Meidner summed up the principles behind this policy in 1993:
First, equal work should be equally paid, regardless of the profitability of the firm, the size or location of the workplace. What matters is the kind and nature of work, and the skills which are needed to perform it. The second aim of the policy is the equalizing of wage differentials, but not their total elimination. Different wages should be paid for different kinds of work.
The solidarity in wages policy had a number of beneficial impacts. First, by making wage demands the subject of central bargaining, it enabled unions to secure rising living standards without creating an inflationary spiral.
Secondly, it ensured that unproductive firms would not be able to stay afloat by underpaying their workers. This would lead to workers being made redundant, but this was considered a feature of the model — low productivity enterprises would be replaced by new jobs in more productive firms and industries through massive investments, active labor market policies, and an extensive welfare state to ensure nobody suffered significant hardship in the intervening period.
It became clear that there was a side effect which threatened the solidarity upon which this economic model was built. Wage restraint in profitable firms kept inflationary pressures down, but it did so by creating huge excess profits for business owners. Exposés by C. H. Hermansson in the 1960s showed that a vast proportion of capital in the Swedish economy was controlled by a mere fifteen families.
A government-commissioned inquiry confirmed Hermansson’s findings, and Meidner summed up the public mood: “Solidarity in the politics of wages had led to a lack of solidarity in the politics of profits.” Profits created by wage restraint and state investment were being concentrated in the hands of a tiny minority. Under these circumstances, workers found themselves asking why they weren’t sharing the benefits. And so it was determined by the LO that a way to redistribute such excess profits had to be found.
The “Meidner Group,” an expert commission whose members also included Gunnar Fond and Anna Hedborg, was appointed in 1973 to create a proposal to achieve three aims: to shore up the solidarity wage policy by ensuring wage restraint didn’t enrich the owners of profitable firms; to counteract the concentration of private capital; and to give employees more control over the workplace.
The result, published two years later and adopted by the LO congress in 1976, was one of the most ambitious democratic socialist policy proposals ever seriously considered in a developed economy. It would confront not only the question of who reaps the benefits of excess profits, but also the question of who owns, controls, and manages the workplace.
If fully implemented, a number of “wage-earner funds” would have been set up, financed through profit-related payments from firms in the form of voting shares, and administered through union-dominated boards. In this way, as firms produced profits for their shareholders, the wage-earner funds would gain larger and larger stakes in the company until they became the majority owners.
Excess profits would no longer benefit only the rich and powerful, and the benefits of holding capital would be shared across society....