The Rise and Fall of Swedish Social Democracy
Kjell Östberg
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When Bernie Sanders was asked in a 2016 Democratic presidential debate what “democratic socialism” meant to him, he responded that we should “look to countries like Denmark, like Sweden and Norway.” Hillary Clinton was unequivocal in her reply: “We are not Denmark.” Yet Sanders kept the line, and his odes to the shining example of Nordic social democracy remained an exhaustive refrain throughout his 2016 and 2020 campaigns. The theme was unsurprising: ever since 1936, when Franklin Roosevelt hailed Sweden’s “middle way” between capitalism and communism, Scandinavia has been a fixture in the American left-liberal imaginary.
What’s not to like about Sweden? Its parents benefit from a total of 16 months leave for a newborn child, which they can divide among themselves, 13 months of which are paid at 80 percent of income. Income inequality, though rising, is moderate by international standards, and measurable gender inequalities are notably small. The country consistently scores near the top of global indexes of “happiness’” and “quality of life.” Union density stands at 69 percent, approximately seven times that of the United States and the second-highest rate anywhere in the world. In a continent in which left-of-center parties have been buffeted by populist and far-right upsurges and the once-flagship parties of the left like the French socialists are hollow shells of their former selves, the Swedish Social Democratic Workers’ Party (SAP) looks comparatively resilient. It has continued to command roughly 30 percent of the vote in elections over the last decade and has led the national government for half of the last twenty years.
Seen from another angle, however, the country looks very different. In part due to the scrapping of wealth and inheritance taxes and a lower corporate tax than both the U.S. and European averages, Sweden has one of the most unequal distributions of wealth in the world today: on a level with Bahrain and Oman, and worse than the United States. Perhaps most dispiriting for Sanders, Sweden also now hosts the highest proportion of billionaires per capita in the world. Many of the country’s trademark social services are now provided by private firms. Its private schools even benefit from the same level of state subsidy as public schools—a voucher system far more radical than anything in the United States and that Democratic politicians would be crucified for advocating. Both here and there, right-leaning commentators in 2020 decried Sanders’s portrait as little more than what Johan Norberg, Swedish author of The Capitalist Manifesto, has called a 1970s “pipedream.” On this, Swedish observers on the left gloomily agree: despite official rhetoric, the “Nordic welfare model” is now more nostalgic myth than reality.
How did we get here? Distinguished Swedish historian Kjell Östberg offers a view of the whole arc in his sweeping yet succinct recent volume, The Rise and Fall of Swedish Social Democracy. An expert on twentieth-century Swedish history and the multivolume biographer of social democrat Olof Palme, who served as prime minister during the 1970s and 1980s, Östberg is an openly left critic of the SAP, yet his history is fair-minded and his account of the Swedish model largely compelling.
“For a hundred years,” he writes, “Swedish Social Democracy linked its destiny to the development of capitalism—not as the result of any ideological degeneration or class betrayal, but as a strategic choice.” When Swedish capitalism entered a deep crisis beginning in the 1980s, the foundations of the movement crumbled beneath its feet. For the reader, a grim question lingers over his story. If the most significant movement for social democracy the world has ever known was ultimately defeated, where could it ever win?
In their search for the key to the Nordic model, many international comparisons have celebrated above all the ideological pragmatism of Swedish leaders. As the storm clouds of fascism gathered over interwar Europe, it was “only in Sweden that socialists were able to outmaneuver the radical right and cement a stable majority coalition,” political scientist Sheri Berman has written, “escaping the collapse of the left and democracy that occurred elsewhere in Europe.” The “key” to the “SAP’s remarkable success,” Berman argued, lay in the party leadership’s break with “exhausted orthodox Marxism” and its wholesale embrace of “democratic revisionism.”
