The Great Reformer

Olof Palme's career illustrates the Swedish model's great successes — and crippling weaknesses.

David Frost interviews Olof Palme in 1969.

This February will mark thirty years since Swedish Prime Minister Olof Palme was shot to death in central Stockholm. The identity of the assassin is still unknown.

Sweden during the time of Palme has often been seen as the pinnacle of social democracy: high living standards and a relatively small income gap; low unemployment; and an advanced welfare system that was financed by progressive taxation and boasted generous pensions and sick insurance, paid parental leave, and universal child care. When asked what his ideal country would be, former French president George Pompidou, hardly even left-leaning, answered: “La Suède avec un peu plus de soleil” — Sweden, with a bit more sun.

Today, Swedish social democracy has largely lost its position as an international beacon for the socialist left. Many point to the late 1980s as the time when things started to change, when the gains of the last half-century began to be reversed. So did the Swedish model die with Olof Palme?

While he was only fifty-nine when he was assassinated, Palme had been at the center of Swedish politics for more than thirty years. Much had changed in Sweden over those three decades — including Palme’s political profile.

In 1932, the Social Democrats took the premiership. They wouldn’t lose it for another forty-four years. Their early introduction of a Keynesian economic policy and the first steps to build a “Peoples Home” in the 1930s gave the party an image of robust reformism.

For several of the decades the party held power, however, Sweden didn’t differ much from other industrialized capitalist countries. After World War II it became widely accepted that the state should expand and build the infrastructure the modern industrial and welfare society needed: roads for freight and transportation, homes and health care for workers, and schools and education for a more highly skilled labor force.

The organization and ambitions of the public sector differed from country to country, to be sure. But a growing welfare state was not something exclusive to Swedish social democracy.

When Palme joined the Social Democratic Party in the early 1950s, society was characterized by a broad social-liberal consensus. Growth-optimism had settled in after the Second World War, and the economy was bursting at the seams. And the party he signed up for wasn’t a particularly radical one. As Eric Hobsbawm wrote: “As for the socialist parties . . . they fitted in readily with the new reformed capitalism, because for practical purposes for they had no economic policies of their own.”

Palme’s background was unusual for a social democrat. A proletarian party through and through, the leadership was comprised almost entirely of men with working-class origins. Palme, in contrast, was born into an elite family and had a traditional upper-class education.

Palme started his career as a cold warrior. He was the central international actor in building the anti-Soviet International Student Conference, a project financed by the CIA and whose main purpose was preventing third world students from becoming communists. He was also drawn into Swedish intelligence operations.

Yet his international student assignment taught Palme the destructiveness and, even from an anticommunist perspective, the counter-productiveness of colonialist wars. After a visit to Malaysia, Palme wrote: “It is a strange paradox that the British government is spending millions of pounds in order to kill off a few communists in the jungle and at the same time is carefully cultivating an increasing number in the University of Malaya.”

Palme’s anticommunist views put him in the mainstream of Swedish social democracy in the ’50s. Formally neutral, Sweden was closely linked to the West, ideologically, economically, and militarily. The country was even seen as NATO’s secret seventeenth member, both by the US and the Soviet Union.

On other issues Palme was also solidly in the mid-field of the party, if not on the right. He was unconvinced that social programs should be made universal — not least to avoid overly high taxes — and he was markedly pro-business.

In 1953, Palme got his big break. Prime Minister Tage Erlander tapped the young social democrat as his personal secretary, and, still a few years shy of thirty, Palme became indispensable to Erlander.

Erlander had long complained that the party was barren of ideological debate. In Palme he found his intellectual sparring partner. By the end of the 1950s, the pair was laying the foundation for a more assertive social-democratic politics.

Their ideas didn’t come from the socialist left. The single most important source of inspiration was the American liberal economist John Kenneth Galbraith. In his 1958 book The Affluent Society, Galbraith bemoaned the imbalance in Western industrial societies between private enterprise and public services, calling for more of the latter and less of the former.

Palme and Erlander formulated an ideological basis for social democracy in their own affluent society. The universal welfare state would provide every citizen economic security, fostering bonds of social solidarity and giving the new middle class a material interest in expanding public provision. Higher taxes would be welcomed, not scorned. It was a clear departure from the selective social welfare policy that Palme had been championing.

A more planned economy and a larger public sector did not a socialist economy make. But there were a couple things that distinguished the country’s political system and became of decisive importance for the next stage of Swedish social democracy.

