Scandinavian Economic History Review
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The Swedish economy in the 1950s
Professor Arthur Montgomery
To cite this article: Professor Arthur Montgomery (1962) The Swedish economy in the 1950s,
Scandinavian Economic History Review, 10:2, 220-232, DOI: 10.1080/03585522.1962.10407627
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The Swedish Economy in the 1950 s
By PRO F E S S 0 R ART H U R M 0 N T G 0 MER Y,
STOCKHOLM
A study of OEEC's industrial statistics for 1949 is liable to lead to the conclusion
that Sweden at that date enjoyed an exceedingly favourable position. Subject to
the reservation that no figures are available for Switzerland, Sweden showed a
greater rise in production over 1938 than any other country of Western Europe.
The Swedish increase was stated to be 50-60 per cent, compared with an average
increase for the OEEC countries during the same period of about 10 per cent. At
the other extreme, West Germany showed a fall of about 25 per cent.
It is true that production in the U.S.A. had risen even more than in Sweden;
the rise there was stated to be about 100 per cent. It has to be borne in mind,
however, that the base year, 1938, was characterised in Sweden by good business
conditions, whereas in the U.S.A. conditions were adverse and productive capacity was under-employed. Even when allowance is made for this difference, the
expansion in the United States still remains impressive. It was in fact a prerequisite
of the recovery of Western Europe, and one of the vital foundations on which the
Marshall Plan was built.
Sweden's overall economic situation, however, was by no means as favourable
as the figures quoted might lead one to suppose. The balance of trade was the
black spot in the picture. In 1949 it certainly showed a surplus on current account,
if the official statistics are to be believed, of the order of some 485 million kronor.
But this surplus was secured only through a rigorous control of foreign trade.
There was a striking contrast between production and foreign trade. While production reached record figures in 1949, the total volume of exports was only
slightly higher than in 1938 and decidedly lower than in the boom of 1937.
Imports in 1949 were about 10 per cent lower than in 1938 (when however the
import figures had been greatly affected by the stock-building programme prompted by defence considerations, which was then under way) .
THE SWEDISH ECONOMY IN THE
1950 S
221
Thus, the rise in production had occurred in circumstances which involved
considerable isolation from the world outside. It was not only the restrictions introduced in 1947 that were responsible for this: the poor showing of foreign trade
was partly occasioned by the impoverishment of continental Europe resulting
from the war. The burden of controls fell the most heavily on imports from
countries which could offer abundant supplies but did not buy a corresponding
amount of Swedish exports, especially the United States.
Isolation, both voluntary and involuntary, had created hothouse conditions for
Swedish industry, and during the early post-war years a number of industrial
enterprises were established which depended for their existence upon a high degree
of protection. Unfortunately it is impossible to correct the production figures in
such a way as to take this factor into account, but there can be no doubt that
the figures prior to the early 1950s must be scaled down if comparisons are to be
made with later years. In other words, industrial production in the 1950s increased
comparatively more than the figures suggest. To some extent these figures reflect the adjustment that occurred as soon as international competition made itself
felt again, including the reduction of industrial capacity which that competition
entailed.
Other figures also stand in need of correction. For instance the available statistics showing the trend of real wages up to the early 1950s seem to be altogether
too favourable. In fact, import controls represented a deterioration in consumption that cannot be gauged statistically but which was certainly quite noticeable.
In other words the cost of living index, upon which calculations of real wages are
based, under-estimated the true price rise and over-estimated the improvement in
real wages.
It is an open question whether it might not have been possible to do without the
stringent system of controls that was in force in 1949. It is hard to offer a quite
definite answer to the question. The economic maladjustments were so extensive
in almost every part of Europe that a very energetic policy would certainly have
been needed in order to maintain more or less free trade. But apart from this it
is a fact that Swedish policy itself helped to aggravate the maladjustments in the
balance of trade, and that the counter-measures for the most part came too late
to be effective. During the critical years, especially 1946 and 1947, Sweden's official policy gave great encouragement to imports and severely inhibited exports.