Refreshingly, Östberg begins with a more fundamental context: Sweden’s place as a resource-rich export economy on the edges of European capitalism, and the uniquely powerful workers’ and social movements that germinated in its fertile soil. Through the nineteenth century, Sweden’s wealth was concentrated in the vast forests and ore deposits of the Norrland—a region the size of the UK, whose timber, pulp, paper, mining, and metal industries were fed by demand from Europe’s growing appetite for raw materials. These extractive industries birthed a rapid and “late” industrial boom in Sweden itself at the end the nineteenth century, giving rise to a string of milltowns, mines, and ironworks across its hinterlands—such as the forestry industry in the valley of Ådalen—as well as a major internal migration to the industrial cities. The pace of this change and the relative distance of these working-class enclaves from the bourgeois centers of power fostered a distinctive, highly organized political culture among Swedish workers, especially given their total exclusion from formal politics in what at the time was one of Europe’s least democratic countries.
These developments stamped a permanent imprint on Swedish social democracy. The sheer pace and scale of the country’s industrialization—between 1890 and 1910 alone, Östberg notes, the number of industrial workers and craftsmen tripled—and the social dislocation it produced were the crucible that forged the mettle and militancy of its labor movement. In 1880 there were only a handful of unions in the whole country; in 1885 there were more than a hundred, and by 1907 union membership growth had set a European record. The country’s most radical unions sprang from workers at the core of the export industries—miners, sawmill and pulpmill workers, dockworkers—who came to occupy key strategic positions within the arteries of Swedish capitalism.
In its early history, the SAP followed the classic path of the European socialist parties, even if it stood out for its organizational strength. Founded in 1889, the party was, as Östberg emphasizes, the offspring of a far broader mesh of popular associational life, which included the two biggest social movements of the period: temperance and the revivalist Free Church. By the early twentieth century, Swedish social democracy was fully interwoven with a densely knit “proletarian public sphere”: worker-funded People’s Houses (for political assembly and public meetings), People’s Parks (for leisure and festivities), worker study circles and workers’ libraries run by the Workers’ Educational Association, women’s clubs, consumer cooperatives, and no less than sixteen party newspapers in 1914. The unions, newspapers, and party generated hundreds of positions for paid socialist functionaries, nearly all of them filled by members of the working class.
The first two decades of the twentieth century marked the heroic phase of Swedish working-class history, with two general strikes erupting in 1902 and 1909—the latter mobilizing nearly two-thirds of the industrial workforce—and large-scale, women-led hunger demonstrations against state rationing in 1917. By the end of World War I, in which the country had been formally neutral, Östberg argues, the institutional and ideological lineaments of what would become Swedish social democracy were already becoming visible.
On the one hand, the SAP had wrested the crucial prize of universal suffrage—for both men and women—from the bourgeois parties, and its officials had begun to enter the national Riksdag and municipal councils in significant numbers. Yet this same development tilted the party away from “extra-legal” forms of political action and toward the strategic maneuvers of the parliamentary game. And as political scientist Adam Przeworski famously noted, appealing to an expanded voting base in which industrial workers never constituted an absolute majority required political compromises. For the SAP, that meant moving away from the rhetoric of revolution and full socialization and hardening the policing of its left flank.
Despite its steadily rising vote share, the SAP would have to wait until 1932 to form a government of its own, when it was catapulted into power after the soaring unemployment and political volatility wrought by the global depression had discredited the bourgeois coalition. Shortly after taking the reins, the party allowed its radical minister of finance, Ernst Wigforss, to put into place an unorthodox fiscal philosophy he had developed from ideas germinating among British and Swedish macroeconomists: deliberately passing an underbalanced budget to fund emergency works programs and unemployment insurance.
Three years before the publication of Keynes’s General Theory, therefore, the expansionary Keynesian program was already a reality in Sweden. When the economy roared back to life in 1934—partly thanks to the prior government’s abandonment of the gold standard—the SAP declared victory. Running under the slogan “We Conquered the Crisis” in 1936, it won a stunning 46 percent of the vote. Social democratic prime ministers would preside over Sweden without interruption for the next forty consecutive years.
The timing was fortuitous. Sweden’s neutrality during World War II—though it gave free passage to massive German troop movements across its railways—allowed it to benefit from rising demand without suffering the massive capital destruction of its neighbors. At the same time, the relative success of the SAP’s Keynesian program and its ability to forge cross-class alliances—encapsulated in its reformist philosophy of the folkhemmet (“People’s Home”)—allowed the country to head off the fascist currents sweeping over much of the continent.
