Här en text jag skrivit för Policy Network inom ramen för en diskussion med anledning av en essä om "The 5-75-20 society":

Closing the insider-outsider gap

Today, the big challenge for developed welfare states is the insider-outsider gap. To close it, we need a predistributive strategy that rebalances the power relationship between workers and employers

Willy Brandt, Bruno Kreisky and Olof Palme were among the 1970s’ most prominent interpreters of and spokespersons for European social democracy. The trio also represented a kind of leadership that was bigger than their own parties and countries. It´s a paradox that despite globalisation and the EU's increased role that this kind of social democratic leaders are rare today. In their co-authored 1976 book, La social-démocratie et l’avenir (Social Demcoracy and the Future), Willy Brandt argues that unlike communists, social democrats do not justify their goals by adhering to a single political theory or philosophy; they have an open world view.

These words say something about what has happened since then. Communism in Eastern Europe died of its own sickness in 1989. And in 2008, deregulated capitalism reached its dead end.

When social democracy now tries – or fumbles – to find a way forward, Willy Brandt's call still holds. This kind of pragmatism and eclecticism is the key to social democracy's historic success and future ability to find political solutions based on new historical circumstances.

But where are the lines of conflict in the 21st century?

Policy Network has presented an interesting analysis in the essay, “How social democracy can triumph in the 5-75-20 society," published in Making progressive politics work: A handbook of ideas. The 5 percent is the economic and financial elite that increasingly freed itselt from the surrounding community, and perhaps the nation states. The 20 percent are those who live outside society and often in poverty, when offered work it is a matter of precarious working conditions. The vast majority are the 75 percent in “the middle”, from the working class to upper middle class. They are in the essay generally referred to as the middle class. This group is experiencing increased pressure both financially and mentally. And they are – and this is probably the essay’s central message – the social group which determines future elections. To be able to form a workable majority and become a realistic government option in a number of countries, social democracy must attract this large group of voters.

The analysis of the 5-75-20 community can possibly be regarded as an attempt to marry the American Occupy movement's criticism of the top one percent ("we are the 99 percent") and a previously widely spread analysis of the emergence of a two- thirdsociety in the post-industrial capitalism. Criticism of the one percent at the top is an expression of an American radical populist or progressive tradition, partly harboured within the Democratic Party but also in various social movements and organisations. The two-third society could be regarded as a warning sign of a shift where the more affluent in the upper third can form a majority along with the third in the middle. The third "down there" run the risk to become a minority. A new election logic is established. Formerly the labour movement built an alliance from the bottom up, between the working class and the middle class. Both of these approaches provide important insights and warning signals.

One could say that Thomas Piketty’s important work Capital in the 21st Century gives support to this analysis. Not least because it highlights that the top layer of society is pulling away and will consume an increasing share of wages and capital income, dividing society further and making the economy more and more dysfunctional. Social democracy emerged in a society marked by poverty. It promised to lift the majority of people materially and provide the working class with full citizenship and participation in society and the distribution of production performance. Today, the major challenge is how we deal with growing prosperity and increasing wealth in society overall. It is as before a matter of distribution policy. But a somewhat different kind of challenge.

During the Progressive Governance Policy Network conference in Amsterdam, many speakers referred to the "middle class" rather than the "working class." However, social democracy is a product of an emerging working class in industrial societies, which later also included workers in the service sector and the public sector. This too might be an American import to European social democracy; "middle class" is long established in the Democrats' rhetoric. But I don´t believe it works in a Swedish or Scandinavian context. And I am not fully convinced about the idea overall. I am aware that in the American context “the middle class” includes both blue collar and white collar workers. But there is a risk the Left knowingly or unconsciously distancing itself from the "underclass" or "the poor."

