Democrats may have believed in such things in principle, but they were Swedish and logical. They decided to let the capitalists go ahead and make money, tax the wages and profits, and use those taxes to buy social benefits. They would “nationalize consumption, not production.” But even with these social benefits, the leftists were lagom. In 1960 the notorious Swedish tax burden was about the same as the burden is now in the United States: Swedish government spending was 31 percent of GDP, and the deficit hardly existed. Growth continued, unemployment was minimal, and inflation was low. It was a left-wing Eden, albeit with an occasional stock-and-bond-owning serpent in a Volvo limousine. Most social benefits were tied to having a job, so the Swedes kept working. And they worked cheap. Approximately 90 percent of Sweden’s blue-collar workers and 80 percent of its white-collar workers are unionized. The unions sat down with the Swedish Employers’ Confederation and colluded in centralized wage negotiations. The pay rate was based on productivity and world price levels. As Per-Olof Edin told me, “For fifteen to twenty years it’s been the LO that has been saying wages must be kept low.” This would hardly make for a rousing speech at an AFL-CIO strike rally. A policy of “solidaristic” wages was pursued, meaning the same pay for the same kind of work, regardless of the employer’s ability to cough up. This favored the most efficient and productive (and largest) companies, though it screwed small businesses and start-up entrepreneurs. Companies were allowed to fire workers for any material reason. Featherbedding was forbidden. Labor mobility was encouraged by government emphasis on retraining and placement instead of unemployment checks. Free trade was maintained. No attempt was made at centrally planned production or marketing. The Swedes may have pestered their barnyard fowl, squeezed it, jiggled it, and poked it in the bottom, but they did not kill the goose that laid the golden egg. Then something went wrong. The Swedish government started granting entitlements that weren’t dependent on holding a job and were often dependent on not holding one. At the same time, the concept of full employment was extended to sectors of the population that didn’t even necessarily want to be fully employed, such as the handicapped and mothers of young children. Likewise, an attempt was made to maintain full employment in failing industries where employment previously would have been discouraged. Steel mills, shipyards, and textile factories were nationalized to “preserve” jobs. Public- sector employment grew from 20 percent to 30 percent of the workforce between
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