Reinventing Social Democracy: An updated Swedish model

Bo Rothstein

Well, Bo, thank you very much for joining us today to do a SWOT analysis of the Swedish Social Democratic party SAP. What is the historic position of the SAP in the Swedish political system and where does it stand currently?

Well, the Swedish Social Democrats have I think forever, at least since back in the 1920s, been the largest political party. They have been out of power of course now and then, but it’s for sure the dominant party, yes.

Although it’s smaller now than it used to be, I think its record score was over 50% of the vote, then for many years it was around 45, 40% and now it’s down to a little below 30. But it’s still the largest party.

It still has a dominant position in the political system?

Yes, and currently it’s in a coalition government with the Green Party with some parliamentary support from the Left Party, but it’s a minority government.

The parliamentary situation is complicated because we have an anti-immigration, xenophobic party known as the Swedish Democrats. Unlike similar parties in Norway, Denmark and Finland, this party has clearly a brown heritage.

I mean, there are populist, anti-immigrant parties also in other countries and they are populist/anti-immigrant but this party in Sweden has clear historical connections to Nazi and fascist organisations. So that makes it basically an untouchable party. Although it’s the third largest party, nobody so far wants to collaborate with them.

If we come to the starting position of a SWOT analysis, in your view what are the strengths and the particular weaknesses of the Swedish Social Democratic party?

Well, I think I can speak for this type of social democracy in general. The strength is that the facts are on the side of social democracy. By that, I mean there are now a lot of measurements, rankings and studies comparing countries on everything from economics and things like the population’s health of course, but also things like are people happy, gender equality, innovation, do people trust other people and so on.

If you put all these measures together, there’s a very clear result. The traditional, northern European, social democratic model, which has been replicated to quite some extent in countries like Australia and Canada, beats everything else.

This is the model that creates on average most human well-being. This is not to say that there are not poor people or unhappy people or miserable people in this model, but much, much less so than in any other model that has ever been invented.

So that leads us presumably to some of the weaknesses that we see across the Western world?

It’s a little paradoxical. Take Portugal which avoided austerity policies. That went very well. They went for classic Keynesian ways to handle the crisis, unlike Greece, for example, and Portugal is now going well.

If you have this facts-based or evidence-based or enlightenment-based idea that we should have a system or socio economic model that creates on average most human well-being, then there is nothing that beats this traditional, northern European, social democratic model.

Those right-wing parties that have managed to come close to this success, like for example the German Christian Democrats, have basically copied lots of what was in the traditional social democratic model when it comes to social insurance and so on.

This was of course also the case in Sweden when they ruled those eight years under the right-wing (Fredrik) Reinfeldt government; it didn’t actually change much of the social democratic model.

If you get onto the weaknesses, are we seeing a disconnect between the facts and perception in much of the Western world?

Yes, but if I had any advice, I think this is the time to stand up against alternative facts and fake analyses of politics. What the social democrats should do is say: “Hey, look at the facts, look at the figures, look at the evidence. We are not perfect but has any system, be it communist, Nazi, fascist or capitalist, created a better model? No. The answer is no, no, no.”

At the same time though, social democratic parties are very much under pressure. So where do you think the particular weaknesses are?

Well, one weakness is self-inflicted and that is that identity politics has taken over. I think for many reasons, that is a blind, dead alley to go down because it just creates divisions.

In the 1970s, the Swedish Employers Federation launched a big ideological campaign that was new for them, saying: “You should mostly look after yourself. You should be an individualist. Self-interest is good.”

Identity politics is very much this sense of self-interest: “I, I, I, my group, we need more, more, more.” It used to be the case that leftist politics was solidarity with other people, with the working class, with people who are poor, with the fighting people in Vietnam, what have you. Now, it’s basically self-interest and identity politics.

I think this is a blind alley. It just creates divisions. Instead of universal policies that cater for everyone, you split it up into group-based politics and that doesn’t work politically.

The other thing is of course that the Social Democrats haven’t found a good way to handle the immigration issue.

Are there any suggestions that you would have especially when it comes to immigration? I know it’s also a big issue in the Swedish discussion.

I have no way to make a political slogan of this, but my recipe would be tough love.

What does that look like in practice?

In practice, it would look like this: Yes, we should really have a generous policy when it comes to refugees, but they have to play by our laws. They cannot create parallel societies with parallel systems of justice and issues about gender equality and so on.

