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Industry and development
(Economic History)

Sweden is a strongly industrialized Western nation with a free enterprise economy. Several of its companies enjoy a worldwide reputation, and names like Ericsson, Volvo and Astra stand for high quality and state-of-the-art products.

Early Industrial Development

The first steps towards an industrial economy were taken in the 1870s, a time when England and a few other countries were already well under way in the development process. Although Sweden, industrially speaking, was something of a slow starter, it entered the scene at a favorable moment, when the economic development in the rest of Europe raised international demand and paved the way for Swedish products. The increase in exports that followed partly explains Sweden«s economic growth during the period, but there were internal factors as well. Substantial investments in infrastructure made transports easier, and new, more rational agricultural methods and a rapid population growth provided a large labor force for the developing industry. In addition, a new type of enterprise emerged, the joint stock company, which was an important factor for the formation of large private corporations. By the end of the 1870s the joint stock system had become the dominating form of ownership in Swedish industry. This was also the time when large, vertically integrated company groups began to form, particularly in the export industry.

The engineering industry made its breakthrough at the end of the 19th century. Some of the companies from this period, like Ericsson, ASEA and SKF owe their success to Swedish inventions, and many of them were strongly export-oriented. Often, too, subsidiaries were founded abroad in order to avoid trade restrictions. As can be illustrated by the company names given above, some of these corporations are still going strong and belong to the core of the Swedish engineering industry today.

The developing industry could take advantage of one of Sweden's major natural resources - hydroelectric power. Thanks to the abundance of rivers and waterfalls in the north of the country, electricity was relatively cheap. This substantially lowered the costs of industrial production which, in turn, raised the demand for Swedish products at the international market. Partly as a result of this, the value of the industrial production increased by 150 percent in the period from 1895 to 1914, and the production itself doubled.

World War I and the Inter-War Period

Sweden did not participate in the First World War and could instead take advantage of the increase in foreign demand caused by the war. Later on, though, this demand led to an accelerating inflation. After the war, the export industry was struck by a deep recession, and it took some years before the economy started growing again. This time the rebuilding of war-torn Europe favored Swedish industry, since it had an intact labor force and undamaged production facilities.

The depression at the beginning of the 1930s affected the whole industrialized world, but some countries, like the US and Germany, were harder struck than others. Sweden came out slightly better, partly as a result of an export-boosting devaluation of the national currency, the krona, in 1931. The end of the decade even saw some growth of the national economy in a time of world-wide economic stagnation. As a result of technical improvements production increased, and so did the quality of manufactured goods. Among the most successful industrial products of this time were textiles, pulp and steel.

After World War II

The Second World War was followed by an economic boom. Sweden, having managed once again to stay out of the war, had a better starting position than most of its competitors. Export was further promoted by a 30 percent devaluation of the krona against the dollar, and the forestry and mining industries grew rapidly. From the early 50s to the late 60s the entire world economy grew by 4 to 5 percent each year, and Sweden was one of the most successful Western nations of this era. Although the native textile industry suffered heavily from increased international competition, the engineering and rubber industries expanded as a result of an increased demand for motor vehicles.

In the 1960s Japan emerged as a major industrial nation, and the country provedto be a tough competitor in industrial sectors like steel, shipbuilding and car. Competition was made even stiffer when the rebuilt nations of Europe began fighting for a place in the sun.

The Swedish labor market saw a major change in the 1960s. While the number of people employed in the service sector increased, there was a drop in the number of industrial workers, especially in the textile and leather sectors.

The 1970s and 80s

The 1970s brought many changes in international trade conditions which turned out to have a negative effect on Sweden. Since the country«s domestic market is relatively small, many industries rely heavily on export. The 1973 oil crisis and the subsequent decline in international business activity therefore affected Sweden more drastically than many other countries. The political answer to this was government subsidies to suffering industrial sectors, like steel and shipbuilding. These measures were not altogether successful, however, since they kept up employment only temporarily. In addition, they preserved structural problems in the economy which were to cause inflation as well as unemployment later on. The picture was not altogether dark, though, since the chemical, plastics, electronics and car industries all did fairly well.

Photo: Copyright © Kamerareportage

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