The Commentary On Swedish Rehn-Meidner Model

As the western welfare state "shop window", Sweden is famous for its sound and extensive social welfare system and social security system. Basing on Keynesian theory and Swedish school theory, Sweden adheres to the ideas that the capitalist system is constructive to high efficiency of productivity。Sweden combined the equality and fair distribution ideology from socialism and capitalism, establishing a welfare state within the structure of the capitalism society. In that way, the "Swedish model" of "High income and high welfare with high consumption" has established.In the early postwar period of World WarⅡ, the rapid reconstruction of Western European countries led to the increase of the demand for Swedish exports, including primary products, semi-manufactured goods and investment goods. The boost in exports, accompanied by large-scale domestic investment and the long pent-up demand for housing and durable consumption goods, gave rise to overheating economic situation in 1940 and the latter half of 1950s. The conflict between full employment and price stability gradually emerged. Keynesian revolution advocated the expansion of fiscal and monetary policy to achieve full employment. But the means of income and price methods to control inflation is not significant. At the same time, two economists, G?sta Rehn and Rudolf Meidner, from the Swedish Trade Union Confederation presented a report to the trade union federation in 1951. This report proposed a plan to solve contradiction between full employment and low inflation combining with the wage gap reduction and economic growth. This program then has been called "Rehn-Meidner" model. This model is the central element and core of the Swedish model. It is also an economic definition of Swedish Model.From early 1950s and the early 1970s, Rehn-Meidner model experienced a period of golden age and reached a peak in 1973. Sweden not only achieved a relatively rapid GDP growth and full employment but also maintained a lower inflation rate and relatively stable price. After this period, however, the tendency of stagflation appeared. Economic growth slowed down with rising unemployment, huge public budget deficit and high inflation. These social problems were called the "Swedish disease" or "European sclerosis."The first part of the dissertation introduces the main topics background and significance. Sweden experienced overheating economic situation in the 1940s-1950s when Keynesian demand management policy was dominating. This idea shows that full employment should be achieved at the cost of high inflation. R-M model is, however, to solve the contradiction between full employment and inflation. The author believes that the series of policies of R-M models could enlighten us in the area of promotion of full employment and reduction of wage gap in the initial income distribution in China. Subsequently, it introduces research on the Swedish model of domestic and foreign scholars, as well as Sweden's employment and wage policy.The second part describes the background and the theoretical basis of Rehn-Meidner model. First of all, it defines Rehn-Meidner model, clears the relationship between Rehn-Meidner model and the general Swedish model, and shows the methods and objectives of the model as well as the relationship between the various objectives by a graph. Then, it introduces the historical background of the model --the limitation of Keynesian demand management policy and Sweden overheating macroeconomic situation; the core ideas of Rehn-Meidner model was greatly influenced by the Stockholm School; the theoretical basis is to achieve a favorable Phillips curve, and the other is on Rehn and Meidner's wage theory.Chapter III details the main measures of Rehn-Meidner model, including restrictive economic policies, active labor market policies and wage policy of solidarity. Then, the role and the impact of each policy are analyzed.Chapter IV analyses the effects of Rehn-Meidner model. From early postwar period to the 1970s Swedish model experienced its golden age with rapid growth of economy, rising labor productivity, unemployment rate and inflation rate at a low level. Meanwhile social security and welfare system were improved and income disparity decreased. But after 1970s because of instability of international economic environment, Swedish economy and employment situation deteriorated, resulting in the deviation from Rehn-Meidner model and adoption of some reform measures.Chapter V points out places that we can learn,from promotion of labor employment,how to decline structural unemployment to effective provision of information and training program; on the other hand, the Swedish solidarity wage policy shows a way to compress the huge wage gap. The author advocates enhancing the status of trade union to improve the efficiency of primary distribution.