The economic history of Sweden has since the

Iron Age The Iron Age is the final epoch of the three-age division of the prehistory and protohistory of humanity. It was preceded by the Stone Age (Paleolithic, Mesolithic, Neolithic) and the Bronze Age (Chalcolithic). The concept has been mostly appl ...

been characterized by extensive

foreign trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significant s ...

based on a small number of export and import commodities, often derived from the widely available raw materials iron ore and wood. An industrial expansion in the latter half of the 19th century transformed the society on many levels. Natural-resource-rich regions benefited from the First Industrial Revolution. A growth surge in Sweden later benefited virtually the whole country during the Second Industrial Revolution. It fostered a broad export-oriented engineering industry with companies such as

LM Ericsson (lit. "Telephone Stock Company of LM Ericsson"), commonly known as Ericsson, is a Swedish multinational networking and telecommunications company headquartered in Stockholm. The company sells infrastructure, software, and services in informat ...

Asea ''Allmänna Svenska Elektriska Aktiebolaget'' (English translation: General Swedish Electrical Limited Company; Swedish abbreviation: ASEA) was a Swedish industrial company. History ASEA was founded in 1883 by Ludvig Fredholm in Västerås as ...

Alfa Laval Alfa Laval AB is a Sweden, Swedish corporation, company, founded in 1883 by Gustaf de Laval and :sv:Oscar Lamm, Oscar Lamm. The company, which started in providing centrifugal separation solutions for dairy (see Separator (milk)), now deals in th ...

Aga Aga or AGA may refer to: Business * Architectural Glass and Aluminum (AGA), a glazing contractor, established in 1970 * AGA (automobile), ''Autogen Gasaccumulator AG'', 1920s German car company *AGA AB, ''Aktiebolaget Svenska Gasaccumulator'', a ...

Electrolux Electrolux AB () is a Swedish multinational home appliance manufacturer, headquartered in Stockholm. It is consistently ranked the world's second largest appliance maker by units sold, after Whirlpool. Electrolux products sell under a variety ...

SKF AB SKF (Swedish: ''Svenska Kullagerfabriken''; 'Swedish Ball Bearing Factory') is a Swedish bearing and seal manufacturing company founded in Gothenburg, Sweden, in 1907. The company manufactures and supplies bearings, seals, lubrication and l ...

and

Volvo The Volvo Group ( sv, Volvokoncernen; legally Aktiebolaget Volvo, shortened to AB Volvo, stylized as VOLVO) is a Swedish multinational manufacturing corporation headquartered in Gothenburg. While its core activity is the production, distributio ...

reaching well established positions on the global market and becoming drivers of

GDP Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...

growth Growth may refer to: Biology * Auxology, the study of all aspects of human physical growth * Bacterial growth * Cell growth * Growth hormone, a peptide hormone that stimulates growth * Human development (biology) * Plant growth * Secondary growth ...

. In addition to engineering, the

pulp and paper The pulp and paper industry comprises companies that use wood as raw material and produce pulp, paper, paperboard and other cellulose-based products. Manufacturing process The pulp is fed to a paper machine where it is formed as a paper web an ...

, steel, and

chemical A chemical substance is a form of matter having constant chemical composition and characteristic properties. Some references add that chemical substance cannot be separated into its constituent elements by physical separation methods, i.e., wi ...

industries developed to reach international prominence. By the 1970s, Sweden had become one of the wealthiest nations of the world. The growth slowed down during the following decades, which were characterized by

public deficit Within the budgetary process, deficit spending is the amount by which spending exceeds revenue over a particular period of time, also called simply deficit, or budget deficit; the opposite of budget surplus. The term may be applied to the budget ...

s and

structural change In economics, structural change is a shift or change in the basic ways a market or economy functions or operates. Such change can be caused by such factors as economic development, global shifts in capital and labor, changes in resource availabil ...

Age of Liberty (1718–1773)

The

Great Northern War The Great Northern War (1700–1721) was a conflict in which a coalition led by the Tsardom of Russia successfully contested the supremacy of the Swedish Empire in Northern, Central and Eastern Europe. The initial leaders of the anti-Swedi ...

(1700–1721) left

Sweden Sweden, formally the Kingdom of Sweden,The United Nations Group of Experts on Geographical Names states that the country's formal name is the Kingdom of SwedenUNGEGN World Geographical Names, Sweden./ref> is a Nordic country located on ...

in a state of economic and demographic ruin. When

King Charles XII Charles XII, sometimes Carl XII ( sv, Karl XII) or Carolus Rex (17 June 1682 – 30 November 1718 O.S.), was King of Sweden (including current Finland) from 1697 to 1718. He belonged to the House of Palatinate-Zweibrücken, a branch line of t ...

died in 1718, the

Riksdag of the Estates Riksdag of the Estates ( sv, Riksens ständer; informally sv, Ståndsriksdagen) was the name used for the Estates of Sweden when they were assembled. Until its dissolution in 1866, the institution was the highest authority in Sweden next to t ...

were convinced that it was the system of

absolute monarchy Absolute monarchy (or Absolutism as a doctrine) is a form of monarchy in which the monarch rules in their own right or power. In an absolute monarchy, the king or queen is by no means limited and has absolute power, though a limited constitut ...

, which reduced their power, that had brought the downfall of the country. Thus, after Charles’ death, they established a system of quasi-democratic rule that ushered in the “

Age of Liberty In Swedish and Finnish history, the Age of Liberty ( sv, frihetstiden; fi, vapauden aika) was a period that saw parliamentary governance, increasing civil rights and the decline of the Swedish Empire that began with Charles XII's death in 1718 ...

