provision (largely public) – while wage increases in the latter follow more or less those in the former – cause the costs of state services to increase more quickly than national income. The existence of ‘unbalanced productivity growth’, sometimes known as ‘Baumol’s disease’, is undeniable, though the implications often derived from it are often unreasonable.63 If service provision is labour-intensive and therefore more costly, or the scope for increasing production per employee (productivity improvement) more limited, this does not necessarily establish that it is thereby undesirable. High public costs are not always an indicator of a problem for public policy: social problems may be being solved in direct tandem with a decline in recorded productivity. Low productivity in the service sector may be a sign of a civilised society (for 63

See Brian Chapman, whose argument is that the presumption that productivity increase cannot or does not occur in expensive public services (such as health care) is unsustainable – it is more accurate to say that such provisions are increasingly overburdened with administrative and monitoring costs (as in the private sector) which any society is entitled to accede to, or otherwise. Chapman writes: ‘It is no vindication of a flawed theory if its predictions happen to accord with empirical results; rather, the problem is to remedy the deficiencies in the original theory or to find alternative, valid explanations for the results’ (2010, p. 18). See also a 1969 contribution by Joan Robinson to the debate over William Baumol’s (1967) claims.

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example, more teachers per student or higher-quality public amenity per citizen). Public policy processes can be expected to take responsibility for increasingly intractable (high cost, difficult and controversial) problems without departing from the principles of public sector provision anticipated for at least a century.64 This consideration of the growth of government, implying that different types of activities are sequentially encompassed by government, has also shown that liberalism’s constraining vision of what state responsibilities should be is becoming increasingly anachronistic. This implies, in turn, that social democracy’s urge to expand the range of activities subject to political debate and determination is not just increasingly contentious but feasible. Nonetheless, to develop or to expand state capacity65 is not to increase the power of government impetuously, but to create the public competences, including those of trade unions, that allow institutionalised decision-making in the public interest. Although the tendency for encroachment of public onto private prerogatives has been largely structural, its maintenance will increasingly demand conscious and volitional efforts. The accomplishments of social democracy are so easily reversed66 that any distinctively post-liberal political processes will need to be more aware of the principled rationale for their accomplishments than their practitioners seem to have been in the past. Hence, Rudolf Meidner has argued, in an associated context, that the conceptual development of an alternative to liberalism requires ‘the consistent development of trade union principles’;67 it is the consequences of such a departure from liberal politics that now needs to be understood.

64

65 66 67

Notwithstanding what we have asserted, the productivity of labour declined in twothirds of OECD countries since the 1990s (OECD 2010, p. 334 and discussed further in chapter 9); this has been occasioned by the same forces that define maturity and should not be interpreted as a reason to abandon the activities wherein costs were incurred. The concept of state capacity, and the correspondence between its weberian and social democratic aspects, is further developed in chapter 10. See Mark Olssen 2010, ch. 8. 1980, p. 347.

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Conclusion The political economy of social democracy being developed here draws on rich evidence that a transition away from private determination of economic conditions has been under way for some time. Capitalist economies are not what they used to be. Social democratic development is inevitable – in the sense that good performance in mature economies can be secured only if new public institutions are created to eliminate as much of the cyclical fluctuation in economic activity as possible (by subjecting investment decisions to social control). Since the mid-1970s, it has become obvious that other responsibilities and institutions can be identified and assumed by political processes – for example the control of the conflicts that give rise to contemporary inflation, as well as institutional interventions to ensure that the ‘labour market’ does not operate like a market at all. These and other state-building responsibilities (to be elaborated in the next two chapters) change the relationship conventionally imagined between political propriety and economic conditions; but politicisation also gets consolidated, normalised, replicated and ‘selected’ by the institutions and practices that constitute it. Such ‘inheritance’ varies, as we have seen in the discussion of modes of regulation (producing differential ‘social structures of accumulation’ and ‘forms’ of development) above. We have here the rudiments of an application of darwinian principles to social and economic evolution.68 It is important for our project insofar as social democracy does not propose to run the capitalist economy in a spirit of business-as-usual, but to extend the democratising principles that energised Ernst Wiggforss and are outlined in this book while ensuring that the development of what Marx called the ‘forces of production’ continues. As indicated above, most traditions of political economy have anticipated that successful capitalist economies have an evolutionary propensity to become less and less like market economies and increasingly institu68

This application has been a long-standing project for Geoffrey Hodgson (following Thorstein Veblen) – see Hodgson 2004, chs 7, 8 & 11 and Hodgson & Knudsen 2010, chs 1 & 5.

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tionalised or negotiated, that is, subject to explicit deliberation over important changes in the context of ever larger, more bureaucratised, somewhat socialised organisations. Even the liberal economies, such as that of the USA, exemplify the trend to increasing government, increasing regulation, and increasingly large and powerful private organisations. Such changes over time, and variations between countries, create an environment within which private capital no longer constitutes private economic activity. These are the pregnant possibilities that are examined in the next chapters.

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9. Labour’s responsibilities in social democratic politics

The development of the productive forces of social labour is capital’s historic mission and justification. Karl Marx

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Misled by the observation that all obstacles to industry seemed in the past to have come from associations, all progress from individuals – an observation which partly explains the indifference of the early economists to cooperation – [Adam Smith] distinctly condemned every form of association. Arnold Toynbee A nation can be maintained only if, between the state and the individual, there is intercalated a whole series of secondary groups near enough to the individuals to attract them strongly in their sphere of action and drag them, in this way, into the general torrent of social life. […] But to fill this role, [the occupational group] must exist and be mature enough to take care of the new and complex role which devolves upon it. Émile Durkheim I sympathise […] with the pre-classical doctrine that everything is produced by labour. John Maynard Keynes A key element in wealth creation after 1848 was labour power, that assured what we have called the collusive spread of economic growth: people of the rich countries got richer by taking out productivity improvements in the form of higher wages, rather than in the form of lower prices. Erik Reinert

Social democracy’s central contention has been that the institutions of labour will be the primary mechanisms for politicisation of the economy. Wigforss and others presumed that assertions of labour’s priorities become more feasible as economies grow and mature – despite the fact that labour 343

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is never the sole author of the structural shifts, and in the face of mainstream liberalism’s hostility to the labour-dominated arrangements required to effect them. Here we are confronted by a central conundrum in contemporary social science: the interplay between non-volitional structural developments and the volitional political programmes seeking to exploit them. Why does labour need to act – and with what objectives – if it’s getting much of what it wants anyway? This chapter tackles this conundrum by arguing that recent intellectual understanding of labour’s capacity to influence capitalist development has grossly underestimated that capacity. We will examine the strands of western social and political thought which have suggested that collective self-awareness is able to shunt social, political and economic trends in desirable rather than undesirable directions. Anti-economic-liberal intellectual traditions – including marxian and keynesian political economy, economic sociology, institutionalism, statist approaches to the economy and politics, ‘historical economics’, ‘social economy’ priorities and a resurgent mercantilism – can, if re-appropriated, again reveal competing but convergent rationales for labour’s assertion of what can be referred to as its ‘macro-political responsibilities’. Confronted by evolutionary developments, these need to be re-stated and re-learned. The fact remains that neoliberal domination of politics and policymaking during the period of globally induced economic restructuring has diminished the ambit of labour politics – and labour’s collective confidence – to a greater extent than have actual socio-economic trends. The evolutionary dimension of social democracy, in which, once organised, labour’s political agency is able to exploit structural opportunities, recalls Wigforss’s own perception of social democratic possibilities. We have already established (in chapters 4 and 6) that Wigforss’s conception of social democracy emphasised the societal purposes of industry, that capital has a social character. Industry not only produces the material goods and services we need, but helps constitute the societies we inhabit, the availability and precariousness of work, the institutional adaptation of formal goals to substantive ones (such as full employment) and, potentially, the form of business’s own involvement in political experiments. Labour needs business participation in experimental institutionalisation 344

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so as to override ill-chosen, short-term criteria of economic success such as profitability, growth, market efficiency and conformity to market principles. However, humanity’s ability to oversee sustainable, universalist and self-reflective progress – which Marx saw as the development of the forces of production – no longer depends (if it ever did) on the supervision of capital. Wigforss insisted, and social democratic principle implies, that alternative productive forces are able to impose additional demands on the accumulation process – a requirement to reconcile developmental pretensions with the inability of economic-liberal prerogatives to manage economies so that they run at full capacity. It will be the responsibility of labour – in conjunction with state institutions precluded from stymieing democracy, and the political organisations of capital precluded from opting out of societal obligations – to ensure that the commitment is collaboratively affirmed. The contribution of classical social science to discussion of labour, capital, the state and their political possibilities has been devalued in recent decades – particularly by managerialism and financialisation. Yet pervasive pessimism about the politics of labour is unwarranted. The purpose of this chapter is to show that contributions from heterodox political economy, sociologically attuned embeddedness studies, and non-defeatist ways of thinking about politics, give the lie to the contemporary denials of labour’s centrality to capitalist development. They also update understandings of labour-capital conflict and labour-capital coexistence and their implications for state-building. The chapter shows that not only does labour have theoretically acknowledged macro-responsibilities, but that developments in advanced capitalist economies over the past three decades have expanded them. 1 More democratic, more effective and more socially productive shifts in the forms of conflict over labour’s and capital’s preferences for production are more likely in the economies of mature capitalism. The prevailing intellectual temper has accepted too readily the debilitating economic-liberal discourse.

1

That is, those detailed in chapter 8.

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In the recent past, intellectual retreat seems to have superseded political defeat in the disillusionment, acquiescence, misguided analysis and policy fatalism projected on to trade unions and labour generally. What has been lost is any aspiration towards progressive appropriations of capitalist development. Structural shifts in the possibilities of politics have damaged the macro-responsibilities of labour less than discursive pressures released during the period of crisis and structural change have. Towards the end of this chapter we show how these macro-responsibilities and the social democratic aspirations they embody can be re-activated in institutions that have long and widely been anticipated. We contend that institution-building and state-building potentials expounded in classical social science have not been exhausted in the past three or four decades, despite near hysterical repetition of the need to abandon deliberative competence in favour of market modes of adjustment that negate democratic process. As a result, discussions of labour, capital and the state can be reconstituted in the light of the empirically sensitive, but still critical, appraisal of trends apparent in capitalism over the past century. Labour is here conceived in ways that resonate with classical formulations in social science and political economy. Labour connotes productive human activity, the subordinated position of that activity in capitalist social relations, the social movement (including trade unions and political parties) that emerged in recognition of its distinctive role, and the potential wealth-generating effects of its enhanced macro-political responsibilities. In addition, of course, it depends on activist motives for morally sensitive development and capacity to adapt to emerging dilemmas that in turn can constitute the nonruptural politics that is at the heart of wigforssian social democracy.

Marxian and keynesian political economy The idea that labour inevitably plays a distinctive social and political role in human development emerges from within marxism, of course, though not uniquely there. Marxian political economy’s contribution to understanding the limits and possibilities of labour in politics and policymaking 346

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was long regarded as the most comprehensive and theoretically rigorous available. The sheer intractability of (and resistance to) the anti-capitalist project, combined with the underdevelopment of labour’s contemporary self-understanding and practice, have in the past suggested limits to politicisation and democratisation in capitalism. The logical understanding of tendencies in advanced capitalist economies – towards crisis-riven accumulation and evanescent stability – indicates that possibilities exist to disrupt those tendencies. Predictably, though unfortunately, within marxism the emphasis has been on the limits, rather than the possibilities. Consequently, marxism’s multiple reluctance to develop explicitly interventionist political prescriptions constituted recurrent lacunae in most branches of critical social science through the twentieth century. We therefore identify here those aspects of the abstracted political economy of marxism which point to political possibilities later denied a place in the marxian corpus.2 We then identify compatible political conclusions available from keynesian and post-keynesian political economy. While we have criticised above marxism’s scepticism towards the progressive possibilities of the ‘capitalist state’ – which has been an almost defining feature of its theory of politics – we believe that this is unwarranted and that Marx’s political economy actually allows quite challenging and expansive conclusions. Keynesianism may have sometimes been as sanguine as marxism has been fatalistic; but its most significant divergence from marxism emerges from their respective methodologies – abstraction and formalism for one, and a more empirical inductivism, even intuitionism, for the other.3 Marxism’s understatement of the political potentials within capitalist polities is more a function of its ‘bracketing away’ of 2

3

Marxism’s contributions to the political economy of labour are of course voluminous, long-lived and contentious – sometimes murderously so. The purpose here is not to review well-known debates but to show that many of the paths towards resolution of them intersect with other traditions. The importance of juxtaposing marxian and non-marxian approaches to these issues has recently been advanced (again) by Sheri Berman (2006). For an account of the transition within twentieth-century Economics from formalism to heterodoxy and back again, see Ben Fine 2010. Keynes’s own understanding of this methodological issue – an anti-ricardianism affecting the very essence of Economics – came with his discussion of Malthus (1933b).

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empirical complications – politics, society, history, institutional specificities, culture – in its determination to expose the tendencies and the logic of accumulation. While marxism therefore precluded itself from exploring imaginable ‘counter-tendencies’, keynesian approaches always presumed, more or less without systematic analysis, that management of a capitalist economy would be possible. To a significant though still limited extent, post-keynesians writers have nonetheless postulated institutional ways of re-engineering the logic of the market. Marxism defines capitalism in terms of its underlying social relations of production – market modes of allocation, profitability as the main criterion for production and investment, commodity production and the commodification of labour, and undemocratic control of production (by owners or managers) and the decisions associated with it. In elaborating these defining features of capitalism in terms of the relations between social groups, Marx departed only incrementally from the prevailing conceptions in other strands of social science, but marxism does highlight two dimensions of class conflict that have received differential treatment in subsequent scholarship. The first concerns the obvious structural conflict between owners and non-owners of the means of production, between capital and labour, and between the distinctive auspices under which the two class forces respectively operate. Capital sought to eliminate customary, politicised, dirigiste and arbitrary modes of allocation; and markets came to displace less rationalistic mechanisms of resource allocation. As part of its ‘historic mission’, capital is bound to struggle not just to secure profits, but also to ensure that the profitability principle drives out conflicting, more deliberated, criteria as determinants of economic activity. This became the main way in which capital ensured its control of the economy. The same processes and historical transformations facilitated the commodification of most production and distribution, and the treatment of labour as if it too were a commodity – through unregulated wage labour and the need for people to find employment to secure their livelihood. In this way, capitalist social power was insinuated into the economies of western nations. The second (and frequently forgotten), dimension of class conflict to emerge from Marx’s historical materialism is that labour acquired a commensurate historic mission. The loaded (though surprisingly unexplored) 348

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acknowledgement of this idea in Capital III – and cited at the beginning of this chapter – suggests the likelihood that capital’s success can render labour stronger. The progressive nature of capital therefore ‘unwittingly creates the material conditions for a higher form of production’ as Marx puts it.4 Labour is seen as both the product of capitalist development and its guarantor; its ‘mission’ is to take responsibility for the development of the forces of production – despite bourgeois resistance – in the interests of all. Marx’s disinclination to pursue this idea is presumably attributable partly to the abstract nature of his methodology (which excludes departures from a pure model), partly to a residual anarchism, and partly to the distance between the idea of politically influential organisations of labour and the reality of the 1860s. But the analytical force of the argument is undeniable. Labour’s mission would obviously be the opposite of capital’s – to oppose, to frustrate, to delegitimate, to dismantle, or to diminish the scope of the social relations of production that were deemed appropriate for capitalist development but which were bound eventually to become dysfunctional. Marx’s pregnant suggestion, repeated throughout his work from the Manifesto and A contribution to the critique of political economy to Capital, is that the development of the forces of production (wealth) will be impeded by increasingly anachronistic relations of production, unless the latter are transformed – as they are bound to be – in the course of capital accumulation and economic progress itself. Mature capitalism will be increasingly amenable to politicisation and democratisation, provided labour’s political competences can develop. Marx’s analysis accordingly ‘authorises’ a range of political and policy interventions that have been occurring – not necessarily for ‘marxian’ or even social democratic reasons – for the past century. It is important to acknowledge that this political project, whereby organised labour acquires a macro-political role and macroeconomic functions, is defensible in principle. As such, it is not compromised by any actual strategic failures, misjudgements or unprincipled retreats. Neither is it a project that can be construed as interest group activity: the class dimensions of class conflict

4

Karl Marx Capital III (1894, p. 368).

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imply that labour represents the general interest when it confronts the limits of capital. Marxists today are understandably attuned to the likelihood of lapses from any such mission; but they should not continue to presume on a priori grounds that it is utopian or doomed to failure. That is, there is sufficient warrant in marxian enquiry to reject the 1848 conception of the state and to regard politics as contingent and open-ended – difficult, inevitably, but not essentially class-biased against labour, as admitted in the regulation school’s contributions to political understanding.5 We consider this issue more fully in chapter 10. Though economic liberalism remains the default position in liberal democracies, it is being superseded by the processes and effects of capitalist development itself, and the democratic element has been garnering increased purchase too. The democratic project is to expand the possibilities of politics. Repoliticisation of accumulation demands the creation of an authentic realm of political activity, with labour being the proxy for the general interest, not in any sociological or representative sense, but in recognition of the fundamental significance of human work for the human condition – acknowledged not only in marxism, but by keynesians, sociologists, anthropologists, institutionalists and Christians.6 As we have seen, marxism can readily produce expectations that, as capital accumulation proceeds, the class balance of power will potentially shift towards labour. Wigforss would obviously insist on the ‘subjective factor’ – politics and the need for labour to become programmatically coherent as a precondition for effective mobilisation.7 The resulting transformation is likely to be controversial, but it began with early developments in capitalism – and is in fact acknowledged even in marxist assertions that the ‘capitalist state’ was a polity oriented towards establishing or ensuring the political preconditions for capital accumulation.

5 6 7

Jessop & Sum 2006, ch. 8. Veblen 1898a; he objected particularly to the implication, sometimes explicit but always implicit in economic theory, that people properly have an ‘aversion to useful effort’. See also Standing 2009, ch. 1 for equivalent outrage. We obviously do not dispute that recurrent efforts are made, at the behest of most sections of capital, to challenge the class compromises and compacts and settlements by which full employment and equality were instated – see Robert Wade 2011.

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Capital accumulation could never be entirely a matter of an unfolding autonomous logic of accumulation. Insofar as allocative decisions become politicised, investment becomes subjected to policy, some decommodification of production is countenanced, remuneration and deployment of labour are institutionally regulated and the range of democratic institutions is extended, then potential exists for social democratic advance – for labour’s long-held ambitions to evolve. As it has become decreasingly likely that these politicisations harm economic development, it is odd that they have not been properly incorporated into marxian perceptions, especially since Marx himself seems to have understood them. Figure 9.1 reveals how labour’s prerogatives might be expressed.

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Figure 9.1: Labour, capital and politics.

Capital’s ‘historic mission’

Labour’s ‘historic mission’

(to create capitalist social relations of production)

(to outflank capitalist relations of production and to create new postcapitalist relations of production)

1. Market allocation

1. Allocation according to political criteria

2. Profitability as the criterion for production

2. Production according to need

3. Commodity production (& commodification 3. Decommodified production of labour) (& decommodification of labour) 4. Undemocratic control of production (owners or managers)

4. Democratic control of production (economic democracy)

[Marx was sceptical concerning any political programme; and was himself reluctant to discuss the implicit political agenda.]

The figure shows, within a marxian framework, what capital achieved historically during the transition from feudalism to capitalism and what labour has been aiming towards, and partially achieving (even without fully realising it), during the capitalist epoch. That these aspects of ‘labour’s mission’ are accomplishments is registered in the hostility towards them of business groups and orthodox policymakers, though also in sporadically successful campaigns to revoke them. When politics rather than markets determine outcomes, they will depend on the ebb and flow of political mobilisation, on labour’s efforts to build 351

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new institutions, and on the extent to which structural tendencies towards economic under-performance give way to popular demands for higher levels of activity, especially the full utilisation of labour. If the institutions and political effectiveness of labour are to be equal to the historical mission, they will need to become aware, once again, of the legacy capital bequeaths to posterity – immense productive capacities and the nascent self-awareness of labour. However, as we have indicated, productive potential remains chronically prone to underutilisation, policy’s procedural mummeries defying democratic decencies. As capital accumulation is not maximised (or even secured) under capitalist auspices alone, the social democratic critique of capitalism is that the job capitalism does well is not done well enough. Market economies are materially deficient; and they regularly frustrate political efforts to control unemployment and unwanted structural change. Against such familiar deflationary propensities labour is well-positioned to offer expansive alternatives, such as those proposing the substantive rationality we discussed in chapter 7.8 A question that remains is whether labour is in a position to advance its universalising mission more in boom times than in times of slump. The answer is not clear – labour is normally stronger, politically and institutionally, in times of high employment, when traditional threats and disciplines are less effective; but during downturn, capital’s assertions of the need for business-as-usual are likely to be less convincing and policy experiments become more imaginable. What we do know is that the long-term consequences of booms and slumps, the recurrence of the cyclical development of capitalism over centuries, has transformed social relations and made the non-economic aspects of the economy more determinant than previously. The social changes (such as welfare-state development) fashioned by the post-1945 political settlements and class compromises were never entirely effaced by the post-1974 neoliberal reaction, as we have seen. 8

Social democratic extensions of this argument have been made for decades – see Stephens 1979; Korpi 1983; Higgins & Apple 1983; Dow 1993. However, on this question too, mainstream marxism appears to have shifted (towards Korpi): ‘Revolution was to be seen [by marxists] not simply as a sudden transfer of power but as the prelude to lengthy, complex, unpredictable period of transition. […] Nor was revolution to be simplemindedly opposed to reform, of which Marx was a persistent champion’ (Eagleton 2011, p. 13).