But social democracy’s key successes were not produced by the foresight of SAP leadership alone; they relied on pressure from below, Östberg stresses. In Sweden, the social energies of the 1930s were channeled not into street battles but an intensification of social democratic mobilization through tenants’ unions, sexual education organizations, workers’ communes, People’s Houses, popular theater troupes, women’s clubs, and the national pensioners’ organization—all culminating in soaring party membership rolls. Labor union membership likewise exploded, with notable successes among women and the new ranks of white-collar workers. And, crucially, thousands of ideologically committed SAP cadres entered the growing state and local bureaucracies, driving social democracy deep within the workings of government itself.
For all the strength of popular mobilization, the pragmatic orientation of Swedish social democracy also extended to its labor movement. In 1938 the trade union federation (called the LO) and the employers’ association struck the famous Saltsjöbaden Agreement, which committed to the avoidance of conflict through a highly centralized bargaining system. The framework it set in motion would be highly effective in the postwar golden age, producing some of the lowest strike levels anywhere in the world while paying the working class a handsome dividend from the booming Swedish economy.
By mid-century the results were dramatic enough that foreign management experts seeking to unearth the secrets of the “Swedish model” had started making regular pilgrimages to the country. Yet Östberg suggests that this level of tight-knit corporatism was only possible because of the uniquely organized nature of Swedish business and labor alike. On one side of the bargaining table, the heroic confrontations of earlier decades had thrust Sweden’s employers into tight class cohesion, facilitated by a thick web of ties with Swedish finance. On the other, the LO exercised unprecedented control over its constituent unions and any contract negotiations, actively expelling Communist unionists during the Cold War and exercising approval over any important strikes.
This “Swedish model” would prove to be a double-edged sword. Certainly, the success of Swedish exports were the preconditions for all the major reforms of social democracy, and the centralized power of the LO allowed it to pursue its famous “solidaristic wage policy” developed by in-house economists Rudolf Meidner and Gösta Rehn. In exchange for refraining from demanding maximum wage increases in the successful export industry, the LO instead bargained for increases in lower-paying industries beyond what companies could bear, which systematically pushed uncompetitive industries out of business. Through this indirect industrial strategy, the LO could pursue a wholesale rationalization of the Swedish economy. At the same time, this meant there would always be constraints on just how hard it could press.
As late as the 1940s, moreover, Sweden actually remained a relative laggard compared to pioneering welfare states elsewhere. It was only in the 1950s, with the introduction of universal health insurance and a supplementary pension system, that the outlines of the universalist Swedish welfare began to take shape. But in all, at mid-century, Swedish social democracy did not greatly differ from other countries in western Europe.
The true turning point came in the 1970s with the international crisis of democratic capitalism. Falling profits and rising inflation pulled the rug out from the class compromise of the postwar golden age, plunging workers and capitalists across the Global North into a series of pitched confrontations. As in France and Italy, a wave of wildcat strikes erupted among Swedish workers in 1969–70, kicked off by miners in the far north, that ended decades of relative labor peace. As elsewhere, too, new social movements—among them women’s liberation and environmentalism—challenged the postwar social compact’s basic underpinnings. Suddenly, the foundational class collaboration of the Swedish way was in serious danger.
As in the 1930s, however, Östberg stresses that the institutional density of Swedish social democracy—then at its organizational peak—gave it unique capacity to absorb these radical energies and channel them into its governing agenda. In the valley of Ådalen at the time, Östberg documents, there were “seventeen Social Democratic workers’ communes in the municipality, twelve women’s clubs, six SSU [youth league] associations, the children’s organization Young Eagles, tenants’ associations, the PRO [pensioner’s association], and a dozen trade unions,” in addition to seven People’s Houses, a People’s Park, a lively Workers’ Educational Association, and a large department store built and run by the consumers’ cooperative. Unlike much of the Western world, the radical energies unleashed by the hothouse of the 1960s did not dissipate but fed into the valves of the pre-existing social democratic machinery. Feeling the heat from below, even the upper echelons of the SAP could not help but respond.
Palme, the social democratic prime minister of Sweden from 1969 to 1976, had been attuned to what he called the problems of a “society of privilege” as early as the 1950s, and his government unleashed a wave of reforms that Östberg estimates were “the most comprehensive ever undertaken in Sweden—or, perhaps, anywhere.”