”. This period brought economic and social upheaval as well as industrial development. However, by the time the Age of Liberty ended in 1772 (as a result of a

self-coup A self-coup, also called autocoup (from the es, autogolpe), is a form of coup d'état in which a nation's head, having come to power through legal means, tries to stay in power through illegal means. The leader may dissolve or render powerless ...

King Gustav III Gustav III (29 March 1792), also called ''Gustavus III'', was Monarchy of Sweden, King of Sweden from 1771 until his assassination in 1792. He was the eldest son of Adolf Frederick of Sweden and Queen Louisa Ulrika of Prussia. Gustav was a voca ...

), Sweden was by all objective measures a weaker nation than it was during its “Era of Great Power”. Its land was diminished, its

monopoly A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...

over the bar iron trade was gone, and it was lagging behind in the race towards early

industrialisation Industrialisation ( alternatively spelled industrialization) is the period of social and economic change that transforms a human group from an agrarian society into an industrial society. This involves an extensive re-organisation of an econo ...

. This decline can be attributed both to

fiscal Fiscal usually refers to government finance. In this context, it may refer to: Economics * Fiscal policy, use of government expenditure to influence economic development * Fiscal policy debate * Fiscal adjustment, a reduction in the government ...

monetary Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are as ...

and

executive Executive ( exe., exec., execu.) may refer to: Role or title * Executive, a senior management role in an organization ** Chief executive officer (CEO), one of the highest-ranking corporate officers (executives) or administrators ** Executive dir ...

policy errors by the various Riksdag parties in power, as well as to technological and economic shifts which allowed Sweden's rivals and neighbours get ahead on the global stage. It was, however, the agricultural reforms, the early industrial developments, and the gradual change from

mercantilism Mercantilism is an economic policy that is designed to maximize the exports and minimize the imports for an economy. It promotes imperialism, colonialism, tariffs and subsidies on traded goods to achieve that goal. The policy aims to reduce a ...

free trade Free trade is a trade policy that does not restrict imports or exports. It can also be understood as the free market idea applied to international trade. In government, free trade is predominantly advocated by political parties that hold econo ...

that occurred during this period which pioneered the path for Sweden's agricultural revolution in the 1790s and eventual large scale industrialization in the mid to late 19th century.

Agricultural revolution and protoindustrialization (1790–1815)

During the period 1790-1815 Sweden experienced two parallel economic movements: an agricultural revolution with larger agricultural estates (land reclamation - Enclosure Act of Sweden), 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. The early division of labor resulted in household handicraft being largely restricted to the region's natural geographic resource. The "

town economic policy A town is a human settlement. Towns are generally larger than villages and smaller than city, cities, though the criteria to distinguish between them vary considerably in different parts of the world. Origin and use The word "town" shares ...

" of the 17th century banned rural trade for the purpose of drawing a clear line between the urban and

rural economics Rural economics is the study of rural economies. Rural economies include both agricultural and non-agricultural industries, so rural economics has broader concerns than agricultural economics which focus more on food systems. Rural development ...

. Craft and industrial production were regarded as urban source of livelihood, therefore centralized manufacturing were preferred. This thus paved way to the first

industrial revolution The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe, and the United States, that occurred during the period from around 1760 to about 1820–1840. This transition included going f ...

of Sweden in the early 19th century.

Early Industrialization, regional specialization and institutional changes (1815–1850)

In the period 1815-1850 the protoindustries developed into more specialized and larger industries. This period witnessed increasing regional specialization with mining in

Bergslagen Bergslagen is a historical, cultural, and linguistic region located north of Lake Mälaren in northern Svealand, Sweden, traditionally known as a mining district. In Bergslagen, the mining and metallurgic industries have been important since th ...

, 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.

"First" Industrial Revolution; Export growth, railroads and investment ''take off'' (1850–1890)

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.

Second industrial revolution (1890–1950)

Historical GDP per capita development in Sweden

During the period 1890-1930 the

Second industrial revolution The Second Industrial Revolution, also known as the Technological Revolution, was a phase of rapid scientific discovery, standardization, mass production and industrialization from the late 19th century into the early 20th century. The Firs ...

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 A lender of last resort (LOLR) is the institution in a financial system that acts as the provider of liquidity to a financial institution which finds itself unable to obtain sufficient liquidity in the interbank lending market when other facil ...

, 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.

Recent trends

During the 1980s, Sweden attempted to preserve its model of capitalism plus a generous welfare state through what it called a "bridging policy." Unintended consequences resulted. There was high inflation as well as overheated real estate and financial markets and a negative real rate of interest. After 1991, these factors caused a recession with high unemployment. There were political reverberations and business called for neoliberal government policies. By 2000, however, the positive trends dominated. Compared to the rest of Europe, unemployment in Sweden was low, while economic growth has been high, inflation low, the budget in balance, and the balance of payments positive.Sofia Murhem, "Security and change: The Swedish model and employment protection 1995–2010." ''Economic and Industrial Democracy'' 34.4 (2013): 621-636.

Historical statistics

Wealth inequality

A 2017 study found that Sweden had lower levels of inequality than other Western European states in 1750 but that the levels converged with those of other European states to become roughly the same by 1900.

References

{{Reflist

External links

*
''Essays in Economic & Business History'' Vol 35, No 1 (2017) Special Issue of 15 scholarly articles on Swedish economic history