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Figure 9.2: The possibilities of politics in marxism.

Crisis tendencies [Markets]

Counter-tendencies [Politics]

1. Long term tendency for rate of profit to fall

1. Expansion of markets

2. Overproduction/underconsumption

2. Economic management

3. Disproportionality

3. Industry policy/public enterprise

4. Contradictory role for the state

4. Public decision-making (deliberative state capacity)

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[We may infer from Capital III (though Marx did not) that crisis tendencies rarely run their full course without the emergence of counter-tendencies; but recurrence of crises (and responses) is never-ending.]

Figure 9.2 reveals one of the under-recognised ironies within marxian political economy: in Capital, the understanding of crisis tendencies was always developed alongside an awareness of likely ‘counter-tendencies’ to crisis. Mechanisms by which crisis tendencies might be neutralised as contributors to ‘ultimate’ problems for capitalism emerge spontaneously, though not necessarily voluntaristically. The figure depicts the countertendencies as if driven by deliberative political responses to the economic difficulties listed in the left-hand column; however, as in the trends discussed in chapter 8, they are not always effected consciously. As problems manifest, policy opportunities arise, and so do pressures from capital for the responses. In good times, capital can tolerate latitude for inefficiencies that are typically important for labour when hard times later recur. Capital itself searches relentlessly for new profit opportunities, and it only inconsistently balks at political interventions designed to assist capital accumulation. The expansion of the market is, of course, historically the most prominent way in which tendencies to crisis are postponed (and even, for quite long periods, eliminated); and this counter-tendency is far from exhausted, as we witness in rich countries and beyond every day. More potentially disruptive to capital’s preferred social relations are political and policy developments (economic management, public enterprise and other expressions of state capacity) which, singly or together, render market mechanisms less central to economic success. Notably, though, even if some of the available responses to crisis emerge at capital’s behest, they frequently depend on political manoeuvring, including by labour. 353

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When considering, then, the interplay between market-induced crises and politics-inspired responses, it is less important to adjudge the empirical standing of the four contributors listed as crisis tendencies than it is to observe that the means by which they might be displaced are affected by these complex combinations of independent and dependent conditions. The so-called long-run tendency for the rate of profit to fall has been contentious in political economy – because in Marx it stems from the tendency for capital to displace labour in favour of technology at a pace which undermines profits (the rising organic composition of capital). But even in schumpeterian analyses, the profitability of old industry, old production techniques and old consumer products drives the search for innovation and therefore the reconstitution of production in new industry, new regions, new forms of consumption and new technologies. The differences between radical and conservative understandings of capitalist dynamics are more matters of tone than of substance. Though intellectual controversy has long surrounded the specification of crisis tendencies and whether they can be avoided, the purpose of the discussion here is to identify the ways in which labour is able (usually through involvement with state institutions) to build effective and durable institutions likely to survive any future regime change.9 Parallel insights into how economic conditions in hard times can be subjected to deliberative processes have emerged in keynesian and postkeynesian political economy. Keynesian analysis shares with marxism an understanding of the cyclical nature of capitalist development but departs from it in being more open to the possibility that a ‘political logic’ can be applied to the course of accumulation.10 In our view, keynesianism has been more sensitive to the effects that differing political choices and institutional capacities can have on the actual history of industrial structures. Keynes’s insistence in the 1930s and early 1940s that investment could and should be ‘socialised’ was never fulfilled, particularly in Anglo-American polities; but the presumption nonetheless remained that control would 9

10

Politicisation of the economy may also, of course, be reactionary, authoritarian or statist, with democratic niceties discarded. Even if politicisation runs its course as well as its enthusiasts expect, gaps between ambition and actual attainment are likely to persist, with gains never permanently assured. This view is expanded, and somewhat modified, in chapter 10.

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be both technically and politically achievable.11 Post-keynesians are also mindful that socialised investment needs to be such as to generate additional industry and employment if it is to be effective as an economic strategy.12 Subsequently keynesians and post-keynesians have advocated industry policy, to manage the demise and rise of industry, presumably on a corporatist basis where labour’s interests in full employment would prove crucial.13 However, already by the 1970s, keynesians had become prominent advocates of incomes policy also, recognizing that the post-1974 inflation was a function of institutionalised power and the ensuing conflict over income distribution.14 In the 1930s and 1940s Michal Kalecki had linked the distributive aspects of the economic cycle with its growth dynamics, as we noted previously. That is, a less unequal distribution of income was shown to be compatible with (and perhaps essential to) higher levels of income; distribution of market income is always more inegalitarian during recessions and periods of unemployment than during high-employment booms.15 Figure 9.2 indicates that ‘keynesian’ processes, and progressive possibilities for politics, were implicit within marxism too.

11

12

13 14 15

See, for example, Robinson 1973; Chang 2008, ch. 3; Chang 2010, ch. 12. A socialisation of some aspects of investment was achieved, nonetheless, in Germany’s investment banking practices, in Austria’s innovative use of public enterprises (in energy and transport), in Sweden’s counter-cyclical investment funds and in Japan’s close industry-government relations (particularly with respect to construction). Increasingly, social expenditures are seen as investment too, with spending on ‘active’ labour policy measures, for example, increasing from about half to about two-thirds of the amount allocated to ‘passive’ measures across the OECD, even though compensatory expenditures for the aged still predominate over more investment-like education expenditures (see Nikolai 2012, pp. 98–101). Some, for example Fred Moseley, also note that the content of public investment will inevitably involve class conflict as it needs to alter not just the quantitative level but, qualitatively, the structure of the economy (2009, p. 144). In capitalist circumstances, ‘expansionary fiscal policy’ that merely expands is unlikely resolve crises. See Layton et al. 1928; Sawyer 1995; Michie & Smith 1996, 1997; Clarke 2009, ch. 4; Harcourt & Kerr 2009, chs 5 & 8; Parsons 2010, ch. 5. Appelbaum 1979; Robinson 1976; Harcourt 2006, ch. 8; King 2002, chs 2 & 6; Kregel 2008. See Kalecki 1933, 1954, 1971; Boddy 2009.

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Figure 9.3: Kalecki’s ‘marxian keynesianism’ Post-keynesian contributions to the theory of intervention.

Insights

Institutional (policy) implications

1. The political trade cycle.

Governments can control levels of economic activity but choose not to do so.

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2. The class distribution of income changes Changes to the relative proportions of income with the phases of the cycle. accruing to wages and profits are not good indicators of whether real incomes are rising or falling. The wages share rises in a slump; while real wages decline; conversely during booms real wages increase while labour’s share declines. 3. The intra-class distribution of income is not independent of the level of income.

Equality of incomes means high levels of employment and income are easier to achieve and maintain; inequalities tend to reduce levels of income (and living standards).

4. Investment is the key to all other economic aggregates; but poses problems of its own – the ‘tragedy’ of investment is that in generating new productive capacity, it risks further rounds of excess capacity or underconsumption.

If increments to investment can be regularised, steady growth in incomes and employment is possible; if investment is capricious, booms and slumps ensue.

5. ‘New political institutions’ are needed for full employment, control of inflation and non-cyclical development: (i) to discipline investment (ii) to manage income distribution (iii) to institutionally outflank the ‘labour market’.

Permanent full employment is politically contentious because it requires new stateeconomy relations, new state structures and new state capacities. Such interventionist, post-liberal, arrangements are usually labelled ‘corporatist’.

Common to keynesian and marxian perspectives, labour would be stronger, with more policymaking confidence, in buoyant times, more able to bid up wages (though not necessarily affecting distributive shares) and, therefore, more obliged to participate in macro-level negotiations over both sets of processes. Figure 9.3 summarises Kalecki’s view of the post-liberal (interventionist) policy implications of post-keynesianism. It indicates as well the reason for dissatisfaction with the evolution of policy competences in the so-called keynesian era and the types of resistance to progressivism that can be expected to continue. Its awareness of class dimensions in anti356

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keynesian politics insinuates that Kalecki’s was a ‘marxian keynesianism’, more attuned to the transformations implied than Keynes was publicly prepared to endorse.16 It has been claimed that lack of enthusiasm on the left for policy involvement along these lines over the past three or four decades can be held responsible for most of its defeats, not vice versa.17 Pusillanimous and inept policy has not been unique to Sweden! Kalecki exposed most succinctly the required articulations between the marxian and keynesian traditions by demonstrating that capital could not really behave rationally, being perpetually torn between its pursuit of profits and its instinct to maintain its class control of accumulation.18 These urges became increasingly discordant during the twentieth century, a circumstance that is reflected in the relatively weaker performance of finance-dominated economies compared to those with more substantive, industrial priorities. Even Keynes had mused, in 1933, that ‘retention of the structure of private enterprise is incompatible with that degree of material well-being to which our technical advancement entitles us’.19 This is an argument marxism has been attempting to keep alive all through the postwar period.20 Kalecki’s contributions imply that, politically, labour needs to construct institutions that allow both public control over investment (for keynesian reasons, to minimise unemployment), and public control over distributive conflicts (to minimise the inflation that is likely during both times of high employment when labour tends to be strong and, as the experience of the 1970s and 1980s showed us, times of high unemployment when labour can still be strong).

16 17 18 19 20

Somewhat similarly Gramsci’s marxism was a weberian marxism, being modified by a respect for political possibilities more usually associated with weberian than with marxian thought. Visser 2003, p. 378; see also Dostaler 2007, chs 6 & 7. Kalecki 1943. Keynes 1933b, p. 240. For a recent example see David Harvey: ‘At times of crisis, the irrationality of capitalism becomes plain for all to see. Surplus capital and surplus labour exist side by side’ (2010, p. 215).

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Table 9.1: The ‘precariat’, Part-time employment (as % total employment) 2009. NL CH Aust UK Ir NZ D N J C DK Ö B Mex Is L OECD av. I S USA F SF Sp T Kor Port Pol H(E) Cz Rep H(U) Slov Rep

36.7 26.2 24.7 23.9 23.7 22.5 21.9 20.4 20.3 19.1 18.9 18.5 18.2 17.9 17.5 16.4 16.2 15.8 14.6 14.1 13.3 12.2 11.9 11.1 9.9 9.6 8.7 8.4 3.9 3.6 3.0

( ♀ : 71 %)

( ♀ : 81 %)

( ♀ : 71 %) ( ♀ : 64 %) ( ♀ : 66 %)

( ♀ : 59 %)

Source: OECD Employment Outlook, 2010, p. 287.

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A third set of institutional innovations, not fully enunciated by Kalecki but nonetheless implied by his marxian keynesianism, would be those required to transcend the ‘labour market’. Probably the most potent political objection to liberalism is the socialist movement’s contempt for the commodification of labour. Modern appropriations of Polanyi’s critique of the commodification of labour – which inspired Rehn, Meidner and Myrdal too – occur in the institutional and organisational commitments that are required to make work (not just jobs) a meaningful occupation – that is, where reciprocity and interaction and collectivism can be civic, incorporating more than its productive aspects. For economic sociologists, Guy Standing particularly, ‘real decommodification’ depends upon work that is never just productive but moral, disciplined, solidaristic, aesthetic, studious and communal.21 This is what occupations offer. It explains why labour, like markets, is embedded in social arrangements able to resist crucial features of a labour market. Inegalitarianism and insecurity in work are the most important features of ‘labour markets’, particularly in the contemporary era. Standing is riled most by the modern phenomenon he refers to as the ‘precariat’ – that stratum involuntarily in non-standard forms of work. Conventional liberalism refuses to concede that quality employment should ever be a prime concern for the polity. In this respect, however, intellectual currents run deep. Table 9.1 presents an important dimension of this problem.

The sociological defence of labour’s anti-liberal prerogatives The social democratic or labour left is not alone in its insistence that market modes of regulation and allocation do not need to be respected if society itself has alternative preferences and is prepared to pay the costs. Conservative anti-liberalism, at its most principled, has endorsed capitalism as a way of getting things done but has remained ambivalent about

21

Guy Standing Work after globalization (2009, especially chs 1 & 10).

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some of its social and moral elements. Conservatism prefers capitalism to socialism because it accepts the sanctity of private property and inheritance of wealth. But principled conservatives have no love of individualistic morality nor of the inequalities produced by capricious market outcomes. There is also a heightened aversion to the ‘commodification of everything’. As an example, the ‘social economy’ tradition (previously known as Christian social thought) has always been wary of the exploitative potential of the market and the indifference of winners to the fate of losers.22 Consequently this tradition has endorsed not only trade unions but also experiments in economic democracy, welfare-state development, and the preservation of occupational guilds able to regulate members’ conduct; and it has often sponsored arrangements which restrict the commodification of labour. Other conservative traditions have favoured state intervention of various kinds (for example, industry protection) and a variety of antimarket or anti-competitive mechanisms (for example, bigness and monopoly in the business sector, cross-subsidisation and some welfare entitlements). They offer no fundamental endorsement of markets and no

22

See Pope Leo XIII’s encyclical Rerum Novarum (usually translated as On the condition of labour). Having decried that relations between capital and labour had ‘passed beyond the sphere of politics’, contributing to the ‘prevailing moral degeneracy’, the encyclical declared that the interests of labour ‘should be protected by the state’ because in wage bargaining ‘there underlies a dictate of natural justice more imperious and ancient than any bargain between man and man, namely, that wages ought not to be insufficient to support a frugal and well-behaved wage-earner’ (Pecci 1891). The sentiments were repeated some decades later, perhaps more emphatically, by Pius XI as Quadragesimo Anno (On reconstruction of the social order): ‘the right ordering of economic life cannot be left to a free competition of forces. […] All economic life has become tragically hard, inexorable and cruel’ (Ratti 1931). Acknowledging both predecessors, John XXIII later endorsed the introduction of the welfare state in Mater et magistra (Mother and teacher, sometimes translated as Christianity and social progress): ‘Men in labour unions are showing more responsible awareness of major social and economic problems’ and the church reaffirmed that the ‘remuneration of work is not something that can be left to the laws of the marketplace. […] Economic progress must be accompanied by a corresponding social progress’ (Roncalli 1961). The academic literature is summarised in McHugh 1993, Waters 1999 and, more recently, Pabst 2011.

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fundamental contempt for authority or the state.23 Conservative departures from the liberal model have frequently been due to discriminatory social and political preferences, and with authoritarian forms of politics. Conservative principles also embody different conceptions of rights (often exclusionary) and responsibilities (often statist and pre-modern).24 But they have not detrimentally affected economic performance and have generally been electorally popular. Conservatives’ recognition of worrying aspects of market society is an important indication that campaigns for political and social intervention into private business decision-making retain intellectual respectability. Joseph Schumpeter, for example, admired the ‘creative destruction’ of capitalism, without sharing the liberals’ insouciance towards its social effects.25 Policy processes ought not disregard the destructive effects (for people, regions, polities) of creative destruction. Many other conservatives, including nationalists, statists, neo-mercantilists and communitarians, have advocated institutional developments able to enforce moral or traditional objectives including those which tolerate inflexibilities, rigidities, constraints and deliberative processes whenever these are seen as politically desirable.26 Unions are therefore easily able to construct a discourse of social protection while drawing on understandings from the social science of the past century or earlier whose themes resonate in societies constantly unnerved by the threat of unnecessary dislocation. Arnold Toynbee’s lectures 23

24

25 26

Historically, conservative sentiment (and nation-building activity) has been the most important form of anti-liberalism. Conservatives, by whatever label, say there can be no general conception of politics: politics and the state are what we make them and there is no reason to presume they do or should evolve similarly in different contexts. State institutions ought to be powerful and authoritative. Perhaps the scope of democracy ought to be constrained (for fear of mass idolatry or ideological fervour); but statecraft (based on political will, bureaucratic competence and institution-building ambitions) can achieve much. There is sometimes a suggestion that political achievements should not readily be wound back; though in reality they occasionally are. See Clegg 1994; Compston 2002; Berger 2002. A contemporary nomenclature for this long-lived alternative to liberalism is problematic and unsettled – with progressive conservatism, progressive authoritarianism, statism or neo-statism, corporatism, organicism, neo-weberian state capacity theories, even neo-mercantilism and renaissance political economy, all vying for acceptance as informative descriptors. Capitalism, socialism and democracy (1943). See Reinert & Daastøl 2004; Dow 2011.

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in the 1870s (with Walter Bagehot’s writings around the same time) established the ‘historical method’ (opposed to Ricardo’s deductive approach which, Toynbee claimed, undervalued observation and illegitimately strived for universal understandings) as a more appropriate method for English political economy.27 The lectures not only railed against the doctrine that individuals were connected only by interests – as noted in the citation at the beginning of this chapter – but also defended the ‘political fidelity’ by which labourers could be expected to improve their condition.28 In the 1890s, Thorstein Veblen, Max Weber, Émile Durkheim, Adolph Wagner and Gustav Schmoller all initiated or contributed to non-marxist socialist analyses and policy recommendations aimed at facilitating societal cohesion.29 Together these broadly sociological traditions have shown that economies are best understood through organic rather than mechanistic metaphors.30 That is, the non-economic aspects of the economies may be as important as the observably functional; and polities ought to reserve the right to override ‘rational’ calculation if the results are deemed undesirable on other grounds. These traditions imply that governments can be expected to usurp larger parts of affluent societies’ wealth and that polities have the responsibility to ensure wealth creation when markets fail to do so. By the 1930s such weighty suggestions were well accepted by the likes of Keynes, Polanyi, Schumpeter and the nation-builders who would later oversee postwar reconstruction.31 27 28 29

30 31

Published in 1884 as Lectures on the industrial revolution in England. 1884, pp. 16, 24. On Weber, Alan Sica has written: ‘contemporary life is less and less characterized by action that is particularly “rational” […] [and for Weber himself ] rationalization at the civilizational level – the merciless coercion of behavior and thought into desiccated rationality and bureaucratic regulation – begets, at the extreme, rational performances too horrible to discuss’ (1988, p. 263). For an account of Schmoller’s historical and inductive method, see Shionoya 2005, chs 1 & 2. A further interesting take on the historical school is provided by Reinert & Reinert 2005. Rueschemeyer & van Rossem 1996; Hodgson 2001; Durkheim 1893; Schumpeter 1918. On Keynes’s anti-rationalism, see Dostaler 2007. He discussed it himself in 1938. It was in this essay that Keynes’s views on ‘over-valuation’ of liberal economic criteria appeared: ‘I now regard (that tradition) as the worm that has been gnawing at the insides of modern civilisation and is responsible for its present moral decay’ (p. 445).

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Karl Polanyi’s anthropological perspective32 was intended to remind policymakers of the dangers attaching to excessive rationalism in politics. People’s desires for protection against risk, uncertainty, insecurity, loss of employment or loss of national self-determination were anthropologically more legitimate than the abstracted imposition of ‘market society’, including the dictates of ‘free trade’. In some of these matters Polanyi endorsed ideas that Keynes had also entertained (both had been sceptical of excessive integration of nations’ economies);33 but the former was undoubtedly a firmer critic of the commodification of labour. As indicated above, the idea that people were entitled to employment as a matter of citizenship right rather than as a result of individuals’ capacities to ‘sell themselves’ to an employer, while keeping remuneration also independent of market determination, constituted a telling overlap between marxian and nonmarxian insights. The labour theory of value relies on the truism that without human effort nothing gets done, and the churches concurred. This wealth- and history-creating role of labour implies that work should always be as safe, morally defensible, non-exploitative and participatory as possible – in other words a societal responsibility.34 The refusal to sanction the subjugation of societal eccentricities was also a concern of the economic sociology of Émile Durkheim. In The division of labour in society,35 he expressed disquiet over the anomie, normlessness and erosion of effective moral constraints associated with the new market norms of the time. Distrustful of the state’s capacity to reinstate the lost commitment to a ‘social order’, he suggested that the role of occupational groups36 could be expanded to include responsibility for integrating individuals’ conduct with socially endorsed moral principles. Confusingly to the contemporary ear, Durkheim called his institutional proposals ‘corporations’, and the system as ‘corporativist’; however, what he defended is now more commonly referred to as corporatism – though

32 33 34 35 36

1944. Keynes 1933. See also Veblen 1898a. 1893; particularly relevant to this chapter is Durkheim’s preface to the second edition, written in 1902. Rendered as ‘professional associations’ in some translations.

