Sweden and modernisation

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SWEDEN AND MODERNISATION H. G. Jones SOME of the concepts which emerge as desirable features of the 1980s are already operating realities in Swedish industry. Sweden has also achieved a highly modernised industry with efFicient manning levels and yet has maintained a low level of unemployment for two decades. Earlier, in 1931, unempIoyment had reached the disastrously high figure of 32% but by the application of sound economic principles, the Social Democrats who then came into power and have substantially remained in control since that date, have, over a period of 20 years, progressively reduced unemployment to 1.5% and then successfully held it around 1.5 to 2.0% until a minor recession occurred in 1971-72. At the same time, the GNP per capita has steadily increased and at a value of A;1350 in 1968 for instance, is nearly twice that of the UK figure of &704 for the same year. The figures quoted so far in conjunction with those in Table 1, symbolise the aims and achievements and some of the problems ofmodernisation. TABLE 1. 1NDUSTRY output 4 6.8

CHANGES IN ;‘;DUL; Manning -23

IN

PRODUCTIVE 196042 (%PER

Hours per worker -

I.1

Investment Modernisation of industry can only be achieved through substantial and continuous investment of capital: to be successful three essential conditions need to be satisfied, namely Mr Jones is EsmCe Fairbairn Senior Research Fellow in Capital Investment, Operational Research Centre, University of Strathclyde, Glasgow, UK

(4

the concept must be correct, the capital must be available, the industrial climate must receptive.

:s C

be

Imaginative market research is the first component in establishing the correct concept. The market needs to be expIored in depth, a policy decided, and detailed planning must follow in order to create a quality concept. For example, Kockums surveyed world shipbuilding requirements for the future and decided the most profitable area for themselves in the light of their capabilities and experience. Then, around 1968, they reorganised the yard so as to capture a large share of the selected market, basing the attack on the market on price and delivery competitiveness. In forestry, safety was regarded as an essential outcome of modernisation, but in achieving safety there has been a major increase in productivity (see Table 2) from the adoption of sophisticated equipment. In textiles, the market research indicated no potential increase in volume so modernisation took place without expansion. The private company of Sydkraft, generating and distributing electricity to the bulk of Southern and Central Sweden, has developed a detailed plan for 15 years ahead, based on demand and the best mix of hydro, fossil and nuclear energy. While similar patterns of approach can be found outside Sweden, it is the widespread, almost universal, frequency of comprehensive planning that is so impressive. Production methods may need fundamental changes. In Sweden, investment certainly did not mean spending money on the same old machines. In-depth studies directed at ascertaining the real dimensions of the problem, followed by an all out attempt FUTURES

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to think radically outside the constraints of tradition characterise the best investments. Furthermore the process is continuous. Plant is not regarded as sacrosanct for 20 years. Ten years is regarded as the norm for plant replacement on grounds of technical obsolescence. The state-owned shipyard at Uddevalla is an example of the introduction of flow-line methods into a new sphere, while the new Volvo plant at Kalmar is a departure in the reverse direction from conventional techniques of car production but for logical reasons. TABLE 2. CHANGES IN TWO SWEDISH INDUSTRIES DUE TO MODERNISATION 1 Year

Employees

Total output change

Forestry

1960 1972

114000 70 000

>

Textiles

1960 1973

145 000 73 000

I-

Investment

+ 10% - 6%

funds

The Swedish government has encouraged investment through two methods, namely the creation of investment funds and the permitting of generous depreciation allowances to offset taxable income. Only the investment funds will be discussed very briefly here. Each Swedish company can set aside 40% of its pre-tax profits for future investments. But there are conditions attached to this concession. 46% of the money set aside must be lodged interest-free in the National Central Bank. The money can only be spent with the approval of the Labour Market Board who monitor the start and finish dates. In times of recession, very ready approval is given by the Board for investment schemes, particularly those which are labour-intensive. The government may then also provide investment grants of up to 30%, especially in regions experiencing depopulation. When the economy is booming and labour in short supply, permission may not be forthcoming for a firm to spend its own money. HowFUTURES

