This text explores the role of social economy and civil democracy in transforming welfare state in Sweden, while retaining public financing for social services. This can be achieved through cooperative self-management and greater citizen participation as co-producers. Separating the financing from the provision of universal social services and contracting out their provision to social enterprises can promote several important social values, such enrichment of work life, improvement of work environment and increased co-determination for the worker; the empowerment of citizens as co-producers of the services they demand; and finally the transformation of the welfare state into a welfare society.