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his own preference was for the subsidiarity principle rather than macrolevel arrangements. The intellectual traditions that give rise to socialist thought are frequently of this sociological kind; they have recurrently argued that the moral and political conditions they have wanted to impose on liberal capitalism are not optional ‘add-ons’ to healthy economic activity and development but essential underlying prerequisites for it – the citation from Durkheim at the beginning of the chapter attests to the implied responsibilities. This explains why so many contemporary conservatives also reprobate the erosion of moral discourse at the hands of liberals.37 The idea that compulsion and constraint ought to be imposed on economic entities recurs in Wolfgang Streeck’s development of durkheimian themes, especially in his insistence that capital ought not be allowed to opt out of its responsibility for training and re-training. Costs can often be imposed on employers which nonetheless redound to their advantage; while proscriptions to which they object may be beneficial in the long run.38 In such ways the integrity of the social determination of economic outcomes, and of the social institutions like trade unions able to implement it, has been defended. Before they lost their self-assurance at the hands of the doctrinaire rationalism that re-asserted itself in the 1970s, unions commonly claimed themselves to be harbingers of civic and democratic decencies, though disquiet over the absence of theory also persisted.39 It seems unreasonably acquiescent to abandon these earlier dispositions now that – with resurgent globalisation – they’re more important than ever. A possible cure for political ineffectiveness (despite intellectual support) was broached in Alva and Gunnar Myrdal’s efforts in the 1930s, in Sweden and in the United States, to consolidate, and eventually extend, the ambit of social policy. As we noted in chapter 5, this was to be achieved 37 38

39

See for example, John Ralston Saul 1993, John Gray 2009, ch. 9 and, perhaps most spectacularly, Joseph Alois Ratzinger – see Pabst 2011. Streeck 1997; see also Wright 2002. A direct continuation of this tradition, both less religious and less conservative, characterises socio-economics, particularly in its journal Socio-Economic Review. The tradition is consonant, of course, with the economic sociology of the Review of Social Economy and the institutionalism of the Journal of Economic Issues. See Abrahamsson & Broström 1980 and Meidner 1980; also Regini 1992.

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not just through social engineering ambitions but also by the ‘cultural’ mobilisation of a number of personal, scientific and policymaking initiatives – covering education, health, housing, population, worklife, childcare and women’s rights. They suggested that ‘little Sweden’ could inaugurate a ‘new deal’ equal to Roosevelt’s positive economic measures and transformative possibilities.40 The point the Myrdals attempted to establish was that diverse ideas and intellectual suasion would probably always be needed to effect even popular changes that could bring actual outcomes more into line with societal capabilities. Traditional socialist preoccupations resonate with non-socialist concerns in the work of Max Weber as well. His differentiation between formal and substantive rationality called forth an affirmation of the specificity and legitimacy of politics. As have others in the aristotelian and machiavellian traditions, Weber celebrated what could be achieved through political methods, while acknowledging the obduracy of much of humanity’s desire to control its destiny. Neo-weberians acknowledge political possibilities and competences (state capacity) 41 as an important part of the struggle against political fatalism in the face of intellectual and institutional pressures for regimes to abrogate distinctiveness and policy experimentation. Most writers in this school are uninterested in extolling labour (or even recognising class conflict); but nonetheless ample indicators of the state-building opportunities that labour can take up persist in demonstrations that the state matters and that political divergence is still the norm in OECD countries. In particular, the state’s infrastructural capacities can be readily imagined. Michael Mann characterises these as a combination of penetrative, extractive and coordinative capacities – the power to assert authority in all parts of a governed territory, the power to raise taxes and have them duly transmitted to the political centre, and the power to persuade fractious 40

41

See Yvonne Hirdman 2006, ch. 7 (especially p. 239). The idea is extended in Jacob Hacker & Paul Pierson’s Winner-take-all politics (2010): just as the effects of neoliberal ‘reforms’, which no one really resisted, unfolded over decades beneath the electoral radar, the counter-movement will need to be similarly surreptitious, exploiting structural opportunities – though ultimately re-activating national politics. Theda Skocpol 1985; Michael Mann 1984, 1993; Linda Weiss 1998, 2003; Theda Skocpol & Lawrence Jacobs (eds) 2011.

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groups (most significantly labour and capital) to engage in collective governance, especially when it is necessary, for policy purposes, to change the behaviour that causes social and economic problems (as in the case of inflation). For Mann, the reason for elaborating these state capacities is to show that ‘state power’ need not be despotic – the alleged source of liberals’ anxieties. For Weiss, it is to assert that transformative capacities (particularly concerning industrial regeneration) can be developed through collective action. For Skocpol and her colleagues, it is to grasp that resistance, part of any politics, can sometimes be subdued. For all these writers, and for the neo-weberian tradition generally, the purpose is to mark the capacity of the state to shape patterns of capital accumulation independently of market logic. State capacities appropriate to labour’s distinctive needs have been less frequently enunciated within the weberian tradition than have developmental prescriptions,42 but they can quite easily be imagined: institutional responsibilities and effectiveness under non-liberal auspices would be required in areas of wages policy, employment policy, investment policy, social welfare policy (including decommodification of living standards), education and training polices and, probably, health, housing and childcare policies. In each instance, bureaucratic competences need to be developed to activate the prior political commitments. High wage levels irrespective of corporate capacity to pay; high employment ensured even in the face of market conditions that may disfavour it; investment maintained at ‘full employment level’ regardless of the economy’s existing stock of productive potential; and social provision designed to reflect society’s rather than individuals’ capacities are all goals of labour. And they all become historically justifiable insofar as they reconcile economic, political and social progress, while all demanding state expertise and dedicated state institutions reliably inconsistent with market forms of calculation, though not with technological propensities. Liberalism has purported to provide the hegemonic legitimating ideology for market-driven capitalism as well as the default position for its social and economic policies. On the other hand, economic transactions (and development) can proceed under authoritarian, pre-modern, mer42

For example, see Reinert 2007, chs 7 & 8; also Ha-Joon Chang 2010, chs 12, 21, 23.

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cantilist, collaborative, religious or communitarian auspices. Capitalist development in Britain, America and Germany, as well as the Asian success stories of recent decades, was not initially market-based; it depended variously on protected industry, colonial appropriations, statist manipulation of producers and a money-grubbing merchant class for whom free trade and market allocation and civic principle would have been anathema. So liberalism is not essential to economic development. The social democratic project consequentially requires conjecture about the extent to which, and when, labour’s auspices can be reasonably invoked – as well as examination of the circumstances in which high levels of economic activity are impeded by liberalism. Clearly, full and high-quality employment would give labour a permanent stake in forging political arrangements able to subject structural change to deliberative policy. So would the need to avoid the disparagement and belittling that accompanied its complicity in the continuing inflation of the 1970s and 1980s. Outside the liberal anglophone countries, labour has made sporadic progress in institution-building in the macro-political realm. Where it has failed, or capitulated, it has done so because its political programme has failed or it has retreated from it, not because the task has been subsumed by history or inexorability. Remember of course that, as Weber lamented, politics is the slow boring of hard boards.43

Labour, corporatism and political institutions Labour’s aspiration – to play a progressively more authoritative role in social and economic advance at the national level, as depicted here – has been somewhat more successful than the contemporary political and intellectual mood appreciates. Theories of labour’s macro-participation, like theories of politics more generally, should have always recognised that erosion of the hegemony of markets is possible, even in the context of ongoing economic decision-making that is still primarily capitalist. Struggles 43

1918, p. 128.

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for the politicisation and democratisation of society and the economy – the crucial and distinctive element of political unionism – have not become less achievable or less successful in recent times.44 Conservative political theorists as early as the 1950s, perceiving the adaptation of strands of thought from religious, nationalist or mercantilist traditions, reckoned that societal trends in western democratic capitalism were evolving towards a secular and modern corporatism.45 For the left, the marxian theory of the state was always a factor militating against wide acceptance of corporatist development. Nonetheless, the demands of equity, security and efficiency, as well as the (anticipated) voice of technicians and engineers, agitated for the regularised involvement of economic groups in policymaking. For Golob, the rise of large corporations and powerful labour movement organisations, together with the emergence of inflationary pressures and technological displacement of labour and productivity improvements from which all classes were entitled to benefit, made classical theories of competition redundant. They also justified an element of compulsion. These developments were ones that ‘neither management nor government can halt’, Golob claimed. Provided the tensions between the production responsibilities and the employment-producing responsibilities of industry could be resolved, through consultation and negotiation mechanisms, a renewed non-revolutionary mercantilist route to macro-management lay open, for all industrialised nations. Empirically the changes that, throughout the twentieth century, made labour’s threshold position more salient have been outlined in chapter 8. Public activity, political decision-making and state capacity have become essential baseline conditions for a labour-led politicisation of the economy though they are not conterminous with it. As we have noted, the extent of decommodification (provision outside the market, mainly on the basis of citizenship entitlements) has not been wound back, though it is sometimes discriminatory for some recipients, often disarticulated from collectivist sentiment, and generally falls short, as Keynes had said, of the degree of liberation from market provision ‘to which our technical ad44 45

There is a wide variety of contributions to this claim: for example, Reinert 1999; Meidner 1980; Jose 2002; Standing 2009, chs 8 & 10. Eugene O. Golob 1954, pp. 573–598.

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vancement entitles us’.46 We also noted, however (compare Figure 8.2 with Table 8.3), that social expenditures (a proxy for decommodification) are much higher than social security transfers (a register of socially unaddressed need). The gap denotes both the societal endorsement and affordability of departures from liberal nostrums. For these reasons, even in the face of efforts to subject welfare organisations to market discipline, the liberal project has failed in the respect that matters most to it. Contrary to popular perception, the dominance of the market principle, particularly as it affects the allocation of resources and living standards, has been eroded in all wealthy countries, apparently permanently. And contrary to marxist pessimism about the state in capitalist society, we cannot interpret these transformations as mere political preconditions for ongoing accumulation.47 The social democratic project, furthermore, is reinforced rather than undermined by far-reaching indicators of structural change (transformations that seem to occur regardless of intentional political activity). While globalisation seems to entrench market modes of allocation and adjustment, within the international business sector, the growth of corporate networks, production cartels, research collaboration, economies of scale, public-private joint ventures, risk-avoidance strategies and cost-sharing synergies dilute them. This process can be expected to continue as private corporations more and more take on obligations to employees, the community and diverse stakeholders. In other words, while retaining the endogenous tendencies towards crisis identified by Marx and Keynes,48 mature economies have evolved and are evolving further and further away from the market model – as most heterodox analysts of capitalism from Marx to Keynes and beyond had anticipated.49 46 47 48 49

See Keynes 1933, p. 240. Declines have been common enough, though modest in extent, in the countries with large welfare sectors – many of which have experienced declining unemployment. A contrary view from within the post-keynesian tradition is presented by Howard & King 2004 and 2008. This theme is developed further in chapter 10. See Goldstein & Hillard (eds) 2009. Nell 1998; Hodgson 2000; Cornwall & Cornwall 2001; Boggs 2000. For criticism of the ‘maturity’ argument – on the grounds that contemporary developments have not been ‘market-eradicating’ – see Howard & King 2004, 2008 and the arguments developed in the next chapter.

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Complementaries between marxian and keynesian analyses, with implications for social democratic politics, are examined in the next chapter; meanwhile the epigram at the beginning of this chapter registers a perhaps surprising instance of Keynes’s heterodoxy. Economics textbooks still cast a spell as rhetorical and discursive media that enervate political ambitions, but they do not describe, nor do they provide reliable insight into, actual economies in today’s world. Discrepancies between conventional understanding and the reality faced by labour movements stand out in the economic history of the recent past. As we noted in the discussion around Figures 8.9 and 8.10 in the last chapter, the successful national economies during the era of globally induced economic restructuring have been those that refused to conform to the London-Washington consensus. Low unemployment was achieved in the post-1974 period only in a handful of countries – and all these were high-wage economies, with high levels of public investment and unusual policymaking arrangements. The liberalised, deregulated, market-conforming priorities of the neoliberal policy orthodoxy in this period produced and maintained mass unemployment – typically for thirty to forty years. Low unemployment in the first decades after 1974 was achieved only in the labour-dominated corporatisms of Sweden, Norway and Austria, and in the labour-excluded corporatism of Japan.50 Table 9.2 indicates that, though trade union membership is quite low in some countries, it is sufficiently high in others to maintain corporatist capacities. Similarly, changes in union density and in the degree of corporatism in OECD countries vary noticeably – from the 1980s to the 1990s membership declined in two-thirds of OECD countries, but rose in one-third (particularly Scandinavia). Meanwhile union confedera50

As noted in chapter 8, counter-intuitive findings abound in research on comparative political economy during the period of recession and structural change: economic growth does not by itself reduce unemployment, nor has the lack of growth impeded low unemployment; high welfare state spending has not produced a ‘moral hazard’ of high unemployment (the most generous welfare regimes have experienced the lowest unemployment while most economies with low social security spending have had high unemployment); taxation is not necessarily a burden (low unemployment occurs in both high-tax and low-tax countries). Further discussion can be found in Garrett 1998 and Boreham et al. 1999, chs 3 & 4.

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tion involvement in macroeconomic policy in the first decades of the long recession varied widely.51 Table 9.2: Labour’s organisational capacities, Trade union membership – 22 countries compared, 2010, % of workforce.

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Iceland Finland Denmark Sweden Norway Belgium Ireland Luxembourg Italy Austria Canada UK

79 70 69 68 54 52 37 37 35 28 28 27

Greece New Zealand Germany Netherlands Switzerland Australia Japan OECD average Spain USA France

24 21 19 19 18 18 18 18 16 11 8

Source: Craig Barratt Trade union membership 2008 London: Department for Business Enterprise and Regulatory Reform, 2009, p. 49 (updated from OECD.stat data – Trade union density, 2012)

Political diversity and heterodox modes of regulation are witness to the room for manoeuvre that labour still enjoys in opposing economic liberalism. Comparative evidence indicates not just what has happened in successful and unsuccessful polities within advanced capitalism since the beginning of the long recession in 1974, but also what might be consolidated in decades to come. In such ways, it has been said, variation is itself knowledge.52

51

52

For union membership, see Anders Kjellberg Fackliga organisationer och medlemskap i dagens Sverige 2001, pp. 20–21 (and also Kjellberg 2011); for union involvement in corporatist policymaking from the 1970s to the 1990s, see Boreham et al. 1999, pp. 176, 182. See Nassim Taleb & Mark Blyth 2011, p. 39 (a fuller exposition is in Taleb 2007) – though we obviously dispute the argument that attempts at policy control in ‘complex systems’ are necessarily futile.

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What we learn is that ‘solutions’ to recurring economic problems can become system-transforming – that is, adaptive – and then influential in other contexts.53 As we have seen, this point constitutes the kernel of Wigforss’s politics. The propensity in some regimes to allow past gains to be undone, though, indicates that there is still political space for labour to re-engage with its earlier causes and extend them into economic democracy. However, re-engagement with issues that constitute an agenda of progressivism is not just a political project but also a matter of recognising that previously accepted knowledge about growth and development – based on serious understandings of production as more than mutually beneficial exchange and catallactics – has been lost.54 In accordance with ‘renaissance-style’ mercantilism, Reinert has been trying to reinstate the priority of production (‘reality economics’) based on Florentine and Venetian conceptions that economic growth – or development, even in affluent societies – depends on the contemporaneous creation of non-economic common weal conditions that can be synergistic – thus promoting diversity and (eventually) increasing-returns activities. Such an approach was explicit in George Marshall’s ‘plan’ for European reconstruction after 1945 and is compatible with labour’s mission by virtue of its insistence on high-cost, highwage institution-building and wealth creation. The opposite approach, economic liberalism, encourages productivity improvements to be taken in the form of lower prices so that rewards from innovation are minimised. All this was known in the centuries before Adam Smith55 – and even incorporated in the ‘American system of manufactures’ prior to the ascendancy of economic orthodoxy. The lost or abandoned knowledge is 53 54

55

Hodgson & Knudsen 2010, p. 34. This is the claim of Erik Reinert’s ‘Other canon’ perspective (2007). Catallactics, meaning barter and trade, is the term used by Friedrich von Hayek to justify the community-enhancing effects of laissez faire (1976). Reinert’s critique centres on the argument that production in early times and now depends more on selection of appropriate industries – not all economic activity is equally conducive to wealth creation – and prudent policymakers will set up institutional processes able to ensure that nations and regions ‘get out of technological dead-end products’ and to claim innovation as the key to success (2007, p. 296). See Antonio Serra 1613.

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that known to Keynes, Schumpeter and Myrdal. Globalisation-led priorities since the 1970s have hastened a trend away from ‘paradigm-carrying’ industry, away from policies and institutions that support ‘bigness’ and towards ‘rules of thumb’ in macro-management (such as balanced budgets or austerity measures) that have recurrently undermined past living standards. In peripheral economies, they drive outcomes which can be seen as a ‘crime against a considerable percentage of humanity’.56 But it doesn’t have to be like this. Perhaps the ideological climate is about to shift. Contentious moves by labour to effect ‘collusive control of production’ as discussed in chapter 7 have now, a quarter-century later, become imaginable again. Public disquiet with corporate governance after the scandals of recent years have obstructed the business sector’s determination to push micro-economic ‘reforms’ that dismantle the ‘societalisations’ of the past. In addition, accumulating evidence of neoliberalism’s substantive ineffectiveness in its own terms, provides opportunities for labour to return to its earlier efforts to reclaim the public interest. Beginning in the 1970s, John Kenneth Galbraith argued that shareholders served no useful function in corporate capitalism and that corporations ought to be governed by boards of communityelected monitors (to oversee compliance with taxation, environmental, labour and consumer law), with shareholders converted into debt-holders without direct influence over institutions that would become more like social foundations than private firms.57 This idea bears an obvious resemblance to Wigforss’s ‘productive organisations without owners’. Swedish labour’s attempts in the 1970s and 1980s to initiate wageearner funds got as far as they did because they addressed the needs of a growing economy; defeats at the time can now be seen as far from inevitable. In any case revised forms of participation in governing and regulating the modern economy are, more assuredly now than then, well within 56 57

Reinert 2007, p. 295. Galbraith 1997, p. 278; see also Schumpeter 1918. From outside the institutionalist perspective, Eugene Golob had already also noted that ‘one of the changes hidden in the growth of trade unionism is the reestablishment of a propriety interest by the workers in the industries […]’ (1954, p. 595); predictably, he remained anxious over whether ‘labourist corporatism’ would be able to sustain the implied economic and moral responsibilities.

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labour’s bailiwick. Guy Standing’s contemporary, and magisterial, enunciation of occupational citizenship – truly decommodified work – argues that more modest versions of ‘capital sharing’ have become inevitable since the hedge-funds, investment-funds and pensions-funds crises of the early 2000s and that ‘fund capitalism strengthens the financial base for basic income’.58 Sovereign wealth funds, for example, can be used to reduce risk, inequality and insecurity, to steer productive activity to long-term deployments, to induce corporate responsibility and to cede to citizens a stake in national wealth – though no invested funds will be immune from misadventure and crisis.59 A further set of institutional innovations follows from the uneven history of welfare state development. Income compensation, including pensions and social transfers, historically originated with Bismarck’s nation building, in the 1870s, as a means of averting labour discontent. Under social democratic auspices, welfare transfers were originally intended to be ameliorative measures in times of unemployment, sickness, disability or retirement; nowadays they would more fully integrate modern life-cycle pressures into demands for further decommodification. Social transfers are not meant to become a permanent alternative to paid employment; but citizens who are employees will be entitled, at their own behest, to enjoy flexible working arrangements commensurate with child care and evolving sabbatical agreements – that is absence from work. Most importantly, political processes do have prime responsibility for the level of employment and must accept the dead-weight costs of compen-

58

59

Standing 2009, ch. 10, pp. 302–303; Block 1992 and Clegg & Clarke 2001 also argue that, for structural reasons, the issue is unlikely to recede permanently. Conservative voices are being added to the list of those demanding profit-sharing by employees, not identical to but compatible with proposals for collective capital formation, and including proposals for limits on the voting rights of shareholders (particularly institutional shareholders) because they have little commitment to each enterprise’s stakeholder ‘mission’, often undermine productive corporate strategies, multiply predatory aspects of finance, encourage wage deflation, create unreasonable hopes for capital gains and perpetuate globalisation’s biases against employment in the rich countries – see John Grahl’s review of (advisor to French employers) JeanLuc Gréau’s critiques of financialisation and globalisation (2011, pp. 41, 47, 51). Wray 2011.

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sation if politics fails to guarantee it. Labour ought to be less defensive about these claims because conservative endorsement is well entrenched in principle. Welfare state arrangements should be generous; but citizens are expected to take up proper employment when it is made available under decent and, as we noted above, societally evolving conditions. Welfare transfers are distinct from the general social thrust for decommodified provision of health, education, housing, transport and urban amenity. As societies become wealthier, each of these is more amenable to collective rather than privatised provision. And responsibility lies more with the state and policy than with individuals. Hence social democratic demands exceed conservative ones and are based on universal (non-discriminatory) criteria. Societal capacity to eliminate risk and insecurity, and to restore social cohesion, is increasing.60 Collective provision outside the market depends on productive processes running at full capacity. The modern welfare state, then, is quite compatible with keynesian techniques and commitments to economic management; but they are distinct phenomena. Keynesianism and social democracy both see high-quality employment as the most effective and desirable distributor of income61 yet both can accommodate adjustments to the definition as societal preparedness to include decisions concerning appropriate absences from work evolves. Today labour seems tempted to resile from welfare state expansion and the extension of decommodification, perhaps fearing that unproductive social expenditure drains dynamism.62 Yet it is important to recognise that unproductive employment is something wealthy societies increasingly have been able to afford.63 Two-thirds 60 61

62

63

Even in the face of recurrent catastrophes. As demands for ‘family-friendly’ work arrangements are translated into policy, the meaning of full-time employment will change somewhat; however social democratic scepticism towards precarious work will remain and the trends indicated in Table 9.1 will not be fully embraced. An example may be Nathalie Morel, Bruno Palier & Joakim Palme (eds) Towards a social investment welfare state (2011, p. 18), although these editors fully endorse neither Giddens’s presumptions concerning ‘moral hazard’ nor the neoliberals’ presumption that social protection burdens productive activity. Wilensky 2000.

