Stockholm Municipal Theatre, late January: for the first time since his assassination in 1986, the murder of the legendary social-democratic prime minister Olof Palme has become the subject of a stage drama. “Olof Palme, a Swedish Play,” is unlikely to mark a turning point in the history of theatre, but it does offer a certain nostalgia-imbued truth, which is palpable in such lines as: "the Social Democratic Party of the socialist paradise here in Sweden," and "Sweden is a social democracy, that is all there is to it."

Many members of the audience were rank and file Social Democratic Party members with direct experience of the Palme’s heydey in the 1970s. "Today, the party leaders don’t know where they are going,” remarked former trade unionist Lasse Hornberg. “They give the impression that we can continue as before. Globalisation has made that impossible, but we should still be able to apply the fundamental principles of social democracy."

By coincidence, the play has opened at a time when the party is experiencing one of the worst crises of its history. In the wake of two lost elections, in 2006 and 2010, and the ousting of Håkan Juholt, who was forced to resign on January 21 after only ten months as party chairman, the social democrats have slid even lower in the polls — to less than 23% according to a survey conducted at the end of January.

This is unprecedented for a party that tends to assume that it should be responsible for the running of the country. Håkan Juholt was found wanting for a number of reasons, most recently a clearly erroneous speech in which he accused the government of establishing a new defence doctrine with support from the extreme right. In October, he had already been taken to task by the press for abusively claiming accommodation allowances.

With support for the party plunging in the polls, the social democrats responded in less than a week by appointing a new chairman, former welder and IF Metall trade union leader Stefan Löfven, who has since become the focus of the movement’s hopes for renewal in a country that has always aspired to be a laboratory for social democracy.

One hundred kilometres west of Stockholm, the former industrial city of Västerås is the capital of the province of Västmanland and a historic stronghold for Swedish social democrats. In recent years, however, the left and right have been neck and neck in the region — a situation which more often than not has enabled the extreme right to tip the balance of power.

"We will have to go back to basic principles"

Every Friday, members of the Gamla Gardet, Västerås’ social-democratic “Old Guard” meet in a former copper factory which has now been converted to house an upper secondary school and offices for local associations. On the day of our visit, 20 party veterans have turned out to discuss the social democrats’ programme. Many of them are unhappy with the five-point agenda determined by the leadership in Stockholm: globalisation, climate change... "Too many big words,” announces one activist. “I wanted to talk about social security and working conditions, but they are not mentioned in the programme. We need to bring back a focus on human issues."

Former interior decorator and section secretary Brage Lundström has his idea of what should be done: "We should set aside the question of right and left in the party and focus on cooperation between the state and industry. With his profile, Löfven is perhaps the right man for the job." Like others in Västerås, he often alludes to the hallowed Saltsjöbaden Agreement of 1938: a labour market treaty that enabled employers and unions to conclude deals without interference from government, which played a key role in the development of modern Sweden.

In a nearby office, Olle Winkler, local delegate for the IF Metall trade union, which was also the launch pad for the current Social Democratic Party leader, puts forward a similar argument: this is the approach to adopt in a time of unemployment which reached 7.1% — a high rate for Sweden — in December 2011. In the past, social-democratic governments had a reputation for promoting the development of major companies, for example the expansion of groups like Ericsson and ABB, the main employer in Västerås, which has benefited from extensive cooperation with the state since the Second World War. "This is the state capitalism that we want,” insists Olle Winkler. “If we are to succeed, we will have to go back to basic principles."

In the former copper factory, Roland Sundgren, who led the “Old Guard” meeting, remembers the heydey of the social democratic movement, as well as its decline, which took place while he was a member of parliament between 1970 and 1994. "The moment they gave the Nobel prize in Economics to Milton Friedman in 1976 marked the beginning of the end. Reagan and Thatcher applied his recipes, and so did Sweden. That is when deregulation and privatisation became the new trend. In 1985, the social-democratic finance minister and his team were referred to as "the financial right" of the party. Palme was prime minister, but he allowed them free rein. They were the ones who deregulated the markets and liberalised the banks."

"I don’t know where I am going"

References to 1985, and the rift that resulted from the social-democratic party’s acceptance of neoliberal arguements are often mentioned in Västerås, as is the call for a new state capitalism. It is a discourse that is in marked contrast to the party line in Stockholm, where the main priority is to win over the urban middle classes, who are seen as the key to power.

And it is this party line that has prompted debates on what the rank and file in Västerås call "the details," and notably the role of the private sector in public services and the big question of the quest for profitability. "There are forces in the party who believe that we should not interfere on issues relating to the profitability of state services like schools, health care and assistance for the elderly," remarks Roland Sundgren.

In the same vein, a columnist writing in a recent edition of Aftonbladet, a daily with close links to the social democrats, has warned: "It will be terrible if the social democrats continue to drift to the right. If that happens, the party will have no purpose.”

At the end of the play that is currently running in Stockholm, just before Olof Palme leaves the stage an old party activist asks him where he is going. "I don’t know where I am going," Palme replies.