Imports were greatly helped by the Riksbank's support-purchases of securities,
which enabled the banks to sell securities in order to raise the foreign currency
they needed to satisfy the demands of importers. It is well known that these sup-
222
A. MONTGOMERY
port-purchases were made at an entirely unrealistic price. Even as late as N 0vember 1948 it was decided to continue this policy, and interest rates were 'stabilised' at 3 per cent for long-term gilt-edged securities. In adopting such a policy
Sweden was certainly not alone; it is sufficient to point to conditions in England.
What must be regarded as a piece of luck from Sweden's point of view is that
the United States was also pursuing a similar 'stabilisation policy'. Had this not
been so, Sweden's 'dollar gap' would have been wider still.
While imports were thus stimulated, exports were impeded, especially by the
appreciation of the Swedish krona in the middle of 1946. No attempt was made
to keep down investments and costs by means of restrictive budgetary policies.
During these years the total budget generally showed a deficit, if a relatively small
one. What was needed was a considerable surplus, secured perhaps by an increase
in the sales tax. Instead, the existing sales tax was abolished.
The outcome of the policies of 1946 and 1947 was a deficit in the current balance of trade. The deficit seems to have been relatively unimportant in 1946, but
by 1947 it may have reached around 1,450 million kronor. In this situation the
regulation of foreign trade became inevitable. It should be observed, however,
that a number of measures intended to relieve the exchange crisis were introduced
at the same time, but too late. Among them the most important were the drastic
restrictions upon investment. In addition, 1949 saw a 'wage freeze' that helped to
some extent to ease the pressure on Sweden's economy generated by the rapid rise
in money-wages during the previous years. One may also venture to suggest that
neutral Sweden's foreign exchange difficulties stimulated her interest in joining the
1947 Marshall Plan which in the long run was to produce very salutary effects
upon the Swedish economy.
Sweden and the Marshall Plan
Reports of Swedish official reaction to the Marshall Plan have varied. A leading
Finnish politician once told the writer that in 1947 an American spokesman had
made the remark to him that Finland's 'No' to the Marshall Plan, forced upon
her by Russia, was more positive than Sweden's 'Yes'. However that may be, it is
at any rate clear that from a narrowly 'neutral' standpoint certain features of the
Marshall Plan were such as to give rise to misgiving. The basic idea of the Marshall Plan, which in the event has deeply influenced the whole economic and political development of Western Europe, was that as far as possible the different
THE SWEDISH ECONOMY IN THE
1950 S
223
nations should agree upon a common programme. This programme was to be the
foundation on which American aid would build. But there was also envisaged a
Western European economic community of more enduring character-one which
would remain in being even after the Marshall Plan had come to an end. The
American view, endorsed at least in form by the Marshall nations, was that the
programme of economic reconstruction should ultimately lead to the creation of
a great common market in Western Europe, perhaps by way of regional customs
unions that would successively merge into a single union. As is well known, it was
precisely this American demand for a common aid programme that constituted
the immediate reason for the Soviet Union's refusal to participate in the plan
and caused her to prevail upon her satellites to decline the American offer despite
their crying need for aid.
It is clear enough that from the very first, the political and economic consequences of Marshall Aid were of the highest importance. The shortages that in
1947 threatened several leading countries of Western Europe with desperate
crises, political as well as economic, were relieved by American deliveries. Production rose, and even in West Germany, once Russian influence was no longer
a restraining factor, the currency reform of 1948 heralded a swift economic recovery. But progress was not equally rapid in every field. International trade was
still hedged about by strict controls which in many countries were more severe
than in Sweden. The prospects for the creation of the sort of European community envisaged during the discussions of 1947 seemed very bleak, particularly in
regard to the general Western European customs union whose outlines had been
sketched during the Paris negotiations of the same year. This was confirmed on
25 September 1951 in a lecture by Dag Hammarskjold, at that time an important
official of OEEC, the organisation born out of the Marshall Plan. As he expressed
it, 'the negotiations for a general customs union could, in view of their failure to
produce so far any tangible results, scarcely raise any claim to anything more than
historic interest.' 1
On the American side, however, hopes of a more far-reaching economic integration had not been abandoned. At the end of October 1949 the American administrator of the Marshall Plan, Paul G. Hoffman, gave concrete expression to
these hopes when he stressed to the Council of OEEC Western Europe's need for
economic coordination. Such coordination would in his opinion involve the creation of a single great market within which quantitative restrictions on the exchange
of goods, currency controls, and finally all customs duties would gradually be
1
Ekonomiska Samiundets Tidskrijt, (Helsinki, 1951), p. 213.