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of OECD economies have experienced falling labour productivity increases from the 1980s to the 1990s to the 2000s – from yearly averages of 1.9 percent to 1.1 percent across the three decades.64 The coincidence of falling productivity with ongoing wealth, we have indicated, is not a pathology. The recent debates over social capital indicate increasing awareness that the non-economic preconditions for economic activity themselves require investment and (like other aspects of capital and other forms of wealth) yield benefits that live on beyond the lives of those who create them. One dimension of labour’s achievement is shown in Table 9.3 – a thirty year decline in average hours worked of up to 20 percent. Many such benefits may not be so readily calculable but they are generally recognised and appreciated – even if costly. The creation of social and urban amenity, as well as other intangible indicators of quality of life that seem tangential to the core business of modern economies – such as respect from within bureaucracies for citizens’ entitlements – also falls to labour because of its structural opposition to liberalism and its ‘historic mission’ to opportunistically exploit the potentials created in capitalism by capital. Labour’s past and future macro-responsibilities can be constituted as the five sets of state-building responsibilities which we summarise in Figure 9.4. Our purpose is to illustrate that traditional goals remain relevant and institutionally easier to accomplish in the twenty-first century. We hope it is also clear that the responsibilities depicted are mutually constitutive rather than additive; material affluence is demeaned in the absence of equality, security, democracy and civic amenity. So political campaigns and movements inevitably operate on multiple terrains, as the classical traditions which provided the theoretical rationales listed recognised. In politics, the continuities in humanity’s struggle to shape the future are more apparent than the discontinuities.65 Among social democracy’s recurrent tasks is the need to maintain the political primacy of this oftenrealised but often-forgotten insight.

64 65

OECD Economic Outlook no. 87, May 2010, p. 334 (and earlier issues). Lefort 1986, ch. 5.

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Table 9.3: Actual average annual hours worked per person. 1979

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Turkey

2009

2004

Decline (30yrs)

Korea Greece

2256 2119

Hungary Poland Czech Rep Turkey

1989 1966 1942 1918

Mexico USA

1857 1802

Italy NZ Portugal Iceland Japan

1773 1729 1719 1716 1714

Canada Slov Rep Australia UK Spain Finland Switzerland Austria Sweden Luxembourg

1699 1693 1690 1672 1654 1652 1640 1621 1610 1601

Japan

2126

Canada

1746

Australia

1831

Spain Finland

1930 1869

Sweden

1530

Denmark France Belgium

1636 1868 1452

Denmark France Belgium Ireland

Norway Germany Netherlands

1580 1770 1388

Norway Germany Netherlands

T

4%

J

20 %

C

7%

Aust

8%

Sp SF

14 % 12 %

S

5 % [↑]

1563 1554 1550 1549

DK F B

4% 7% 6 % [↑ ]

1407 1390 1378

N D NL

11 % 22 % 1%

1920 hrs = 40 hrs × 48 wks; 1800hrs = 36 hrs × 50 wks (USA) 1440 hrs = 36 hrs × 40 wks (Norway, Germany & Netherlands); 1680 = 35 hrs × 48 wks (Australia) 2250 hrs = 45 hrs × 50 wks

Source:OECD Employment Outlook, 2010, p. 291

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Figure 9.4: Labour’s state-building responsibilities: Post-keynesian, marxist and institutionalist prescriptions for new political institutions. Social democratic Object of interventionTheoretical rationale or conservative goal activated

Type of institution required

Affluence

Investment, disinvestment & re-investment

Equality

Conflict over income distribution

Tripartite decision-making (business, unions, government) to govern restructuring; industry policy could include compulsory arbitration of disputes over disinvestment; facilitation of ‘natural oligopolies’ & controls on pace of technological change. A court system (compulsory arbitration); and national negotiation.

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Security

Participation

Civility

Keynes: to prevent cycles; to achieve full employment; to reduce extent of damaging competition (‘coerced investment’)

Kalecki: to control inflation – both at full employment and during recession The ‘labour market’ Marx, Polanyi and the social democratic and Christian social thought traditions: the ‘labour market’ is the most repugnant of liberal achievements Economic democracy: Institutionalism – ‘societalisation’ of Veblen, Wigforss, productive Meidner, Galbraith, organisations; Block, Clegg: new democratic (shareholders serve forms of corporate no social purpose); governance less managerialism Social capital (civic Conservative, and urban amenity) durkheimian and statist traditions: to exploit structural changes in mature economies; to eliminate risk and uncertainty; to restore social cohesion

Active labour market policy (training, retraining, labour hoarding, trouble shooting); government as ‘employer of last resort’. Foundations without owners; community auditors and public interest monitors; specific provisions to monitor gender differentials. Welfare state decommodification; expansion of unproductive but useful & secure employment.

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Labour’s occasional resistance to involvement in corporatist arrangements, bolstered by British experience with ‘social contracts’ – where outcomes were, admittedly, tawdry – seems to have been especially ill-advised. Swedish labour for fifty years benefited from its corporatist engagements in terms of low unemployment; declining inequality; high general living standards; high non-market, non-discretionary social provision; and massively superior occupational health and safety standards. Even centrist observers of trade unions have noted that labour organisations occupy a ‘unique position as purveyors of social cohesion in all societies’.66 It might be added that the politics and passion involved in charting ways ahead might be more effective if supplemented by adequate theoretical understandings less in thrall to the ossification of cyclical tendencies than many current commentaries have been. Even recent claims that corporatism is ‘only’ a different version of capitalism, that capitalism is the only game in town,67 seem to miss the point that within the parameters of capitalism vast achievements – amounting to cumulative transformation – are possible. Without precluding setbacks, these facilitate future political advance.

Conclusion As we have shown, socialists typically embellish their denunciation of the unlovely aspects of capitalist markets with theories of societal development wherein more democratic and egalitarian conditions become progressively more imaginable and reasonable as wealth increases. They were right to do so. Marxism permits conclusions from which its founders tended to resile. But their abstentionism was unwarranted, because a century or more of change has made the deliberated shaping of social and economic outcomes more, not less, viable. 66 67

Jose 2002. These social coherence issues seem to explain the continuing deep embeddedness of unions in national economic regulation in Denmark (Lind 2007) compared with the historically more eventful Swedish experience (Kjellberg 2007). Desai 2002. Across the decades of scholarship, conservative commentators (Golob 1954, Wiarda 1997) seem to have provided more reflective evaluations.

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The most important of socialist claims against capitalism is the assertion that political processes (the state) can and should play a much greater role. But within orthodox marxism, this socialist assertion has been weakened by sometimes debilitating controversy between advocates of ‘reform’ and the more pessimistic views of so-called revolutionists. Some have regarded all formal political arrangements as parts of the ‘capitalist state’, thereby replicating the liberals’ besetting fallacy – that capitalism enshrines a logic of accumulation which will become effusively wealth generating. Rather, the logic of profit making tends to become socially destructive, financial and antithetical to production. With new forms of governance and ‘regularisation’, there are signs of ruptures in orthodoxy. Neither conservatives nor labour movements any longer accept that the nature of capitalism and the advent of the ‘global economy’ make economic management within nations redundant or anachronistic. The effective evolution of industrial relations systems (to institutionalise and sometimes to transform distributive conflicts), the emergence of corporatist decision-making arrangements in many countries (admittedly uneven and contested), the strikingly positive economic effects of public infrastructure spending, and the mutual dependency of rich democracies on generous redistributive transfer systems (and other aspects of social capital) all attest to the continuing viability of political processes at the national level. Clearly, some progressive developments have been influenced by forces outside the socialist tradition; but the existence of intellectual thought that explicitly celebrates the distinctiveness of politics surely shows that neither political defeats for labour’s long-term project nor unprincipled departures from it by its notional protagonists renders it historically redundant. To resuscitate a conception of labour appropriate to this century’s scepticism but drawing on those social science understandings of social development and human aspirations over the past hundred years, we need to recognise and forcibly restate six principles. First, the ineradicability of conflict between labour and capital needs to be acknowledged. This is not primarily a sociological phenomenon and its importance is not diminished by changes in class consciousness or occupational structures. It’s a function of the roles of markets and profits and commodification and undemocratic control of production in determining the trajectory of eco380

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nomic development. Second, labour has a structural propensity to usurp capital’s prerogatives and priorities which doesn’t seem likely to erode with wealth, even in the face of globalisation. Labour has a responsibility to ensure capital, by nature feral and not wealth-consolidating, is socially responsible. Third, the politicisation and democratisation of the pursuit of affluence, equality, security, participation and civility are institutionally feasible. Fourth, institution-building of this kind poses the possibility of rendering the state less emphatically like the ‘capitalist state’ described in classical marxism. In essence the state can become a political arena; even if the nature of politics continues to some extent to be shaped or contaminated by its capitalist context, never wholly avoidable. Fifth, labour will need (and be able) to ensure that the non-economic conditions for economic activity and social cohesion are nurtured and maintained. Finally, in accordance with the technical possibilities granted by maturity, labour will need to oversee the progressive downgrading of criteria such as competitiveness and growth and their replacement by auspices for both productive and unproductive economic activity designed to achieve high standards of living and high-quality employment. Maturity both allows and demands that other criteria of activity – such as environmental responsibility – are similarly endorsed. These are as much intellectual as political responsibilities; and this chapter has shown that diverse traditions of social science can be mobilised in their defence. Capitalism’s most significant defect is recurrent unemployment. During the twentieth century, something close to full employment was attained for only 25 percent of the time. Concomitants of unemployment include lower living standards than are technically feasible, a distribution of income more unequal than is technically necessary (and which itself helps to depress incomes), periodic insecurity, unutilized resources, and capricious disruptions to the level, location and potential of production. Unemployment is a consequence of structural change deliberately kept beyond the reach of politics and which is usually, therefore, also unwanted – except, ambiguously, by capital. This is the part of the labour project that matters most, and it is the part that has been least effective, in most nations, for the past forty years. There are no circumstances that could justify labour’s abandonment of the political struggle for full employment. Wigforss’s 1932 question, ‘Can we afford to work?’ remains still to be posed. 381

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Labour’s agenda seems to have foundered, not on altered conditions, but in intellectual terms, on its inability to counter the liberals’ pervasive doctrines of depoliticisation and de-democratisation. The project that developed intellectually, in fits and starts, over the past century has lost its political momentum but neither its historical relevance nor its technical feasibility.

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10. The state and deliberation: on the economic possibilities of politics

Without the making of theories […] there would be no observation. Charles Darwin Followed to its logical conclusion, common sense will now lead to paradox.

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Edward J Nell

It must be said that the implosion of political principle in the advanced countries in recent decades is largely a problem for social democracy. Central to Ernst Wigforss’s conception of political progress was that human action was responsible for developmental tendencies, or disruptions to them, that marxism had variously seen as fated. Political activity should never be a passive or accommodative response to trends determined elsewhere.1 By silencing discussion about the purposes of politics and disavowing those knowledge-production activities that had contributed to distinctive possibilities throughout the twentieth century, official parties of the left have contributed to failures of understanding and of vision.2 The distinctive social democratic alternative that emerges in our previous chapters (one built on deliberative action programmes) therefore challenges conceptions of the possible that have long claimed to embody deeper analyses of capitalism and more radical, yet also darker, less spirited political conclusions. Marxism is most commonly presented by its adherents as 1 2

Re-stated as recently as 1962 in ‘Manifestet tände elden’ (‘The Manifesto lit the fire’). ‘The working class’s liberation must be the workers’ own work’, Wigforss wrote (1962, pp. 154, 156). The point has been made strikingly in respect of Swedish economic policy reversals from the 1980s to the 2000s by Lennart Erixon (2011b). However it was not merely an ideological shift, nor the unalterable effect of globalisation; but rather the joint product of traumatic events, new economic ideas administered by a new generation of economists, the weaker position of the social democrats electorally, and technological change allowing finance-sector deregulation.

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uniquely able to recognise generic problems, biases and tendencies in liberal economies. They still tend to dismiss both the efficacy and necessity of well developed policy programmes, lapsing easily into anti-political determinism.3 Wigforss struggled to show that democratic human agency is entitled – and able – to mobilise against inefficient, inequitable or unsustainable market outcomes. This is the issue on which social democracy’s departures from more orthodox anti-capitalist sentiment still turn. The concern of the present chapter, therefore, is to bring marxian political economy back in to the discussion of reformist politics by outlining some recent developments in, and perhaps surprising concessions by, historical materialism – because these tend to sanction less pessimistic evaluations of the possibilities of politics. As contemporary social science unearths more evidence of the mutual dependence of wealth creation and deliberative institutions, some apparent paradoxes, previously imagined limitations and false choices dissolve. Notwithstanding critical scholarship emphasising abstract and logical aspects of capitalism that appear to baulk at progressive political interventions, the arguments presented in chapters 8 and 9 posit that what is happening in the advanced economies is explicable only in terms that Wigforss would have celebrated: lack of political will and inventiveness is also political failure. As if in accordance with his inclinations, recent changes in regulatory arrangements within advanced capitalism open opportunities for a revision of earlier dismissals. In consequence, the demands of institution building and statecraft are becoming harder to ignore. We have noted above more than once that in political economy, intellectual analysis, understanding and critique frequently lag behind realworld developments. Until recently in the twenty-first century, such discrepancies resulted in the representation of labour-dominated corporatism as anachronistic, ignorant of world-historical development tendencies in capitalism, and inclined towards misguided policies that only frustrated radical confrontation with liberal-capitalist normality. We are suggesting the opposite: that the conventionally radical accounts fatally ignore emergent possibilities in contemporary evolutionary developments, in particu3

We concede that, for the older traditions, Wigforss’s social democracy is challenged by the more radical view. Our task is to reverse the force of the argument.

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lar the implications of the maturing of capitalism and the expansion of state capacity over the past six decades. For almost three decades from 1945, political interventions had been designed to ensure economic reconstruction in wealthy countries (and economic development in poorer ones). These interventions were anticipated and nurtured by heterodox economic theories which seemed to be informing, however unevenly, political development in general and economic policy achievements in particular. The idea of a mixed economy, drawing on Keynes, Beveridge, Polanyi, Schumpeter and the hopes of social democrats in the western tradition, appeared to be coming to fruition as public expenditure and taxation neared 25 percent of GDP and social transfers passed the 5 percent mark. Andrew Shonfield explained and celebrated the trend as a permanent and structural change in the ‘balance of public and private power’.4 For keynesians the new circumstances represented the triumph of social science’s capacity to guide human sovereignty against the vicissitudes of market-produced cycles – a simultaneous leap forward in knowledge and practical political acumen.5 For welfare state advocates, postwar developments promised not only income compensation in the event of unemployment, sickness and retirement, but an eventual transformation of capitalism towards political determination of living standards, democratisation of socio-economic life and an expansion of citizenship entitlements. Among anti-internationalists, the shifts confirmed the efficacy of chosen national development and protection strategies. Schumpeter had earlier imagined the institutionalisation of economies and 4

5

Andrew Shonfield 1965. A slightly earlier (and potentially transformative, though sociological and somewhat conservative) formulation, in the social market economics of the German Bad Godesberg programme, was ‘as much market activity as possible, as much intervention as necessary’. Recent re-statements of the case for a mixed economy include Colin Crouch’s affirmation of third way precepts (2012) and Lance Taylor’s defence of keynesian principles in Maynard’s revenge (2010) though in the latter it is seen as a cyclical phenomenon (the progressive stage of successive long swings in political economy). Geoff Harcourt & Prue Kerr 1980; the ideas are repeated, if implicitly, in their discussion of Joan Robinson’s views on inflation and full employment (see 2009, pp. 176–192). Robinson’s initial outline of the problems for a mixed economy – controlling inflation at full employment and adjudicating rival claims – were set out as early as 1945 and 1946.

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business organisations – societal arrangements newly able simultaneously to secure innovation and to protect people from its most disruptive effects. Intellectually, traditions of analysis associated with institutionalism, economic sociology and even conservative religious social thought – all of which argued that social cohesion should normally prevail over economic liberalism’s desiderata (including wage labour, inequality, unwanted change and insecurity) – appeared vindicated. The end of the postwar boom in 1974 heralded the beginning of a long recession (now extending to forty years) and the optimism of the immediate postwar period dissipated; however, the advance of heterodox thought stalled. During these decades, economic-liberal and far-left pundits have been announcing a ‘crisis of the state’ constituted variously by political over-reach and administrative overload, the demise of keynesianism, the irrelevance of national politics, the moral hazard of social welfare transfers, the impossibility of counter-cyclical or protective policy measures, the ritual dismantling of many corporatist settlements, the legitimacy of unrestrained financial innovation and the desirability (usually spun as the inevitability) of political impotence. In consequence, intellectual and discursive hegemony passed to liberals, internationalists and others proclaiming the need for a more modest and restrained role for politics in capitalism’s governance.6 6

Of course, social democrats themselves were often authors of the shifts, apparently unable to realise that changes they promoted, against resistance, were responsible for effects (financialisation) they now decry. Economic liberals within social democratic parties, or wearing social democratic garb, obviously never embraced the possibilities endorsed by Keynes, Beveridge, Polanyi, Schumpeter and Shonfield. Anthony Giddens’s (1998, 2000) efforts to differentiate periods of postwar capitalism as if there were not tensions between liberal and interventionist tendencies in each period, which were won or lost in each period and which continue in each period, has been echoed by one of the prime instigators of Swedish social democratic retreat, Klas Eklund (2012). For Sweden, Lennart Erixon’s careful critique of the resulting ‘new economic policy regime’ since the era of Kjell Olof Feldt in the 1980s is revealing: unemployment has become permanently high; corporatist and collective bargaining arrangements have been dismantled (and LO marginalised); scepticism towards discretionary economic policy has been incited; a new consensus over the need for flexibility has been accepted (thus excluding high-wage-led ‘transformation pressure’); monetary policy has been promoted (and made independent and responsible for stabilisation); fiscal

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Conceptions of the evolution of capitalism towards something more institutionalised, equitable, potentially manageable and democratic, wherein outcomes could be more deliberated and less capricious, lost their scholarly appeal. The state achievements of the period after 1945 were alleged, in the decades that followed, to have been ‘hollowed out’. Pessimism and defeatism about political and public capacities – attitudes fomented steadily throughout the period of economic rationalism, neoliberalism and globalisation – nonetheless seem to have been unwarranted. While the global financial crisis towards the end of the first decade of the twenty-first century regenerated expectations of a return to keynesian interventions only momentarily, in social democratic and conservative circles, they are not inconceivable. Publicly mediated investment, together with a reimposition of controls on financial and remunerative excesses, again appear thinkable – though not without some contemporary reconceptualisation of the scope of activist and principled politics. In addition, awareness of deficiencies and neglects in public infrastructure, if not macroeconomic management generally, has been renewed almost everywhere. Discontent over the morally and psychically disruptive effects of the policy priorities of the years of political retreat, worldwide, can again be imagined.7 So actual structural developments, in the countries of mature

7

and inflation targets (permitting some austerity and tax reductions but not novel institutional experiments) have been introduced; and foreign ownership of iconic companies has been accepted. On the positive side, important parts of the social democrats’ statsbärande parti status endure: Sweden has maintained its large public sector; trade union membership is still relatively high; neoliberal challenges to social security and taxation-financed welfare have been partly resisted; a ‘productivity miracle’ has occurred; inflation and public debt are low; and some elements of the old Swedish model (active labour-market policies, wage-equalisation measures and high participation rates) have been retained even by the non-socialist party coalition (2011b). Sweden’s conservatives seem quite reluctant to use lower wages to encourage job creation. Examples are Jenny Andersson’s 2011 critique of mainstream leftist parties’ complicity in the current malaise, particularly in France, Britain, Germany and Sweden, and her 2012 re-statement of the ‘primacy of politics’, ‘Not without a future’. Another is Magnus Ryner’s 2010 critique of the use of conventional economic theory to demean social democracy’s achievements in the 1990s. Similar points are made more extensively by Robin Blackburn 2011.

