Goal: Full Employment (3-4% unemployment) With Low Inflation and Internationally Competitive Industries

Key Assumptions:

productivity growth was an essential precondition for real-wage growth and welfare state expansion. No tradeoff between efficiency and equality. Trade openness would create incentives for firms to be competitive (e.g., Volvo, Eriksson).

Pillars:

(1) a solidaristic wage policy - equal pay for comparable work across firms and industrial sectors regardless of profit and productivity levels. Inefficient firms had to raise productivity if the solidarity wage rates were too high. LO negotiated wage restraint among most well-paid.

(2) an active labor market policy designed to retrain and move workers into jobs; incomes policy to compensate workers displaced by industrial restructing; industrial policy to offset higher wages; extensive public insurance, education and welfare programs.

(3) a restrictive fiscal and monetary policy to keep inflation down and limit corporate profits (which would limit inflationary wage demands too).

(4) international competition prevented firms from passing higher costs onto labor or consumers. Linked labor's interests to free trade.

(5) low corporate taxes (top=57%), high income (top=80%) and consumption taxes.

Social purpose: shift resources to more productive areas of the economy and force inefficient firms to upgrade or perish, but limit labor militancy with retraining and other labor benefits.