224
A.MONTGOMERY
abolished. The fact that the people of the United States had access to a single
market of 150 million consumers had been an indispensable condition of the
economic strength and efficiency of the American nation. Free competition, together with such an expansion of the market, would reduce costs of production in
Europe and enable the dollar gap to be finally closed.
It cannot be said that these promptings gained any very enthusiastic support
among those to whom they were addressed. Most influential circles certainly acknowledged in principle the importance of a comprehensive integration of Western
Europe, but looked on the measures necessary to bring it about with scepticism or
with an outright non possumus. The immediate outcome of the meeting of OEEC
in October 1949 therefore went only part way towards the goal set by Mr. Hoffman. Nevertheless there can be no doubt that the decisions reached then and later
by OEEC were of crucial significance for the future economic development of
Europe. OEEC was powerfully assisted in its actions by the fact that in September
1949 the Western European currency system had been reorganised, a process
which involved the heavy devaluation of a number of currencies, in particular
the pound sterling, in terms of dollars. Sweden had followed the example of Britain and devalued the krona in the same ratio as sterling. This decision was taken
in a very pressing situation when there was little time to gauge carefully the appropriate new rate of exchange. Looking back, one is undoubtedly justified in
wondering whether Sweden would not have done better to have devalued less
drastically, as indeed was suggested in certain quarters at the time. Perhaps it
would have sufficed merely to reverse the appreciation of 1946. However, there
are many grounds for supposing that the prerequisites for such a policy would have
been restrictive monetary measures which the government and Riksbank do not
seem to have been prepared to introduce at the time.
At all events, devaluation brought increased opportunities for Western Europe
to free its trade from burdensome controls. And this was the moment when a start
was made in earnest, under the leadership of OEEC, on the policy of liberalising
international trade which characterised the years that followed. Through this
policy, in fact, OEEC made an enormous contribution to the cause of European
integration. The liberalising process, however, did not get into full swing until
September 1950, when the EPU, a central clearing and credit organisation, was
established. The EPU represented a decisive step towards multilateralism and
regional convertibility within Western Europe. As far as Sweden is concerned, the
abolition of import controls represented an even greater step towards freedom of
trade than in most other parts of Western Europe. In some countries, even after
THE SWEDISH ECONOMY IN THE
1950s
225
the gradual dismantling of the controls, protective tariffs still remained and these
sometimes constituted a formidable impediment to free trade. Swedish tariff levels,
however, were very low, with the result that the ending of controls created heavier
pressures in Sweden that in most other countries. But positive effects were also to
be observed. The drastic rationalisation now forced upon Swedish industry vastly
improved its ability to compete internationally. Over the rest of Western Europe,
too, there was a notable trend in the same direction. Thus some measure of success
was achieved in bringing about the relative fall in costs of production recommended by Mr. Hoffman, which was later to enable the dollar gap to be bridged
and trade with the United States to be liberalised.
Production and public finance
The first fact disclosed by a study of the Swedish balance of payments in the 1950s
is that, even in the new situation, the trend of the current balance remained quite
favourable, the transition to more liberal trade conditions being to some extent
facilitated by the readjustment of foreign exchange rates in 1949. It is true that
1951 was a special case. The huge surplus of 900 million kroner in that year was
of course related to the Korean boom, which created exceptional export opportunities for some Swedish industries, especially for wood pulp. But the next two
years also seem to have closed with a surplus, if of smaller size. There was a continuance of the strengthening of the gold and foreign exchange reserves that had
been started in 1951, though on a reduced scale.
