How Sweden built up its public wealth: socialization in Sweden

Matthew Bruenig has written an excellent piece in People’s Policy Project that I want to expand upon. Sweden had large-scale public ownership in a variety of sectors and was a highly socialized economy during the golden age of social democracy.

‘’In 1950, the Swedish state owned just 14 percent of the national wealth. By 1975, SAP had pushed that figure over 44 percent. Notably, this build up of public assets was done at the same time as Sweden put together its best-in-the-world welfare state.’’

This development goes back to the establishment of a public telegraph and telephone system and shortly thereafter the beginning of the socialist movement in Sweden when the Swedish Social Democratic Labour Party (SAP) was founded in 1889.

The Swedish government began involving itself in the telegraph and telephone sector when it established itself as Televerket, or the Swedish Telephone Agency, in the 1850s. It purchased communications lines and network infrastructure during the 1880s and 90s to ensure universal connection and became a public monopoly by 1920.

Coincidentally, the Social Democrats first called for sweeping socialization of industry on an organized basis in their 1920 Gothenburg Program, and although Hjalmar Branting became the first ever socialist to win office in Sweden in 1920; the socialist movement did not truly gain power until 1932 when Per-Albin Hanson became prime-minister. The Social Democrats would govern the country for the next 44 years straight, until 1976.

“We Social Democrats do not accept a social order with political, cultural and economic privileges or one where the private-owned means of production are a way for the few to keep the masses of people in dependence.”

— Per Albin Hanson

Initially, public ownership started off slowly. The Social Democrats decided on a significantly more gradualist policy than what had been outlined in the Gothenburg Program. The railways were nationalized in 1939, for example. Some restaurants and hotels were absorbed into the state-owned chain SARA. The finance minister, Ernst Wigforss, proposed public monopolies on coffee production and gas utilities to help finance the welfare state, although there was strong resistance from the bourgeois parties who did not find this an acceptable funding method. Many socialist intellectuals of the time period also noted the high level of public ownership and praised it as pragmatic left-wing governance:

“They noted enthusiastically that in Sweden, alone in Europe apart from the Soviet Union, the socialized sector of the economy was already extensive. It included the Post Office, most of the railways, most electric power, forests, the Riksbank, air transport, radio services, tobacco, liquor, and even some iron-ore mining….’’

During the 1940s, the drive for public ownership accelerated. In 1944, the Social Democrats proposed the 27-point program otherwise known as the Postwar Program of the Labour Movement, which was authored by Ernst Wigforss. The program proposed a transition to a socialist economy.

‘’To realize this program is to give the business community a new organization and to transform society in a socialist direction.’’

Several capital intensive industries and those involved in export trade were nationalized between the years 1940 and 1957. A public alcohol monopoly was also established in 1955. The Swedish state became the second largest steel producer by the beginning of the 1960s.

‘’Following WWII, the SOE sector expanded to take over key industries requiring heavy capital injection, and also to support the regional policy.’’

Specifically:

‘’In 1938, the so-called pig iron inquiry proposed that an ironworks should be located in Luleå and in 1940 Norrbottens Järnverk AB, NJA, was founded, with the Swedish government as owner. The proximity to iron ore was one of the basic reasons for the facility in Luleå. NJA was built during the 1950s. In the early 1960s, production and sales improved significantly and NJA was Sweden’s second largest steel producer, with an annual production of 400,000 tonnes, and accounted for 30% of Swedish exports of rolled-steel products’’

‘’In 1945/1946 the government settled on taking over insurances, petroleum products trade, the part of forestry industry, road works and the production of schoolbooks. In 1957 the Luossavaar-Kiirunavaars mines became nationalized-it was the biggest exporter of iron ores.’’

Sweden replaced its paternalistic and cumbersome alcohol rationing system with socialized distribution as Systembolaget:

‘’Instead of imposing a total prohibition on alcohol sales, like the United States, in 1917 Sweden instituted the so-called Bratt System, an obligatory alcohol rationing programme following on from wartime rationing, which led to a drop in per capita liquor consumption to five litres annually.

In 1955 rations were abolished, and Systembolaget was set up. While Swedes can now buy alcohol in any quantity they like, through regulation the company’s stated goal is “a society where alcoholic drinks are enjoyed with a care for health so that no one gets hurt.”

The public sector continued to expand in the 1960s and the SAP’s position moved to the left. In 1960, a state-owned pension scheme that would acquire shares in banks and enterprises called the ATP System was established. There was indeed ideological bias in this program, the Social Democrats and the Communists favored a comprehensive version because it was pro-worker, whereas the non-socialist bourgeois parties feared it because it would control more private industry. (see Sweden: Problems of Maintaining Efficiency Under Political Pressure Gunnar Eliasson and Bengt-Christer Ysander.)

