Bernie Sanders and others hold up Nordic welfare states as a model for winning change through reforming capitalism. But they too are under attack writes James Supple
Over the last three decades governments all over the world have been cutting spending on public services and dismantling the welfare state.
Neo-liberal policies have led to growing inequality. In Australia the top 1 per cent of income earners, making on average $450,000 each, have doubled their share of income since 1980.
In the US the picture is even starker. In the wealthiest society in human history one in seven people, 45 million Americans, survive only on food handouts.
Bernie Sanders’s campaign for the Democratic Presidential nomination last year inspired millions of Americans with a call to turn this around. Describing himself as a democratic socialist, Sanders said, “I think we should look to countries like Denmark, like Sweden and Norway”. These Nordic countries, with the addition of Finland, maintain the most generous welfare states in the world.
Denmark, the best example, provides free universal health care and university education, unemployment benefits paid at 90 per cent of your former wage for two years, as well as 75 per cent of the cost of child care.
Sweden is famous for providing 13 months of government-funded parental leave paid at 80 per cent of your wage, plus another three months for the partner who goes back to work first. This compares to four and a half months paid at the minimum wage in Australia.
Although this system is sometimes referred to as “Nordic socialism” it is better described as social democratic.
It developed through a series of reforms based on a compromise with capitalism that allowed businesses to maintain healthy profits.
The Nordic countries have been a test case for efforts to use the state to reform capitalism in the interests of workers, developing the welfare state to its fullest extent anywhere in the world.
Sweden, the largest of Nordic countries, is a clear example.
The Swedish working class managed to force reforms after a period of intense class struggle. In 1902 workers staged a three-day general strike to demand the vote.
Another month-long general strike followed in 1909. During the 1930s Depression a bitter strike in the Adalen valley saw police shoot down five workers.
This produced a period of Social Democratic Party government, the equivalent of the Labor Party in Australia, from 1932 until 1976. They were able to strike a deal with Swedish capitalists in return for winding down strikes and the level of class struggle.
A partnership deal between unions and employers was agreed in 1938, where the unions policed national wage agreements through holding back further strike action.
After the Second World War this was expanded into a centralised wage fixing system enforced across industry regardless of an employer’s ability to pay.
While “inefficient” companies were driven out of business, those that could invest and improve their competitiveness benefited through wage restraint.
Far from undermining capitalism, there was relatively little nationalisation of industry, less than in countries like Britain and France at the time.
In return workers received a very high “social wage” through government spending on welfare and public services.
But this arrangement was only possible because of a long period of economic boom where businesses continued to comfortably make profits. Sweden’s neutrality in the Second World War saw the country boom in the late 1930s through supplying the needs of German rearmament. It emerged unscathed from the destruction caused by the war in other parts of Europe.
This situation continued through the period of the post-war boom, the so called “golden age” of capitalism that continued until the mid-1970s.
It was in this period, when welfare states were expanding in many other countries, that most of the increase in welfare spending in Sweden took place. Government spending grew from 25 per cent of the economy in 1950 to 60 per cent by the early 1980s.
But once economic crisis and recession hit, the willingness of Swedish capitalists to accept these levels of government spending and the old wage agreements was called into question.
When the post-war boom ended and recession swept the world in 1974 Swedish economic growth shrank. Another severe recession in early 1990s saw unemployment rise from 1.7 per cent to 8 per cent.
Unemployment shot up again after the 2007 economic crisis and is still at 7.4 per cent today. This is a far cry from the period of the post-war boom when unemployment averaged 2 per cent.
The result was the adoption of the same kind of cuts and neo-liberal policies that we have seen in Australia and across the world.
Sweden cut taxes on high income earners, cut public pensions, sacked 90,000 workers in the public sector and began opening health care to private companies.
As a result, the pro-market The Economist gloated: “The majority of new health clinics and kindergartens are being built by private companies, frequently using private money…The Swedes have done more than anyone else in the world to embrace Milton Friedman’s idea of educational vouchers… More than 10% of students under 16 and more than 20% of those over 16 attend ‘free’ schools, two-thirds of which are run by private companies.”
In 1995 Sweden also joined the EU, accepting fiscal rules that led to cuts to spending on sick leave, unemployment benefits and parental leave.
As The Economist commented in 2013, “Sweden has reduced public spending as a proportion of GDP from 67% in 1993 to 49% today. It could soon have a smaller state than Britain. It has also cut the top marginal tax rate by 27 percentage points since 1983, to 57%, and scrapped a mare’s nest of taxes on property, gifts, wealth and inheritance. This year it is cutting the corporate-tax rate from 26.3% to 22%.”
The same story has been repeated across Scandinavia. In Finland, ten years after the recession in 2007, unemployment is still at 9.2 per cent.
This has triggered an effort by the current conservative government to strike a “Competitiveness Pact” where unions have agreed to longer working hours, lower holiday bonuses, a wage freeze and an increase in workers’ pension contributions.
All this is designed to “increase productivity” by 5 per cent, in an effort to boost business profitability through wage cuts.
To top it all off, the Finnish government is also outsourcing employment services and cutting $14 billion in spending by 2030.
Despite the cuts in recent decades, welfare services in Scandinavia remain by and large better than those in Australia or the rest of developed world.
You can still read reports on the success of Finland’s school system or its “baby boxes” that deliver nappies and clothes for a baby’s first year to every expectant mother.
But the trajectory is clear—these are not societies moving towards socialism but towards the same growing inequality, government cutbacks and ruthless, unrestrained capitalism as anywhere else.
Crisis of social democracy
Politically, the social democratic parties that introduced the Nordic model are facing the same kind of crisis as they are all across the developed world.
And, as elsewhere, there has been the rise of racist far right parties on the back of disillusionment with the political mainstream.
Much like Labor in Australia, Sweden’s Social Democrats have polled only around 30 per cent in the last two elections, down from an average of 45 per cent in elections until 1980.
The Swedish Democrats, a racist party that campaigns against immigration and refugees are sitting at 20 per cent in the polls and have 49 seats in the national parliament. The racist Danish People’s Party came first in the last European elections with 26.6 per cent.
The Nordic model was able to deliver an extensive welfare state in a period where capitalism was healthy enough to pay for it.
But in the period of lower growth and economic crisis since the post-war boom ended these measures have been under attack.
This has been the experience all around the world. In the 1970s Australia introduced free universities and a universal Medicare scheme. We once had state-run banks as well as power and phone companies.
Today the Labor Party may promise to end the freeze on Medicare spending or to protect penalty rates while in opposition. But when it takes government it delivers cutbacks in an effort to balance the budget.
This has led to the growth of new left-wing electoral parties like The Greens, who aim to use parliament and control of state to deliver reforms, just as the old social democratic parties did in previous decades.
But in a period of economic crisis such a parliamentary strategy faces major problems.
In 2014 the radical left party Syriza formed government in Greece promising to end austerity, only to capitulate to the demands of the European Central Bank and the IMF and end up implementing austerity itself.
Real socialism requires overthrowing capitalism, not compromising with it.
It would mean a society where we take control of the wealth out of the hands of the super-rich 1 per cent and use it in the interests of the working class majority. This would allow spending on services and welfare to meet social needs, as well as tackle the threat of climate change and environmental crisis.
This kind of social transformation can only come through class struggle on a mass scale.
The best example of this came 100 years ago, when Russian workers and peasants succeeded in overthrowing capitalism in the 1917 revolution.
Workers’ struggle, through strikes and industrial action, has the potential not just to halt the operations of capitalism but to construct a new, thoroughly democratic way of running society.
It is only this tradition, not the social democratic model of the Nordic countries, which can bring about socialism.