Of course, with immigrants, if it comes to criminality and so on, we should be tough. So, tough love would be my way – we should be generous, but also say: “If you come here and we let you in and we will help you as much as we can, you have to play by our rules. You can have any religion, any values, any ideas you want, this is a free country, but our laws, our rules are the laws, the rules. Period. We will not accept parallel societies.”

You’ve also referred to what you said as the fateful shift away from socio-economic issues towards identity politics. Do you see this also as the underpinning of the oft-cited divide between communitarian roots and the cosmopolitan elite? How do you think this division can be bridged?

I don’t recognise such a big division. My explanation for the Brexit referendum, the Trump phenomenon, is a little different.

This cosmopolitan elite, the well-educated people like you and me, we have gained a lot from globalisation, but what was forgotten, especially in the neoliberal countries, was that there would also be quite a number of losers. People would lose their jobs, they would have to move and the losers weren’t taken care of.

This is nothing new from a Swedish perspective. In the 1950s, the legendary union economist Gösta Rehn launched a policy that he knew would make quite a number of traditional industries that were unprofitable go bankrupt, or at least lose money. This was the famous Rehn–Meidner model with the solidaristic wage policy and free trade and so on. They knew lots and lots of people, workers, would lose their jobs.

Now the thing was, they should be given a very good second chance. There should be money for relocation, re-education, all the traditional means of social policy. That was forgotten.

I can very well understand that such people, they would vote for Trump or – no, I really don’t understand that anyone would vote for Trump – but they would oppose globalisation and this free-market thing.

I remember interviewing Gösta Rehn. He said: “Well, it’s also a matter of dignity.” At the time when they started labour exchanges, they were quite dirty, filthy places on backstreets and so on. “No,” he said. “They should be like banks. They should be right in the middle of the city, they should be elegant. Going in there and asking for help to get a new job, relocation or retraining should be like if you go into a bank and ask for a loan to buy a house.”

So, there shouldn’t be any stigma associated with it.

Absolutely not. It worked quite well for I think four decades.

But that stigma has returned.

It has very much returned. I should also say this is a quite complicated policy to launch because every person in such a situation is unique. They have unique skills, unique social situations, so you need to have a quite well-educated quorum of civil servants or labour exchange people or people who have a very good empathy and understanding.

This is a complicated policy. It’s one of the hardest policies to implement with any legitimacy, so you have to have very high quality in the staff that you hire.

So, it’s not what we see predominantly now, warehousing unemployed people, but it’s rather enabling and having a proper service culture to it as well.

You work in an industry and you cannot demand that people should have the foresight to say: “In six years, we will probably be run out of business because of competition from China or whatever. So, I should myself now start some retraining,” and so on. That is not how life functions.

When it happens, there have to be resources and these resources should of course be taken from all the gains we, the elite or other people, gain from globalisation. Look at how cheaply we can buy things, how we can travel. Our standard of living has gone up dramatically.

So, it’s not a question of resources. It’s a question of fairness. A lot of people have been gaining a lot from globalisation and the losers have to be compensated in a good way.

Do you also see in Sweden, before we move to the opportunities and threats going forward, a very interesting finding that I now know from the German context, which is that you have cohorts of people who are quite satisfied with the status quo economically, but at the same time anxious about the future?

So, they think yes, at the moment things are reasonably okay but I fear for my children’s future, I’ve lost the fundamental underlying promise of progress in the sense that the next generation will be just slightly better off than the previous generation. People everywhere, even in the countries that do well by any standards such as Germany, feel that this is under threat. Is this also the case in Sweden?

Not so much. I think it exists, but of course it has become harder for young people, especially on the housing market and to some extent but not so much on the labour market.

It’s of course that the 1960s generation, the golden generation, have I think taken too much out of the system and left too little to their children and maybe grandchildren now. They have been extremely lucky with all material things. From what I can see, housing, education, student loans were extremely generous and created a system where you’re not being so generous to the next generation. So, there is such a problem.

Recently, I wrote this article about unintended consequences. This is another fact, and the same with Germany: The countries that have taken a lot of refugees are growing, but the countries who have not taken a lot of refugees, like the UK, are not growing. The UK is in a real mess, I think. It’s one of the worst economies so far, I think. Is it nought per cent growth or 0.5% or something?

Well, it’s not much at the moment and the question is also what is it driven by? As you know, so far it’s been driven by rising consumer debt so that will come to an end. 

As you know, the Bank of England is already sending warning signals that consumer debt is at unsustainable levels. So, it’s very hard to see the source of sustainable growth in the United Kingdom.

