Stefan Sjöberg

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Stefan Sjöberg:

Collective Capital Formation for Economic Democracy; the Fordist History in Germany and Sweden and the Post-fordist future

The article analyses the German and Swedish experiences of elaborating collective capital formation as a strategy for economic democracy. It stresses how the original Swedish wage-earner funds (WEF), to a large extent were influenced by proposals for capital formation funds that had already been elaborated in Germany. The original WEFs should be considered as a socialist strategy aiming to transform the power and property relations in order to achieve economic democracy. The WEF struggle resulted in a hegemonic turning-point; up to this point Swedish social democracy had for decades strengthened its power position, but the WEF struggle meant that the bourgeois actors managed to unite as a hegemonic force which have had important consequences for the development afterwards. To understand the origin and decline of the plans for collective capital formation in Germany and Sweden, the analysis needs to take into account the transformation from a Fordist to a Post-fordist mode of production. This transformation has important implications regarding the possibilities for the labour movement to once again work out strategies of collective capital formation for economic democracy, e.g. trade union pension funds.

Keywords: collective capital formation, economic democracy, wage-earner funds, pension funds, hegemony, Post-fordism, Marxism

Collective Capital Formation for Economic Democracy;

The Fordist History in Germany and Sweden and the Post-fordist future
The labour movement has historically shown two ways to strive for economic democracy, what one can call the co-determination line and the property line (Niedenhoff, 1979: 60f; Lewin, 1992: 356ff). This within social democracy sometimes manifest conflict is related to an old conflict between the “ownership line” and the “welfare line”, between a Marxist influenced analysis and policy focusing on the power/property conditions, and a ”function socialism” dealing with welfare reforms without changing the core of the capitalist social formation. In Sweden the proposals for wage earner funds meant that the ”ownership line” was manifested after a long period almost entirely dominated by the ”welfare line”.
The co-determination line has been the dominant within social democracy. It is in line with the so called “function socialism” (Adler-Karlsson, 1970), the classic reformism that has as its aim to limit the functions and rights of the capitalist system - when it comes to co-determination to limit the functions and rights emanating from the ownership of capital - without changing the basic capitalist property conditions in itself: the private ownership of capital and the means of production. From the left and the socialist labour movement this strategic line has been criticized from a Marxist point of view. It is then argued that if one really wants to achieve economic democracy - where the economy is democratically controlled and the wage earners have real power and influence on all levels of the economy, and where the produced returns will be democratically controlled and equally distributed - this will not be possible without changing the private ownership of productive means and capital.
The co-determination line has been dominant, but from time to time the property line has been manifested within social democracy. Important examples of such manifestations were (West) Germany and Sweden in the 1970´s, in the form of the issue of collective capital formation and fund building in the hands of the wage earners, as a strategy for economic democracy. The main focus of this article is to analyse these historical experiences of elaborating collective capital formation as a strategy for economic democracy. Over the last two-three decades there has been a large number of studies in both Germany and Sweden about the co-determination issue. That is not the case when it comes to the issue of collective capital formation in wage earner hands, at least not during recent time. Somewhat astonishing since the issue marked the social debate in both Sweden and Germany. An important aspect somewhat overlooked in previous studies of the Swedish wage-earner funds (WEF), is that the basic principles for these funds can be found in the German fund debate which took place 5-10 years before the Swedish one. In this article I want to show the importance of the German influences on the Swedish WEFs. After a long and intense debate a form of WEFs were implemented in Sweden, which was never the case in Germany. The aim is here to analyse the German and Swedish debates around the issue of collective capital formation for economic democracy, and to explain why – in a revised form - WEFs were implemented in Sweden while they were never near implementation in Germany.
In Sweden the WEFs became the most controversial societal issue in post-war time, which gives place for an elaborated discussion in the article to explain the Swedish case. Implementation of the original proposals for wage earner funds, with Rudolf Meidner as main architect, which were presented in the middle of the 1970´s, would have meant fundamental changes of the Swedish economy and the social formation. A point of departure is here that the original WEF proposals should be considered as a socialist strategy, aiming to transform the capitalist power and property conditions, in order to even out the distribution of power and wealth. From my point of view it was the most concrete and elaborated strategy for economic democracy ever shown. Therefore analysing this issue is not only of interest from a scientific perspective, but also for the international labour movement, which ought to find important learnings from the German and Swedish fund issues, when elaborating new strategies for economic democracy.
In the article I show that in order to understand the development of the fund issues, it is not enough to put focus on the political and ideological levels. Processes at the economic level were crucial for the birth of the idea of collective capital formation as well as for the development and outcome of the fund issues. In order to understand these processes the final discussion relates to the theoretical discussion about the transformation from a Fordist to a Post-fordist mode of production. The article ends up in an attempt to integrate this discourse into the contemporary discussion about possibilities to use trade union controlled pension funds, as a collective capital formation strategy for economic democracy today.
Collective capital formation for economic democracy in Germany...
In Germany the issue of economic democracy was early dealt with by the social democratic classics Fritz Naphtali and Viktor Agartz, who were in the 1920´s and -30´s dealing with the transformation process from capitalism to socialism (Weinzen, 1982). Although pointing at the necessity of changing capitalist property conditions, Naphtali were emphasising the co-determination line, while the focus of Viktor Agartz was more in accordance with the property line, comprising socialisation of key industries by the state and a planned way of transformation of capitalism. Although the issue of economic democracy, comprising the transformation from capitalism to socialism, then was at the agenda of social democracy, the classic co-determination line prevailed to be dominant. The property line has however continued to be manifested by social democracy at certain periods in history, also in post-war time. One such period was from the late 1950´s, when German theorists related to the trade union DGB and the party SPD first began to talk about collective capital formation in the hand of the wage earners, as a new way to change fundamental power & property conditions towards economic democracy. Ideas which in the beginning of the 1970´s became subject for concrete decisions by DGB and SPD, and later were elaborated in Sweden.