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capitalism, have apparently not eliminated the possibility of deliberated public superintendence after all. This chapter questions currently influential positions – on both conceptual and empirical grounds. Extending the survey of empirical political influences on economies in OECD countries over the past century that we have presented above, we here examine the implications (for political theory and political understanding) of those developments. We criticise the scholarship that treats contingent changes (including economic disruptions after 1974) as if their consequences and effects were precisely anticipatable and unstoppable, that is, part of an unfolding logic of economic development. Fatalistic structuralism like this serves to repudiate accumulated knowledge and perspectives from earlier social science, particularly insights about the capacity of politics and institutions to achieve equitable and efficient outcomes. Next, we specify those (potentially social democratic) developments in critical political science that have appeared in recent decades, drawing attention to convergent and synergistic developments within conservative and marxian political economy.8 We nonetheless maintain that public intellectual appreciation of the likely evolution of modes of regulation – that is, future relations between the state and the market in capitalist economies – has faltered. We will show that alongside orthodoxy’s recurrent acquiescence to disturbing, damaging or meretricious trends, critical approaches have too readily postulated transitions that have not in fact occurred and which, on the evidence, remain unlikely. The future of state-market relations may instead be a resumption of tendencies towards enlargement of the institutionalising and politicising impulse that always characterised Wigforss’s thinking, and that was broadly expected, in the early postwar period. Finally in this chapter we explore some of the ways in which previously opposed traditions of analysis – marxian and post-keynesian political economy – are now producing the mutually reinforcing analytical rapprochements and institutional proposals on which social democracy depends. 8

The actual history and practice of both these philosophies obviously has included some repugnant occurrences; clearly our aim is to elucidate their potential contributions to civilised collective achievement.

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In all politics, of course, there is ample room for disagreement and it is unlikely that the debates between liberals and conservatives or radicals and reformists, on the legitimacy of an expanding polity, will ever be settled.9 Nevertheless, it is important to register that principled conservatives are largely unperturbed by state encroachment onto market mechanisms and the enlargement of government’s management responsibilities. These trends do not violate conservatives’ occasionally statist dispositions. Marxism, though, has been more challenged, politically and analytically, as we now shall see.

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Marxism’s re-evaluation of the state Marxism cleaves to a pessimistic view of the state and political possibilities, one famously announced in the 1848 Manifesto: the modern state was irremediably bourgeois and therefore an ‘alienated form’ of politics. This conclusion resonated at the time with anxieties about the fragility of liberal democracy as capitalist economies emerged. Nonetheless, it was never entirely convincing. Even marxism’s foundational conceptions contained the more politically pregnant proposition, summarised in Figures 9.1 and 9.2, that although the social relations of capitalism initially facilitated the development of the forces of production (wealth in all its social forms), the underlying conditions and facilitators of capitalist development would eventually impede productive capacity and progress. This contradiction would give rise to varying degrees of economic socialisation or politicisation. The ‘logic of accumulation’ would then yield to a variety of institutional possibilities – for example, deliberated allocation of resources, needs-based production, decommodified social provision (including decommodification of labour in the form of wage regulation and employment policy) and less despotic control of the production process – and for these, historical rather than abstract analysis would be best suited. Discrepant evaluations of such

9

See Hicks 1995; Castles 1988, ch. 4; as well as Tanzi 2009 & 2011.

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possibilities were always imaginable; yet orthodox marxism has dismissed anti-functionalist and volitional political developments as revisionist or reformist, even delusionary,10 thus short-circuiting deeper critical assessment. As a result, relations between the state and the market in the countries of advanced capitalism tended to be seen as invariant. In recent decades, Bob Jessop has revised this scholarship; and more open-ended conclusions on the ‘state in capitalist society’11 can now be broached in marxist terms. Jessop’s ideas – enunciated, refined and repeated over a long period12 – were formulated within marxian political economy, but recognise the widely shared perception that marxist state theory is undeveloped in its familiar form. Jessop calls his reformulations the ‘strategic-relational’ approach to the contemporary state. He thus retains marxism’s insistence that the state, polity and public institutions need to be understood in terms that are explicit about their relation to capital’s dominant and labour’s subordinate positions, while allowing scope for strategic political calculation both inside and outside conventional processes of governance. The most striking aspect is the abandonment of orthodox marxism’s view that the state was (for the most part) structurally constrained by its obligation to secure the conditions for capital accumulation which were (for the most part) known in advance. 10

11

12

An example is Tony Smith’s review of Phases of capitalist development: booms, crises and globalizations (by Robert Albritton et al): ‘The world market is a distinct level of determinations with its own its own emergent properties. […] The advocates of social democracy do not grasp this’ (2005, pp. 366–367). Perhaps a more salient way of putting the argument is this: ‘Capital does not invest in order to boost gross domestic product […] [but] to expand itself via the capture of shares of global profit’ (McNally 2011, p. 37). This is the point of Marx’s discussion of valorisation in Capital I. Social democrats have only to argue that politics (national or otherwise) still retains some purchase over economic activity and capital accumulation within nations. Then a space for social democratic statecraft (in a machiavellian and weberian sense) and multiple determinations is opened. We use the term ‘state’ to refer to a ‘political community in which citizenship rights may be realised’ – that is, the polity, political processes, public institutions, democratic rule, government and governance arrangements within the nation. This excludes consideration of the nation-state as an ‘actor’ in an international context. See Jessop 1990, 2002, 2007a, 2008; Jessop & Sum 2006. At issue is whether the state should be regarded as an arena for political activity, or whether it is ‘one of the players’.

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In the reworked conception, politics remains in some measure structurally constrained, though not completely determined. The diversity of political arrangements and economic outcomes (particularly in the post1974 period when crises of restructuring have been experienced in the advanced capitalist democracies – that is, the impacts of and responses to global economic change) made the previous precepts untenable. Accumulation strategies, notably, have often been forged deliberatively (by the state, or by private industry in collaboration with state institutions); so patterns of industry do not always emerge spontaneously as the consequence of a market-driven ‘logic’ of accumulation and initial resource endowments.13 Many characteristics of capitalist development are now seen, even within marxism, as dependent upon political choices, though not every political ambition will be achieved. Jessop has shunted marxism towards a conceptual accord with nonmarxian strands of political thought, and potentially with established strands of democratic thinking. This section outlines Jessop’s reconsiderations – in order to evaluate both marxism’s accommodations to the political economy and social economy discussed above, and its potential contribution to understanding the increased influence of the state on markets. Though it is not a uniquely marxian insight, Jessop’s writings begin from the observation that the capitalist market economy is not ‘constitutively complete’ and that therefore its political and social preconditions need to be established through processes that are not generated automatically by capitalist social relations themselves. However, because politics is necessarily subject to variable choices and variable outcomes, he concedes that the liberal-democratic state should not be considered ‘essentially capitalist’. The capitalist economy does not imply a definite institutional form for the state, nor pre-definable functions; and the struggles over these forms and functions are only partially grasped by calling them class conflicts. Even if the major function (or policy concern) of major state institutions is to ensure accumulation (and hence the class-based imbalances that militate against democratic development), the institutional separation of the

13

A critical but non-marxist assertion of this is in Erik Reinert 1995 and 1999. The insight is equally disruptive to liberal economics and to marxism.

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political and economic spheres (the ‘form’ of the state) means that two alternative logics prevail in all phases of capitalist activity – the market economy, and political attempts to control it – and that the two requirements do not always coalesce. For conventional policymaking, this amounts to an acknowledgement that there is no ‘one best way’ to manage, or to restructure, a capitalist economy, or to cope with its problematic tendencies. Capitalism thrives well under quite divergent political pacts and compromises, including those which alter the balance of power between capital and labour. Jessop explicitly concedes therefore that marxism ought not advance a general deductive and predictive theory of the capitalist state. There are so many contradictions, strategic dilemmas (political and economic) and potential institutional responses in the course of even ‘normal’ economic management that abstract depictions of the requirements, limits and possibilities of the state will always mislead. Empirical and historical inquiry will reveal a wider range of these contingencies than abstraction.14 Of course, by ceding the state’s strategic capacities – the ability to politically privilege some strategies and industries or sectors at the expense of others (which Jessop calls ‘structural selectivity’) – we are taken away from a distinctively marxian view and brought very close to a weberian, or perhaps gramscian, viewpoint (whereby the state does shape economic and industrial structure). This is especially the case if the state is seen as an ‘ensemble’ of institutions with self-consciously differential impacts or which various social groups (beyond the state) can utilise differentially. The possibility of ‘path dependency’ amplifies the volitional dimensions of this marxism, because it opens the politics of capitalism to ‘complexity’ (embeddedness, interaction, interdependence and multiple determination).15 The modern state and the capitalist economy have always been discussed together; but contemporary complexity brings a new range of issues to defining the state’s boundaries. Insofar as capitalism depends on conditions provided by the polity (infrastructures, training, a legal frame14 15

An indicative example: ‘The gap between the abstract, and thus somehow depoliticized, nature of financial derivatives and the absolutely devastating effect these things have on our lives is enormous’ (Andersson 2012, p. 176). Jessop 1997, 2008, ch. 10; also see note 32 to chapter 8.

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work and so on) and the polity depends upon contributions to governance from non-state institutions (trade unions, business lobbies, international monitoring agencies), in addition to ‘market modes of governance’ that are themselves differentially constituted (by the specific industrial structures of various economies), the state loses its discreteness as the influences upon its roles multiply. Yet, scope for ‘strategic’ action, that is, deliberated choice from diverse possibilities, backed by distinctive capacities, undeniably exists and, we insist (on strength of the data presented in chapter 8), is probably increasing. Though Jessop recognises at the beginning of his 2008 book that the state has been a ‘distinctive accomplishment of social development’,16 this distinctiveness is not really specified. Earlier, he seemed to endorse the view that the state had no power of its own;17 in 2002 he concluded that there could be no guarantee that political outcomes would be specifically ‘state outcomes’; and by 2008 he arrived at a more ‘ecological’ view in which state power is scarcely separable from its interactions with economic, legal and cultural institutions.18 In this conceptual progression, specifically political struggles, political institutions and political capacities have become less and less central. Jessop’s theoretical resolution and its context are summarised in Figure 10.1. Hence, answers to age-old conundrums about political possibilities (or even a guide to internal development tendencies) are not a feature of Jessop’s stance; even if more explicit observations on ‘what is to be done’ may have been expected from a major revisionist body of work on the state from within the marxist tradition. The strategic-relational approach does, however, preserve the marxian (perhaps not uniquely marxian, because they also feature in keynesian political economy) premises that the state must deal with both the contradictions and the crisis tendencies of a capitalist economy. This re-orientation of the state after 1945 is the subject of the next section. 16 17 18

2008, p. 1. 1990, p. 256. The interactions are rendered variously as ‘structural coupling’, ‘mutually reinforcing correspondence’ and ‘reciprocal consolidation’ – implying evolutionary processes which are probably unpredictable and contingent.

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Figure 10.1: The capitalist state and the market economy: the debate. 1.

MARXIAN

VIEWPOINT

(anti-liberal, proposes a severely limited autonomy):

The bourgeoisie became more politically influential as the capitalist economy developed […] (p. 81). The modern representative state has now become typical […] (p. 82). The executive of the modern state is [nothing] but a committee for managing the common affairs of the whole bourgeoisie (p. 82). Marx & Engels Communist Manifesto 1848 ECONOMY

—›

POLITICS

Regulation complements the market: i. e. little political distinctiveness / autonomy 2.

WEBERIAN

VIEWPOINT

(anti-liberal & ‘statist’ – political possibilities exist):

Politics is a strong and slow boring of hard boards. It takes both passion and perspective. […] All historical experience confirms the truth – that [people] would not have attained the possible unless time and again [they] had reached out for the impossible (p. 128).

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Max Weber ‘Politics as a vocation’ 1918 POLITICS

—›

ECONOMY

Regulation determines economic development: i. e. significant political autonomy 3.

J ESSOP’ S VIEWPOINT (the revised marxist, ‘strategic-relational’ approach): Politics is structurally constrained (some things depend on political choices, but not all objectives are possible); patterns of industry don’t always emerge spontaneously from market forces and resource endowments; the state can forge accumulation strategies. The capitalist market economy is ‘constitutively incomplete’ so ‘modes of regulation’ emerge, though permanent ‘regularisation’ of accumulation is improbable; the state becomes a ‘structurally inscribed strategic context’. Hegemonic (political) projects help to maintain the strategies (to ensure they’re not disrupted) … but these strategies change (e. g. the shift from a national to a global orientation in industry & politics, historic compromises / class settlements etc.). ECONOMY

‹—›

POLITICS

Non-economic conditions (the polity) implicated in competition (economy)

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Modes of ‘regularisation’ Jessop’s efforts to integrate contemporary political developments into historical materialism have involved a long-term engagement with the ideas of the French Regulation School. The main effect of these efforts, for Jessop, is an expanded understanding of contemporary transformations in economic governance. For the regulationists, historical materialism’s underemphasis on the part played by political (and, perhaps increasingly, nonstate) institutions in the necessary ‘regularisation’ of capitalism’s conflicts and contradictions has been corrected.19 The concern here is not only to demonstrate that all economies require some forms of non-economic support, as both marxian and nonmarxian traditions accept, but also to reiterate that the form of that support has varied across time and place and that, as a consequence, industrial structures (firms, industries, patterns of innovation, capacity to manage externally imposed structural changes) have emerged and evolved differentially. The final segment of Figure 10.1 indicates that Jessop sees development trajectories, economic successes, structural problems and pressures for adjustment as the interactive effects of regulatory arrangements, political preferences and state capacities. Marxism’s traditional causal presumptions (where economic function implies a distinctive political form) are amended, if not completely reversed. The extra-economic (including sociological) dimensions of contemporary corporate and national performance are not outcomes of deliberate political or social choices; however any discernible trends are obviously important for deliberative politics – because they do reveal that non-liberal regulation is possible and effective. The persistence of departures from the liberal model therefore suggests that the room for progressive political and social development is far from exhausted, even if trends towards a global market as the operative locus of productive activity continue. To some extent, conservative concerns have overlapped the social democratic impulse, particularly when disquiet over insecurity and concern for the 19

The major texts are Jessop & Sum 2006, Boyer 1990 and Boyer & Saillard 2002; but see also Jessop 2008, ch. 2.

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fate of the labour force during periods of structural change have emerged. Again, we emphasise that what once seemed over-expectant hopes for politics from occasionally imprudent traditions can now also be sanctioned from within marxian political economy, conceptually and empirically. As indicated above, heterodox traditions of political economy have long anticipated that successful capitalist economies have an evolutionary propensity to become less like market economies, and more negotiated or politicised. Regulation makes a difference; and the defining features of the system (its social relations) are not left unaltered. The trend to increasing government and regulation is matched by larger and more powerful private organisations and growing recourse in times of crisis to unusual forms of management, even in the liberal economies.20 The changes confirm that private capital and its prerogatives alone no longer constitute private economic activity. In addition, as indicated above, these are the conditions that give rise to what social science including Jessop’s calls complexity, part of a series of conceptual difficulties that we address later. The cross-national differences during the period of large-scale structural adjustment since 1974 (represented by unemployment, less secure employment, inflation, manufacturing decline and broadened inequalities) have been the most obvious registers of divergent regimes of economic governance in the subsequent decades. The distinctive clusterings of individual countries’ performances for the decades immediately after the era of stagflationary crisis, and also for the period since the early 1990s (during which economic outcomes generally improved), were presented in Figures 8.9 and 8.10. These data showed that there is no single continuum, no simple dichotomy between non-interventionist and interventionist polities: while liberal polities can be contrasted with various forms of ‘strong state’ – that is, those with capacities in the public realm to guide the private determination of investment and re-investment – poor outcomes after 1974 featured in both liberal and statist nations. Good 20

Even in the six English-speaking countries, aggregate government spending increased on average from 35.2 % of GDP in 1974 to 43.3 % in 2010; though both the UK and New Zealand remain above the OECD average. Social security expenditures increased from 8.7 % of GDP in the early 1970s to 10.8 % in the 2000s, for the five English-speaking countries for which data are available.

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performance was experienced in both social democratic and labour-excluded contexts. And, overall, the structures that emerged after 1974 endure still. The configurations confirm, then, for critical analysts if not for policy elites, that the modes of regulation that have underpinned familiar regimes of accumulation (patterns of industrially based growth and development) have had a purpose. They include not only the regulationists’ contentions – systems for regularising access to finance, the social structuring of conflicts over accumulation, industrial relations systems and trade arrangements; but they also consolidate modes of technological change, systems of innovation, and business competition systems.21 They have imparted their apparent idiosyncrasies to social and economic circumstances for the past four decades. As private economic activity and capital accumulation itself has been framed, facilitated, regulated or constrained by institutional arrangements, if not always by formally legitimated authority, the conception for many observers, practitioners and victims, that market-imposed transformations are unavoidable, needs to be qualified. While capitalist divergence has thrown up sometimes unexpected, sometimes unwanted institutional forms during the crisis period, and while these arrangements have sometimes solved generic or particular problems, they should not be regarded as permanent, decreed uniquely in accordance with either economic circumstances or the balance of political and class forces. Nor is success inevitable. The four-fold typology of macro-level governance that we have developed is what Robert Boyer depicts as ‘multiple forms of capitalism’, each with its own historical experience of adapting inherited institutions and cultural biases to changing circumstances. Institutional conditions consolidate themselves to structure the success or failure of private corporations and the process works the other way as well: variable success affirms and regenerates institutional peculiarities. Each mode of regula-

21

Hollingsworth, Schmitter & Streeck define a ‘governance system’ as the ‘totality of institutional arrangements – including rules and rule-making agents – that regulate transactions inside and across the boundaries of an economic system’ (1994, p. 5). This is a formal version of the conception of ‘régulation’ adopted by Boyer and Jessop.

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tion accommodates some types of productive activity but not others.22 Crucially, each institutional mode has the capacity to select and alter criteria applicable to productive activity, and such variability can become habitual. As suggested, national experiences permit different settlements to a perennial dichotomy between state authority and market regulation. In particular, the decisions of elites in determining access to finance or exposure to structural transformation, the scope given to trade union organisations in labour-market or countercyclical-investment policies, and whether policy should tolerate the search for and protection of economies of scale are also institutionally variable. Though not entirely a matter of deliberate choice, the forms of interaction between private and social institutions in, for example, America (or Britain), Japan (or East Asia), Scandinavia (particularly Sweden) and Germany (or France) seem to have produced distinctive patterns of industrial success. To repeat, institutions and politics help to determine accumulation. Insofar as generic problems in a private market economy are resolved (at least for discrete periods) by specific organisational experiments, they then make possible specific private competences. It is scarcely surprising that different modes of governance result in such unintentional specialisations, since it is the very demands imposed on firms by production that in turn channel the evolution of interdependent parts of the private economy towards specific industries, thus precluding others. All economic activities are not equally viable in a particular economy – not just because of different resource endowments, but because of the impact of deliberately constructed organisational relationships, networks, collaborations and synergies.23 As for all politics though, each of these developments is contingently achieved: the political conditions are only uncertainly secured, but once they exist their effects are reasonably predictable.

22

23

Other depictions of these ‘coordination mechanisms’ have been used – for example, markets, hierarchies, networks – (appearing to conflate what we have referred to as statist failures and corporatism without labour) and liberal capitalism, dirigisme, and the negotiated economy (once again appearing not to differentiate between Asian developmentalism and European statism). (See Jessop & Sum 2006, pp. 247–263.) The argument is elaborated in Reinert 2007, ch. 2.

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The Regulation School’s argument is that parts of the state (and perhaps social institutions outside the state) regularise the potentially disruptive aspects of the social relations on which they depend. These include (a) exploitative or conflictual relations between labour and capital, to which industrial relations systems are a response, (b) relations between the finance sector and industry, which are often non-harmonious and which different regimes of accumulation manage differently, and (c) relations between individual economies and the rest of the world, whereby unwanted criteria may affect production or management or structural change. The emphasis (on regularisation rather than regulation) is significant, firstly, because it acknowledges that what is to be controlled (that is, ‘fixed’) is conflict and contradiction, implying that regulation can never be achieved completely or with any finality and that the very idea of stable capitalist development is ‘improbable’, except for limited periods.24 For policy purposes, a distinctive gauge of what counts as success emerges. According to the regulationists, a permanent solution to most economic and regulatory problems would be neither required, nor expected, nor possible. And as the emergence of problem-displacing modes of regularisation is usually neither rationalistic nor willed, but unintentional and (often enough) path dependent, there will never be general governance solutions, just struggles and incompleteness, perpetual evolutionary movement, wherein the future is ‘pregnant with a surplus of possibilities’, as Jessop has put it.25

24

25

At the micro- and meso-levels, regularisation also includes the relationships that are established, consciously or by marginal adaptation or by accident, between a private organisation and other private organisations or groups of firms or public institutions that are intended directly or indirectly to solve one or more of the problems business firms routinely confront. Product choice and design, selection of production processes, labour training and skill development, whether to resist or accept externally induced change (for example in technology or competitive conditions or innovation possibilities), how to guard against the predatory behaviour of others, responses to periodic official reviews of competitiveness, how to assuage suppliers, sub-contractors or customers, and obligations to broader constituencies all involve inter-organisational discussions and all shift private production away from a strictly market focus. Extra-organisational arrangements such as these constitute ‘systems’ not merely because they exist but because they get reproduced over time. Jessop 1990, 1997, p. 105.