Yes. I can imagine that. Including me, a lot of people will be leaving the UK.

Including myself as well. I’ll be leaving next year. But coming back to the SAP particular case, where do you see going forward the specific opportunities and the specific threats for the party? Populism obviously is a threat, so how can the party react?

Populist is a threat and the anti-immigration party is strong.

On the other hand, we now see that traditionally there has been a very strong Conservative party, but the moderates are really in disarray. They’ve kicked out their leader, their poll ratings are really down. I think the latest opinion polls show that the Left Party, the Green Party and the Social Democrats are substantially ahead of the four Conservative or right-wing parties.

Also, they are in a successful government now. The public finances are in super good order, the economy is growing by 3.5%, 4%, so when the election comes they will launch a very generous budget, I think, with lots of reforms. So, I think they are in a quite okay situation for the moment.

If the economy is the important thing here, it is growing extremely well. I mean, there is a lot of unemployment but it’s basically, I would say, people who, because this is a high skill, high pay economy, they are on wages that are going to be so low as to make them unemployable. It’s refugees with extremely low human capital, people with lots of social or mental problems and so on. Otherwise, the labour market is extremely strong.

The problem is how to get back the voters who have decided to go with the Swedish Democrats and that will not be simple or easy. I think this idea of tough love could work.

It’s like with children, I think. Or how should I say? You should love them but you cannot be extremely lax when it comes to rules because then they will misbehave.

I think there is a feeling, rightly or wrongly, that many immigrant communities have been able to create parallel societies. One of the most idiotic decisions was to allow religious schools, for example. We didn’t use to have that. There is also ethnically based gang criminality, not at an American level, but still. There is a general feeling among a large part of the population that immigrants are to some extent exempted from playing by the rules.

I cannot think that 18% of the Swedish or Danish or whatever it is population are racists. They are unhappy with parts of immigration policy.

This leads right into my next question. A few months ago you wrote a very well-read article for us about how the marriage with the traditional working class is to an extent over. How do you see that traditional core constituency of social democracy changing and how can social democracy reconnect with this traditional core constituency?

First, the core constituency is now very small in sheer numbers.

The second is that a substantial part of them have gone to those populist parties. I’m not so sure that the appeal to the working class works anymore. I think the appeal should be to wage-earners, basically.

There is a conflict between people who live on their wages and people who live on capital and that conflict should be exploited, of course.

To launch a policy that has the working class at its centre, I think it’s a dead-end for these two reasons. It’s a small group. The traditional blue-collar working class is I think less than 8% – 9% of the working population now, if you mean people who have manual jobs in production. Of course, the huge majority are wage-earners.

This distinction that you mentioned between wage-earners and people who live off capital returns is likely to get even starker the more digital the economy becomes.

Yes.

So, going forward, you think that the Social Democratic party should focus on this particular distinction because that is one of the key conflict lines?

I’ve also for many years been interested in increasing the possibility for wage-earners to become core owners of their companies or the public service production units where they work. I think that is an underexploited political way to go, to make it easier for, say, teachers to run their schools, for doctors and nurses to run their healthcare centres, in general for workers, wage-earners, to take the next steps.

This is a special route here, but I think if you see what is happening in the most developed parts of the economy, the high-tech industries, you see that owning capital is not giving you so much power anymore because you’re so extremely dependent on the human capital. Such companies nowadays very often really want to make their staff in some way equity owners.

But it runs into one problem. The unions are not fond of it because it takes away their sense of solidarity in a way.

Yes. Against the backdrop of the shift towards the more digital economy and especially if you look at the research being done in the inequality area, the general idea of democratising capital ownership one way or another, and that includes different forms of management, how companies are owned and run, is I think huge on the agenda and it will become even more important going forward.

Yes. I published a book – unfortunately in Swedish – a volume, a couple of years ago about this. When it came out, nobody cared, but I can see I’m now more and more invited to give talks about this issue, so it is a coming issue which is interesting.

I think there are many, many ways to do this. In a way, it’s a constitutional or, how should I put it? If there is a house with tenants in Sweden who rent their apartments and this house is put on the market, the tenants have the right to buy it and create a housing cooperative.

If they do that – I live in such a house – that has been very, very common in the last 15 or 20 years. They can just call one of the housing cooperative organisations and a whole package of rules and regulations of how to do it comes in the mail.