The scale of change in the early and mid-1970s remains staggering: over the course of the decade, the public-sector share of GDP increased by 50 percent. By the end of the 1970s, nearly all the country’s schools, universities, hospitals, health clinics, nursing homes, and daycare centers were publicly financed, owned, and operated. Major infrastructure like the telecommunications network, electricity grid, and railways were also state owned and operated. All hospital care was free, as was abortion; visits to a local clinic cost a pittance, and pharmacies were nationalized.
In the workplace, a series of laws in the mid-1970s repealed the exclusive authority of employers to control hiring, firing, and management work, granting workers a measure of decision-making power. In addition to the forty-hour week and retirement at sixty-five, employees were guaranteed a five-week paid holiday and a six-month parental leave to divide between mother and father (extended to twelve months in 1980). Universal health insurance ensured 90 percent of an individual’s salary in sick pay from the first day of illness, and unemployment insurance stood at similar levels. Children received an educational allowance throughout all years of schooling, and teaching, learning materials, and school lunches were free. So too was adult education, which flourished in this period, with employers obliged to give workers time off to study.
Östberg rightly notes that much of the daily administration and planning of the welfare state actually occurred at the level of the municipalities, many of which were also governed by the SAP. These municipalities were required to plan for full-time care for all children, with fees indexed to income and largely symbolic at the lower end of the scale. On the housing front, municipalities were also the largest house builders and landlords in the country, and even across much of the private housing market, rent was set by negotiations between landlords’ and tenants’ associations to align with public housing rates. The level of freedom for ordinary citizens from market dependence was profound.
On the international stage, too, Sweden stood apart. Palme was a staunch ally of decolonizing movements abroad—especially the rebel movements against the Portuguese empire in Africa and the struggle against apartheid in South Africa—and warmly received the framework of the New International Economic Order proposed by the Global South, much to the displeasure of the United States. After Palme compared the U.S. bombing of Hanoi in 1972 to the Nazi atrocities at Guernica, Nixon reportedly referred to him as “that Swedish asshole.”
During its tenure on the UN Security Council in the mid-1970s, Sweden repeatedly voted with the non-aligned Third World on controversial issues, including the recognition of the right of the Palestinian Liberation Organization to participate in Council debates. Visiting the Moncada military barracks in Cuba in 1975, Palme emphatically declared that “the demands of the people cannot be suppressed. . . . That was the case in Cuba yesterday. So it is in Vietnam and Portugal today. It will be the same in Chile tomorrow.” (None of this rhetoric, however, prevented the arms industry—Saab fighter jets, Bofors missiles and howitzers, Nobel munitions—from being one of Sweden’s principal exporters, then and now.)
By the late 1970s, there was much to hail in the Swedish experiment. Although class society remained intact, social and economic inequalities had been radically reduced. The country had lower income inequality than any country in the world, then or now. Some 85 percent of Swedish workers—blue-collar and white-collar alike—were unionized. The reforms were so transformational to women’s prospects that, by decade’s end, men and women were working at practically the same rate (by contrast, women’s labor force participation in the United States in 1980 was 26 percent lower than that of men). So strong was public support for the radical welfare state that even when a coalition of bourgeois parties took office in 1976, after the SAP lost a narrow election over the controversial issue of nuclear energy, the new government promised no significant changes to welfare policies.
As public expenditure reached 70 percent of GDP, it was an open question how far the experiment would go. The key issue, Östberg argues, was “whether a public sector outside the direct control of the market could be used as a lever for wider attacks on capitalist structures—whether a reformist Social Democracy had the potential to transcend the boundaries of capitalism.” Palme, for his part, was emphatic that it could. As he wrote to his friends the German and Austrian social-democratic leaders Willy Brandt and Bruno Kreisky in the early 1970s, “We have come further in realising socialism than the countries that usually call themselves socialist.” At stake now was “not whether we should have more planned management and whether we should have more democracy in economic life,” but rather how it all should be organized.