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153

ever, after five years, the firm may spend up to 30% of the tax free money without the authority of the Labour Market Board. Rapid depreciation, in the first year, is also another of the conditions attached to the use of the investment fund.2 Encouraging the efficient companies to set aside profit for investment enables these companies to become more efficient and at the same time the finance is not divorced from the productive area. The result is a general rise in the level of the economy. Only 6% of Swedish industry is in public ownershiwI and is exwected to be (and I \ is) profitable. Further nationalisation is only undertaken if a struggling enterprise is believed to be capable of conversion to a viable unit. The Labour Market Board was created by an act of intervention by the government to control or at any rate to stabilise the economy in a progressive manner. The Board is financed out of the government budget and operates within broadly-based guidelines defined by the government which does not interfere with the implementation. The functioning of the Board involves the intimate collaboration of management and unions. The Governing Body comprises the Director General, the Deputy Director General, three representatives from each of the employers’ confederation and the bluecollared unions, two from the salaried unions and one each from the professional associations’, agriculture and women workers.2

The industrial

climate

The Swedes have accepted that modernisation may mean different kinds of work. If the market cannot expand, it may mean less workers in that industry. This philosophy is only acceptable because of the steps taken, largely by the Labour Market Board, to retrain and relocate workers. Some 300

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very adequate training courses are in existence, but in general can only be attended by unemployed or workers with imminent unemployment. Allowances and grants are paid by the State to enable the worker to visit the location, settle in the new job and move the family. Backed by the statistics of the Labour Market Board, the courses are geared in content and numbers to the requirements of the economy. 3 With continued modernisation, even allowing for increased demand, inevitably there comes a time when the worker cannot be gainfully occupied in the production of goods or food. In Sweden in 1964, 47% of the workers were thus employed. By 1972, the figure had fallen to 3876. This does not mean unemployment. The service industries (defined broadly to include the provision of new roads and homes) in the same period have expanded from 25% to 33% of the working population which had itself increased by 6.8% through the increased employment of women. 4 Theoretically, there is a limit to the extent of the transfer. The demand can reach saturation point but so far the powerful Labour Market Board are convinced that as standards rise, new schemes and concepts will originate.5 The second factor limiting the expansion of the service industries is that they must in the last resort be paid for by the producing industries. The rate of industrial growth has fallen from 8.1% per annum in 1960-65 to a projected figure of 6.8o/o in the period 1970-756 but would appear still to be sufficiently healthy to maintain expansion of the service industries. It must be emphasised that the Swedes appreciate better libraries, swimming pools and sports stadiums as factors raising their standard of living, almost as much as a bigger pay packet. As an example of the forward planning typical of Sweden, the five year budget (1972-77) of the Labour Market Board7 is remarkable in that:

(1) it exists in such detail; (2) effective control is based on information, and that information can be costly (6.5% of the budget in 1979) ; (3) more of the budget is spent on retraining (29%) than on the payment of unemployment benefits (26%) ; (4) serious attempts (24.5%) are made to integrate the handicapped and the difficult to place into the working population; (5) 19% of the budget is projected to create work in the regions and centrally when necessary; (6) the same trends of change involving geographical and occupational mobility are expected to continue.

New problems The success of the economic policy of 20 years was also sowing the seeds of trouble which germinated in 1968 to 197 1 due to four main causes : (1) There was considerable unemployment among new graduates, a section of the community which had been trained to be vocal and did not necessarily accept the criteria of an earlier generation on the virtues of conformity. An explosion had taken place in the university throughput increasing from 8000 in the 1950s to 30 000 per annum in 1968. Action has been to reduce the throughput to 20 000 per annum and to concentrate on career-oriented courses, the distribution of which is determined from the Labour Market Board forecasts of demand. (2)Sweden as a socialist state was committed to the aim of creating an egalitarian society. A certain amount of success (regretted by the Confederation of Labour as not being greater) had reduced the wage spread from the average, which in 1959 had a range of + 17 and - 13%: it had become + 8 and - 7% in 1972.8 The policy had not hindered retraining, but it left the more highly skilled-both wage earnFUTURES

