What can be learnt from the Nordic Model?

Introduction

There is a lot of heated discussion on the welfare state, or the
European Social Model which it is often being named in
Europe. In my part of the world we call it the Nordic
Model
, which by many people all over the world is being
considered the most advanced version of this social model.

The welfare state represented great progress in terms of living
and working conditions, unprecedented in the history of mankind.
Public health, life expectancy and social security improved
enormously over a short period of time as the welfare state
developed in the last century. It therefore became enormously
popular among ordinary people.

In the current era of neo-liberal hegemony, however, the welfare
state is being attacked by strong political and economic forces in
society. Deregulation of the economy, privatisation and cuts in
public budgets contribute to changing the specific power relations
which were decisive for the development of the welfare state. Its
very existence is thereby put at risk.

There is, however, a lack of analysis and focus in public debate
on what made the welfare state possible. The entire question is
being depoliticised. This makes it possible even for those who
attack social institutions and provisions to argue that it is done
in order to modernise the welfare state and to defend and protect
it for future generations.

We also experience that many labour organisations in the South
as well as left-leaning politicians (e.g. President Lula in Brazil)
are interested in importing this model to their countries.
Trade unions and political parties, particularly social democratic
parties, of the North are just as eager to export their
successful social model, and they use a lot of resources to
transfer their experiences to the South. Social peace, tri-partite
co-operation and social dialogue are being promoted as central
measures in order to achieve the welfare state.

In this article I will challenge these rather simplistic
concepts of the welfare state. This social model which developed in
a very specific historic context cannot be assessed independently
from its social and historical origin and the power relations which
made it possible. If we really want to get to grips with the
potential, the actual development and the perspective of the
welfare state, a deeper and more thorough analysis and
understanding of this particular social model is crucial.

The political economy of the welfare state

Some kind of social services (health, education, social
protection, etc.) will develop in all countries as the economy
develops. The economy itself demands a lot in terms of the
reproduction of labour, qualifications, public transport and so on.
The organisational form, quality and level of these services,
however, will reflect power relations in the actual societies as
well as internationally.

In the last resort, therefore, democratically managed,
universally accessible public services, as opposed to profit-driven
private service markets, is a question of structural power – of
economic, social and political power relations in society. The
welfare state is thus the result of social struggles. High quality
public health services, national insurance schemes, social security
and other public services were introduced and improved as a result
of the increasing power of organised labour. Public ownership and
control of the basic infrastructure in society, of the utilities,
represent an important part of these new power relations.

However, the welfare state as we know it was not only a product
of power relations in general, but the result of a very specific
historic development in the 20th century, including the
Russian revolution (see below). Contrary to being the result of
social dialogue and tri-partite co-operation, as many in the labour
movement will have it, the welfare state was the result of a long
period of hard social struggle and class confrontations.

Ever since capitalism became the dominant mode of production in
our societies, it has developed from boom to bust, from bust to
boom. The relatively unregulated laissez-faire capitalism
of the 19th and first half of the 20th century represented strong
exploitation of workers in general, and caused extraordinary misery
during its bust periods. The response of the working class became
to organise and fight – at the workplaces as well as at the
political level. Through this fight the labour movement gradually
achieved better wages, better working conditions as well as high
quality social welfare provisions.

This period was thus strongly dominated by social
confrontations. There were general strikes and lock-outs. There
were use of police and military forces against striking workers,
also in the Scandinavian countries. People were wounded and killed
in these confrontations. As the labour organisations developed and
became stronger, they gradually gained ground in the social
struggle. A big part of the movement turned politically to
socialism as a means to end capitalist exploitation. Demands for
systemic changes became prevalent.

Particularly, the international economic depression of the 1930s
lead to increased popular pressure for political interventions in
the markets. Mass unemployment, increased misery, fascism and war
produced massive demands for peace, social security, full
employment and political control of the economy. When the leaders
of the victorious nations met at the Bretton Woods conference
towards the end of World War II (WWII), therefore, the message from
their workers and citizens back home was clear: The unregulated
crisis-stricken capitalism must come to an end. Under the then
existing balance of power, it became the Keynesian model of
regulated capitalism which won hegemony, and thus, the social and
economic foundation for the welfare state was created.

In this regard, it is important to notice that the strength of
labour did not only result in better trade union rights and
regulated labour markets. Much more important was the general
taming of market forces. The power of capital was reduced in favour
of politically elected bodies. Competition was dampened through
political interventions in the market. Capital control was
introduced and financial capital became strictly regulated. Through
a strong expansion of the public sector and the welfare state, a
great part of the economy was taken out of the market altogether
and made subject to political decisions. This general taming of
market forces was a precondition for the development of the welfare
state, and the resulting comprehensive regulatory framework became
more important than labour legislation in providing better working
conditions.