The pioneer of collective fund building strategies was Bruno Gleitze, a statistician and economist related to the DGB. His ideas have to be put in the historical socio-economical context, the specific West-German post-war conditions. After the war private capital accumulation was being supported by economic policies, which lead to an increasing concentration of capital and wealth on few hands. By beginning of the 1960´s 1,7% of the people owned 70% of the means of production (Take, 1988: 117f). In the so called Gleitze-plan, first presented in 1957, Gleitze questions the fact that the growth of wealth that emanates from self financing in industry goes to the capital owners. These accumulation and concentration of capital in few private hands hinders the wage earners to build capital and wealth. Gleitze believes this problem can not be solved solely through active wage and tax policies. He suggests a way of socializing of the capital accumulation, through the construction of a “social fund”, controlled by trade unions. A certain amount of the profits of the big companies should be shared and transferred to the social funds. Through these overarching funds the wage earners should get part of the capital accumulation in big industry. Only big companies would be included in the fund system, since the accumulation of capital and power are concentrated to these. The wage earners should get individual shares in the funds, which would not be possible to sell for a longer time, to guarantee the capital would not once again concentrate to the big capital owners. (Gleitze, 1969)
This proposal was the starting-point for the vivid discussion on collective capital formation and fund building within social democracy in Germany and later in Sweden.1 By the beginning of the 1970´s DGB and SPD began to be ready for decision making. In 1971 the DGB-Bundesvorstand (the DGB board) adopted a number of theses, with demands for wage earner share in companies profits. (Halbach, 1973: 98) The DGB congress in Berlin in June 1972 passed a motion from the Bundesvorstand, which demanded the share of wage earners in the capital growth in the companies. In order to carry this out it is proposed that capital formation funds (Vermögensbildungsfonds) shall be built up. The funds have two basic aims: 1. A redistributive aim to complement the wage policy and to correct the unequal distribution of wealth and share of the social products. 2. A socio-political aim to counteract the concentration of power, property and wealth to the big capital owners in enterprise. The congress decision stated that “The employees in all branches have to be able to participate in productive wealth in an adequate way by an overarching system of profit sharing.”2, and that “This trade union wealth-forming policy has the objective of changing the concentration of property and wealth reigning in the Federal Republic and the unbalanced economic and social power positions linked to that.” (Deutscher Gewerkschaftsbund, 1972)
It is stated that a certain share of yearly profits in companies with profits higher than 200 000 DM - from 4 to 15% of profits depending on the profit rate - should be transferred as stocks to funds on a regional basis. It is argued that when the profit shares should be transferred as stocks and not as cash, the liquidity of the companies would not be harmed, an argument later to be found in the original Swedish WEF proposal. The regional funds ought to be autonomous and not compete with each other. The funds should be controlled by the wage earners with representation also from public interest. The fund boards should be appointed by all the fund share holders. The boards should then appoint an executive body (Aufsichtsrat), in which one third of the members should be representatives from the public interests. The chairman should be appointed by the Aufsichtsrat. The owners of the funds should all get certificates corresponding to their shares. The congress points at two alternatives for how to handle the certificates: 1. they should only be possible to redeem in exceptional cases, 2. they should be possible to sell at the stock market after ten years. Although pointing to these two alternatives, the first one is favourised in the arguments: “The distribution and social-policy goals of wealth policy (Vermögenspolitik) can only be reached by way of fundamentally infinite waiting periods.” (Materialen zur Vermögensbildung in Arbeitnehmerhand, 1973: 44) The logical reasoning was that individual shares possible to sell, would mean that after some time the property shares would be back in the hands of the big capital owners again. Again, exactly the same arguments used later by Rudolf Meidner in the first WEF proposals.
DGB now had a principal decision for funds which called for a concrete standpoint from the SPD. In the Godesberg-programme, SPD had in 1959 proposed that the growth of fortunes and capital should be used for common purposes. This was in accordance with the Gleitze-plan, but it was not until beginning of the 1970´s SPD began to elaborate and radicalise its positions on the fund issue. At the party congress (Parteitag) in Saarbrucken 1970, a motion on Vermögensbildung from the party board was taken, that talked in general terms about investment funds in decentralised forms under public control, which could be used to give wage earners part of the capital growth and change the injust capital/property structure (Materialen zur Vermögensbildung in Arbeitnehmerhand, 1973: 44f). In 1971 the SPD party board (Vorstands) recommended the party congress in Bonn, which then decided in accordance with this, to appoint a “Vermögenskommission”. Construction of not competing decentralised funds, taking care of stocks from profit sharing from the companies is considered as a way. (Materialen zur Vermögensbildung..., 1973: 80)
In response to the 1972 DGB decision, the SPD board declared in June 1972: “The realization of co-determination does not do away with the unjust wealth distribution in our economy. It does, therefore, not replace the demand for a stronger participation of the employees in productive assets.” (Materialen zur Vermögensbildung…, 1973: 108) Decentralised funds controlled by the wage earners are once again recommended. The Dortmund party congress same year, as well as the programme for the parliamentary elections, meant that the so called 3rd capital formation law (Vermögensbildungsgesetz) was good for the wage earners, but “The ownership of means of production, however, is still in the possession of a small stratum.” (Materialen zur Vermögensbildung…, 1973: 146)
The SPD congress in Hannover 1973 then finally positioned near the 1972 DGB congress decision. An elaborated fund proposal based on a report from the Vermögenskommision was adopted. It is stated that “The property of the productive wealth in our economy still rests in relatively few hands. It is one of the goals of social democratic policy to involve the employees in the growing productive assets of the economy and to contribute, in this way, also to the democratization of the economy.” Companies with profits higher than 400 000 DM should transfer part of the profits to a central fund, which then should give the shares to regional funds not competing with each other. The capital supply should not be in cash, since the aim is not to introduce a new tax but to give wage earners share of the productive capital. The share holders, that is the wage earners, should appoint a body of representatives (Vertreterversammlung), which then elect an administrative council (Verwaltungsrat) where one third should represent public interests. The fund share holders gets certificates possible to change for cash after seven years, which was the most significant difference from the 1972 DGB decision. The fund capital was aimed to be used to stimulate investments in infra-structure. (Vermögensbildung, 1973)