From 1954 onwards, however, the situation deteriorated perceptibly, though
the state of the current balance of payments suffered no severe change. The degree of deterioration that occurred was quite limited and it is impossible to determine whether in fact a real deficit arose. The figures are much too dubious to
permit very definite conclusions in that respect. Nevertheless there certainly was
a deterioration compared with the opening years of the decade. It is interesting to
observe that this weakening of the balance of payments occurred during a period
when Sweden's public finances were taking a very decided tum for the worse.
The sharp rise in government receipts occasioned by devaluation and the Korean
boom resulted in an even sharper rise in expenditure later on. In each of the
financial years 1953-54 and 1954-55, the overall budget deficit rose to over
1,000 million kronor. The deficits in the two following years were rather lower,
though still considerable. Finally in the years 1957-58, 1958-59 and 1959-60
the deficits reached unprecedented levels. In each of the last two years, the figure
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A. MONTGOMERY
was about 1,500 million kronor. It is obvious that this must have imposed severe
strains on Sweden's monetary system.
With the aid of a restrictionist policy, this expansion of the public finances was
certainly prevented from producing dangerous effects on the balance of trade, but
this was accomplished only at the cost of a retarded rate of expansion in industry.
The essential principle of the means employed to keep the inflationary tendencies
as far as possible in check-insofar as they were greater than those prevailing
abroad-was the virtual exclusion from the capital market of all but priority
borrowers, a category chiefly comprising the state and the housing industry. The
policy favoured consumption at the expense of the industrial investment which
is highly necessary to an expanding economy.
Another factor that did a great deal to limit the capacity of the official capital
market was the cheap money policy to which the government consistently clung.
It was not until 1955 that the first cautious moves were made in the direction of
a more flexible monetary policy; this inevitably meant that long-term interest
rates had to rise if a free capital market was to be achieved. At the end of 1961
the yield of gilt-edged securities was about 50 per cent greater than in the late
1940s. But the rise was nevertheless insufficient to permit a return to a free market
for long-term borrowing. The 'grey' market, the very existence of which exerted
a disorganising influence on the open credit market, continued to function. Despite the increased flexibility of official interest rates, there was altogether less
freedom on the capital market in Sweden than in certain other more or less comparable money and capital markets. As long as the reconstruction of the domestic
capital market remained incomplete, it was also impossible to permit that freedom
of movement of foreign capital which was an important prerequisite if Sweden
was to be able to cooperate fully in the common market, EEC.
It should nevertheless be added that in recent years a number of important
steps have been taken towards the liberalisation of the Swedish capital market.
The former disruptive budget deficits were replaced in the budget year 1960-61
by a small overall surplus (of about 400 million kronor). Even though the final
reorganisation of housing policy is still being awaited, this improvement in the
public finances brought considerable relief to the capital market and increased
the opportunities for the financing of industry's long-term capital needs. Indeed,
industrial production and investment both took a favourable turn during the
recovery of 1959-61.
It is extremely difficult to estimate statistically the influence of the obstacles
which economic policy placed in the way of industrial production in Sweden
THE SWEDISH ECONOMY IN THE
1950s
227
for some part of the 1950s. One approach might be to try to reach more accurate conclusions by comparing trends in Sweden with those of Western Europe
as a whole. In 1960, the Swedish Konjunkturinstitut made a number of statistical
comparisons of this sort leading to the conclusion that the rate of expansion of
the gross national product of the Scandinavian countries during the period 194959 was generally lower than that of most other countries of Western Europe.