The welfare state, in other words, is not only a sum of social
institutions and public budgets. It represents first and foremost
specific power relations in society. Capital control, in
particular, made it possible for governments to pursue a policy of
national and social development without continually being
confronted with capital’s exit strategies where big corporations
threatened to flag out, to move to other countries with more
favourable conditions, if their interests were hurt. So, in short,
public welfare is a question of power!

The social pact policy

An important part of the history of the welfare state as well as
of the balance of power in society is the social pact or the class
compromise. As there is no room for a comprehensive analysis here,
I will only focus on some key elements of this specific, historic
development. During the last century, the social struggle between
labour and capital in many countries turned into static warfare in
which none of the parties were very successful in advancing their
positions. The labour movement was not able to capture new power
positions and capital forces were not able to defeat the workers’
organisations. As a result of this, the trade union movement
gradually developed a sort of peaceful cohabitation with capitalist
interests.

In the 1930s this cohabitation started to become
institutionalised in some parts of Europe when the trade union
movement stroke accords with employers’ organisations, particularly
in the North, and after WWII also in most of Western Europe. From a
period characterised by hard confrontations between labour and
capital, societies entered a phase of social peace, bi- and
tripartite negotiations and consensus policies. It was the balance
of power within the framework of this social pact between labour
and capital which formed the basis on which the welfare state was
developed – and working and living conditions as well as social
provisions were gradually improved.

One important factor in the post WWII period was that
international capitalism experienced more than 20 years of stable
and strong economic growth. This made it easier to share the
dividend between labour, capital and the public sector.

It is important to realise that this social partnership between
labour and capital was a result of the actual strength of the trade
union and the labour movement. The employers and their
organisations realised that they were not able to defeat the trade
unions. They had to recognise them as representatives of the
workers and to negotiate with them. The peaceful cohabitation
between labour and capital rested in other words on a strong labour
movement – a strength which was developed exactly through the many
struggles and confrontations between labour and capital in the
previous period.

An important feature of this context was the existence of a
competing economic system in the Soviet Union and Eastern Europe.
As the British historian Eric Habsbawm (cf Habsbawm 1994) has
pointed out, this was instrumental in making the capitalists in the
West accept a compromise. It is also important to notice that the
welfare state, in the form of regulated capitalism, was never an
aim for the labour movement before it was created. The stated aim
was socialism. It was in fear of socialism (after the Russian
revolution and a strengthening and radicalisation of the labour
movement in Western Europe during WWII) that capital owners in
Western Europe gave in to many of the demands of the labour
movement. They voluntarily entered into social pacts and gave in to
many of labour’s social and economic demands in order to win time
and dampen socialist sentiments in the labour movement. 50 years
later, we can today state that this corporate strategy proved to be
quite successful.

The fact that the welfare state was not the expressed aim of the
labour movement, but the result of the specific historic compromise
between labour and capital, is also reflected in the mixed
characteristics of the welfare state. On one hand, parts of it
represent the seeds of the labour movement’s vision of another and
better society (social insurance, child benefit, redistribution,
free welfare services, universal rights). On the other hand, other
parts of the welfare state function more like a repair workshop of
a brutal and inhumane economic system, where deficiencies are being
compensated (e.g. unemployment benefits and different
pension-schemes and benefits linked to work-related disabilities,
occupational health problems, labour market exclusions etc.).

We should also have in mind that there were ideological and
political struggles within the labour movement on the way forward.
The more radical or revolutionary currents wanted to socialise, or
democratise the ownership of the means of production, while the
more moderate or reformist currents aimed at delimiting the power
of capital through political regulation and reforms. It was
precisely the strength of the more radical currents that made
capitalist forces go for a class compromise in Western Europe. The
important role of the Soviet Union in this regard was due to the
fact that capital owners in Western Europe feared that if it should
come to a confrontation over state power in Western European
countries, Soviet Union would support the more radical
currents.

In any case, the policy of the social pact, which in reality
became the development of the welfare state, resulted in enormous
improvements in living and working conditions. In the labour
movement this led to the common understanding that a way had been
found to a society which brought social progress and a relatively
fair distribution of wealth to ordinary people – without having to
make all the sacrifices connected with class struggle and social
confrontations. Settlements between labour and capital were made in
rather orderly and peaceful ways at the national level. The
dominant apprehension was that society had reached a higher level
of civilisation.

Through gradual reforms the labour movement had increased
democratic control of the economy. The crisis-free capitalism had
become a reality! No more economic crises like that of the 1930s,
no more mass unemployment, no more social distress, no more
concentration of wealth among the rich and privileged, no more
misery among people. All social trends pointed upwards. For a great
many in the labour movement this was the reformist road to
socialism – and it was for everybody to see that it worked! These
social achievements formed the material basis for a social
partnership ideology which became, and still is, deeply rooted in
the national and European labour movement.