One was the strength of the labor movement, which included the Social Democratic Party, the trade union confederation LO, a microcosm of local educational associations, People’s Houses, tenants’ organizations and so on. Another difference was the manner in which social democrats used their influence to build the welfare state, nationally and locally. With few exceptions the welfare institutions were inclusive, universalistic, and publicly financed, owned, and run. They were politically controlled and exempted from private exploitation.

This laid the foundation for a potentially different society. But it took a popular upsurge to unleash these possibilities.

The radicalization of the 1960s and ’70s was deep in Sweden, beginning among the youth with the Vietnam War and challenging both Stalinism and Social Democracy. During the 1970s the new feminist movement grew strong and pushed out the older forms. The environmental movement almost succeeded in stopping the construction of nuclear plants. Most important was the strike wave, which started with the miners’ strike in 1970. The working class, the traditional carriers of radicalism, suddenly took the stage and challenged the policy of class compromise.

In the 1960s, Palme noted with interest the burgeoning radicalism. And he was not unaffected. By virtue of his strong opposition to colonialism and racism, he found it easier than many other established politicians to understand the dynamism of third world liberation struggles. His receptiveness, curiosity, and good relations with influential intellectuals allowed him to grasp the importance of these new social movements more readily than most others. Palme’s vociferous opposition to the US’s war in Vietnam made him a unique figure in international politics.

When the demands for more profound reforms found their way into Social Democracy, not least through the voices of the union and women’s movements, Palme was often the one most equipped to articulate their justness.

Taking office as prime minister in 1969, Palme promptly ushered through a series of reforms that encompassed fundamental aspects of social and economic policy. In fact, a great many of the phenomena typically associated with the Swedish welfare state were either introduced or substantially reformed during Palme’s first seven years. National spending to GDP — a rough, if instructive, measurement of his achievements — increased from 26 to 38 percent.

A striking number of reforms were related to family policy, and many bore the stamp of equality: housing allowances for pensioners and for families with young children, parental insurance, greatly increased child allowances, state-subsidized universal day care, and beginning in 1975, free abortions.

By the mid-1970s, Sweden had progressed farther than any other social democracy. Naturally, this was not the work of just one man. On the contrary, it is crucial to stress the importance of old and new social movements in the development of the Swedish welfare state. The magnitude and content of reforms cannot be explained without reference to these movements.

These were also the years when Palme made a name for himself as an anti-imperialist international statesman. It started with Vietnam. As early as 1965 he publicly condemned the war, and his criticism deepened under pressure from the solidarity movement. His comparison in 1972 of the US bombing of Hanoi to Guernica and Nazi atrocities outraged Henry Kissinger and prompted Richard Nixon to call him “that Swedish asshole”.

During the 1970s he stood out as a much-fêted participant in the international dialogue between the Global North and South, and usually favored the latter. In the UN Sweden voted against the West on resolutions on South Africa, Israel/Palestine, and the distribution of global economic power. Sweden gave material support to the liberation struggle in several African countries. And radical third world leaders like Fidel Castro — whose country’s revolution Palme had supported — embraced the Swedish leader.

At the same time, Palme never let his antiracism and anticolonialism interfere with his desire to keep radical movements subordinate to the dominant powers. This was exceptionally clear during the 1974–75 Portuguese Revolution, when Palme used all his prestige to help pacify the unrest by bringing the country into the Western European fold and keeping it in NATO.

And when it came to Sweden’s military relations, it was business as usual. “Now when I am rowing with the Americans,” Palme told his generals, “for God’s sake make sure that we have a good relationship with them on defense at least.”

Indeed, for the US and other powerful governments, Palme had a distinct function: he was one of the few statesmen who could serve as a contact with, and bridge-builder to, radical regimes and movements. That Kissinger travelled to Stockholm to thank Palme for his role in the Portuguese Revolution less than a year after the end of the Vietnam War speaks to his utility.

Still, for many third world leaders, he was one of the few representatives of the developed world who pleaded their case for a more just world order. The existence of innumerable streets, schools, and squares in Africa and Latin America bearing Palme’s name indicates the importance of that support.

Back at home, the scope of social-democratic reforms and the steady growth of the public sector incited friends and foes to ask whether social democracy under Palme was going to fundamentally change the system.

The trade unions wanted to. In 1976 the LO called for the establishment of wage-earner funds. Under the proposal, every year a proportion of a company’s profits — in the form of shares — would be transferred to union-controlled funds. After anywhere from twenty to seventy-five years, workers would control a majority of shares in most companies.