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ers and salary earners-with a sense of grievance. The result was a series of strikes in 1969-71 .O (3) Absenteeism at one in seven, with a high turnover of one in three at Volvo, for instance, had made retraining of new entries an expensive operation costing around E7*8m per annum.lO (4) Piece-work systems of payment were becoming increasingly unpopular. New solutions In the Kockums shipyard at Malmij in 1968, when the firm was trying to convert a struggling enterprise into a profitable one, the same combination was making it impossible to achieve delivery dates. The Labour Office (equivalent to the TUC) was asked by the company President to analyse the situation. The unfavourable report was published in full. Among its recommendations were those of more consultation of a realistic nature, and of taking a greater interest in the workers as people. The recommendations were implemented very quickly, the first through a formal and extensive committee structure and the second by major welfare schemes, partly inside and partly outside the yard. By 1972, the company was a world leader in its productivity. Mutual confidence had been established to the extent of agreeing a widely disseminated definition of company democracy stating inter alia:ll that the company and its employees share the same fundamental goals, that one of these goals is the long-term development of the company, with resultant security for employees, . . . that everyone in the company is responsible for fulfilling these goals. . . . Roughly the same pattern of events was occurring in Volvo. Saab-Scarnia have followed similar lines of development in their plant at StidertHlje for the production of trucks and the 99 series petrol engines. Part FUTURES

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of the experiment consists of a formal organisation with a Reference Group to determine the objectives, 60 Development Groups of about seven people in each which must meet at least monthly to plan the work flows, and 130 Working Groups with some ten or more operators in each. The experiment started with two Development Groups but by 1973 involved some 1550 of the Saab employees. la The individual work stations may look much like those of a conventional line-the same work must be accomplished-but the machine-paced straight assembly line has been replaced by a series of loops serving both as locations for buffer stocks and as work places. The object is to create greater job interest by letting the group be responsible for a complete sub-assembly. The jobs can rotate in the group or there may be some specialisation within the group. The work can be conducted as the group wills, provided work schedules and quality standards are met. The Development Group which has two representatives from the Working Group, determines work layout and methods, and has in it the planner and a work study specialist, together with the foreman who acts as chairman of the group. While not all the groups are successful (broadly speaking it seems the higher the skill the greater the risk of failure of the group), Saab are claiming the scheme has passed from the experimental to the operational stage. Over four years, unplanned stoppages have reduced from 6.2% to 2.2% of total time worked. Rectification work at final assembly has reduced by 38% and in an extreme case on the chassis line, the annual personnel turnover has reduced from 72% to 20% (from 40% to 20% for the plant as a whole).13 It would appear that a spirit of cooperation has entered the plant and is producing the required payoff. The evaluation of investment will in future need to absorb a new dimension. The cheapest or the technically most logical

April 1975 K

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of Change

may represent sub-optimisation in the light of the Volvo and Saab experiments. The other point of grievance in Sweden has been the piece-work system (defined as greater than 50% of the wage derived from production bonuses). Many firms have changed either to straight time rates or to premium systems (in which less than 30% of the wage is obtained from production bonuses). With characteristic thoroughness the Swedes have examined the results obtained in 73 companies who have recently changed their pay schemes. It was found that those firms changing from piece work to a fixed day rate lost productivity by 15 to 25%. Those changing from piece work to premium schemes gained 5 to 10%. Those changing from fixed day rates to premium rates gained 25 to 35O/e.l4 Also characteristically the report publicising the results states “stagnation or recession in the development of industrial efficiency is incompatible with the general attitudes and values prevalent in our country”. Worker

directors

To have worker directors on the com-

pany boards is largely regarded as a political issue based on ideological concepts of industrial democracy. In 1973, an Act empowered the local unions to seek the appointment of two worker directors in all firms employing 100 or more.15, 16 If the unions SO request, the companies must agree. SO far relatively few such appointments have been made, the notable exceptions again being Volvo, Kockums and the state owned shipbuilding yard at Uddevalla. The Confederation of Labour has set up a training school for worker directors to provide background education in economics and company law. One of the problems is the dichotomy of interests these appointments entail. On the one hand, a responsible attitude to the company problems is essential for the worker

director concept to be successful. At the same time, the worker director (who in the bigger companies is expected to be a union leader) has loyalties to get the best deal for the workers. TABLE 3. WORKING DAYS LOST THROUGH DISPUTES (PER 1000 EMPLOYEES)”

