Drawing Lessons From The Rehn Model of Sweden

In the previous article, the first of this Risk Mitigation and Economic Planning Series I am writing, I made a strong play in favour of anticipating risks and actively planning for their mitigation. In this relatively short article today, I look at one model that was developed in the 1950s – The Rehn Plan, which was implemented in Sweden in the 50s to the 70s. I do not recommend this for India; this example is used to underscore and highlight how proper planning needs to proceed, and how we need to anticipate and plan rather than be reactionary; and how we need to develop solutions as per our own internal needs.

In the normal scheme of things in the modern capitalistic context, readjustment of employment is considered a natural outcome, and that the market for labour will adjust accordingly. This is a very hard hearted approach, leaving the readjustment to market forces, which can result in loss of productive resources as well. The assumption  is that the individual will retrain himself or herself, without a proper examination of the alternatives available – these are highly productive and skilled people; and a developing nation can ill-afford a productive skilled resource to be idle.

THE REHN PLAN {Rehn/Meidner Model}

The Swedish system was designed by a union leader and top economist Goesta Rehn in the 1950s. He realized that Sweden had to change Industrial and Economic Structure, as well as shrink low-technology and low-productivity industry. He also realized that the worker desires security.  While Drucker credits only Goesta Rehn, most other sources identify this with the much larger initiative called the Rehn/ Meidner Model, developed by Rehn with another Swedish top economist and union leader Rudolf Meidner.  

The Rehn Meidner Model, though never fully and consciously applied, did have a golden period in the 50s to the 70s. Those of you interested in a full Economic Study of the Rehn-Meidner Model can consult the Bibliography {The Rehn-Meidner model in Sweden: its rise, challenges and survival – Lennart Erixon, Stockholm U}; I have used Drucker { Managing in Turbulent Times / Management – Tasks, Responsibilities and Practices} as the main source, while using the wider economic analysis as a reference point and to cross-verify Drucker.

Under the Swedish System, industries were not encouraged to maintain employment. They used what the working paper referred to above called an active labour market policy, allocating measures to stimulating occupational and regional mobility and improving the matching capacity of labour markets. The Swedes encouraged industries to anticipate any redundancy in employment  that might result from technological development or economic change. At the same time, businesses and industries expected to anticipate future needs for worker, as well as their skills.

This information was fed to the Rehn Board, a semigovernment, semiprivate organization in which government, employers and labour unions work together. The board then underwrites the income of the redundant employee, retrains him, finds a new job for him and places him in it. The Rehn Plan explains in large measure the economic transformation of Sweden – something attested to and accepted by many sources, identifying it as a success factor. The Sweden of the 50s was almost an underdeveloped country for most of her population. The bulk of the labour was employed in low productivity low income activity.

20 Years later, Sweden had become one of the technological leaders of the world with a living standard second only to the United States. A larger proportion of the workforce than in any other country has moved from one kind of employment to another with a minimum of disruption, with almost no resistance to change, and with extraordinary willingness to acquire new skills and learn new things!

DRAWING LESSONS

The above abridged version, taken from the two Drucker sources, with a few aspects from the Research paper quoted, should be good enough for our purposes – which is to learn how others have handled change, grown from pre-industrial or low-development status to developed status. We shall subsequently look at Singapore, Japan and a few other cases – so that we can understand deeper the macro thought processes required, analyse how they succeeded, and learn to transfer those lessons to our settings. Not copy – but develop a deeper understanding.

I do not advocate copying this – or any other model. We have to find our own solutions. But what is critical is that in the above case we can see how nothing was left to chance or market forces; contingencies were anticipated and catered to. Sure there would have been issues in implementation {consult references}, but they were overcome, as even the {mildly} critical paper admits. Planning may be anathema to hardcore capitalists, who would {might} regard this as socialist; I respectfully submit this is hardcore capitalist, as a performing productive potential resource has been saved, upskilled and put into productive use ; to say nothing of the overall decency and humanity this approach entails. Can we think of similar out-of-the-box solutions to our dilemmas?  A start has been made – many Government schemes bear testimony to that; but are they comprehensive enough? This is a question we all have to face and answer for ourselves, and one that Media needs to answer for us!

REFERENCES

1. Management - Tasks, Responsibilities, Practices - Peter F Drucker

2. Managing in Turbulent Times -Peter  Drucker

3. The Rehn-Meidner model in Sweden: its rise, challenges and survival - Lennat Erixon

4. A Visionary Pragmatist

5. Rehn Meidner Model Wiki