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A second significance of the regulationists’ view is that it contradicts the idea that accumulation ‘normally’ proceeds predictably – albeit subject to occasional setbacks, for limited periods, when politicising interventions disrupt the typical logic. Both views are drawn from historical materialism, though their policy implications are divergent: the more orthodox view is that politics is ultimately ineffective. We consider this second view later in the chapter. Modes of regulation have been and are functionally important; their emergence helps define a sector or industry; and they differentiate any actual economy from others. Private firms and corporations are not just ‘black boxes’ within which autonomous and commensurate demand and supply signals get processed; they are a reflection of the complexities and difficulties of production itself and of the inherent conflicts which the founding social relations of capitalist production tend to mask. The existence of productive organisations indicates, too, that investment decisions, which are notionally private and calculative and insulated from external political interference, are in fact much more socially and institutionally determined than liberal rhetoric allows. However, as Jessop argues, the ‘form’ of the liberal state tends to problematise its economic functions; and as a consequence there has been a ‘tendential evolution’ away from economic-liberal arrangements. We have, above, refrained from fully endorsing the use by many writers of a simpler, if telling, contrast between the Anglo-American and European preferences in economic institution building. Admittedly though, many points have been authoritative – for example, the distinctiveness of the American (‘management coordination’) and German-Japanese (‘collective-collaborative’) models, which have been seen as contrasting ideal types of business governance within contrasting interpretive traditions.26 The first was said to rely on management authority and hierarchy to control production and investment decisions. The second, more institutionally complex, allowed a broader range of potential inputs. Both models 26

A comprehensive example is Shionoya 2005. The British enterprise culture was broadly consonant with the American, though more reliant on family-owned firms and generalist managers, less innovative and with less restless zest for technological change.

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were compatible with the ‘typical’ twentieth-century, ‘fordist’ model of capitalist production: mass production, mass consumption, standardised commodities, vertical integration of production, with ‘in-house’ research and development and innovation. The separation of ownership from management conspired with large fixed costs and significant levels of earningsretention for re-investment; and this seemed to determine the post-1945 norm for large bureaucratic productive enterprises. Both were ‘embedded’ in non-liberal or post-liberal forms and possibilities. The large corporation has certainly been a productive institutional form, but hardly liberal, harbouring as Schumpeter claimed in the 1920s, tendencies towards socialisation – an observation clearly consonant, as noted in chapter 7, with Wigforss’s social corporations ‘without owners’.27 Departures from and emendations to the liberal standard have long been noted. German and Japanese companies attempted, often successfully, to create long-term relations of loyalty both within the workforce (thus increasing cooperative interactions) and with suppliers, sub-contractors and customers. In these circumstances, institutional developments such as the establishment of cartels and collusion with respect to skills-creation or research or access to finance could be imagined. German and Japanese productive systems for long pioneered distinctive ways of institutionally ensuring that industrial activity was appropriately financed – its absence elsewhere has been a significant cause of manufacturing under-performance and decline. Through established patterns of cross-sectoral negotiation (financial sector involvement in industrial management or state direction of finance to selected industries), the two economies had, until the 1990s, been able to orient national business activity towards national development goals, rather than global or speculative demands. Despite some politicians’ and managers’ preferences, there has still been no obvious erosion of these divergences and, in both cases, ‘significant and surprising resilience’ in traditional ways of ensuring good corporate performance and managing

27

Schumpeter 1927, p. 195. The issue has been the subject of ongoing controversy ever since; see particularly the critique, discussed below, by Howard & King 2008, chs 4, 5 and 6.

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conflict.28 Both were able to maintain above-average industrial employment and manufacturing commitments, well into the present century.29 German experience before unification and deregulation highlighted other significant departures from the liberal mode of corporate governance: both its system of codetermination (works councils) and its system of technical training were imposed on employers despite the latter’s resistance.30 Yet these impositions at the behest of trade unions – one of the ‘pillars’ of ‘Modell Deutschland’ – were keys to Germany’s postwar quality-led manufacturing success. So central were such institutional conditions that it is still possible to conclude that industrial outcomes can be improved when the corporate preferences of business are challenged. If business is prevented from doing what it would prefer to do (maximize short-term profit) and is forced to do things it would prefer not to do and pay for (invest in long-term viability), competitiveness can be strengthened. Constraints can thus be beneficial, as Wolfgang Streeck has insisted.31 These arrangements are frowned upon in social or political contexts which encourage individualism, market principles, liberalisation, financialisation and unfettered managerial prerogatives.32 American and 28

29 30 31 32

Thelen & Kume 1999, p. 500; but see also Whitley 1997; Chandler, Amatori & Hikino 1997. Ronald Dore has described one end of the continuum (and hence exposed other possibilities) this way: The Japanese stock market is not a place where you can buy and sell control over companies […]. [There is] a deep-seated cultural antipathy towards the idea of buying and selling what are still seen as communities […]. [There] is greater scope in Japan for propagating the notion that there is a national, rather than just a class, interest in preserving established structures and organisations and protecting them against the pressures of global markets, global firms and US dominated global institutions (2000, pp. 108, 118). The point was made, perhaps more famously, by Chalmers Johnson 1982. See Table 8.16. Offe 2000. Streeck 1997a. ‘The form of relationship between manufacturers and contractors which is the rule in Japan is distasteful to Americans […] the French do not have the same faith as the Anglo-Saxons in the virtues of the invisible hand’ (d’Iribarne 1997, pp. 164–165). The tenor of this argument was famously echoed by Nicolas Sarkozy in September 2008 at the height of the global financial crisis. And it has been re-asserted in the context of a contemporary re-assertion of the value of the ‘relatively lasting accommodations’ that characterise ‘social structures of accumulation’ by William Tabb (2012, ch. 6).

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British industry have found their investment decisions less administered, more uncoordinated, but more tied to finance-sector criteria with a familiar bias towards short-term results that prevent any systematic regeneration of industry.33 Liberal market economies have explicitly endorsed the legitimacy of managerial prerogatives though comparative analysis shows they are far from inviolable. In the more coordinated ‘social-market’ economies, private enterprise has been seen mainly as a ‘licence’ to deploy selfinterest, under conditions stipulating social objectives, with the ‘permits’ revocable at any time if the social judgement alters.34 The German and Scandinavian models tended to treat the problems of workers, in particular, as ones that ought not be resolved according to market principles – the contrasting principle, for many decades, was for these to be matters for negotiation and politicisation.35 If there were ever an apparent paradox posed by the association of good economic performance with non-economic-liberal regimes, it dissolves when traditions of analysis outside the neoclassical school are invoked. It has been recognised for centuries, for example, that whenever economic activity depends on knowledge-intensive ‘capital’, on ‘human wit and will’, rather than on simple resource inputs, there will be systemic effects from their deployment.36 Then there will be synergies and positive feedback or ‘virtuous-circle effects’ from production, and it will be desirable to share fixed costs and risks, to allow increasing returns and ‘cumulative causation’ to generate higher living standards, through higher wages and incomes rather than through lower prices, and to enhance the ‘social fabric’. Knowledge and investment and productive capacities can be further fostered if the abnormal incomes (‘rents’) generated by successful enterprises but unavailable to the rest of the world can be partially captured by society. It is these observed conditions that provide the defensive force of the ‘other canon’ in economic analysis and a practical explanation for the longevity of unorthodox modes of regulation and explanation.37 33 34 35 36 37

Soskice 1999; Jessop 2007b. Streeck 1997b. Rueschemeyer & van Rossem 1996; see also Erixon 2011b, p. 275. See Antonio Serra 1613. As noted above, these ideas have been developed into a general argument by Erik Reinert (1999 and 2007).

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Of course, none of this path-dependent affluence is possible if competitiveness is at the expense of, rather than being subordinated to, societal achievements (and social costs) which protect populations from insecurity and loss. Diversity in corporate governance reveals, most importantly, that competitive market pressures do not alone dictate corporate strategies and responses, and competition should never determine policy preferences. There are critical ‘societal effects’ which have both helped private organisations survive in capitalist markets (even international markets) while also providing protection for citizens from their disruptive effects. Thus do market-eradicating developments continue in the face of pressures for nonliberal regulatory regimes to become less socially responsible and ‘holistic’. Reform or liberalisation of organisational achievements – such as are implied by unforgiving attitudes to societal obligations, industry associations, cross-shareholdings, profit rates and payment systems – cannot always, or even usually, be condoned. Occasionally observed counter-trends towards less hierarchical production methods and less vertical integration do not justify abandonment of past accomplishments either.38

The question of discontinuity The extent to which macro-level changes since the 1970s have forestalled deliberated politics remains contentious on other grounds too. The first decades of recession, the period characterised by Jessop and the regulationists as the end of postwar fordism, the ‘crisis of keynesianism’, and the beginnings of contemporary globalism seemed to institute the divergent modes of regulation canvassed above. Conventional opinion and comparative analyses present the decades after 1974 as ‘hard times’, a period of high unemployment and inflation in about half the OECD economies,39 with the subsequent period (since about 1994, during which un-

38 39

Contra Howard & King 2008, ch. 6, discussed below. For example, Gourevitch 1986, Garrett 1998; but see also Figure 8.8.

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employment has been falling in a majority, though not all, of those economies) as a return to ‘good times’. For economic and policy orthodoxy, this latter period until 2007–2009, generally consolidated the picture of capitalist prosperity. The years since the early 1990s are therefore celebrated by policy institutions such as the OECD as a vindication of the reforms that dislodged, among other things, postwar political settlements and class compromises. Nonetheless, though unemployment fell somewhat across the OECD economies, it does not herald ‘recovery’ by any defensible criteria. The 1974–2004 experience of unemployment (stuck above 6 percent and stubbornly intractable since then), manufacturing decline (accompanied by crisis-level inability to create meaningful wealth and employment in most economies), ongoing falls in labour productivity, slower GDP growth, disrupted mechanisms for the transmission of productivity gains from winners to losers (resulting in increased inequalities), undiminished state expansion despite hollowed-out ideological defence and explanation, infrastructure neglect despite the availability of funds in most countries, apparent exhaustion of national commitments to education and social policy, and craven acceptance of finance-sector criteria should have dampened confidence in the west’s governance preferences – even if predictions of growth and prosperity for the next quarter-century are accurate.40 As shown, some of the previously low-unemployment countries developed mass-unemployment economies in the period from the mid-1990s.41 Heterodox and post-keynesian commentary on the other hand treats the post-1974 period as a ‘long recession’, one of globally-induced structural change, a recessionary crisis not essentially dissimilar from the slump of the 1930s, and a period of considerable social disruption – without sufficient structural transformation to generate new employment. The inflationary aspect of the stagflation was new, attributable to the epoch’s increased class and institutional power – of labour and capital – sufficiently 40 41

As noted earlier, Maddison predicted about 2 percent annual percapita growth (2007, pp. 335–340). Note, though, that some big government nations fell below the OECD-average and the UK regained its pre-Thatcher position as relatively, if ambiguously, statist.

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well organised to bargain-up wages and prices despite unemployment and falling production.42 What the evidence reveals, however, is that the divergent clusters of governance modes developed during the first decades of the recession, and apparently fusing more or less enduring characteristics of their respective ‘type’ of capitalism, are still largely intact. With the above-noted modifications to the composition of these ‘regimes of accumulation’, the advanced capitalist economies still conform to the patterns noted two decades earlier. Capitalism in crisis is, after all, the norm: the twentieth century revealed near-full employment as an infrequent experience. Surprisingly, the left abandoned most of its previous interpretations during the period and adopted most of the liberal account. Claus Offe, for example, criticised the contradictions of the ‘keynesian welfare state’ as if both types of increased public expenditure were commensurately irresponsible, ineffective or anachronistic.43 Economic liberalism now permeates marxism too; as much as orthodox neo-classical liberalism, orthodox marxism now criticises keynesian and other interventionist policies, both on principle (for ceding to intellectuals and to political institutions greater acumen than they could ever reasonably have) and because the recurrence of unemployment after 1974 seemed to refute the policies’ efficacy.44 Orthodox marxism similarly, but inaccurately, attributed inflation to keynesianism-inspired spending profligacy. As part of the same discourse, welfare state expansion was denounced, also as inflationary, and as undermining the work ethic. Postwar interventions had left a legacy of ‘sclero42

43

44

Boreham et al. 1999, pp. 145–151; Brenner 2006, chs 10, 13. The ‘long recession’ argument has been criticised by David McNally (2011) on the grounds that the post1974 period witnessed global growth (despite neoliberal restructuring) largely as the result of China’s economic rise. We commented on the coincidence of growth with recession in chapter 8. Offe 1983; the arguments were popularised by Giddens 1998 and 2000 and wrongly maintained even by social democrats: Morel et al. argue ‘While keynesianism shared with the Myrdals’ productive social policy approach a belief in the mutually reinforcing qualities of social policy and economic growth, […] Keynesian economic theory [demonstrated an] incapacity to explain and to respond to the simultaneous rise in both unemployment and inflation’ (2012, pp. 6–7). See note 46. For example, Meghnad Desai Marx’s revenge 2002 and Bill Dunn Global political economy 2009; there are many others.

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sis’, even marxists claimed, at a time when a more integrative international division of production was demanding competitiveness, efficiency and a reduction in political interventions. These misunderstandings reappeared in the ‘third way’ literature of the 1990s and then, improbably, in Jessop’s own depictions of what he saw as a ‘major discontinuity in capitalist development’.45 ‘Crisis’ does not accurately embody the politics of the repudiation of keynesianism. The refusal of governments to adopt keynesian investment and restructuring policies over a long period (and which became apparent at the end of the long boom in employment) is not the same as a failure of keynesianism. The end of full employment and beginning of the post-1974 stagflation could have been subjected to keynesian (or post-keynesian) measures but were not, despite their availability and consistent and full discussion in the post-keynesian literature.46 Sober appraisals of keynesian macromanagement techniques always recognised that keynesianism implied a contradictory mission – to attempt through political means to generate full and decently remunerated employment even though the capitalist nature of the economy recurrently generated the fluctuations in capital accumulation (investment) that would continue to cause structural change and unemployment. This oscillation between mechanisms intended to promote market-led accumulation and mechanisms which constrain markets is not ruptural to capitalism: it is, as Polanyi understood, anthropologically inevitable. On this issue, keynesian and marxist accounts of capitalist crisis tendencies differ far less than is often supposed. Crisis and contradictions inhere in capitalism, not in political attempts to deal with them. Jessop seems to conflate political pusillanimity with a presumed propensity for politics to fail because it is politics. Colin Hay and others have argued that just as it is not globalisation that forces the abandonment of political and policy deliberation, but the discourse over global change, it was not economic failings of state intervention that necessitated 45 46

2007b, p. 68. Notably in journals such as Challenge, Cambridge Journal of Economics, Journal of Post-keynesian Economics, Review of Radical Political Economics, and, for a while, Capital & Class and Studies in Political Economy. From the numerous accounts of the keynesian and post-keynesian explanation for the 1970s stagflation, early examples are Robinson 1975, 1976 and 1978.

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the anti-keynesian and monetarist counter-revolutions of the 1970s and 1980s, but the liberal narratives of state failure.47 Keynesian policy did not fail in the decades after 1974; its prescriptions were by-passed, not expended. Rather, the neoliberal ascendancy defeated them politically. Much the same could be said of ‘fiscal crisis’ which, in keynesian terms, was an erroneous assertion that public revenues during recession were destined to increase more slowly than demands on the state. The liberal equivalent was ‘government overload’. A simple solution would have been higher taxation, though this would have implied a permanent, wagnerian shift from private to public consumption. As taxes across the OECD did increase sharply in real terms after 1974, there was no fiscal crisis and no inevitable difficulty. Public expenditures can have self-financing multiplier effects. There has even been some ‘unintentional keynesianism’ as budget deficits slowly fell from about 3 percent of GDP in the 1970s and 1980s to about 2 percent since the late 1990s across the OECD – while all the time government spending has continued to rise. Keynesianism does not object to fiscal deficits in times of high unemployment, provided they are reduced as recovery sets in. This is more or less what has happened in the OECD since 1974; despite higher spending, some countries are now experiencing substantial budget surpluses. Jessop’s analysis of the transformation in relations between states and markets (from the apparent primacy of politics to its subservience) that began in 1974 depends on his elaboration of a transition from the era when production depended on contiguously located consumption (and therefore on fairly high levels of equality, social cohesion, income compensation and more or less enlightened and institutionalised negotiation of labour-capital conflicts) to their opposites. This was a shift from the postwar set of ‘spatio-temporal fixes’ (for example, keynesian countercyclical commitments or industry policies or deals between states and finance sectors, commonly referred to as fordism) to neoliberal anti-keynesianism, for this is what delineated the new political ethos. Jessop refers to a transition from ‘structured coherence’ to ‘structured incoherence’.48 The ques47 48

Colin Hay 2004, 2007, ch. 4; Ryner 2002, ch. 7; Chang & Rowthorn 1995, ch. 1; though see Jessop 2008, pp. 47–52 for a putative acknowledgement of this. Jessop 1994.

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tion – Whether the fixes or a repudiation of the fixes is aberrant? – is the subject of the next section. However, in light of stable trends in state-market relations, not just since 1974 but since 1945, this aspect of Jessop’s political economy is unpersuasive. The continuities in national clusterings of economic and political outcomes through the entire 1974–2008 period of crisis and recovery (albeit with wider inequalities, more insecurity and more disruptive competitiveness) confirm development tendencies anticipated by the postwar generation of keynesians, institutionalists and nation-builders. Clearly the growth-related trends were in place all through the twentieth century. They created space for the ‘structure-altering’ decisions49 – policy responsibilities and political opportunities – that would later develop what institutionalists refer to as emergent properties. Relentless political and intellectual efforts to transform societal expectations against such observable changes have been disruptive, but not successful. In Jessop’s terms, the ‘high-point’ of liberalism has passed, if not its ‘ecological dominance’, that is, its capacity to prevail in other spheres.50 The implication is that capitalism’s capacity to flourish in the absence of the conscious supports and regularisations inaugurated after 1945 is limited. No neoliberal mode of regulation that eliminated such enduring extra-economic ‘pillars’ could support a viable future regime of accumulation.51 Jessop’s scepticism towards the existence of ‘varieties’ of capitalism also appears misdirected.52 If the state and the market economy exhibit 49 50

51

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Lee & Jo 2011. Jessop 2007b, pp. 81–82. An explication in 2010 indicates both the tenacity and the reach of his argument: The always tendential ecological dominance of capitalism is closely related to how far its internal competition, internal complexity and loose coupling, scope for self-reorganization, ability to engage in time-space distantiation and compression, capacity to displace and defer problems, and hegemonic aptitudes are freed from frictions and obstacles established by other social systems (2010b, p. 182). This of course has also been claimed by keynesians and post-keynesians, particularly since 2008 (see Clarke 2009; Davidson 2009; Skidelsky 2009; Taylor 2010), though refuted by others who see even ‘supportive’ interventions as impediments to capitalist flourishing. Jessop 2007b, pp. 68–69; his suspicions are surprising in view of the recognition of divergent modes of regulation.

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the degree of mutual determination, interactiveness, co-evolution and ‘strategic drift’ that he (with many others) allows, why should the partial ‘autonomisation of the state’,53 the possibility of changes in the balance of class forces (from good times to hard times), and differential contingencies not result in enduring public institutions and societalised structures and economic competences? It is also difficult to accept the claim that temporally specific regularisations simply shift problems onto other nations. By no means all (or even most) economic activity comes at the expense of the (global) commons. Social democrats have never needed to claim that nationally derived accumulations displace a ‘tendentially emerging variegated global capitalism’; nor do they disavow the associated crisis tendencies and need for responses. Political possibilities persist, even if the resulting accomplishments are never set in concrete. We need not deny the inference from Jessop’s analysis that economic conditions can cause current difficulties; it is also likely that past solutions also contribute to current difficulties. This is an enduring dilemma social democracy is obliged to accept. Central to Jessop’s argument, though, is his wholly defensible charge that the neoliberal upsurge of recent decades ultimately undermines substantive productive activity. This is an acknowledgement from within marxian political economy that is unusual but fundamental and essential. It links essential tenets of historical materialism to convergent and compelling strands in heterodox analysis. It shows that potentially effective policy conclusions from within marxism converge with equally credible tenets in wigforssian social democracy. The contradictions of capital (and capital’s resistance to ameliorative ‘counter-tendencies’) are more apparent and potent when capital is disembedded from social and institutional supports, without ‘moments’ when the requirements of material reproduction are purposefully met. In other words, liberalisation and ‘market proxies in the residual public sector’ recreate tensions that were always features of capitalism but kept temporarily at bay by what used to be called the mixed economy – but which marxism once dismissed as (perhaps temporary and unsustainable) frictions, fixes, constraints, regulatory interventions and compacts.

53

Jessop 2007a, p. 240.

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That neoliberal reforms, oriented to internationalisation, cannot succeed in their preferred terms reveals much about capitalism.54 The ‘politically licensed plundering of public assets and the intellectual commons’ has led to a ‘growing disjunction’ with the ‘primacy of productive capital’; this unpopular dispossession militates against the long-term ‘structured coherence of accumulation regimes’.55 As we have shown, the neoliberal experience is one of decades-long unemployment, low growth, increased inequality, slowing productivity improvement, manufacturing decline in rich countries, infrastructural disinvestment in most countries, low-quality employment, and evidently excessive consumption – all accompanied by the loss of redistributive and democratic capacities.56 To explore this paradox further, we now consider the interaction between the two (notionally contrasting) strands of political economy that have always had most to contribute.