Conclusion

The table reflects the influence of earlier remarks. Sweden had a problem in 1970 and 1971, but faced up to it in spite of earlier complacency. The problems required a new approach to cooperation. This was forthcoming. It may not represent the best approach to the 1980s but it does represent a flexibility which will face up to new problems with new solutions. Modernisation was essential for a prosperous economy, which in turn was necessary to support the social developments. To be successful, redeployment must be seen by the workers as something that “works”. Cooperation is seen to pay. The 1980s should be bright for Sweden if this spirit is maintained. References 1. Ake SundstrGn, Department of Industry, private communication Policy in Sweden” 2. “Active Manpower fstockholm. The Swedish Institute, &me 1973) ’ 3. LMB Budget Review 197217. Stockholm, October 1973, page 129 LMB 4. “Labour Market Policy-1974/75”, 1973, page 10 Planning Director of 5. Aksel Spendrup, LMB, private communication 6. See ref 1. Slightly lower figures are quoted in ref8, page 15 7. See ref 3, page 37 Skandin8. “Some Data about Sweden”, aviska Enskilda Banken 1974, page 14 9. “Labour Relations in Sweden” (Stockholm, The Swedish Institute, August 1973) FUTURES

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Futures Essays: From Prophecy to Prediction

10. Simon Caulkin, “Volvo versus Ford”, Management Today, January 1973, page 44 11. “Guidelines” Kockums (Malmo), 1973, page 3 12. H. Lindestad and J.-P. Norstedt, Autonomou.rGroups and Payment by Results (Falkoping, Confederation of Swedish Employers, May 1972) page 47 13. J.-P. Norstedt and S. Aguren, “The SAABScarnia Report” (Viisteras, Conf. of Swedish Employers, February 1973) page 27

From Prophecy to Prediction

157

14. “The Condemned Piecework” (Stockholm, Confederation of Swedish Employers, 1973) page 3 1 15. Andre Thiria, “Labour’s Voice Joins the Corporate Board” (Stockholm, The Swedish Institute, June 1973) 16. “Board representation for the employees in joint stock companies and co-operative associations”. Act adopted by the Riksdag, Dee 14,1972 17. See ref 9 and ref 8, Table 14.

A serialised survey of the movement of ideas, developments in predictive fiction, and first attempts to forecast the future scientifically

6. The end of the world is at hand I. F. Clarke ONE of the main points in December’s discussion of “Evolution and Expectation” was the King-Hele Conundrum-that futurologists have the habit of “predicting what is socially acceptable”, because the price of their survival is that they should conform to the necessarily optimistic requirements of their society. After the proposition comes the corollary: the way in which a society regards the future is often the consequence of a prevailing mood and this may have very little to do with the concrete, quantifiable conditions that decide the nature and workings of that society. Human beings are less rational than they would admit; and some of our most powerful illusions derive from fantasies that are attempts to find coherent images for the many hopes and fears that are the life-long companions of Homo sapiens. How is it otherwise possible to explain I. F. Clarke is Chairman of the Department of English Studies, University of Strathclyde. He received the Pilgrim Award for 1974 from the Science Fiction Research Association of America in recognition of his contributions to their field. FUTURES

April 1975

the widespread expectation that any day now visitors from some other world will descend upon our planet? Indeed, this variation on the legendary tales of the divine sky-travellers has close associations with the modern versions of that other archaic myth-the coming end of the world. Beneath the surface complexities of industrial civilisation the ancient myths live on with undiminished vigour; for the polar tensions between hopes and fears-between paradise and perdition-find their most recent expression in a modern iconography that is as explicit as the frescoes in any Egyptian temple. The television screens of our world display the never-ending triumphs of the invincible Captain Kirk in his role of Horus, the falcon of the heavens. The sky-ship Enterfirise voyages eternally through the far reaches of the galaxies, and the achievements of the sky-god carry the comforting assurance for a time of troubles that the human race will go forward for ever from new horizon to new horizon. In like manner the images of universal