3 Nov 2010

Welfare Capitalism or Capitalist Welfare?

By Fredrik Jansson

In recent decades, the capitalist offensive in Sweden has had the ideological fire support of a neoliberal paradigm shaped by the dichotomy ‘nutritive and consumptive’ (‘närande och tärande’). By splitting the economy into a capitalist element putting money into the coffers and a governmental element that empties them, it became possible for the private sector to criticise the public welfare sector as expensive, inefficient and bureaucratic, and, in the pursuit of profit, to take over parts of the former decommodified welfare services.

In the welfare society of the post-war period a different ideological concept, founded in the class compromise of its time, emerged within the Swedish labour movement. Instead of the party programme’s solemn speech about ‘putting the production and its distribution in the hands of all of the people’, the emphasis was on building a welfare sector with socialist principles – ‘from each according to his ability, to each according to his needs’ – while private industrial capitalism was regulated by the laws, taxes and collective bargaining.

The idea that came to be called ‘functional socialism’ argued that ownership is not an absolute, but rather that ownership consists of different functions that can be controlled by different agents. As long as the state and capital had focus on different areas it worked out well and they lived in symbiosis with each other. But ‘functional socialism’ also meant that social democracy had no arms to defend their progress when Sweden became more of a post-industrial society and financial capital was seeking new areas for the accumulation of profits. If not the ownership itself was important, why should not private actors deliver welfare services while government stuck to the order and pay for them?

Ironically, the changes over the last decades did not result in better or cheaper services either in education, health or social care. Through the voucher systems that are increasingly used in the Swedish welfare sector, a small number of private equity firms can ensure themselves of risk-free profits without having to go to a free market. As in Rosa Luxemburg’s description of the arms industry, there is only one customer, the state. And the relationship between state and capital could, in analogy with Dwight D. Eisenhower, be described as a welfare-industrial complex.

This is in itself not a strange development. Although the gospel of the market is preached, as the French historian Fernand Braudel noted, capitalism’s hallmark is not the free market but the anti-market, where monopolies and oligopolies are flourishing under the protective wings of the state. Capital’s goal is profit, and if it can be accumulated without having to take the detour over a market, it is desirable.

The oligopolistic vulture capitalism that I’ve outlined above is not a model for the Good Society. The recent decades, however, have shown that the ‘consumptive’ sector has been a prerequisite for the development of the ‘nutritive’ sector. In a modern economy the dichotomy is irrelevant as a capitalist society is totally dependent on the existence of a dynamic interplay between state and capital.

A natural social democratic response to the kind of economic crisis we have seen in recent years would be to, in a Keynesian spirit, stimulate the economy by making public investments that seek to expand existing and develop new industries in areas such as environmental technology. If there is a housing shortage, it is reasonable to use a downturn in the economy to build public housing and build them in such a way as to provide the development of prefabricated houses that are cheaper, more energy efficient and more environmentally friendly than those built with the construction methods generally used today. The same applies, for example, to the development of the railway system with the introduction of high-speed trains between cities and trams within the cities.

In a post-industrial period when knowledge capital is increasingly important for economic development, independent government-funded research is increasingly important to create conditions for future prosperity. For example, you can take the thriving biomedical industry that exists in my own hometown, Uppsala. It is entirely dependent on the proximity of a major university and a research hospital. But you can also take the US space programme as an example of a government initiative that achieved results in product development and economic growth far beyond the original application. These are developments that would not have taken place in an environment completely dependent on private capital.

Unless social democracy succeeds in regulating capitalism to the benefit of the citizens it has no raison d’être. But social democrats must also understand that capitalism must be regulated in order to flourish. There is no such thing as an invisible hand of the market.

About Fredrik Jansson

Fredrik Jansson works as a freelance writer and educator within the Swedish labour movement. He has a background as an official and activist in the Swedish Social Democrats (SAP) and the Workers Educational Association (ABF).

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