It was at this radical peak that the Swedish labor movement put forward perhaps the most serious proposal for a wholesale transition to socialism. Developed by the LO’s economist Rudolf Meidner in 1975, the “wage-earner funds,” or “Meidner plan,” proposed that employees of medium- to large-sized companies be given a piece of their corporation’s profits, in the form of shares, each year. As these profits were transferred into union-controlled funds, a majority stake in most companies would pass into collective ownership in a matter of decades. Socialization of the economy would grow smoothly through the capitalist cycle of accumulation itself.
Yet just at this moment, Swedish social democracy began to face severe headwinds. Capitalist crisis, long thought abolished by the judicious corporatism and coordination of the Swedish way, suddenly reared its head once again. Sweden’s balance of payments dipped into the red as its core industries in shipyards, steel, mining, and textiles were battered by the global restructuring crisis and continued to falter despite extensive public support. As profits, investment, and productivity growth fell, the wage gains of the mid-1970s gave industry little room to maneuver. Following the second oil crisis in 1979, growth practically halted and inflation soared.
Meanwhile, scared stiff by the Meidner plan, Swedish business groups poured unprecedented sums into an ideological counteroffensive of think tanks, newspapers, pressure groups, and public relations campaigns aimed at heading off the socialist threat. Even ABBA joined the chorus of opposition in advance of the 1982 elections. The SAP won decisively, but the broader currents around them had shifted—a point hammered home in October 1983, when business leaders hired some sixty railway cars, two hundred buses, and chartered planes to bring demonstrators to Stockholm to protest the Meidner proposal.
In response, SAP leadership quickly backed off the threat of socialization, watering down the Meidner plan into an entirely trivial proposal. Palme and his new finance minister also gave a “Crisis Group” of young economists influenced by neoliberal critiques of Keynesianism an unprecedented remit to fight inflation. Their solution was twofold. First was aggressively targeting the public sector, even at the cost of higher unemployment, with cuts across the board to unemployment benefits, pensions, medical aid, students grants, housing subsidies, grants to municipalities, and more. Second was a systematic liberalization of the financial sector. When he heard the proposals, Palme replied, “Do what you want, I don’t understand anything anyway.”
Despite protests from the LO and elsewhere, Palme remained steadfast in backing the measures, desperate to “crawl through a tunnel” where perhaps “on the other side, light was waiting.” Paralleling François Mitterrand’s hasty about-face in France in 1983, Sweden’s own tournant de la rigueur was thus already set in motion years before Palme’s shocking (and still unsolved) murder in 1986.
The core features of Swedish social democracy, Östberg argues, proved to be its undoing. The breakdown of the postwar class compromise produced a profound radicalization, which nevertheless stopped short of interfering with the structures of capitalist ownership and investment. But when the reliance on the export industry became not an asset but a liability, the government had few cards to play. As Östberg insists, moreover, the dramatic turnaround of the 1980s was entirely “orchestrated from above.” The very centralization of organizational structures and the levers of economic management that had given Swedish social democracy its political strength gave the party leadership the power and autonomy to execute a dramatic U-turn with few constraints.
The decline that followed is bleakly familiar from social democracies across Europe. Severe public sector cuts failed to return Sweden to the growth rates of the postwar golden age, and financial deregulation produced a credit bubble that created further crises—and further austerity. During the 1990s, as Sweden faced one of the most profound downturns in its history, alternating social-democratic and bourgeois governments pursued waves of further cuts to welfare, privatization, and liberalization, even as unemployment—which had rarely exceeded 2 percent before 1990—shot into the double digits. Swedish entry into the EU in 1995, where neoliberal parameters were built into the architecture of the common market, imposed further constraints on domestic policy.
These overlapping crises had a predictably demoralizing effect on the social-democratic grassroots. Mobilization dwindled and party membership crumbled. When collective party affiliation through the LO was abolished in the early 1990s alone, membership numbers plunged from 1.2 million to 250,000 overnight. As its deep roots in Swedish society withered, the party itself was transformed—its ranks filled, in Östberg’s telling, by a Stockholm coterie of political operators, PR consultants, think tankers, and pollsters. Only a handful of SAP ministers in recent years have come from working-class origins, compared to half of Palme’s cabinet in the 1970s.