All this requires strategic and policy analysis and reflection. To me the challenge is not about choosing one or the other, or if social democracy should represent or appeal to the middle class or the working class. I suspect that this reflects a conflict whithin the progressive political field. Various representatives of social democracy emphasise either the working class or the middle class in its political analysis, or as a potential electoral base, which tend to tell something about if you lean to the "right" or to the "left." The question is whether social democracy can overcome this tension and be relevant once more, in line with Willy Brandt's advice in 1976.

In fact, the middle class and the "interlayer" is an old problem for the left. It goes as far back as to Marx, who predicted that these groups would shrink in an escalating class struggle while the working class was awarded messianic tasks. Neither one of his predictions have come true. In fact, social democracy gained support among the working class and built an alliance with the middle class conceived through the welfare state as such. Swedish social democracy began in the 1920s to move from “class” to “the people” in their rhetoric. In the 1950s, the growing layers of white collar workers became an important part of the social democratic reform strategy. In the 1970s, Olof Palme spoke about "the working people" to attract both white and blue collar workers.

But what about political and social alliances today? In the political arena, Social Democrats are experiencing increased competition. Not least over their core voters. Moreover, right wing populist parties are gaining support in traditional left wing communities. But there are also new progressive competitors on the pitch. Some left socialist parties developed in the (left) social democratic direction. The greens represent a philosophical tradition previously lodged within the labour movement and in the socialist family from William Morris and forwards. And in Sweden, a feminist party could very well enter the Swedish parliament in September. The feminist party gained one seat in the European Parliament this summer and its representative has joined the S & D Group! You could say that the party falls as much in line with is as with social democracy as with liberalism. The orignal parties no longer have patent to their ideas.

But the big question today is whether the labour movement risks distancing itself from "the 20 percent," or if it can maintain an alliance with those outside the community and the labour market on the one hand, and the "workers" on the other. The insider-outsider problem is also a real challenge for any society and certainly for a developed welfare system. I think this in itself is the strategic key. It´s obvious that this group should be consolidated and that the working conditions especially in the service sectors must be improved. And that high permanent unemployment is a monumental failure of the economic policy paradigm that has dominated the last decades.

This crack between insiders and outsiders has been exploited very successfully by the Swedish bourgeois parties. They won the 2006 election and have governed Sweden for eight years on a policy that radically widened the gap between the “75 percent” and the “20 percent” (in Sweden probably 10 percent). They won voters from the “75 percent” on a simple and cynical policy: Reduced benefits from social insurance to the sick and unemployed and more stringent conditions in order to receive welfare benefits. And tax cuts for those with a job. This meant that the "75 percent" (and the “5 percent” even more) have come out increasingly better. The “75 percent” in Sweden is not squeezed as in Great Britain. But the 10 percent with low incomes have been hit, and hit really bad. Enough voters from the working class and the middle class bought the message and changed their party preferences from left to right. Social democracy was consigned to  opposition and has undergone its biggest crisis in a hundred years. The Social Democratic social pact must be built from the bottom up while maintaining an alliance with the upper social hierarchy and officials.

The whole discussion about predistribution contributes in this regard with an important perspective. Hopefully this does not mean that redistribution will or should be defined away from the progressive agenda. A social democratic strategy also needs redistributive measures. For me predistribution is mainly about the power of labour relations and workers' bargaining power towards employers. Furthermore, social democracy was created on work-related issues and redistribution of power and money. Labour organisations have been losing ground across Europe and worldwide for a long time. A social market economy requires that the workers can negotiate on reasonably acceptable terms with their counterparts. Otherwise the economy will produce growing wealth at the top and greater uncertainty and lower incomes at the bottom. We need a comprehensive plan to once again embed capitalism in democracy starting from the labour market. And it must be done at the European level. The problem is that the EU guarantees freedom of the markets and undermines the social dimension of the European project.

And this is social democracy's central dilemma today. European societies are being pulled apart. This contradicts not only social democratic instincts, but also evades the whole basis for the social democratic project.

Håkan A Bengtsson is CEO of Arenagruppen in Stockholm
This article forms part of a series of responses to the Policy Network essay on the Politics of the 5-75-20 Society