This decision meant the trade union and the political part of German social democracy were now united behind the principles for a collective fund system for capital building in wage earner hands. At the same time, the social democratic actors were divided internally.

In 1973 the DGB leadership (Bundesausschuss) adopted a declaration which was close to the congress decision from 1972, but with clearly individual shares which would be possible to exchange for cash. The decision then corresponded directly to the SPD congress decision.

But the Bundesausschuss was divided; the declaration was accepted with 55 votes against 52. There was thus a strong minority against the capital formation funds, and IG Metall was the dominant oppositional voice.

The position of IG Metall was that collective capital formation in funds through profit sharing, could harm the struggle for higher wages and increasing co-determination. For IGM active wage and tax policies and struggle for co-determination would better fulfil the aims of the proposals for collective capital formation. (Fuest et al., 1997: 57) In October 1972 the board of IG Metall declared:

“The social position of the employees, however, cannot be fundamentally changed by wealth-political measures… The active wage and earnings policy of the trade unions and their efforts for a social tax reform are, therefore, of considerable wealth-political significance… The connection to profit, that way, reacts backwards to trade union collective policy.” (Halbach, 1973: 148f)

In April 1973 another declaration was directed to the DGB Bundesausschuss, in which it is said that certificates not possible to sell, will mean that the redestributive effect will shrink without higher living standards for the employees. Co-determination, taxation of profits and capital, and transfer of key industries into common property is the way proposed.
Another rather important actor of social democracy was the Youth federation „Jungsozialisten“, who at their congress in 1970 declared that: “Wealth policy, tax policy and co-determination policy are indivisible… A change of the scandalous distribution of assets can only be achieved by overarching distribution of profits.” (Halbach, 1973: 70) Regarding the individual certificates the Jungsozialisten deliver a critic contrary to that of IG Metall. The Juso´s criticism, deriving from a Marxist perspective, means that a system with individual certificates possible to sell, will not lead to changes of the basic power & property conditions in enterprise. They therefore propose a collective fund system without individual certificates.
The SPD leadership now had to handle the different sorts of critique within social democracy, and at the same time work in a governmental coalition with the liberal FDP. The FDP position regarding Vermögensbildung was, according to the so called Freiburger thesis from 1971, to work for wider parts of population getting share of the capital growth. Fund building is proposed, but it shall be in cash form, and with individual shares possible to sell after three years, and the funds are supposed to compete and be included in the financial market. FDP also speaks about security for private property and the old capital owners. (Halbach, 1973: 47,91)
Also CDU had proposals for Vermögensbildung, in form of “personally disposable co-ownership in productive wealth and against collective property” (Halbach, 1973: 32). In fact factions within CDU relating to the Catholic social doctrine, were important actors behind the issue of Vermögensbildung3. But the CDU proposals never leaned to collective capital formation, what they proposed were individual wage earner shares of profits and capital. The most critical actor against collective Vermögensbildung was the Federal association of the German Employer’s Union (BDA), meaning it was