However, to be really significant the comparison must be confined to countries
in which conditions were more or less similar. This means that West Germany, for
instance, should be omitted from the comparison; as already noted, even in the
base year of 1949, the level of industrial production was below that of pre-war,
while at the same time productive capacity, at least as far as it depended on labour
supply, had increased greatly through the huge influx of refugees. In other
countries also account must be taken of divergent demographic trends and particularly of differences in the supply of labour. With these problems in mind Konjunkturinstitutet also estimated the rate of growth of the gross national product
per capita. This method of calculation changed the relative positions of the various countries. There was still one particularly progressive group of countries that
included France and Italy as well as West Germany and Austria. In the Scandinavian countries, the rate of expansion remained lower-in some respects much
lower-than that in the expansionist states just mentioned. Moreover, even after
the above-described adjustments, it is to be noted that such countries as Switzerland and the Netherlands showed more favourable results than Sweden. On the
other hand Sweden performed better than the United States or Great Britain,
and certainly no worse than the other Scandinavian countries--rather the opposite. A comparison confined to figures of industrial production does not give very
different results. At any rate it does not lead to any more favourable conclusions
about the development of total production in Sweden.
One of the observations made by K onjunkturinstitutet in this analysis of gross
national product is that 'expansion in the 1950s was most vigorous in those countries where the material destruction of the Second World War was most extensive
and!or where standards of living were relatively low.' Countries with low living
standards can also be termed low-wage countries; accordingly it seems not inappropriate to wonder whether the high wages in such countries as the United
States, Great Britain and Sweden-all of which, especially the first two, have
experienced a relatively unfavourable industrial development since 1953-cannot
be ascribed in part to a level of costs which is altogether too high.
There is no doubt that, measured by European standards, the level of wages
228
A.MONTGOMERY
in Sweden is high, and in the 1950s the rise was very rapid. Between 1949 and
1960, hourly earnings in Swedish industry for male adult workers increased by a
good 140 per cent; real wages over the same period are estimated to have increased by some 50 per cent. The significance of these figures from the point of
view of costs of production is not easy to assess, however, as long as fully comparable figures of wages and productivity in different countries are lacking.
At all events the cost factor has not prevented a very impressive growth of
Swedish exports. Liberalisation and the gradual dismantling of exchange controls
in the various countries of Western Europe have contributed materially to make
this development possible. In this way foreign trade has come to constitute an increasingly important feature of Swedish economic life, as has been true in Western
Europe as a whole. A long-term forecast recently published by an official committee in Sweden expects this growth in the importance of the international sector
of the economy to continue in the 1960s. This is certainly a very plausible anticipation, provided that the plans for close cooperation with EEC lead to positive
results.
The effect of liberalisation upon imports was perhaps even more notable than
upon exports: during the 1950s the volume of imports rose rather more steeply
than that of exports. With the 1949 level as 100 in both cases, by 1960 exports
seem to have risen to over 210, imports to a figure not much short of 250.
From Regional to International Convertibility
It would have been reasonable to expect that Western Europe's share in Sweden's
foreign trade, which grew so sharply during a large part of the 1950s, would
show some weakening towards the close of the decade. For during this period
far-reaching changes occurred on the international scene of a sort likely to promote a less markedly regional orientation of Sweden's trade. The policy of liberalisation, which was at first aimed almost exclusively at trade with Western European countries, was being applied more and more in other directions as well;
in particular, liberalisation of the trade with the United States made rapid progress. An important pre-condition of this development was the resolution of the
financial and exchange difficulties which had prompted the regional orientation
of trade and of which EPU was in part a manifestation.
At the beginning of the 1950s it had been widely held that the dollar gap was
a 'structural' problem, the alleviation of which must be a long-term process. As
things turned out, the recovery of the European currencies and the regional com-
THE SWEDISH ECONOMY IN THE
19505
229
petition promoted by EPU gradually brought about an equalisation of costs.