For the trade union movement the social pact in reality
represented the acceptance of the capitalist organisation of
production, the private ownership of the means of production and
the employers’ right to lead the labour process. In exchange for
the gains in terms of welfare and working conditions the trade
union confederations guaranteed industrial peace and restraint in
wage negotiations. Simplistically, the welfare state and the
gradually improved living conditions were what the rather peaceful
labour movement achieved in exchange for giving up its socialist
project. Today we can conclude that it was a short-term achievement
in a very specific historical context.

Now, more than 50 years later, we have to admit that the
capitalists to a far degree have succeeded with their strategy. Due
to important achievements in terms of welfare, wages and working
conditions, the policy of the social pact gained massive support
from the working class, and the more radical and anti-capitalist
parts of the labour movement were gradually marginalised. The
dominant parts of the labour movement also started to see the
social progress as an effect of social peace and co-operation with
more civilised capital owners. To many of the trade union leaders
of the time, social confrontations actually became negative
features which had adverse effects on workers’ conditions and
therefore should be avoided. Combined with the dominant conception
that free-market capitalism was defeated, this development led to
the depolitisation and deradicalisation of the labour movement and
the bureaucratisation of the trade union movement. It became the
historic role of the social democratic parties to administer this
policy of class compromise.

What the ideology of the social pact fails to explain, is that
the great achievements in terms of welfare and better working
conditions during the era of the class compromise after WWII
represented a harvesting period. This was made possible only
because great parts of the working class had been able to shift the
balance of power between labour and capital through a number of
confrontations and hard class struggles during the first part of
the 20th century (including the Russian revolution). It was in
other words the confrontational struggles of the previous period,
as well as the still existing organisational strength, which made
it possible for the trade unionists of the social partnership era
to achieve what they did through peaceful negotiations. Thus, we
face the paradoxical situation, that the ideology of the social
pact, which also became the ideology of the welfare state, in the
long run undermined the power basis on which the same welfare state
was developed!

The turning point – the neo-liberal
offensive

As the reconstruction and rebuilding of the economy after WWII
came to an end, the post-war Keynesian economic model ran into
increasing problems. Stagnation, inflation and profit crises became
prevalent. Spurred by these international economic crises, market
forces went on the offensive and the current era of neo-liberalism
started. The politics of the social pact thus culminated in the
1970s. After that, the capitalist forces changed their strategy in
order to restore profitability, withdrawing gradually from the
social pact and introducing more confrontational policies against
labour.

The political and ideological hegemony which the capitalist
forces then were able to obtain in a very short period of time has
been used to carry out a quick and systematic project of
deregulation. Some of the results are increased market competition,
attacks on wages, labour laws, agreements and power positions which
were won during the era of the welfare economy, and which at that
time were accepted by the employers as part of the class
compromise. Through political pressure, threats of flagging out or
speculative attacks on currencies, they go far towards sanctioning
government policies and push forward cuts in public budgets – i.e.
the economy of the welfare state.

Most of the complex system of regulatory means which were used
to tame the market forces and thus to create the preconditions for
the development of the welfare state have simply been removed. This
policy of deregulation has led to the development of a completely
crazy, speculative economy, in which more than 90 per cent of
international, economic transactions are speculative, mainly
currency speculation, and to an unprecedented redistribution of
wealth – from public to private, from labour to capital and from
the poor to the rich. Public as well as private poverty is growing
side by side with an ever more visible private abundance of wealth
among the elite. The redistribution model of the welfare state has,
in other words, been turned upside down.

An important part of the strategy of capital has been the
restructuring of capitalist production at the global level. Global
production chains, lean production, outsourcing, offshoring and
relocation of assembly lines as well as of supportive services are
central features of this development. Workers and social models are
being played out against each other as a result of this more and
more unlimited freedom of movement of capital, goods and services.
New Public Management has introduced private sector models also in
the public sector. Market freedom and the ability to compete on
increasingly deregulated international markets have been the
guiding principles behind the actual policies. As a result,
competition is increasing in the labour market and a rapid growth
of precarious work is undermining trade union and workers rights. A
widespread brutalisation of work is one of the more
serious adverse effects of this development.

This capitalist offensive did not meet much resistance. The
labour movement was not very well prepared for the new economic and
social situation. The trade unions had difficulties to act under
the changed economic and social conditions as their policies and
activities were mainly linked to their experiences in a period of
economic prosperity. In addition, the process of depolitisation and
deradicalisation which had taken place during the era of the social
pact, made it easier for capital owners to try to solve
the crisis by attacking working conditions, trade union and
workers’ rights, public services and social rights and
provisions.