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Towards a post-keynesian marxism Complementarities between marxian and keynesian perspectives are obvious: both have elaborated tendencies to cyclical development, in turn affirming that all knowledge in political economy should derive from its macroeconomic focus – awareness that, with the economy, the whole is 54

55

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Neoliberalism has been referred to in other ways: economic liberalism, economic fundamentalism, economic rationalism; none of these seems inaccurate. A recent rendition is the ‘great capitalist restoration’ (Stanfield 2011, Wrenn 2011). Disengagement of public and private managerial elites from the productive and macrodimensions of national economies – allowing over-expansion of financial mechanisms, impaired macromanagement capacities, restored discipline for labour and a stunningly skewed distribution of income – constituted its social basis (Duménil & Lévy 2011, ch. 1). It is associated with, but is different from, financialisation and globalisation. Jessop 2007b, pp. 81–85 and 2010, p. 184. Though this has also been rendered as ‘accumulation through dispossession’ (see David Harvey 2010), the arguments imply that dispossession’s contribution to accumulation may be minimal or even negative (unlike its role in the initial transition to capitalism). Characterised by Robin Blackburn (2011) as a new ‘great recession’ and by Duménil & Lévy (2011, ch. 2) as a ‘great contraction’.

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greater than the sum of the parts.57 As a consequence, both traditions acknowledge excess capacity problems in a ‘normally’ functioning economy – for marxism this argument stems from its conception of the inevitability of overproduction and underconsumption (see the discussion around Figure 9.2); for keynesianism, it derives from the vagaries of privately coordinated investment (item 4 in Figure 9.3). The long-term constriction of outlets for profitable investment has been postulated explicitly in marxian analysis and implicitly within keynesianism.58 Each implies, with Schumpeter, that in a low-growth environment competition may produce cost-cutting ‘forced investment’ (which increases capacity without commensurate or general increases in likely profits) by businesses that cannot afford to do it and cannot afford not to do it.59 For similar reasons, awareness of the irreversibility of investment and the unpredictability or unreliability (for enterprises) of future cash flows, together conceptualised as ‘radical uncertainty’ by the keynesians, is also central to marxism. Such are the conditions that contribute to cyclical activity and disruption. Also linking marxian and keynesian theories is an understanding that growth, or even economic activity in the absence of growth, is normally ‘transformational’.60 Market competition itself ‘selects’ not only different 57 58 59

60

Of course, this insight is not unique to marxism and keynesianism; it recurs in schumpeterian approaches too. One of several attempts to reconcile the two traditions is Joseph Halevi & Peter Kriesler 1991. See also the collection Goldstein & Hillard (eds) 2009. The issue has been a controversial one, with marxian, keynesian, schumpeterian and neo-mercantilist dimensions. James Crotty’s work on excess capacity and Ha-Joon Chang’s (2010) critiques of the recent liberalisations that produced ‘excessive competition’ (especially in Asia) establish the links between excessive investment, forced investment and stagnationist tendencies generally: ‘Coerced investment continues to reproduce excess capacity, and competition continues to severely constrain prices and profit margins. Yet core industries are, at the same time, building cooperative relations across numerous firms and many aspects of business’ (Crotty 2001, p. 32). John Bellamy Foster’s discussion of a 1946 debate between Joseph Schumpeter and Paul Sweezy concludes that the crucial question of stagnationist ‘tendencies’ in capitalism was ‘buried prematurely’ (2011, p. 11). Edward Nell 1996 and 1998. Of course, some of the transformations can become destabilising or crisis-enhancing – a recurrent theme in both marxist and post-keynesian analyses (see Taylor 2010, ch. 5).

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industries, but different problems and pressures, a different balance between politics and markets, thus different political economies. Compared with earlier stages of capitalism, markets work differently after such processes have unfolded; this explains why growth is never wholly quantitative and why the potential of politics to manage or mismanage markets varies. Marxism apprehends any opportunities, mistakes and wilfulness of political intervention in terms of the changing demands of the forces of production on the relations of production; keynesianism’s purchase depends on its recognition that ‘the economic problem’ (resource allocation in conditions of scarcity) is not the permanent problem of humanity and that, while adjustment to economic understanding is being made, practical politics may well ensure that ‘fair is foul and foul is fair’.61 Political confusions and policy errors arise contextually but for structural reasons. The ‘general theory of transformational growth’, as Ed Nell calls it, can claim generality because it repudiates the presumption in Economics that economies are all the same. Instead, they are always made qualitatively different by quantitative progress. Secular stages of development (substantive and epoch-defining transformations) may not (as with modes of regulation) be intended; in fact they may be observable only with analytical hindsight. They are typically long-term outcomes of many short-term processes. But their characteristics and effects are sui generis. Transformational growth alters the economic structure and changes social relations.62 Market economies of the early twentieth century are quite different from market economies of the early twenty-first century – corporate power, the interdependence of production and unusual governance arrangements, the 61

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The quotation, and the sentiment, is from Keynes’s ‘Economic possibilities for our grandchildren’ (1930) as well as from Shakespeare’s witches. The paradox of an ‘abundance of production’ facing a ‘shortage of consumers’, thus generating a social surplus available for alternative (social) deployments, is addressed by Mary Wrenn (2011) and James Stanfield (2011). If economies are ‘not homogeneous over time’ as Paul Davidson (2009, 2012), following Keynes, argues, then they are not subject to ergodic processes; that is, past performance and expectations are not useful guides to future economic outcomes. In an uncertain capitalist environment, the scientific pretensions of Economics as a theory of optimising markets dissipate.

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institutionalisation of labour-capital conflict, the forms and extent of state intervention, and corporate accommodation of political democracy, all attest to transformations – though of course continuities from one epoch to another are also evident. In recent decades, transformations have also included a new societal tolerance of inequalities and the dysfunctionality of finance. Marxian and keynesian insights coalesce in this assertion, whose contemporary incarnation – the ‘maturity thesis’ – is an element of postkeynesianism. Wealthy economies that have been wealthy for a long time develop distinctive properties. The major claim of the maturity thesis is that markets are increasingly ineffective for nurturing production and capital accumulation – successful economic activity under capitalist auspices is therefore ‘market-eradicating’. Marxists and keynesians express this conundrum differently: for marxism, the capitalist social relations no longer support further wealth generation; for keynesians, markets need increasing regulation.63 The two traditions might well be coaxed into agreement that the non-economic supports which productive capacities increasingly require will be embedded and, from a rationalist perspective, inefficient or unnecessary; though such reconciliation would require a shift in discourse from ‘pure theory’ to ‘full economic analysis’ (whereby the latter takes human agency and institutional conditions into account).64 Earlier, we noted that employment creation remains a worrying, somewhat intractable, political problem even when wealth creation is not; and this is the most obvious

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Wealth is defined as any developmental achievement out-lasting its productive inputs, for example, infrastructure assets whose longevity exceeds that of their creators and which therefore are bequeathed to the future. This revision to orthodox analysis has occurred in writings which emphasise embeddedness and social capital. As with all forms of social capital, however, the implied real-world ‘non-core’ underwriting of ‘core’ activity will be expensive and require investment – even if, as intended, it ultimately delivers a social return. Lee & Jo go further: in their explanation of the requirements of material production (conceived broadly as a ‘social provisioning process’), they show that a ‘social surplus’ needs to be sufficient to cover the costs of both core and non-core economic activities and that the latter include public investment, state expenditures, the institutional costs of social agency, and the costs of ensuring that the requisite activities recur over time (2011, pp. 859–860).

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pressure point on public policy, compelling a settlement between formalist and anti-formalist analyses. Employment creation requires political capacities, macrostabilising capabilities, employer-of-last-resort competences and other state proficiencies which are not focused merely on support for corporations but which nonetheless directly and indirectly expand the forces of production. Unemployment in rich countries (persisting for forty years) is a key feature of maturity. Both marxism and keynesianism are disquieted by the observation that elites are rarely troubled by either of its origins – whether transient or permanent. For both traditions, maturity involves slower economic and productivity growth (which need not provoke political unease) as countries get richer. But ongoing structural transformation, a democratic deficit and elite insouciance should cause concern. Acknowledgement that the vision of conventional politics is limited, summoning the case for more transformative, market-displacing interventions – which capital may be prepared to accept, though not publicly acknowledge – may emerge as an unexpected consequence of economic maturity.65 We see, therefore, that interdependent transformations engender a perpetual dilemma for policy and institutions, one which marxism, as much as keynesianism and reformist social democracy, now admit: the nexus between crisis and policy constitutes a set of problems to be resolved, both intellectually and practically. Marxism, as we have shown, does seem to be on the brink of prescriptive answers to the question ‘Should the state and politics be called on to regularise or ensure accumulation and profitability?’ Keynesianism for its part should be expected to deal with the associated question ‘How can policy and politics control the competitive erosion of living and working standards?’ That marxism, putatively at least, allowed for ‘counter-tendencies’ to crisis indicates that a heterodox alternative to formalistic pessimism is imaginable. If the paradox of neoliberalism is that the preferred policy settings of the age do not promote sufficient

65

As we have noted earlier, keynesianism has been more prepared to embrace experiment in this respect.

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accumulation for full resource utilisation,66 a heterodox paradox is that formalist and anti-formalist conclusions can therefore be expected to converge. The maturity thesis has only rarely been advanced explicitly; but it is an identifiable hypothesis deriving from the combined concerns of Thorstein Veblen, Joseph Schumpeter, Andrew Shonfield, John Kenneth Galbraith and Edward Nell.67 These imply a specific view of capitalist development. The argument is that, as they do their job of producing and innovating and generating wealth, the resource-allocation functions of markets generally recede, to be replaced by administered or negotiated decisions (even in the private sector). To insist on market purity is to distort the polanyian trends that gave civilisation its early leverage over an unconstrained economic logic. Political and organisational developments which had been engineered in the postwar period to secure correspondence between the needs of producers and the needs of populaces were also developments that progressively ‘deglobalised’ the contemporary world. They inaugurated scope for national innovation and democratic determination and international diversity that had until Keynes been associated mainly with mercantilism. The social settlements and class compromises after 1945 – which frustrated endorsement of market supremacy and began a long transition towards institutionalisation of economic judgements 66

67

In the collection compiled by Goldstein & Hillard, the neoliberal paradox is presented as the tendential outcome of a sequence: perpetual tendencies towards underconsumption are exacerbated (not caused) by redistributive shifts of income away from labour – originally resolved (temporarily) by the spread of two-income households, consumer debt and asset-price inflation. Eventually the underconsumption provokes coerced investment which expands capacity and further aggravates the original excess-capacity problem (2009). Veblen 1898a, 1898b, 1899; Schumpeter 1940, 1943; Galbraith 1977, 1987; Shonfield 1965; Nell 1996, 1998. It could be argued that more-or-less marxist versions appeared in Baran & Sweezy (1968) and in the discussions and debates that followed (Mattick 1969, Horowitz 1973). The argument for ‘market-eradicating maturity’ is criticised by Howard & King; but even they admit that ‘any adverse effects on economic activity generally [caused by financial crises] would be limited by the size and extensiveness of government expenditures’ and that ‘social welfare programmes for the vast bulk of people continue’ (2008, pp. 235, 238) – that is, precisely the characteristics of maturity we have extolled.

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and class conflicts – were the major empirical events thought to instantiate this aspect of capitalism. So the disruption of these tendencies since 1974 amounts to an assault on democratic human achievement of considerable moment. It is not that market-promoting measures do not have a relentlessness of their own; it is that they are not unstoppable – they have not always prevailed, and need not in a democratic age. Clearly the point is controversial. A certain form of economic realism from within marxism has often won out; it has been thought that challenging markets is idealistic – though obviously not because the economicliberal case is unassailable. In political-intellectual disputes such as these, analysts and commentators reach different conclusions when reviewing the same historical evidence.68 Liberal discourse carries a lot of weight, deadening unfamiliar possibilities. Social democracy needs to renew its own principled understandings of political-economic options – and their limits – for the present time. Advocates of the maturity argument accept that capitalism generates contradictions and that state capacities or political interventions to resolve them will not proffer permanent solutions – any more than arrangements by capital to secure its favoured conditions for the production and extraction of surplus can be everlasting. We have already noted that contingency in economic life (especially the need to ensure that non-economic conditions for production are periodically created and recreated) ranks among the circumstances that make politics inevitable. The institutionalists, conservatives, keynesians and post-keynesians listed above – with epigones broadening the evaluations more recently – all hope and expect that democratic opportunities will be enhanced by productive capitalist development (because autocratic, self-serving or finance-led forms of capitalism are no longer compelling). If the retreats from markets associated with postwar macromanagement, the welfare state and regulatory embeddedness are signs that economies can never be purely liberal, we must still accept that the political and institutional ‘forms’ most conducive to the forces of production and accumulation are not knowable in advance, but are varied and manipulable. Paradoxically, state activity that is in the interests of capital is never wholly 68

Howard & King themselves retain intellectual allegiances straddling marxism and post-keynesianism.

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in the interests of capital. The mixed economy that emerged after 1945 established state institutions as crisis managers, employers and social providers; but the cost to capital was higher taxation and public spending, with public enterprises sometimes becoming monopoly suppliers of infrastructures and services – and competitors. As capital itself became more organised, powerful, bureaucratic and willing to countenance negotiation with the state and the organisations of labour, that is, only rhetorically in thrall to market disciplines, competitiveness, flexibility and ideological purity, the conditions of social life became increasingly ‘socialised’. Political opportunities opened. Decommodification of consumption was only one manifestation of the trend;69 but it damaged the integrity of the selfsufficient individual far more than it damaged business interests, capitalist development or affluent countries’ living standards. Markets as such became irrelevant to the private sector and a gulf between criteria governing efficiency and productiveness opened up. Conflict remained incessant – between labour and capital, between financial and productive auspices, between national and international priorities, all the conditions of capitalist life which mandated postwar regulatory achievements – and it is so notwithstanding the uneven emergence of institutional developments to manage it. The rights of labour do clash with those of property (by dint of the former’s attachment to a broad conception of human progress), but the continuing supremacy of finance and its demonstrated ability to incapacitate all capitalist calculation does far more harm to both general prosperity and the productive forces. Impediments to production include financial instability, but also underdeveloped and under-maintained institutional competences. The maturity thesis, in conjunction with conceptions of transformational growth, explains why the conditions which maximise profitability for capital or optimise its control of its operating environment are not discernible in advance. It equally ensures that impositions on the market principle and the autonomy of finance by quite significant levels public activity, even including ‘employer-of-last-resort’, ‘financier-of-last-resort’ and ‘coordinator-of-last-resort’ facilities and other political peculiarities,

69

Continuing still in the USA, the UK, Germany and Japan, for example.

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do not routinely result in what the public-choice theorists call ‘moral hazard’ or the abuse of politics. It is neoliberalism – deliberate attempts to reassert market purity in a system where it never substantively operated or belonged (including the licence captured by the finance sector) – that has been abnormal. The opposite case, the argument against the maturity thesis, insists that market purism reigns, whether at the hands of marxist or economicliberal traditionalists. It interprets contemporary developments more austerely (though also more tortuously) than our argument above. Michael Howard and John King, as the major protagonists for the view that markets only temporarily and contingently lost their potency as determinants of production and competition, during the ‘age of catastrophe’ from 1914 to 1945, then insist that social democratic political achievements have been transitory. Contemporary changes within capitalist organisation have reversed previously observed trends towards bigness, vertical integration and economies of scale, they say: small-scale production and outsourcing (especially in service industries) have been facilitated by technological change (in transport, communications and computing), which has then transformed cost structures in directions which enhance market dependence. Controls on finance (the ‘repression of finance’) during this period were aberrant.70 The ideational aspects of neoliberalism have also been overstated, they argue – though professionals’ activities have become ‘dangerous’.71 Within social relations, workers are less inclined to

70

71

Howard & King 2008, ch. 6; but see also Panitch & Gindin 2010, Panitch & Konings 2009 and, from a different intellectual perspective, Niall Ferguson 2011. All claim, for example, that the financial excess inaugurated and required by neoliberalism was immanent in the logic of unregulated capitalism. ‘Within the framework of capitalist relations of production, finance exercises an influence far exceeding its relative size’ – it is, after all, infrastructural (Howard & King 2008, pp. 195, 199, 233, 236). They suggest that a conception that the role of elites is predatory is ‘genuinely absurd’ (2008, p. 237). Chrystia Freeland (2011) doubts the absurdity; Colin Crouch (2011) depicts it as an increase in corporate influence (over both politics and markets) while Duménil & Lévy see it as a ‘compromise to the right’ at the behest of the ‘managerial classes’ – ‘neomanagerial capitalism’ is a ‘thorough alignment’, a ‘new balance of power between managerial and capitalist classes in favor of managers’ (2011, pp. 18, 330).

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be collectivist; self-employment has spawned a generation of ‘employees’ ‘wholly committed to the market’,72 private housing and private pensions funds mean ordinary people have become more tied to markets; the commodifying possibilities of domestic labour have expanded; marketmimicking arrangements increasingly prevail within bureaucracies; and managerial discretion in the private sector has been superseded by financefriendly rules. All these developments have been immanent in twentieth-century capitalism, Howard & King claim. They see any disconnection from the market as only apparent, and weakening in the longue durée. Developments in the ‘capitalist state’ have confirmed, not disrupted, capitalism’s enabling social conditions. Increases in public sector spending and decommodified provision have been insufficient to negate the neoliberal priorities of macroeconomic management (away from full employment and equality, towards a more dogmatic monetary policy stance with deflationary biases) and more unforgiving attitudes to welfare and to politics itself.73 The upshot of this line of argument is that the neoliberal trajectory does not imply less ‘weight’ or power for public agencies and is quite compatible with authoritarian impulses. As opposed to the maturity argument, Howard & King imply that ‘state failures’ and inefficiencies are genuine and problematic, that the organisational forms most conducive to capital’s hegemony over production are known or knowable, and that the overall trend of capitalist accumulation is constant, predictable and given by a (global) market logic. The inefficiencies referred to were, of course, the selective, modernising industry supports central to the postwar settlements. Neoliberalism is not seen as aberrant; it recon-

72 73

2008, p. 174. 2008, pp. 186–187. They argue that the neoliberal character of the European integration project was cemented by a ‘reduction of state subsidisation to “national champions” (which) thus promoted hard budget constraints through privatisation and harmonisation of neoliberal re-regulation’ (2008, p. 217). Wolfgang Streeck endorses the line of argument by noting a ‘secular invasion of social life by market forces’ also seen as an anti-political ‘sociation by consumption’ (2012, pp. 32, 35).

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stitutes the market-affirming necessities that always characterised capitalism.74 It is these four claims that we dispute. Social democracy needs to understand and re-embrace the intellectual controversy arising from the political economies associated with the marxian and keynesian traditions. It needs to mould the tensions between alternative understandings into coherent practical politics – what Wigforss understood as programmatic clarity and proactive statecraft – not only for the near future, but for as long as capitalism and the state exist. These disputes are the stuff of the world; they will never disappear or be resolved to the satisfaction of all. They include real political predicaments over whether polities should accept or resist globalisation – with marxism usually, though not unambiguously, presuming that the pertinent dynamic of capitalism is global accumulation, and keynesianism usually, though not unambiguously, ceding legitimacy to political interventions into the accumulation processes.75 Fortunately, political and intellectual progress in this respect is implicit in the ideas themselves. Marx provided the nineteenth century’s leading anti-liberal critique of capitalism and Keynes was the twentieth century’s leading anti-economic-liberal and critical commentator; yet they each initiated schools of thought which should have engendered more common ground than has been apparent. In chapter 9, we explained that Marx was firmly in the 74

75

Howard & King 2008, pp. 210–217. A list of the retreats since 1974 that can only be regarded as deliberate, and in many respects bizarre (because of their long-term effects on wealth and political capacities), is provided by Robin Blackburn 2011, pp. 35–38. Also in contrast to Howard & King, Duménil & Lévy offer a critique of neoliberalism to which ‘corrections must be expected in the longer run’ because its chances of developing sufficient investment, particularly infrastructure, are ‘rather limited’. Financial and corporate excesses during recent decades have been ‘pillars’ of neoliberalism but a ‘major drain’ on the surplus generated. And a ‘new social order’ (post-neoliberalism) can be imagined (2011, pp. 326–331). See of course note 65. Among numerous comparisons of the two perspectives is Gerald Epstein’s ‘The case of capital controls revisited’: ‘Marx tended to argue that capital mobility, as a reflection of the power of capital, was a juggernaut that would wash over the globe […] eventually increasing both the forces of production and the class struggle. […] Keynes, on the other hand, believed that capital controls and government control over important aspects of social investment could tame capitalism, […] national capitalism, protected by capital controls, was possible’ (2009, p. 238).