Western Europe thus became more and more able to compete on the American
market and dollar reserves increased. Simultaneously other factors were working
in the same direction. America's current balance of payment continued on the
whole to be strongly favourable, but the surplus became less adequate to cover
the huge expenditures involved in the American programme of military and economic aid to other countries. In this manner a point was eventually reached when
the dollar gap was closed, and the problem became, albeit temporarily, one of
how the U.S.A. might cover the large deficit in her balance of payments. In each
of the years 1958, 1959 and 1960, the U. S. A. had an overall deficit in her balance
of payments of around 3,500 million dollars. The other side of the picture was a
considerable surplus in the balance of payments of other countries, particularly
those of continental Western Europe."
It was against this background that the process of liberalising trade with the
United States was hastened. At the same time, decisive steps were being taken
towards increasing the convertibility of currencies. Even before current convertibility into dollars ('non-resident convertibility') was introduced by a number of
European countries in conjunction with the winding-up of EPU at the end of
1958, facilities had already been provided for converting Western European currencies into dollars without too heavy a discount. The so-called transferable pound
had a particularly important role in this. From February 1955 onwards, the exchange rate for the transferable pound was supported by the British monetary
authorities; obviously, this helped to reduce the discount still further. At the beginning of 1961, another step was taken in the same direction as in 1958. Sweden
and a number of other countries now imposed upon themselves the more rigid
rules of convertibility involved in the acceptance of Art. VIII of the IMF's
Articles of Agreement. By this act Sweden abandoned the right to reintroduce
restrictions on current payments abroad, without the prior approval of the IMF.
As the IMF has stated in its International Finance News Survey, practically all
the currencies employed in the financing of international trade and international
payments have now become convertible under Art. VIII.
When EPU was wound up in 1958, its functions were partly taken over by
the IMF, an organisation whose sphere of action was international rather than
regional, though not including the eastern bloc nations with their special forms of
commercial and currency organisation. With this change demands on the re, P. Jacobsen, The Market Economy in the World of Today. (Philadelphia, 1961), pp. 59 ff.
15
Scand. Econ. Hist. Rev.
230
A. MONTGOMERY
sources of the IMF increased considerably. In collaboration with other nations,
therefore, Sweden has taken an active share in fortifying the position of the IMF.
This was particularly evident in the agreement for the support of the IMF signed
in Paris at the end of 1961 by a number of industrial states. The preliminary
guarantee made by Sweden amounted to 100 million dollars. This was a small
part of the whole, only a tenth of the sum contributed by Great Britain or West
Germany, but quite considerable in relation to the Sweden's limited resources.
A Western European Customs Union?
There is every reason to believe that this trend towards greater international convertibility would have had stronger repercussions on Sweden's foreign trade than
have in fact been in evidence, at least up to the present, had there not been other
factors operating with a regional emphasis. Just when international commercial
transaction were being liberated, the movement towards Western European integration began to meet with a degree of success that came as a surprise to many,
not least in Sweden. It has already been remarked that the customs union included
in the original programme of the Marshall Plan did not come to fruition; nor did
the regional associations that had been planned as a first step towards more
general integration. The only exception was Benelux, the origins of which, however, ante-date the Marshall Plan.
The project that initially appeared the most promising was the plan for a
Northern customs union." The plan was confined at first to the Scandinavian
countries in the narrower sense of the concept, but once Russian opposition had
been withdrawn in the mid-1950s, Finland became a participant in the preliminary work. The result of these very protracted deliberations, however, was almost
entirely negative, despite the fact that certain more or less preparatory agreements
were already in force-for instance, one for a common Northern labour marketwhich should have provided some of the prerequisites for broader cooperation. By
far the most important reason for the breakdown of the proposal for a Northern
customs union was the powerful competition of other projects of association,
especially EFTA. These other projects, which included the leading buyer of Swedish exports, Great Britain, were more ambitious and more attractive commercially.
But it should also be observed that the proposal for a Northern customs union
which finally did emerge from the very protracted negotiations was based upon
3 A. Montgomery, 'From a Northern Customs Union to EFTA', Scand. Econ. Hist,
Reu.,
VIII (1960), pp. 45 ff.