What we have been facing over the last twenty years is therefore
the abolition of capital control, the deregulation and
liberalisation of markets, the redistribution and concentration of
wealth, the privatisation of public services, the increased use of
competitive tendering and outsourcing, the downsizing of the
workforce to the absolute minimum and the consequent increasing
labour intensity, and the flexibilisation of labour markets. In
this way, most of the economic and material basis on which the
welfare state was developed, is simply gone.

It is not an accidental setback we are facing, but a fundamental
change in the development of our societies. Behind the massive
shift in the balance of power in society, which we have experienced
over the last couple of decades, we can identify some strong
economic and political forces. Globalisation is not a
necessary consequence of technological and organisational changes,
as some will have it, but a result of strategic and political
decisions in the closed boardrooms of multinational companies, in
financial institutions and by governments.

Through informal and unaccountable power structures like the G8,
institutions like the International Monetary Fund (IMF), the World
Bank and the World Trade Organisation (WTO), regional institutions
like the European Union (EU) and the North American Free Trade
Agreement (NAFTA) and other bilateral and regional trade
agreements, neo-liberal policies are being pushed through and
institutionalised internationally. In short, an immense shift in
the balance of power between labour and capital has taken place,
and this time in favour of capital. The big multinational companies
have been in the forefront of this development – with their newly
achieved freedom from democratic regulation and control.

The fact that the power basis of the welfare state is eroding,
does not, of course, mean that we can risk ending up in a
pre-welfare state situation, where social spending constituted a
considerable smaller part of GDP than today (cf Lindert 2004:
11ff.). Society has developed a lot since then, and the current
economy is completely dependent of a number of social and public
services. It is therefore not only the size of the public sector
that is decisive in this regard, but also, and even more
importantly, the power relations within it.

The undermining and weakening of the welfare state will first
and foremost be reflected in the organisational forms, the
stratification, the quality and the level of the social services –
through privatisation, increased use of competitive tendering,
increased poverty and inequality in society, more and higher user
fees, the transition from universal services to means testing, the
increased commodification of labour (cf Esping-Andersen 1990:35
ff.) and so on. Due to strengthened market forces, many people will
also experience reduced access to decent housing, deteriorating
working conditions and health services.

Based on the above, we can conclude that the weakening and
deconstruction of the welfare state is going on, but the potential
of the new power relations are not exhausted. Institutional
slowness, the existence of universal suffrage and democratic
institutions, although weakened, and sporadic social resistance
slow down the speed of the process of deconstruction. Whether or
not this development will be allowed to continue will therefore
depend on the breadth and strengths of the social resistance which
will be mobilised in defence of the achievements which were won
through the welfare state – and subsequently for more offensive
social and political aims.

The shift from consensus to confrontation

The fact that the relatively stable class compromise in the post
WWII period has broken down, and the capitalist forces are
withdrawing from the social pact, does also imply that the
consensus policies of the social pact is gradually being replaced
by confrontational attacks. In other words, bi- and tripartite
negotiations, or social dialogue which it is now being
named in the European Union, do not any longer work the same way as
it did during the social pact period.

The trade union movement was taken by surprise by this
development. The shift from consensus to confrontation on the side
of capital was incomprehensible within the consensus-oriented
social pact ideology of the labour movement. The breakdown of the
historic compromise therefore also led to a political and
ideological crisis in the social democratic parties and in most of
the labour movement. With a depoliticised and passive membership,
and an increasingly self-recruiting leadership which was moving
into the elite of society, social democratic parties rapidly
adapted to the dominant neo-liberal agenda, although in the form of
softer alternatives than the original right wing version.

In this context, globalisation, rather than to be the concrete
form of the current neo-liberal offensive, became interpreted as a
necessary phase of development of the new world economy.
Globalisation has come to stay has been the mantra of
dominant parts of the labour movement, and larger parts of the
trade union movement in developed countries have therefore also
come out in favour of a narrowly focused policy to strengthen the
international competitiveness of their own companies
(business unionism). Increased flexibility,
including in its new, dressed up version flexicurity,
which means the weakening of working conditions and labour
regulations, has been accepted in the name of increased
competitiveness
. Competitiveness, in its turn, is being
launched as the one and only way to secure jobs.

Deregulation and liberalisation of the economy in general have
also been widely accepted, provided it was accompanied by labour
standards (or social clauses). Thus, a focus on real power
relations and limitation of market forces through enforceable
regulations have been replaced by a sort of legal formalism – both
at the national level, within the European Union and in
international institutions like the WTO and the World Bank. An
entire academic industry focusing on corporate social
responsibility (CSR), in the form of voluntary ethical standards,
has emerged in this vacuum created by the crumbling power of trade
unions and social movements – and with an army of well financed and
well intentioned NGOs and research groups to produce this
ideological smokescreen over the immense shift in power relations
in favour of capitalist interests, which is going on in the real
world.