Not surprisingly, the SAP’s vote share also entered a gradual if uneven decline from the 1990s—the consistent 45–50 percent results of midcentury now a distant memory. Today, the same number of working-class voters support the right-populist, hardline anti-immigration Sweden Democrats as do the SAP. The latter’s results in 2022 (30.3 percent) were the second-worst ever in 110 years. And the bleeding continues: union density is now considerably lower among younger employees (especially blue-collar workers), and SAP membership stands at an anemic 75,000, with most members over sixty.
Meanwhile, Swedish capitalism has been utterly reshaped in the wake of partial deindustrialization. The big household-name firms—IKEA, Volvo, the H&M Group—are now less paragons of the homegrown Swedish export industry than of modern supply-chain capitalism, built on high-volume, low-margin sales of goods secured through the cutthroat management of commodity and labor inputs from around the world.
What are we to make of this rise and fall? To be sure, as the Swedish sociologist Göran Therborn has noted, “post-industrial, globalized and financialized capitalism has an intrinsic tendency to increase economic inequality” through class fragmentation, weakening and deskilling of organized labor, international wage arbitrage, capital mobility, and rentier profits. But “one might have expected social-democratic Sweden to be among the countries best placed to resist and contain such tendencies.”
Therborn points to ideological shifts in the SAP leadership, the well-financed business offensive, and the rise of Swedish tech and finance to explain why it has not. But Östberg makes an argument rooted in a much longer history. The fundamental compromise of social democracy from almost the beginning, he avers, was its dismissal of questions of ownership and its refusal to challenge the basic structures of capitalist relations in favor of the endless horizon of reform. Facing the existential threat of falling profitability of the 1970s, Swedish capitalists retained the power to seize the initiative, to mount a counter-revolution against the pillars of social democracy in a moment of profound crisis. For all the continued rhetoric of the “Nordic model,” they were largely successful. Social democracy’s celebrated class compromise turned out not to be a permanent victory but a fatefully unstable stalemate. When the balance of forces tilted out of equilibrium, ABBA put it best: the winner takes it all.
“Stopping halfway, without attacking these basic power relations,” Östberg concludes, “is the defining weakness of reformism.” This thesis is narratively compelling, and it has found favor with left theorists outside Sweden as well. But it sidesteps the far tougher question of whether a genuinely socialized economy would have navigated any better through the whirlwinds of a global restructuring crisis. It is not clear that SAP leaders—whose acclimatization to the long boom made them shockingly unprepared for the downturn—had the ideological resources to reimagine, much less remake, the Swedish economy. But even more fundamentally, given the country’s structural reliance on exports, it is an open question whether control of its commanding heights would have offered anything more than deindustrialization with a human face.
It is certainly a vital lesson from the Swedish experience that when the postwar compromise broke down in the 1970s, the neoliberal order which triumphed across much of the Western world was not a foregone conclusion. For a moment, the radical energies of the period actually led to an intensification of social democracy, briefly producing one of the most egalitarian societies the world has known. Disoriented and disorganized by the crisis at the end of the decade, the momentum of the social democratic movement was ultimately reversed, but it was a close-run thing. A genuine alternative was not only conceivable but had been actively mooted within its ranks. Crucially, however, even at the radical flanks of social democracy, this alternative was always more of a gauzy aspiration than a concrete program—and it remains so nearly half a century later. Absent such a program today, it is not surprising that the most prominent architects of “post-neoliberalism” have looked to classic forms of economic nationalism and state-led developmentalism for their blueprints of the future.
The tragic history of social democracy presents a tangle of lessons not reducible to the calcified formula that pits reform against revolution. On the one hand, midcentury bread-and-butter egalitarianism has become a deeply radical demand in our age of hyperinequality—a demand the system appears totally unable to deliver. On the other hand, the failure of that model’s most successful experiment is an ominous portent. Worse still, the historical conditions in which Swedish social democracy first flourished—the mass politics forged by rapid industrialization—are unlikely to return.
But this is not to say that they won’t be replaced by another kind we can now only begin to glimpse. Amid climate disaster, halting growth, global migration flows, and geopolitical breakdown, it is tempting to find refuge in the shades of millenarianism the Swedish pragmatists believed they had buried a hundred years ago. Perhaps this is the most pragmatic position today: any breakthrough to a more humane future will arrive in a far more disorganized, unpredictable, uncoordinated form than the Swedish experiment might prompt us to hope.
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