The plan’s call for gradual socialization roiled the party. Palme and the party leadership favored what they used to call “functional socialism”: the deepening of democracy, a growing public sector, greater state planning resources, laws to reduce the influence of employers. Ownership itself they refused to touch.

The “Meidner Plan” was an attack on this credo, and Palme spent several years killing the proposal’s radical elements. His reaction demonstrated that, for all his reform accomplishments, he was not prepared to step beyond the boundaries of capitalism.

The wage-earners’ fund that ended up being enacted, as Meidner’s biographer Lars Ekdahl points out, bore little resemblance to the original proposal. Gone was the profit distribution; gone was almost all union power over industry; gone was the determination to break the solid concentration of power and wealth once and for all — gone was the idea of the funds as an element of a democratic socialist strategy.

At the same time, the shift in the social and economic zeitgeist was changing the conditions for reformist politics, radical or otherwise. With the postwar boom period passing into a more turbulent phase, the economic foundation of the welfare state was being called into question. Friedman was replacing Keynes as the guiding star. And the social movements, the carriers of radicalization, started to decline.

In addition, the Social Democratic Party found itself out of power for the first time in decades. Between 1976 and 1982, the party was in opposition when the economic crisis was at its worse. When the party returned to power after the 1982 election, the conditions for traditional social-democratic politics had undergone a profound change.

In part, the Swedish economy was seriously weakened by huge budget deficits, significant unemployment, and a high rate of inflation. But Social Democracy itself had begun to adapt to a monetarist and neoliberal-influenced economic policy. This was particularly true for a group of young economists around Palme’s finance minister, Kjell-Olof Feldt.

In the government’s first financial document, they proclaimed that an upswing in industrial output must boost profits for companies, consumption must be contained so the country’s total savings could rise, and anti-inflationary measures must be prioritized. All this would come at the expense of the public sector. If the Meidner Plan had incensed the center and right of the party, the financial document prompted clashes between the party leadership and the LO.

Still in power in the mid-1980s, the Social Democrats took the first steps toward deregulation of banking and currency. What was Palme’s role in this development? There were few indications that he had any intention of applying the brakes. Through it all, he defended his finance minister against attacks from the party’s left.

To Palme, the new political and economic landscape did not imply that reformism’s potential had been exhausted. While politicians like Feldt wanted to permanently reorient the party and break with its former economic policies, much of what was done in the 1980s was in Palme’s eyes a necessary evil that would eventually bring order to the national economy. Palme’s position, Feldt explained, was “more about giving the party the opportunity, through undesirable means, to return to its former policies. We had to crawl through a tunnel. At the other end was the light.”

Was this a realistic hope? Or, to return to the question initially posed, did the Swedish model die with Olof Palme?

The question is not an uncomplicated one, not least because the concept of “the Swedish model” is in itself multifaceted. Clearly many of its essentials are still intact — a relatively generous social safety net and a universal social security system funded by high taxes — even if benefit levels have been chipped away and a large part of the public sector has been sold off. And the Swedish labor movement — the true force behind, and architects of, the Swedish model — remains comparatively strong.

If, on the other hand, one means the classic social-democratic policy of welfare state expansion and management of the economy, it is clear that much has been jettisoned: Keynesian crisis policy; government-financial control of the credit and currency markets and interest-rate policy; a national bank under political influence; the ambition of pursuing an active nationalized industry policy; a public sector that is not only commonly financed but also chiefly run by the state, with no profit motive; public housing development and ownership programs; and a generally fixed-benefit pension system.

Even if we leave the terra firma of historical analysis, there is reason to doubt whether Palme would have been able to tilt at the windmill of change.

One important reason for this is that the twinkle at the end of the tunnel turned out to be the lights of an oncoming train. The economic policy that the Palme government advocated helped plunge the country into a new and serious crisis in the early 1990s, which in turn heralded a new series of austerity measures, deregulations, and privatizations.

It is obvious that the leading Social Democrat politicians who succeeded Palme were unable or unwilling to abandon the course he had embarked on, and in fact saw it through to the end.

So while the Social Democratic Party of today may seem out of step with Olof Palme, it’s important not to be overly exculpatory in assessing his legacy. Straddling the postwar consensus and the neoliberal era, Palme was both the great reformer and the facilitator of the shift of power from politics to the market.

Palme, the consummate social democrat, thus crystalizes the conjunctural and constitutive dilemmas of social democracy. And he proves that social democracy’s inability to think beyond capitalism is the source of its terminal decline.