The Evolution of the Swedish Economic Model

The foundation was laid with the Saltsjöbaden Agreement of 1938, where the trade union confederation

(LO) and employers (SAF) agreed to regulate the labor market through centralized bargaining without

state interference. The economic engine of this era was the Rehn-Meidner Model (1951),

which aimed for low inflation, full employment, high growth, and income equality.

A key mechanism was the Solidarity Wage Policy, which set equal wages for equal

work regardless of a company's profitability. This forced inefficient firms to go bankrupt (as they could not

lower wages to survive) and pushed labor into highly productive export sectors. During the "Golden

Years" (1940–1970), this model succeeded, delivering annual GDP growth of roughly 3% and funding the