As is well known, the proximate reason that the system of central wage negotiations between the Swedish Confederation of Labor (LO) and the Swedish Employers Confederation (SAF) was terminated in the 1980s was that employers, particularly the large multinationals dominating the engineering sector, wanted to terminate it. There are strong grounds, including the economic interests entering into the engineering employers’ actions, for arguing that this is a sufficient explanation for the demise of the system (Pontusson and Swenson 1993; Swenson and Pontusson this volume). In this essay, I explore the possibility that it may not be sufficient. The alternative I suggest is that the macroeconomic consequences of policies implemented by Social Democratic governments during the 1980s made it very difficult if not impossible for those, including the governments, who sought to maintain centrally coordinated negotiations in at least some form to do so in the face of efforts by those who sought to end them. This implies that under different macroeconomic conditions, it might have been possible to maintain some form of centrally coordinated wage bargaining, though not without modifications that would have been necessary to satisfy the main economic interests of those who sought to abolish them. Accordingly, I attempt to show what this counterfactual scenario might have looked like, offering some evidence that policies producing different macroeconomic conditions could plausibly have been implemented and that the necessary modifications could plausibly have been made, and indeed were beginning to be made, so that the conditions for maintaining centrally coordinated wage negotiations would have been considerably more favorable. I suggest, however, that the employers opposed to central negotiations might nevertheless have persisted in their determination to block their continuation in any form and that, if so, it would have been because they had political interests that would not have been satisfied by any modifications in the system of central negotiations short of its demise.

This reexamination of the 1980s experience in Sweden does not offer an explanation of the demise of central negotiations that is radically different from that offered by others. It differs in putting more weight on two factors that the others treat more summarily or not at all: macroeconomic policy and the political interests at stake in centralized negotiations.