These policies do not aim to fight the liberalisation of the
economy itself, but the negative effects of liberalisation on
the workers.
However, liberalisation without negative effects
on workers does not exist. It is the liberalisation process which
is the problem. If trade unions and social movements want to reduce
the negative effects of liberalisation, they will therefore have to
fight liberalisation itself, since liberalisation means
deregulation and privatisation, which exactly represent the way the
on-going, enormous shift in the balance of power in society is
carried through.

This is one of the most important experiences the short history
of the welfare state has given us. Quite a lot of the regulations
which we have in society today have exactly been introduced as a
result of social and trade union struggles to protect workers,
women, children and the environment from the excesses of free
market capitalism. The great social progress which we experienced
in the era of the welfare state was precisely achieved through
regulations. Workers secured their interests and gained more power
and influence through regulation and through increased public
ownership. Regulation in this regard means laws and rules which
delimit the power of capital and market forces and at the same time
give more power to democratically elected bodies as well as to
employees and trade unions. Liberalisation means that these
instruments for democracy, social protection and trade union and
workers’ power are being scrapped and abolished.

The rather narrow focus on CSR and social dialogue will
therefore do nothing but lead the struggle astray. Demands for a
new class compromise, obviously with a nostalgic hope that the
social peace and the gradual improvement of social conditions of
the 1960s should be restored, do not have any realistic basis under
the current balance of power. The social forces which want to
defend public services and gains of the welfare state will
therefore have to meet the confrontational attacks from the
capitalist forces with a counter offensive. Whether one likes it or
not, reality is that social relations are shifting from consensus
to confrontation. The labour movement had rather be prepared.

The brutalisation of work

One important effect of the new balance of power is a serious
brutalisation of work. An increasing number of workers are being
excluded from the labour market declared disable to work. We
experience an all-time high in sick leave, as well as an increase
in occupational injuries and accidents. A growing number of workers
experience increasing stress and so-called chronic fatigue syndrome
at the work place. In many industries and sectors, workers
experience degradation of work, with less influence over the work
process. In short, there are many signals that something dramatic
is about to happen to our labour market and to our whole
relationship to work.

Many people have therefore experienced in the past years that
the work pressure has become tougher, that labour laws and
agreements are often undermined and put aside in the daily work and
that insecurity and uncertainty have increased. A rapidly growing
number of workers are being excluded from the labour market
altogether. In Norway, almost 15 per cent of the total population
between the ages of 16 and 67 – the latter being the ordinary age
of retirement – are now on early retirement, disablement benefit or
some kind of rehabilitation. The figure has doubled over the last
20 years. At the same time, trade union and labour rights are being
weakened and undermined. There is no doubt, then, that a serious
brutalisation of work is going on.

This represents a serious break with developments during the
golden years of the welfare economy. At that time we, at least in
the industrialised world, for a long period experienced a gradual
improvement of working conditions – a development which included
dampened competition, shorter and better regulated working hours,
longer annual leave, better job security, the introduction and
improvement of sick pay, a reduction in work intensity, less
stress, the removal of many health hazardous workplaces, and the
development of gradually better working environment legislation.
This developed in parallel with a high level of employment,
improved trade union rights, increasing co-determination in the
workplace and in the companies, etc.

This does not mean that we did have an ideal working
environment. Far from that, there were many problems and challenges
ahead. What it means, is that we had a positive development.
Working conditions and working environments were gradually being
improved. That is no longer the general trend. The shift in
development is so formidable that workers’ human dignity is being
heavily attacked.

Particularly, new management methods, new work processes, new
organisational structures and increased competition in the markets
have had immense effects on working conditions and workers’ health.
The Australian professor Michael Quinlan went through 29 different
reports about the effect of outsourcing and competition in both
private and public sectors. His conclusion was clear (referred in
the Norwegian daily newspaper Klassekampen, 30.06.2001 – my
translation):

-Completely independent of the different research methods
that are used, the results go overwhelmingly in the same direction.
Outsourcing affects the health, says Michael Quinlan. (…) 23 of
the 29 studies of outsourcing show that injury, stress and other
health problems increase. None of those show health improvements at
any point. (…)

-We can without doubt conclude with overwhelming evidence
that the new work regime worsens people’s health. The result is
anything from deaths to dangerous situations and increased
psychological stress, he says.

