The Meidner Plan

In response to several motions from members of the metal workers union, the 1971 LO congress decided to form an inquiry into the possible misuse of industry funds. Meidner was tasked with heading a small working group, which also included the young economist Anna Hedborg and the student Gunnar Fond. The group presented their work on August 27, 1975.

The central idea was that companies above a certain size should be forced to use a certain share of their profits each year to emit new shares to so-called wage-earner funds. Over time, these funds would own an increasing share of Sweden’s biggest companies. Not only would this counter the inegalitarian consequences of the solidaristic wage policy , but the cumulative result would be a gradual socialization of large sectors of the Swedish economy.

This was a radical departure from the ideological tenets of postwar social democracy in Sweden. Social Democratic leaders had subscribed to what was known as “functional socialism”: the idea that the goals of socialism could be achieved without any transfer of ownership. Instead, the functions of ownership would be altered. For example, the housing market could be regulated through legislation without touching the property of landlords.

Meidner’s proposal represented a clear rejection of functional socialism. As he remarked in an interview with a union-affiliated newspaper: “We want to rob the old capital owners of their power, which is exercised precisely through ownership. All experience shows that influence and control is not enough. Ownership plays a decisive role.” In Meidner’s view, functional socialism was insufficient to meet the political moment of the 1970s.

The wage-earner fund proposal echoed ideas which Karl Marx and Friedrich Engels had expressed in the Communist Manifesto:

The history of industrialism is the history of the rise of and conflicts between classes: a small group has in an early stage of industrialism acquired and then expanded its property rights to the means of production. The great popular majority has only been able to provide for itself by selling its labor to the owners of the means of production.

The LO adopted a slightly revised version of the proposal the following year followed by the spontaneous singing of the Internationale.

The wage-earner fund proposal soon became a burning political question in Swedish politics. Being steeped in functional socialist thinking, the leadership of the Social Democratic Party were caught on the backfoot. At a party board meeting in November 1977, Mats Hellström, who would become minister of trade in the 1980s, argued that it was “dangerous” to equate the wage-earner funds and economic democracy. The funds were only “one piece of the puzzle.” The party leader Olof Palme concurred: “I completely share Mats Hellström’s opinion.” It was “a fundamental misconception” to “equate economic democracy and wage-earner funds.”

At the same time, Meidner’s proposal drew public criticism from all sides. Assar Lindbeck, one of the most prominent Swedish economists of the twentieth century and then a member of the Social Democratic Party, wrote a series of articles for Swedish newspapers criticizing the funds. The Meidner scheme represented nothing less than a “death sentence for pluralism.” By placing power in the hands of union bureaucrats, the scheme would create a single, powerful monolithic organization on which all members of society would depend. “Meidnerland” would be “a silent society,” he surmised. Lindbeck left the Social Democratic Party in the early 1980s because of the funds.

Employers did not initially come out strongly against the funds, seemingly because they did not think that the proposal would be realized. However, in 1978, a massive anti-fund campaign began. The employers saw the wage-earner fund issue as an opportunity to rewrite the rules of the labor market and the welfare state. Invoking the specter of Soviet socialism was an effective way to unite against the social democrats.

For the social democratic leadership, the funds were not an opportunity to transition to socialism but a political burden to be unloaded in the least harmful way possible. In the following years, leading Docial Democrats backtracked and kicked the can down the road until 1983, when a diluted version of the proposal finally passed in parliament. The funds were abolished by a right-wing government in 1991.

Kjell-Olof Feldt, who took up the powerful post as finance minister in the 1980s, later wrote in his memoirs: “Our members did not understand it, practically it would hardly work and politically it was almost a catastrophe.” The party had been too closely wedded to Meidner’s original report. “The fundamental mistake was that we did not dare to distance ourselves far enough from the original Meidner proposal and the LO congress decision,” Feldt concluded. Wage-earner funds could be accepted as an alternative way of raising investments, but not as a step toward a postcapitalist society.