“Efforts of the DGB towards the syndicalization (Syndikalisierung) of the economy… These funds…, by way of such a forced transfer, … would in the foreseeable future even become majority owners. The SPD has to take the question whether it is really willing to eventually leave to the trade unions one half of the executive board seats in the firms by way of proportional co-determination, the other half by way of these participation funds.” (Halbach, 1973: 18f)

At the time of the DGB and SPD proposals 1972/73, the collective capital formation funds were then criticised both from bourgeois actors as well as from actors within social democracy itself. The SPD leadership in government with FDP, had to perform a difficult act of balancing. With the SPD decision from1973 as background, it came as a surprise to many within the social democratic movement when the coalition government in 1974 decided on a proposition that fundamentally diferred from the DGB and SPD proposals, and was more in line with the FDP Freiburg program. Certain amounts of company profits should be transferred to profit sharing funds, in stocks or cash, with individual fund certificates possible to sell after 7 years. As was argued in the 1972 DGB decision, and by e.g. the Jungsozialisten, this construction would mean that the basic aim to fundamentally change the ownership structure in society, would not be fullfilled. The proposal also stresses the need for securities for old share holders, in order not to take away their rights. (Halbach, 1977: 43ff) This proposal meant that the internal DGB opposition driven by IG Metall grew even stronger. With SPD distancing itself from the 1972 DGB decision, and with internal tensions, DGB did not push the issue further. In spring 1974 the new chansellor Helmut Schmid declared that the SPD/FDP proposal would not be implemented. It is said that the intention is still to implement Vermögensbildung, but due to different technical problems, eg companies not introduced on the stock market, one has to work to solve these problems. (Halbach, 1977: 48)
After that the German discussion on collective Vermögensbildungsfonds for economic democracy faded away. Or perhaps one can say the issue emigrated to Sweden, where it was brought into the Swedish discussion by a German refugee, Rudolf Meidner, who flew to Sweden after seeing the fire of the Reichstag in 1933, and later became one of the most important theorists in the social democratic trade union, LO.
…and in Sweden
If Naphtali and Agartz were forming theorists of the German Economic Democracy discourse, the most important Swedish social democratic theorist starting to deal with the Economic Democracy issue, was minister of finance Ernst Wigforss. In his work “Kan dödläget brytas?” (1959: 135-139) Wigforss writes about what he calls “foundations or companies without owners”, which no doubt had impact on Rudolf Meidner. In a review of this book, Meidner already by the year 1960 shows that he had elaborated thoughts around the synthesis of collective capital formation, fund building and economic democracy (Meidner, 1984: 386). However the time – and the trade union movement – was not ready yet to make something concrete out of this theoretical discussion.
The social democratic party, SAP, held governmental power from 1932 to 1976. During this period the Swedish welfare model, the “people´s home”4, was built. One of the corner stones of this model was the social democratic labour market policy, based on active measures for full employment combined with the solidaric wage policy. Main architects behind this were the LO economists Gösta Rehn and Rudolf Meidner. The basic feature of the solidaric wage policy was that workers and unions in high profit companies and branches, held back their wage demands in solidarity with workers in low wage branches who instead could raise their demands and wages. This way the gaps within the working class were decreasing and along with full employment the wage earners became a stronger and more united force in the struggle with the employers federation, Svenska Arbetsgivar Föreningen (SAF), and the capital owners.
However, in the end of 1960´s it became clear that with the solidaric wage policy also followed negative consequences for the working class. When workers held back their wage demands in high profit branches this meant the capital owners got even higher profit levels, what was to be called “excess profits”. One could see that even though the social democratic people´s home had meant rapidly increasing living standards for the working class, at the same time the concentration of capital, property and power to big capital owners was increasing. By the shift of 1960/70´s there was also a wave of wild strikes in Sweden, beyond the control of LO, pointing at the fact that increasing living standards, social welfare etc, had not meant democratisation of the working places, real power and influence, co-determination etc.
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