The increased exclusion from the labour market, however, is not
necessarily and not only a result of the deterioration of workers’
health. The Norwegian health authorities state that there is no
identifiable deterioration of public health in Norway. Health
problems and disabilities are relative and dependent on how
societies and workplaces are adjusted to accommodate different
people’s needs. The problem of increased exclusion from the labour
market is therefore first and foremost related to growing demands
at work. Workers are being excluded at an earlier stage than
before. Due to increased competition, more rapid restructuring of
companies and public undertakings and changing working relations,
less control over the work process, more precarious work, the
demand on workers is becoming more and more intolerable. At the
same time research and experience prove that measures taken by
politicians and public authorities to stop and reduce this
exclusion from the labour market have failed all over Europe, as
proved by the European Foundation for the Improvement of Living and
Working Conditions (referred in the Norwegian trade union
newsletter LOnytt, 05.02.2001).

This is not a big surprise. If you do not analyse – or if you
even deny the existence of – the power structures and the driving
forces which lay behind the ongoing brutalisation of work, you will
never succeed in fighting it. There are causes and there are
effects, and if you want to influence the effects, you will have to
attack the causes. That is not being done by our politicians and
public authorities today. They are scratching on the surface and
attacking the symptoms rather than the causes – and their results
are vain. On the contrary, through their welfare-to-work policies
and their attacks on sick pay and social benefits they are
spreading a climate of suspicion, disgrace and humiliation. They
are individualising and privatising serious social problems.
Workers are made believe that it is their own problems that they
are being excluded from the labour market. ‘It is me who is
not good enough and cannot master the new demands in the labour
market’.

The increasing gap between rich and poor in society is adding to
these adverse effects on peoples’ health and well-being. Professor
Vicente Navarro concludes that the growing inequalities we are
witnessing in the world today are having a very negative impact on
the health and quality of life of its populations. He proves that
it is the inequality itself which is bad, i.e., the distance among
social groups and individuals and the lack of social cohesion that
this distance creates. (cf. Navarro 2004, p 26.) In other words, as
neo-liberal policies increase the poverty gap, and as increased
inequalities lead to health problems, we can conclude that
neo-liberal globalisation is a health hazard.

The ideology of the social pact is able neither to explain nor
to develop counter-strategies against this development. Under the
welfare economy there were direct inter-links between economic
growth and better living and working conditions. These links are no
longer there – the economy grows, but it leads to setbacks rather
than to progress. The entire concept of the welfare state is
breaking down.

What went wrong?

The welfare state, and particularly the Nordic model,
represented enormous social progress for the great majority of
people in society. So, what went wrong, then? Why is something,
which, in spite of its weaknesses, can be characterised as one of
the most successful social models in the history of mankind now
being attacked and undermined? Here is a summary of the most
important reasons:

Firstly, the social pact was not a stable situation. It was a
compromise in a concrete and very specific historic situation, and
the main economic and social characteristics of the capitalist
system were still in tact. Secondly, something which could have
been considered an important short term tactical compromise from
the point of view of the labour movement became the long term,
strategic aim. Rather than to be seen as a step towards a more
fundamental social emancipation, the class compromise, and its
true-born offspring, the welfare state, gradually became the
end of history. Thirdly, and linked to the previous point,
the ideology of the social pact proved wrong. The democratic
control of the economy was never fully achieved, the crises-free
capitalism was not created, and the class struggle was not over.
Fourthly, the labour movement was taken by surprise by the
neo-liberal offensive. Rather than to mobilise socially to defend
the achievements which were won through the welfare state, and to
take the social struggle forward, a great part of the leaders of
the trade union and the labour movement were pushed on the
defensive, clinged to the social peace and social dialogue model,
negotiated concessions and adopted a surprisingly big portion of
the neo-liberal ideology themselves.

There is no reason why we should moralise over these
developments. Neither conspiracy theories nor blame-games are
particularly productive in this regard. There are reasons why this
happened, and it is possible to comprehend the political and
ideological effects of the very specific historic developments. The
important thing is to analyse and to try to understand the reasons
for the social and political backlashes which the labour movement
is experiencing, and, not least, to learn from them, and act
accordingly.

The need to go beyond Keynesianism

The most important learning from the history of the welfare
state, as we see it develop today, is that it did not go far enough
in taking democratic control of the economy. One of the most
successful effects of the welfare state has been the redistribution
of income in society. The basic relations of capitalist production,
however, prevailed. The strong concentration of the ownership of
capital, of the means of production, thus formed a strong power
basis, on which an attack on the more equal distribution of goods
and services in welfare societies could be launched. This is
exactly what we are witnessing today, in form of the on-going
global neo-liberal offensive.

A new social model will therefore have to go beyond the
Keynesian welfare state. Emancipatory social policies will
presuppose a more fundamental shift in the balance of power in
society. To achieve that, one has to understand and to focus more
strongly on power – and ownership. It is not a question of good
intentions, good will or high morale (or corporate social
responsibility, as somebody names it), but of power relations, of
the balance of power between labour and capital, between market
forces and civil society.

