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Economic history of Sweden

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Title: Economic history of Sweden  
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Economic history of Sweden

1790-1815 - Agricultural revolution and protoindustrialization

During the period 1790-1815 Sweden experienced two parallel economic movements: an agricultural revolution with larger agricultural estates, the crown transferring areas to private farmers, new crops and farming tools and a commercialization of farming, and a protoindustrialisation, with small industries being established in the countryside and with workers switching between agricultural work in the summer season and industrial production in the winter season. This led to economic growth benefiting large sections of the population and leading up to a consumption revolution starting in the 1820s. It also led to rapid demographic increase.

1815-1850 - Industrial revolution, regional specialization and institutional changes

In the period 1815-1850 the protoindustries developed into more specialized and larger industries. This period witness increasing regional specialization with mining in Bergslagen, textile mills in Sjuhäradsbygden and forestry in Norrland. Several important institutional changes took place in this period, such as free and mandatory public schooling introduced 1842 (as the first country in the world), the abolishment of a previous national monopoly on trade in handicrafts - the skråväsendet - in 1846, and a stock company law in 1848.

1850-1890 - Export growth, railroads and investment take off

During the period 1850-1890 Sweden witnessed a veritable explosion in its export sector, with agricultural crops, wood and steel being the three dominating categories. Important institutional changes in this period included the abolishment of most tariffs and other barriers to free trade in the 1850s and the introduction of the gold standard in 1873, linking the Swedish krona at a fixed parity to gold. These institutional changes helped the expansion of free trade.

During this period Sweden's investment quota (investments/GDP) went from 5% to 10%, called take off. During this period modern economic growth, with yearly GDP growth of around 2% made its advent in Sweden. Large infrastructural investments were made during this period, mainly in the expanding rail road network, which was financed in part by the government and in part by private enterprises.

1890-1950 - Second industrial revolution

During the period 1890-1930 the Second industrial revolution took place in Sweden. During this period new industries developed, with their focus on the domestic market: mechanical engineering, power utilities, paper making and textile industries. The rapid expansion of these industries was clearly helped by the existence of a well functioning risk capital market: the Stockholm Stock Exchange was established in 1866, the Bank of Sweden (founded in 1668 as the first central bank in the world) in 1897 was given legal rights as the sole issuer of bank notes in Sweden and given status as lender of last resort, this making it easier to establish small independent private commercial banks, leading to a rapid expansion in the number of private banks and also to a rapid credit expansion. The private banks issued loans to start-up companies, with stocks as security. As the company was in business and showing positive business figures, the stocks were sold on the stock market, enabling the bank to lend the money to other start-up companies. The rapid credit expansion led to bank tragedy in 1907, as well as a property market collapse.

Having imported vast amounts of foreign capital to finance its industrialization, during a 60 year period, from 1850 to 1910, Sweden was probably one of the leading debtor nations in the world by 1910. This situation would change rapidly in the coming decade. In 1914 the First World War commenced and international demand for Swedish exports of strategically important products such as steel, to be used in the armaments industry, increased rapidly. The warring nations had imposed severe limitations on trade between each other, as a neutral country, Sweden was not affected by these restrictions. The warring nations, such as the UK, to a large extent used the printing of new money as a means of financing the war, leading to inflation and thus causing the prices for Swedish exports to rise rapidly. The massive transfers of foreign money as payments for wartime Swedish exports meant that Sweden went from having been one of the most indebted nations in the world before the war, to being a net creditor after the war.

References

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