The wage-earner funds never became the transformative project Meidner had hoped for. There are many reasons for this: The party leadership were convinced that socialist aims could be achieved without touching private ownership. The proposal was made at the very moment when Social Democrats lost their hegemonic position in Swedish politics. The unions and the party did not see eye to eye. The white-collar trade union confederation, Swedish Confederation of Professional Employees (TCO) initially endorsed the funds but were forced into a neutral position by the more right-leaning segments of its membership. Organized employers launched an ideological counteroffensive, painting the funds as a slippery slope to a Soviet-like economy. The fund debate quickly became technical, making its relevance for ordinary wage-earners hard to explain and understand. All of these factors plausibly contributed to the fate of Meidner’s original proposal.

Looking Forward

If Meidner’s ideas nonetheless continue to attract attention it is because he put his finger on a central problem of capitalist democracies: growing inequality of wealth and power. Economic inequality has increased drastically since the wage-earner fund episode. Sweden is no exception. Perhaps due to its reputation for being exceptionally egalitarian, it has largely escaped international attention just how steep Sweden’s rise in inequality since the 1980s has been. If one compares the rise in income inequality between the 1980s and the 2020s, the picture is almost identical whether one looks at “egalitarian” Sweden or neoliberal trailblazers, such as the United States and the United Kingdom. To be sure, Sweden had a more equal starting point, but the increase in inequality has been just as severe.

Sweden’s rising inequality has in great part been a result of welfare retrenchment and an increasingly unequal labor market. Though this development has been driven by the political right, the Swedish Social Democrats have also played a significant role. By the 1990s, the Social Democrats came to accept cuts to the welfare state as necessary for its preservation. When a housing bubble burst in the early 1990s, the Social Democrats oversaw a massive austerity program to balance the public budgets. In the process, they gave up on full employment in practice (though not in theory). As unemployment has become a permanent feature of the Swedish economy, the labor market has become increasingly divided between top and bottom. The Swedish historian Erik Bengtsson has described this as “the Rehn–Meidner model in reverse.”

In contrast, Meidner remained a staunch defender of the universal welfare state and full employment until his death in 2005. However, by the 1990s, he had given up on the wage-earner fund idea, concluding that national funds were no longer viable. “The internationalization of the Swedish economy, which also applies to wage policy, the influence of wage-earners over important decisions in enterprises and capital formation, makes national funds an unrealistic prospect,” he wrote shortly before his death.

Even if the wage-earner fund model cannot simply be lifted from the 1970s and applied directly today, it is still possible to draw inspiration from it. One of the strengths of the wage-earner fund idea is that it offers an alternative to state-centric visions of socialism, identifying trade unions rather than the state as the site of socialization. This fact offers an important rhetorical retort to right-wing critics, who insist that democratic socialism is a contradiction in terms. At the same time, Meidner always insisted on the need for coordination and rationalization across the economy as a whole. In Meidner’s view, the wage earner funds represented “a third way” between nationalization and self-owning cooperatives, with elements of both.

Similarly, the Rehn–Meidner model could serve as a source of inspiration for democratic socialists now. Today, as in the 1940s, inflation has become a central political concern. The immediate cause was the combined shocks of the pandemic and Russia’s invasion of Ukraine. However, as in the 1940s, there are reasons to think that the problem is not entirely transitory. Inflationary shocks could become more common in the twenty-first century for several reasons. Climate change will likely cause severe supply chain disruptions; zoonotic pathogens may cause more pandemics; and renewed geopolitical rivalry could create further volatility. Given these prospects, we are in urgent need of political answers to inflation, which go beyond the standard neoliberal method of central bank interest-rate hikes. As a means of combating inflation, this instrument is excessively blunt. To let workers pay the price of inflation was precisely what Rehn and Meidner sought to avoid.

The climate question remains the greatest political challenge of our time. The neoliberal notion that markets will engender a green transition appears increasingly delusional. Capitalism is quite clearly not delivering what is needed. When Meidner retired from the LO in 1979 at the height of the wage-earner fund controversy, he gave a farewell interview in the LO newspaper. On that occasion, he noted: “Capitalism has failed and cannot solve our future problems. It is that simple.” For those who share this sentiment today, Meidner’s two models may still serve as sources of inspiration.