In order to, in the long run, fight for another social model in
the interest of the great majority in society, one will therefore
have to confront the economic, political and social interests who
stand behind the attacks on public services and the welfare state.
Power structures and power relations will have to be changed.
Structural reforms like a currency exchange tax, capital control,
increased taxation of multinational companies, local control of
natural resources, and progressively increased democratic control
of the economy should therefore be the starting point and the
direction of the struggles which have to come.

Growing resistance

After initial setbacks, political and ideological confusion and
a number of isolated and lost struggles during the 1980s and 90s,
we can today see growing resistance against the existing
neo-liberal economic and social order. While a lot of people were
deluded by the many promises of a bright future if only the market
forces could be freed from their regulations and chains, more and
more people are now experiencing in practise that the neo-liberal
project does not deliver. Both neo-liberalism and its global
institutions are therefore increasingly being drawn into a crisis
of legitimacy.

Power breeds counter-power – and this is all about power. Time
is ripe to confront neo-liberalism and the increased power of
capital head on. There is no other way to break the existing
development than by once again mobilising broad movements from
below. Ever more people realise that the so-called globalisation of
the economy not only represents the offensive of capital, but also
its weaknesses, its vulnerability, vulgarity and internal
contradictions. Hand in hand with the growing resistance against
corporate globalisation, we therefore also experience an increasing
globalisation of the resistance.

Ever more unveiled attacks on welfare and social provisions from
multinational corporations, governments and international financial
institutions provoke social resistance on a growing scale. In many
countries we can see a revitalisation of the trade union movement.
New and untraditional national and international coalitions are
being developed between trade unions, social movements and NGOs.
The new global justice and solidarity movement which has proved
itself able to gather more than hundred thousand people at social
forums and mobilise millions of people in the streets, has produced
optimism and confidence that another future is possible.

An increasing number of trade unionists are experiencing that
the narrow focus on CSR and social dialogue in the trade union
movement does not deliver as expected, and that a much wider and
system-critical perspective is necessary. The growing realisation
that labour standards cannot offset the adverse effects of
privatisation and deregulation contributes to creating stronger
opposition to the policy of liberalisation itself. Successful
struggles against privatisation, so-called public-private
partnership (PPP), deregulation and other expressions of
neo-liberal policies in many countries are strengthening
self-confidence and a new belief in social mobilisation as a way
forward.

The currently most encouraging developments can be seen in
Latin-America, where strong social movements are able to win
national elections in declared opposition to neo-liberal
policies.

The immediate tasks

The following are some of the most important, immediate tasks
which the labour movement faces:

a) To defend the achievements which were won through the
welfare state.

This is our first defence line. It is a defensive struggle, and
we have to realise that we are in a defensive situation. This means
to fight privatisation, deregulation and attacks on our social
security provisions, to oppose the undermining of the universal
social systems which have been developed in many countries and to
prevent them from being replaced by means testing and other
humiliating needs tests. It also includes fighting for a financing
model which is based on a progressive taxation on the
haves rather than on individual user fees for the have
nots
.

b) To confront the institutionalisation of neo-liberalism at
the international level.

An important part of the neo-liberal strategy is the attempts to
institutionalise its policies at the trans-national level. In this
way, the interests behind these market-oriented solutions are able
to avoid and overrule democratic structures and processes at the
local and national levels. Markets are thus being forced open
through legislation at the EU level (the Services Directive being
one of the most recent), or through agreements within international
institutions like the WTO. The General Agreement on Trade in
Services (GATS) is, as an example, being used not only to give
market competition priority over social or environmental
regulation, but also to make this kind of privatisation and
deregulation irreversible. Broad international networks of social
movements and NGOs have been developed to mobilise against such
corporate trade and investment policies. The Our World Is Not For
Sale network (OWINFS) is the most important one, and should be
supported by all who want to defend the achievements of the welfare
state.

c) To democratise and further develop our social
services/institutions in a user/producer alliance.

Although popular support of public services is broad and
comprehensive, there is also widespread discontent with many
aspects of them, such as limited accessibility, bureaucratic
structures, lower than expected quality, etc. Under-financing in
order to weaken and discredit public services to pave the way for
future privatisation is a well-known strategy from neo-liberal
politicians. It is important not to deny or explain away these
deficiencies, but to admit them, to correct them and to develop a
policy for further improvement of them in terms of quality, user
influence and accessibility. Democratic and organisational reforms
are decisive in this regard and can, if successfully managed, work
as strengthened barriers against privatisation and political
attacks in the future. The development of social and political
alliances between the users of the actual public services and those
who produce them is of great strategic importance for the more
decisive social struggle which has to come.

While all these immediate struggles are important in their own
right, they must all the same be developed in a way which
strengthens our more long-term, strategic aims. Our concrete
demands and struggles should therefore:

* Contribute to shifting the balance of power from capital to
labour, from market forces to civil society.