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classical tradition, extending the analyses of Smith and Ricardo and sharing their abstract methodology. His critique, based on theories of exploitation and crisis tendencies thought to apply universally, implied that the state could not be expected to resolve crises, but other parts of the corpus were readily compatible with keynesian ideas.76 Core marxian insights, that market processes initially spur development but later impede it, and that bourgeois forces pressure governments to adopt liberal policies, would not be unfamiliar to the author of ‘Economic possibilities for our grandchildren’. Nor would the centrality of labour to the accumulation process. Regrettably, neither Marx nor Keynes fully elaborated labour’s alternative role in the politics of capitalism. Marx and marxists often thought marxian analyses held only revolutionary consequences. Keynes had reformist intentions that keynesians usually thought had only evolutionary implications. With the thrust of these suppositions, we disagree. We can delve further into the political implications of keynesian presumptions by contrasting the contributions of Wigforss with those of Keynes. Figure 10.2 shows that the two understood the potential of politics and policy differently – with Keynes gradually becoming more cautious and apparently unwilling to disrupt the institutional and disciplinary status quo.

76

These ‘other parts’ include the pregnant issue of what is to be done when the relations of production are generally recognised as hampering (further development of ) the forces of production. It is at this point, we suggest, with other contributions to heterodox political economy, that the abstract conceptions preferred by marxism come up against more obviously empirical, and political, dilemmas. A crucial instance of the problem is illustrated by the activity of the finance sector – which both marxism and keynesianism see as hampering capitalist development. For the former, finance’s quest for profit is incompatible with production-based surplus value creation; for the latter, it breeds changed (and wasteful) behaviour among both producers and consumers: see Taylor 2010, ch. 9 (as well as Lanchester 2012 for a novelised version). For such reasons, as we have claimed above, deductive and inductive forms of reasoning diverge less than expected.

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Figure 10.2: Parallel political concerns of Ernst Wigforss and John Maynard Keynes. W IGFORSS

KEYNES

Politics must prioritise democracy, morality and proactive statecraft (Statecraft = recognising opposition, developing public competences)

‘Progressive liberalism’ became ‘liberal socialism’: wanted to preserve moral principles of liberty; wary of laissez faire but ‘politicisation’ overrode democratisation

Political arrangements can protect society from inequality, unemployment, cycles, competition, and disruptive effects of markets

Unemployment is the main source of inefficiency and inequality; so volume & direction of investment should be ‘socialised’ (individual initiative is not diminished by regulation of total spending)

Industrialisation and democratisation permit new anti-economic-liberal possibilities: collectivism, autonomy of values, self-rule, citizenship, welfare state, full employment, collective capital formation

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Limits to market liberalism (including social liberalism) become ever more apparent; though counter-cyclical policy ‘solutions’ don’t eliminate endemic problems Traditional welfare state & labour market policy cannot address mass structural unemployment or lack of democracy in economic sphere The economy assumes a ‘social character’: new institutions, new responsibilities, new competences, new opportunities (for labour) Evolutionary tendencies should be exploited (political democracy → social democracy; welfare state → decommodified provision on universal principles; growth of state → expansion of political possibilities; elimination of market elements in the ‘labour market’)

Consequentialist ethics: rationality depends on circumstances (no general principles) State should embrace desirable projects and be semi-autonomous; parliamentary control and a ‘public service tradition’ Political arrangements should use ‘sound economic means’ to allow desirable inefficiencies Private organisations become more like social institutions (– though new forms of governance only minimally explicated) Economies, polities & societies evolve: experiments become possible (quest for best ‘mix’ of public and private) Evolutionary solutions: existing tendencies should ‘guide’ new policy programmes Ultimate objective: let society, through the state, control its destiny; downgrade the ‘economic problem’ and monetary incentives, enlarge scope of unproductive activity, expand aesthetic dimension.

Wealth-creation & politicisation / democratisation become self-reinforcing.

The problems Wigforss and Keynes independently addressed in the 1920s & 1930s still confront the political left in the early 21st century – a pessimistic assessment of feasible social democratic policy directions and a resulting crisis of confidence, strategic and political.

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Figure 10.3: The social democratic purpose: reconciling post-keynesian marxism and postkeynesian social democracy. Views on capitalism

Views on neoliberalism

Political problems and challenges

Political pessimism 1: Neoliberalism is a logical outgrowth CAPITALISM of capitalism: (Howard & King) it’s mandated by normal capitalist development.

Political interventions Post-1945 interventions are disruptive / were unsustainable; aberrant / temporary. structure-altering decisions are unlikely.

Political pessimism 2: Neoliberalism is DISCONTINUITY IN new, a preference CAPITALISM but not of finance capital: in politics and but it undermines regulatory ambitions authentic capitalist (Jessop) economic activity.

Political priorities of economic liberalism disrupt economies (the regulatory mode of neoliberalism doesn’t support stable accumulation); ‘fixes’ become necessary.

Post-1974 political possibilities are constrained by reluctance to envision structure-altering politics and institutions.

Political economy of Neoliberalism after 1974 has been part (recognising the of the eternal ebb rapprochement and flow of political between postinfluences on the keynesianism and economy – though it marxism) was a political defeat for keynesianism and social democracy; crisis tendencies persist.

Counter-tendencies to crisis are structurally generated but can also be exploited by voluntaristic politics (an action programme which secures full employment, economic democracy, decommodification and equality). Capitalism changes.

Politicisation is inevitable; it generates emergent properties (its institutional forms evolve according to ‘habit, example, instruction and reflection’); consistent adaptations can transform the economic structure.

CONTINUITY IN

SOCIAL DEMOCRACY Copyright © 2013. Peter Lang GmbH, Internationaler Verlag der Wissenschaften. All rights reserved.

Views on intervention

MATURITY

→ →

EVOLUTION

STRUCTURE-ALTERING DECISIONS ARE IMAGINABLE.

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Our alternative, deriving from what we have called ‘post-keynesian marxism’, is summarised in Figure 10.3. Recognition of structural contradictions in capitalist development need not imply that these remain intact after political responses to them. Keynes and his followers did identify tendencies towards secular stagnation;77 though this was a conclusion based on analysis of the empirical present and their awareness of uncertainty rather than being derived from theorised structural conditions.78 Keynesian critiques of orthodox methodology were implicated in the observation that past motives for prosperity (laissez faire) were now (by the 1920s and 1930s) exhausted, that the autonomous dynamic driving economic activity was too weak for the task, that income and employment security could be improved through policy intervention (and that this in itself would improve economic performance), that crises were problems to be resolved, that the expansion of policy options would transform important elements of capitalism, and that wealthy economies offered more scope for politics. George Katiforis has made just these claims, which push Keynes’s ideas in the direction of a post-keynesian marxism, in a long and insightful comparison which concludes that the differing methodologies in marxism and keynesianism do not preclude convergent political inferences.79 Concern over the corrosive effects of financial calculation on production is an obvious instance. Marx and Keynes employ quite different rhetoric of course, but both seem to expect that the economy will be forced by circumstances to adapt fundamentally. It might be said then of both Marx and Keynes, first, that their vision failed to influence politics in directions that social democracy 77

78 79

See Soo Haeng Kim, who notes that Keynes’s secular stagnation thesis has acquired a ‘theoretical and ideological status’ commensurate with Adam Smith’s ‘fantastic “invisible hand” thesis’ (2009, p. 229). See also notes 59 and 66. At its core, this is the issue that divided Malthus and Ricardo, and then turned Keynes against the latter (1933b). It has divided economists outside the marxian and post-keynesian traditions ever since. Radical or ‘fundamental’ uncertainty implies that, regarding the outcomes of business investment, the future is non-ergodic (see note 62). George Katiforis ‘Keynes as a bourgeois marxist’ (2004). Katiforis’s discussion of Keynes’s socialism is more sympathetic (and, in our view, more defensible) than Kim’s (see note 76 above).

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has grappled with for a century and, second, that thanks to a methodimposed reluctance to acknowledge a messy or complex reality, the social democratic task of determining a volitional politics in the face of structural change has continued to falter unnecessarily.80

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Conclusion The basic contradictions of capitalism have not been transformed by the evolution of economies towards ‘maturity’ since the depression of the 1930s. Nonetheless, the possibilities of politics were re-awakened at that time and, for this reason, the state’s relation to the economy changed, with the emergence of more consistent appreciations that the positive contribution of the state to economic performance would be periodically resisted, both in practice and in discourse. While we do not expect that conflict between the forces urging a determinant role for market principles and those in favour of more post-liberal, or post-capitalist auspices for production and accumulation will subside, we do suggest that social democratic responsibilities for the latter need to be affirmed, institutionalised and embraced in a popular counter-hegemonic discourse for our age. Our task in this chapter has been to indicate that diverse analyses from marxian and keynesian political economies have had more to contribute to the social democratic project than most contributors to the controversies over the 80

We note that the vision was recognised early, particularly in 1945. Douglas Berry Copland’s Godkin lectures at Harvard University were explicit about the social democratic tasks for postwar keynesianism: Capitalism under the control of the entrepreneur […] does not give economic security; […] it does not [allow] increased technical efficiency [to be] transformed easily into a generally higher standard of living; it does not furnish society with the social institutions required to meet the strains imposed by economic fluctuations; […] it does not provide the increasing range of free or collective goods that enter more and more into the standard of living […]’ (1945, p. 1). Wigforssians would argue here that sometime in the ensuing 30 years the vision was lost or abandoned. For contemporary keynesians, the world has been blighted by ‘cognitive misperceptions and inappropriate actions’ (Taylor 2010, ch. 9).

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limits and possibilities of politics in contemporary capitalism have been prepared to admit. The state has not only increased quantitatively in relation to the market; its capacities and institutional compass have evolved as well. In accordance with the emergent-properties principle of evolutionary theory, the state in advanced capitalist polities now performs functions unanticipated by earlier generations of statists, reformers or their critics. The increase in decommodified social provision is a visible and important indicator of the evolutionary potential of modern state activity: the welfare state is now not so much a provider of compensation for lost income as a provider of services and amenities outside the market, thereby extending citizenship entitlement and broadening latent demands. In this way, behaviours, practices and collective possibilities have been transformed. We have concluded that there is a tendential evolution towards enhanced state capacity, with greater democratic potential, more production directly tied to politically or socially mandated need and expanded, more responsive, institutional management. This being so, the evolutionary tendency has also facilitated a transition in capitalist economies towards organisms that can be more assuredly productive – albeit needing constant adjustment of regulatory arrangements every bit as sedulous as the incessant pressures for their dismantlement. In our view, Bob Jessop’s marxism has not been as prepared to discuss the political possibilities (possibilities and compossibilities, he calls them, indicating that conditions for existence need to be nurtured and protected) as his analysis allows. Undeniably, though, contemporary state theory has opened up discussion of the state within marxism so that its estrangement from post-keynesianism is now less tenable. The terrain may be riper than ever for the wigforssian project to be re-activated in a way he always considered necessary – with recourse to the fullest scope of analytical inputs. Despite acknowledging the political openness of the future, and the substantive hollowness and ineffectiveness of the liberalisations of the past thirty or forty years, the recasting of marxian state theory nonetheless appears still to preserve marxism’s reluctance to advance optimistic conclusions. But marxian political economy has more to offer than defeatism – especially as a marxist reformism based on an understanding of the counter-tendencies to crisis (that is, state attempts to manage the macroeconomy, 427

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state attempts to secure accumulation, state activity that results in decommodification, and state sponsorship of non-market auspices for economic development) is affirmed as a logical and intellectually robust conceptual development. Continuing politicisation of economies, and the continued expansion of decommodified provision, with continuing diversity in modes of regulation and country clusterings both in ‘hard times’ and in times of ‘recovery’ together suggest that the trajectory of institutional and state development instigated in the immediate postwar years remains extant – though a history of successful management obviously has not conformed with the possibilities. Jessop’s emendations to marxist views on the state’s relations to markets in contemporary capitalism have been important, not merely because they bring marxian thought on political possibilities closer to non-marxian perspectives nor even because they mollify marxism’s abrasiveness, but because they simultaneously enrich both the conservative-statist tradition and social democratic reformism. Awareness of an imminent co-evolution of accumulation and regulation was always latent in political economy; today it is able to expose enhanced opportunities to analysts and practitioners alike. Marxian political economy, while magisterial in its capacity to understand the common primary structure of capitalist economies, has been less effective in its capacity to grasp the impact of difference and departures from the paradigm model and subsequent evolutionary tendencies. Its responsibilities in this respect have been largely absorbed by post-keynesian theorisation – always more prepared to embrace the non-economic realm. The resulting disputes – over whether contemporary crisis-encumbered capitalisms have developed market-eradicating propensities – themselves are serving to illuminate features, and therefore institutional channels, which add gravitas to the social democratic project. Clearly much remains to be accomplished, both intellectually and practically. Realistic appreciation of the contradictions, conflicts and crisis tendencies in all market-driven economies is marxism’s and post-keynesianism’s combined contribution to a ceaseless project. Political economy thereby provides ‘knowledge conditions’ with which human intentions and political action can transform crisis into institutionalised solutions to crisis tendencies. Social democracy should now also be able to re-enliven its own 428

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search for distinctive though informed progressive responses. We have asserted that morality and democracy are integral to the social democratic political project – they enhance commitment to high-quality and sustainable private economic performance. Therefore social democratic governance should shed its too-frequent propensity to acquiesce to internationally oriented financialisation and methodological orthodoxy.81 Just as conservative statism struggles to ensure that institutional accomplishments are resilient in the face of the vicissitudes of political contingency, marxists – now also alert to the ‘precarious co-presence’ of crisis and responses to crisis – are also in a position to ensure that political pessimism does not inflame new rounds of policy denunciation. Enduring societalisation can never be guaranteed, even if structural conditions are making it ever more imaginable and viable. But the ongoing challenge for any political programme is to simultaneously maintain prosperity, civility and the progressive commitment to a lessening of inequality, exploitation, insecurity and the indifference of others. The diversity of modes of effective regulation of contemporary capitalism, together with the survival and durability of trends established in the glow and enthusiasm of 1945, confirm that the social democratic challenge remains conceivable. Variations in regimes of capital accumulation mean that the ‘effects of habit, example, instruction and reflection’, as Darwin put it,82 serve the survival of adaptable variants of capitalism and thence encourage (differential) reproduction or replication of the most adaptive forms. The selection process, however, remains vital; it is at this stage that human agency, democratic determination and deliberative institutions with requisite competences all play their part. Social democrats can never rely on unguided, autonomous evolutionary processes, any more than on ‘general theories’ of capitalism, to produce betterment. As Veblen once remarked, evolutionary sequences also produced rogue species, false starts and ‘imbecile institutions’.

81 82

Howard & King refer to this as an understandable passivity within advanced capitalism (2008, p. 238). Taylor calls it a ‘complicitous silence’ (2010, p. 345). In The descent of man (1871, p. 332 and elsewhere). The epigram at the beginning of the chapter is from Darwin’s letters, published in 1887.

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Conclusion

There is no paradise at the dawn of human history and there is none at its end. […] Each generation must solve its own problems. Ernst Wigforss

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[W]e are intuitively familiar with issues of injustice, unfairness, inequality and immorality – we have just forgotten how to talk about them. Social democracy once articulated such concerns, until it too lost its way. […] Social democrats across Europe are hardpressed to say what they stand for. Tony Judt

An alternative to markets and to the disruptions they cause always exists. And nothing can repress movements around ‘moral sentiments’ in aid of social decency and cohesion. Humanistic desiderata do not obstruct any progress worthy of the name, and democratic polities cannot allow flawed ideas to reverse decades of collectivist accomplishment. Rather, they must position themselves to confront and exploit new forms of the antagonism – persisting in the west for seventeen decades – between market-driven development and what Karl Polanyi termed the self-protection of society. Prosperity in any form depends on political will and societal achievements; and it is these that need to be advanced, reconceptualised and maintained in wealthy societies. Social democracy asserts that citizens are entitled to an equitable share of whatever living standards their society is capable of producing. And even though the gap between imaginable and actual living standards in western countries – a gap indicated by unemployment, inequality and unmet social aspirations – has been widening in the past few decades, social democracy continues to resist the unoriginal idea that politics rarely achieves all that is possible. Politics can in fact redress new imbalances and extend the democratic impulse, only if it confronts the ‘cognitive misperceptions and inappropriate actions’ that have occasioned so much recent damage. 431

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The political threat that democratic polities face time and again is the enthralment of public economic management to the academic discourse and self-serving theories of economic liberalism. The test of an hegemony is its ability to keep any opposition to it dispersed and incoherent – a task achieved repeatedly in claims that economic orthodoxy is the only harbinger of progress. Ernst Wigforss’s historical importance lay in his joining the leadership of a potentially counter-hegemonic social democratic labour movement, and from that vantage point loudly observing that the economicliberal emperor was stark naked. The ideological spell was thus broken. Far from being mutually frustrating, he suggested, the values of maximising useful wealth, public amenities, social security, social justice, and democratisation of all aspects of communal life, constituted an integrated social democratic matrix, one capable of generating coherent policy responses to all socio-economic contingencies. His party’s crisis programme of 1932 to meet the great depression was its first product. The social democrats duly presented it to the Swedish electorate in 1932, and within months were able to form the county’s first majority government in democratic times. With economic liberalism discredited, its political champions in Sweden lost majority status, and their sole ideological stock-in-trade; in this way they were to endure 44 years of electoral eclipse. Under social democratic auspices, Sweden matured from a poverty-stricken backwater to an internationally acknowledged paragon of competitive industrial success underpinning well spread affluence, social equity and comprehensive social security. The labour movement grew into the central bearer of this development, and in turn spawned new public institutions to keep moving it forward, typically along the lines Wigforss himself sketched for a good society supporting a good economy. From the mid-1970s, the Swedish social democratic party lost touch with its wigforssian legacy, and distanced itself from its union affiliates which retained it. The party’s subsequent electoral decline, globalisation, Sweden’s EU membership from 1995, and the international resurgence of economic liberalism (rebadged as neoliberalism) have eroded much of what was distinctive in Sweden’s socio-economic arrangements, even if Swedish unionism has largely kept the faith with the wigforssian matrix, on the basis 432

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of which it has been able to make common cause with other social movements. In restoring the old hegemony, the neoliberal pressures in question have denatured reformist parties throughout the western world. The latters’ current lack of direction and inarticulateness defy credulity, not least in Britain. Wigforss himself mined Britain’s progressive intellectual tradition – collectivist liberals, fabians, dissenting economic theorists, left-labour thinkers, and even conservatives such as G K Chesterton – to formulate his own vision of economic efficiency in the service of reasonable affluence, social justice, equity and inclusiveness. Earlier glaring mismatches between technical possibility and actual outcomes have recurred in our own time, thus shrinking the possibilities of future development as well. How is it possible that long-debunked deregulatory policy and the predictably skewed outcomes of market mechanisms – thanks to which an insatiable kleptocracy occupying the commanding heights of unregulated financial sectors in London and New York brought most western economies and many others to their knees in the global financial crisis – still prevail? In an age of excess capacity, overproduction, and flagrant waste of financial resources, neoliberals’ convoluted invocations of financial and proprietorial licence divorced from substantive objectives attract catastrophic consequences. For each expansionary possibility denied, a democratic or developmental potential remains unachieved, and old intellectual battles need to be re-fought. In political economy, the worst often prevails. Explanations of economic liberalism’s apparently eternal recurrence surely include references to the histories and institutional sociologies of the reformist traditions in question. But one explanation is certainly not available – the lack of a clear alternative to economic liberalism. In this book we have retrieved Ernst Wigforss’s vision and game plan in the struggle against economic liberalism, and the matrix he and his heirs used to incubate policies to nurture an affluent, fair and decent society. And as our data show, despite the best efforts of neoliberal public economic managers in many countries over many years, long-term trends in public spending, the public sector’s share of national income, public indebtedness, and the share of GDP going to social transfers have all defied them. Wigforssian social democracy today would again target the programmatic weakness and political paralysis of the left and allow it take 433

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advantage of these historical trends. It would put an end to recurring cycles of disheartening and enervating politics, the history of which does not imply fate. These issues will not be settled in technically rationalist terms – either for those whose interests seem to align with a ‘pure’ capitalist economy and ‘economic rationalism’, or for their opponents who embrace postenlightenment efforts to enhance wellbeing. As we have noted, Wigforss appreciated that new institutions able to give democratic shape to human aspirations were viable even under conditions unfavourable to radical programme-building. New institutions in turn foster measures to politicise industrial renewal, societal mechanisms to continuously expand extra-market provision, and the enlargement of participatory arrangements encompassing both social and economic life. This is the gist of Wigforss’s legacy. In its spirit we can appreciate why ideas from Marx and Keynes, and institutionalism and social science as a whole, continue to inform policymaking and institution building. A contradiction always ripe for exploitation is that an ostensible liberal goal – wealth creation – depends on the public regulation of the liberal holy of holies, private proprietorial prerogatives. Today’s most important controversies derive from the interpretive difficulties encountered in any heterodox political economy. Throughout this book we have explored conceptual developments in social science that now transform understandings of the effect of politics on economies. Six characteristics of modernity – complexity, uncertainty, maturity, interdependency, emergence and evolution – render the political possibilities which Wigforss envisaged far less illusory than orthodox theory would have us believe. If the course of accumulation is not determined entirely by a putative logic of enterprise-based accumulation, then an expanded range of intellectual conflicts becomes essential, as political possibilities are re-awakened. In its own inarticulate way, contemporary western capitalism is itself generating the trends which a resurgent, policy-savvy social democracy could guide towards a convergence of sustainable affluence and humanistic values. Social-democratic possibilities have never been as salient as they are today. History will not lightly forgive those who neglect them. 434

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