Wages, Profits, and Investment in Sweden
Sweden's political economy combines a set of characteristics that makes the management of distributive conflict between capital and labor vital to its economic welfare. It has a small, open economy, highly dependent on foreign transactions for the levels of employment and consumption it can enjoy. With a relatively small public enterprise sector, it must rely very heavily on capitalist firms to carry out those transactions. At the same time, Sweden's labor movement has an exceptionally strong position in the state as well as market arenas. This juxtaposition of a capitalist economy and a powerful labor movement renders the country especially vulnerable to distributive conflict between capital and labor. It places a high premium on managing that conflict so that foreign demand is not jeopardized. This has in fact been possible for much of the period since World War II, contributing significantly to exceptionally high levels of employment and consumption, collective as well as private.
To the extent such management has been possible, it has apparently depended on the way in which relationships between capital and labor have been structured in Sweden. While the overwhelming proportion of production for the market is conducted by capitalist firms, trade unions covering three-quarters of the labor force organize a very large proportion of those who work in those firms. The largest of the three confederations to which the unions belong, the Swedish Confederation of Labor (Landsorganisationen i Sverige, or LO), itself accounts for about half of the labor force. The strength this gives it in the market arena is also the source of power in the state arena. The LO and its affiliates provide the principal organizational and financial resources and also the core electoral constituency of the Social Democratic party (Socialdemokratiska Arbe