* Be linked to the experiences, the problems and the interests
of the social groups in question, since this is a precondition for
effective mobilisation.

* Contribute to building the broad social alliances which are
necessary to win social power.

A considerable shift in the balance of power can only be
achieved through a broad interest-based mobilisation of trade
unions, social movements and other popular organisations and NGOs
which is strong enough to confront the corporate interests and push
them on the defensive. An ever broader part of our societies are
the victims of the current neo-liberal offensive, and it is exactly
these affected social groups which will have to be united in new,
untraditional alliances.

In particular, it is important to develop the alliance between
the trade union movement and the new global justice and solidarity
movement which has developed over the last few years. Even though
its knowledge of class relations is rather poor, this movement has
been decisive in revitalising popular resistance and has – with its
dynamic, its insistence on independence and democratic control from
below, its radicalism and its militancy – raised hope and
inspiration. These characteristics could also contribute
constructively to the revitalisation of many old-fashioned and
bureaucratic trade unions. If the relationship is handled
constructively and correctly, these two movements could reinforce
each other and bring the struggle to a higher level.

International co-operation and co-ordination of these alliances
and movements are important, but in order to co-ordinate over the
borders, there have to be strong and active social movements at the
local and national level in the first place. There is no such thing
as an abstract global struggle against neo-liberalism. Social
struggles are being globalised as and when local and national
movements realise the need for co-operation over the borders in
order to advance their positions against internationally existent
and well co-ordinated counter forces. Even if a global perspective
and international co-ordination is necessary, the primary task is
therefore to organise the struggle and to build the necessary
social alliances locally.

In Norway, over the last few years, the so-called Campaign for
the Welfare State has been pretty successful in building
opposition. The alliance includes trade unions in the private as
well as the public sector, women’s organisations, student
organisations, retired people’s association, small peasants’
organisation, organisations of users of welfare services, etc. It
is not yet a real popular movement, but this broad alliance
represents the political, social and organisational infrastructure
which is necessary if the aim is to stop the policy of
liberalisation, deregulation and privatisation – and make another
world possible.

In conclusion

The welfare state is not only a sum of social institutions and
public budgets. It was made possible by certain power relations
which permeated all parts of society:

– a policy for full employment,

– regulated markets and dampened competition,

– increased influence of employees and trade unions at the
workplace,

– redistribution of wealth and poverty eradication,

– universal services as opposed to means testing.

The shift in the balance of power between labour and capital
over the last 25 years has influenced all these provisions
(increased unemployment, exclusion, poverty, health problems and so
on), and the welfare state is in danger of weathering away with its
power base.

The following three main pillars constituted the power base of
the welfare state:

a) The needs of the new capitalist economy, expressed through
the social help state thinking of the social liberal
politicians,

b) The struggle of the labour movement (at the particular time
expressed through its strength in the class compromise), and

c) The existence of a competing system in Eastern Europe, which
disciplined capital owners in the West.

The last-mentioned has broken down. The relatively stable class
compromise is breaking down. This means that if the working class
and allied social forces are going to maintain what they have
achieved, and not fall back to minimum, paternalistic and means
tested benefits of the social liberal type, they will have to
mobilise the social and economic strength which they still
represent and are able to raise in today’s society – in
confrontation with offensive capitalist forces.

Since the welfare state was the result of a very specific
historic development, it can hardly be copied. Neither can it
easily become an export product. The attempts from many labour
organisations of the North to export their successful
model to their brothers and sisters in developing countries, fail
in two important ways. Firstly, it underestimates the threats and
attacks which their social model is currently facing back home and
which, under continued offensive from the neo-liberal forces, lead
to the gradual undermining of the welfare state. Secondly, when
social dialogue and tri-partite co-operation are promoted as the
way forward, delinked from any assessment of the actual balance of
power between labour and capital, it is not only politically wrong,
it is counter-productive and will lead the struggle astray.

The most important lessons to be learnt from the Nordic model
are the hard social struggles and the enormous shift in the balance
of power between labour and capital which were required in order to
achieve the social progress of the welfare state, but also how
fragile the model is, and how unstable and vulnerable the power
base of the welfare state has proved to be.

Based on the experiences of the last 25 years, the perspective
must now be to go beyond the welfare state – to a socially and
democratically organised society where peoples’ needs and
environmental limits become our guiding principles. The main aim of
the labour movement in the North as well as in the South today must
therefore be to delimit the power of capital and to make the
economy subject to democratic control. This will not be achieved
through social dialogue and tri-partite co-operation, but through
class struggle and social confrontations. History tells us that
power never steps down. It has to be brought down.

(Previously published in LABOUR, Capital and Society
40:1&2 (2007).)

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