A Swedish Economic Policy - The Theory, Application and Validity of the Rehn-Meidner Model

Abstract

The macroeconomic principles behind the Swedish model were developed by two trade union economists, Gösta Rehn and Rudolf Meidner, shortly after World War II. The Rehn-Meidner model represents a unique third way between keynesianism and monetarism in its approach to combine full employment and growth with price stability and equity through the use of extensive selective employment programs, a tight fiscal policy and a wage policy of solidarity. This essay demonstrates the logic and comprehensive character of the Rehn-Meidner model, as well as the originality of its underlying economic theory. It also analyses the application of the model in Sweden during the post-war period. In the 1980s, the means of the model were largely abandoned. In the 1990s, the governments generally adopted the means of the model, but they were unable to combine low inflation with full employment. A renewed interest in the Rehn-Meidner model may emerge from recent declarations by the EU to prioritise full employment without giving up the objective of price stability.

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