‘’After World War II, the credit system was used more strongly to divert household savings to other uses than manufacturing investment. Formally under private ownership, the banking system, through regulations and controls, came to be more or less in the public domain. Public control of the credit system was further enhanced in 1960 by the creation of a supplementary pension scheme (the ATP system) with a huge funding arrangement (the AP funds). The three initial funds were later supplemented with a fourth, designed to operate as part of a new industrial policy strategy by direct acquisition of shares in companies. This huge financial institution (the four funds) was imposed upon a highly regulated capital market. As a consequence the AP funds, to a large extent, became the main source of cheap (below the market interest rate) finance for the housing sector.’’

The shipbuilding enterprise Uddevallavarvet AB was nationalized in 1963.

The 1970s were perhaps the most rapid expansion of public ownership.

In 1970, pharmacies and large parts of pharmaceutical production were nationalized. A state-owned enterprise known as Apoteksbolaget AB (now called Apoteket AB) was established alongside publicly-owned production and labs:

‘’Much of the Swedish pharmaceutical sector — including retail and specialty drug development and manufacturing — was nationalized in 1970. The state-owned company, Apoteket, was the only pharmacy authorized to purchase prescriptions for retail sale in Sweden, thus serving as the country’s sole wholesaler.’’

Many Social Democrats had been advocating public ownership since 1946 and the proposal was popular with the public, and also among the left-wing activists of the time period. Motions were put froward at the 1968 SAP party congress calling for socialization:

‘’At the Social Democrats’ party congress in 1968, the left winds that swept the world were clearly felt. Congress discussed the socialization of finance, industry, and more. Three motions called for the nationalization of the pharmaceutical industry. The party board said that they should wait for the results of the investigation. Minister Krister Wickman thought that by socializing the retail trade it would be possible to control drug prices…’’

A spokesperson for the pharmaceuticals lobby in Sweden compared social democratic nationalization proposals and the eventual passage of the bill to ‘’a knife at our throats.’’

It was with the knife on the throat, of course. Once one had realized the situation, it was wise to make the best possible of the situation. And I think we did.

A state-owned investment bank (SIB) was established in 1967 as was the Statsföretag public holding company in 1970, who’s job was to manage existing publicly-owned industrial assets or absorb new privately-owned enterprises. The left-wing of the Social Democratic Party also wanted increased emphasis on economic planning and public ownership over industrial sectors.

Brewing enterprises, restaurant chains, chemicals and a greater share of the industrial sector were nationalized:

‘’The Government thus has bought a majority interest in the dominant Swedish brewery (Pripps, in 1975), purchased a drug company (Kabi, in 1969), established a state monopoly in drug distribution (Apoteksbolaget, in 1971), and has formed a series of new companies for technical testing purposes — Semico and Statens Anliiggningsprovning, for example.’’

‘’It was introduced by state-owned restaurant company SARA (Sveriges Allmänna Restaurangbolag) back in the 1970s, when Sweden had been under Social Democratic rule for around 50 years. At the time, SARA ran restaurants and pubs across the country and was one reason Sweden had so far not seen American chains.’’

‘’Just as McDonalds opened their first Swedish branch in 1973, SARA bought up several small burger restaurants and created the chain Clock, its vivid red and yellow branding a not too subtle hint at their main competitor.’’

‘’The Government also chose to enter the business sector directly by forming new companies or taking over responsibility from existing firms. There were some bold ventures into so-called ‘future industries’. The most typical were computers and nuclear technology — in particular the state half-interest in Data-Saab, Udd-Comb and Asea-Atom.’’

‘’A series of new ‘national’ companies emerged in shipbuilding, steel and textiles (Svenska Varv, SSAB and Eiser)’’

(Note: Eiser was half-nationalized in 1974 and fully nationalized in 1976)

Sweden’s public ownership of industry expanded rapidly during the 1970s, public sector employment jumped from 26.8% in 1970 to 38.5% by 1979.

By 1979, Sweden had an immense level of public ownership. There were more than 70 state-owned enterprises (SOEs) and state-owned pension funds also controlled stocks and credit institutions, which are not included in the first figure and were comparable in scope to the normal SOEs. Everything from Celsius (aerospace) to SSAB (steel) to Eiser (textiles) were in public ownership.

Conclusion

Public ownership rapidly expanded in Sweden after the Social Democrats became the largest political force in the country, and especially during the 1970s. The SAP after 1932 favored a policy of gradualism and pragmatic compromise rather than the sweeping nationalizations conducted by socialists in countries such as Britain, France, Norway and Austria.

Nevertheless, Sweden eventually came to possess one of the highest levels of public ownership of any nation in Europe, with more than 70 state-owned enterprises (SOEs) in sectors as diverse as iron ore, restaurants, textiles and steel as well as the retail of drugs and alcoholic beverages, despite the gradualist bent of the socialist policymakers. The economy was highly socialized.