THE SWEDISH ECONOMY IN THE
1950s
231
extremely shaky foundations and took far too little account of political realities.
Furthermore, the efforts made to preserve the greatest possible sovereignty for
the member states had been so successful that the future of the union could only
be regarded as highly problematical, even if it had managed to survive its initial
stages.
As already stated, however, the most immediate cause of failure of the negotiations for a Northern customs union was the overwhelming competition offered
by the EFTA plan. But it can be safely asserted that EFTA itself would never
have seen the light of day had not EEC already been in existence and been meeting with considerable success.
When the plans for a general Western European customs union broke down
about 1950, the countries that were later to form the common market, EEC,
were already feeling their way towards achieving this ultimate goal by measures
of partial integration. The first move along these lines was the creation by the Six
of a Coal and Steel Community in 1951. The general idea was that this union
should be supplemented by similar agreements in other branches of industry-or
agriculture-so that eventually a general customs union could be brought about
without major difficulties. This ultimate goal was kept in view all the time. From
the very beginning, the management of the Coal and Steel Community (the 'High
Authority') spoke of the union as 'ee commencement d'une Europe unie'. Robert
Schuman himself took the same line in a lecture delivered in Stockholm in the
middle of April 1953. The political motivation of the Community was set forward
with full clarity. The aim of the policy, as Schuman put it, was to prevent new
conflicts, and especially any renewal of war between Germany and France. The
task was, quite simply, to save Europe. It is difficult not to feel that the union has
revealed itself to be an instrument well suited to the purposes announced by Schuman. At the same time much graver difficulties than were at first anticipated were
encountered in the endeavour to extend the union by the inclusion of new industries and new member-states. It was under this pressure that the decisive steps
were taken which led to the conference at Messina in June 1955 between the
foreign ministers of the Six. As Dirk P. Stierenburg, a member of the High
Authority, put it in a lecture to ]ernkontoret (the Swedish Iron Masters' Association) in 1955, the principal result of their deliberations was the decision 'to take
European unity further forward by the development of common institutions, the
gradual fusion of their national economies, the creation of a Common Market and
the harmonisation, step by step, of their social policies.' 4
• '[ernkontorets AnnaleT, Vol. 139, (Stockholm, 1955), pp. 559 ff.
15*
232.
A. MONTGOMERY
In non-member countries there was some scepticism about the prospects of
bringing into being an organisation of the sort outlined at Messina. France's economic difficulties and especially her apparent lack of political stability had the
effect of creating considerable uncertainty, at least among non-participating countries, about the ultimate fate of the union. It is against this background that one
has to understand the relatively inflexible attitude of the later EFTA nations in
their negotiations for a link between EEG and a Western European free trade
area. However, the situation was radically altered by the drastic measures of
economic reconstruction introduced by the de Gaulle regime at the end of 1958.
These made it possible to bring the EEG agreement into operation on 1 January
1959. Obviously, it is impossible to predict whether EEG will also be able to overcome successfully all the new difficulties which may arise as a consequence of the
present unsettled political conditions in the international field. Up to the present at
any rate, EEG has displayed a considerable capacity for solving even the most complex problems. An example of this was the agreement on agriculture reached at the
beginning of 1962. It is most unlikely that these results would have been achieved
if the 'supra-national' political element of EEG had been less powerful. But it is
this very element which has introduced complications into the question of the
attitude of 'alliance-free' Sweden towards membership in the group.
Whatever the solution to this problem, there is at present every reason to believe
that EEG will become a very important factor in the future development of
Sweden's international trade and indeed of its whole economy, whether through
Sweden's joining the association more or less on the terms sought by the
Swedish government-i.e., as an 'associated' member-s-or else through Sweden's
being compelled to follow a separate course outside this great organisation as a
result of failure to reach an agreement. It need scarcely be added that the latter
alternative would present far greater problems than the former, which in the main
would simply amount to a delayed realisation of one of the basic ideas of the
Marshall Plan.