Say you are a group of nurses who run a home for the elderly and your local municipality says, “We’re now going to privatise this. Everything will be paid for by tax money but they won’t involve you. They say, “We are quite good at this, we would like to put in a bid. We could do this.” They call the union and ask, “Can you help us in any way how to do this?” They get a ‘no’ answer.

You know, there are quite a number of quite complicated legal matters that have to be fixed in such a situation, but there is no fixed model that you can just say: “This is how we want to do it.”

The whole legal system is very unprepared for this type of ownership. For example, a simple thing, what do you do with people who retire? Should they become external owners? Then the whole idea is of course gone, right? Or what do you do with temporary workers?

All these problems can be solved, there are solutions to them, but they are quite unknown, at least in this part of the world. What we’ve found is that every such company that gets started by the employees has to reinvent the wheel. That is often one reason it doesn’t happen.

But do you think in general terms, the topic of ownership is one that is going to be put on the social democratic agenda going forward?

Yes. I’m not thinking of nationalisation, I’m thinking that ordinary people who have ordinary jobs could get together and do this.

Let me give you a relevant story. You know that both Volvo and Saab were in deep trouble a number of years ago. The people who worked at Saab and also their CEO said, “We have everything to be profitable. We have all the knowledge, all the techniques, all the machines, everything. We just need a new owner.”

Then I wrote that op-ed article in the local paper saying: “Well, if what you say is true, why do you need a new owner? What is this owner going to contribute? It’s not new technology, not new markets. You have everything, you said. Why don’t you go to the pension funds and ask if you couldn’t get a nice deal with them and run it yourself?”

Then I got a call from the civil engineers’ union at Volvo. They said: “What you are writing is very interesting. We have actually created such a society, an organisation, member organisation, to do this, but it turns out it is impossible for us to do this at Volvo. Why? Because the blue-collar union says absolutely no.”

Why was that? What was the argument for saying no?

Because for a blue-collar union, you have to think, all their sunken cost in knowledge is to have this opposing position. They know everything about framing legislation and safety regulations and negotiations. If that goes, they have nothing.

So, this is a problem for real, that the traditional unions are not much in favour of this ownership democracy.

I don’t know if you have seen it, there is a very good documentary about this. ‘Can We Do It Ourselves?’ by Patrik Witkowsky. It’s a very, very good documentary. He has many good ideas.

It’s showing this is not problematic, it can be done, there are a lot of examples where it works, but there are a number of issues, very much a mental blockage.

It’s interesting because usually if a company is sold and the new owners, they usually have some sort of restructuring which would be against the interests of blue-collar trade unions as well. So presumably, the transition and management of that ownership transition should actually in theory be easier if the owner was technically a pension fund, a Swedish one.

Yes. It’s also a change of capitalism. Now most of capitalism is owned by pension funds, some mutual funds. These capitalists have no knowledge or actually no ambition to have any say about the company.

So, the old idea of shareholder value is not there because the shareholders don’t exercise any control or any discipline.

Exactly. What has happened is this managerial golden time where they can take out gigantic wages because they are exploiting this vacuum. But basically, shares have become more like bonds.

That’s a very interesting comparison because it provides a framework to explain how these, that you mentioned, salary excesses could actually come to pass, even though the shareholders should actually exercise this proprietary role.

But they don’t because they’re very weak and they don’t know how to run the companies. I think of the Swedish stock exchange, 80% is now owned by institutional investors.

80%?

80%. I don’t know for other countries, but this is a very different capitalism. The most successful bank in Sweden, the biggest owner is an employee-run pension fund.

So basically, if you condense the discussion of the last 10 minutes or so, the task for social democracy is basically redefining capitalism around different models of ownership.

Yes.

So that is in your view the core challenge going forward?

Also, in addition to making the case that when it comes to human well-being, this traditional social democratic model with a regulated market economy but with high taxes and lots of social insurance and social service, that is the model that creates overall most human well-being. It’s known. This is not a political statement, it’s an objective fact.

Do you see any other social democratic parties that already have a policy agenda that is forward-looking, or do you see them pretty much all in the defensive?

I wish I knew more about the Portuguese party. They seem to have been quite forward-looking but I know too little about them to say something.

Okay. The Portuguese party is hopefully also going to be part of this series of interviews and podcasts.

Bo Rothstein, thank you very much for the interview and I’m sure we can come back to these issues later again.

This interview is part of a new project on SWOT analyses of progressive parties Social Europe is running in partnership with the Friedrich-Ebert-Stiftung.