Rudolf Meidner on the Meidner Plan

The Meidner Plan--or something very similar--must be the centerpiece of any plan to peacefully end capitalism. It can help to ensure a gradual but sure, fair, and transparent end to capitalism.

The Meidner Plan was proposed by Rudolf Meidner and his colleagues in the Swedish Social Democratic Party in 1978. The Meidner plan established so-called "wage earner funds," which were simply stock holding companies. Each year, large companies (those with over 50 employees) would be forced to disburse a small percentage of their profits in the form of new shares to the wage earner funds, which were to be controlled by the company's workers. These new shares would be the same as any other shares in the company: owning 10% of the shares of a company, for example, entitles a shareholder to 10% of the company's profits and 10% of votes on the company's board of directors. Slowly--over the course of several decades--all large companies would transition from shareholder control to worker control. With ownership of more and more shares, a company's workers would have a slowly increasing influence over the company's management and entitlement to its profits, eventually controlling a majority of shares. These shares could never be sold and would always be controlled by workers via the wage earner funds. Shareholders would never completely lose their share in the company, but their influence and entitlement to profits would slowly dilute until workers had a controlling share.

As the transition from shareholder to worker ownership would take place very slowly, any genius inventor or angel investor would be long dead several decades after their initial start-up grew to employ more than 50 people. If the point of ownership of companies by shareholders is to reward entrepreneurs for taking risks by starting new companies, then the Meidner Plan preserves this strength. The Meidner Plan is so slow-moving that shareholders will surely have enough time to be amply rewarded for their entrepreneurial spirit.

There are two major myths surrounding the Meidner Plan, which Rudolf Meidner himself helpfully clears up. First, Rudolf Meidner frequently gets credit for the idea of wage-earner funds. Rudolf Meidner is not so generous to Rudolf Meidner. Here is Rudolf Meidner on the Meidner plan:
Wage earner fund schemes had been discussed in Western Europe in the early post-war years. The German DGB put forward the idea of national wage earner funds in the mid-fifties;-aimed at correcting the inequitable distribution of wealth which followed with the rapid restoration of the German economy after the war. In the Netherlands the unions proposed in the sixties a similar fund scheme with its origin in the government-inspired incomes policy during the first post-war years. When the Danish unions in 1971 published a report suggesting a wage earner profit and investment fund the focus was mainly on economic and industrial democracy.
Meidner's wage earner funds came the closest to actually passing, which is why we probably remember it as his idea. But the idea had been around for decades.

Second, the Meidner Plan is remembered for how it would have slowly ended capitalism in Sweden. Were it enacted, workers would have eventually owned a majority stake in all large companies. But Meidner and his colleagues came up with the wage earner fund to solve a very different problem. Meidner explains the Swedish Social Democrats' concept of wage solidarity:
Whereas welfare has been the responsibility of public authorities, a second way to achieve equality was through the wage policy of solidarity itself. Solidaristic (originally called socialist) wage policy, which constitutes the ideological heart of the Swedish union movement, means two things. 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. It is obvious that both components of the solidarity wage policy presuppose accurate job descriptions and norms-of job evaluation.
At the time of this proposal, Sweden was in full employment. Though difficult to imagine today, because there were more job openings than job seekers, individual workers had tremendous power. A shortage of available workers meant that literally any worker could negotiate a higher wage if he wanted to. But because of the principle of wage solidarity, huge swathes of the Swedish workforce refused to do so--believing that the same work should earn the same pay regardless of a firm's profitability.

This was great for Sweden's small businesses. As a whole, the profitability of small firms always is considerably lower than that of large firms. With Swedish workers adhering to wage solidarity, Sweden's small businesses could afford to hire top talent. Without wage solidarity, small businesses do not do well in full employment as only the largest companies can afford to pay rising wages.

Wage solidarity was always a priority of the Swedish Social Democrats because they believed it was beneficial for society. But a persistent problem with wage solidarity is that--as Meidner points out--it engenders a very non-solidaristic outcome among capital owners. Obviously, when workers in large, profitable firms voluntarily refuse to negotiate higher wages for themselves, those large, profitable companies reap higher profits as a direct result. Thus, wage solidarity actually enriches the shareholders of large companies. This is completely unfair; why should workers agree to negotiate lower wages for themselves to secure the betterment of society when doing so enriches the idle shareholders of their company? This was extremely difficult for the Social Democrats to sell to rank-and-file workers, and Sweden roiled with wildcat strikes, workers outraged that their wage restraint was enriching shareholders.

The Meidner plan sought to solve this problem in order to preserve wage solidarity. The wage earner funds removed some of the profits from shareholders who did nothing to deserve the benefits of wage solidarity. This would satisfy angry workers on wildcat strikes. And because the wage earner funds were simply stock holding companies controlled by workers, they would have preserved wage solidarity. None of the benefits of participating in wage earner funds were monetary--workers who controlled wage earner funds did not get a higher income from doing so--thus maintaining wage solidarity.

Obviously, the Meidner Plan only targeted large companies (those with over 50 employees) because large firms had highest profits and were the obstacle to wage solidarity.

Although the goal was to preserve wage solidarity--many Social Democrats realized the potential to use the plan to transform Sweden from a capitalist country to one where capital was socialized. Though the Meidner plan was designed with wage solidarity in mind, the prospect of a gradual yet certain transformation to worker ownership is why we remember the Meidner plan. Meider writes:
The proposal was discussed intensively in the union movement, mainly in a large number of rank and file study circles which reacted in a surprisingly positive way. Many active unionists hailed the wage earner fund issue as an important step on the road towards economic democracy. The original motive - to lend support to the wage policy of solidarity - was overshadowed by the broader anti-capitalist aspects of the proposal which had a vitalizing effect on the union
movement.
The LO [Social Democratic] leadership which originally had taken a rather neutral position vis-a-vis the working group report, was influenced by the positive, even to some extent enthusiastic reception by the union elite and decided to present the report with minor changes to the 1976 LO convention. It was adopted by acclamation followed by the singing in unison of the Internationale. An issue had been created capable of mobilizing and activating the union movement.
Meidner is of course extremely disappointed at the end results:
The fierce opposition of all non-socialist parties and business organizations forced the labour movement to make repeated retreats. When the social democratic government finally in 1984 introduced wage earner funds it was the first time that a Western country had realized the idea of employee-owned funds. But the scheme had been changed beyond recognition from the original LO proposal. Five small regional funds were established, mainly financed by an excess profit tax. The fund capital was used for purchasing shares in the stock market. The scheme was intended to be annulled after only seven years and the total assets of the funds amounted at the end of the period (1991) to less than five per cent of the total value of the Swedish stock market. None of the original tasks has been achieved and the whole scheme must now be considered a rather symbolic gesture.
The Meidner plan would need to be augmented with other policies. For example, if enacted, Sweden would surely have experienced devastating capital flight. And it's not hard to see how workers with access to wage earner funds could become as abusive to the rest of society as wealthy shareholders.

But some form of the Meidner plan will surely be a part of any peaceful end to capitalism.

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