Simposium Ner 14:
HISTORICAL NATIONAL ACCOUNTS:
NEW ACHIEVEMENTS, NEW CHALLENGES
Swedish Historical National Accounts 1800-2000 - a new
generation
Lennart Schön
Department of Economic History
Lund University
Sweden
Lennart.Schon@ekh.lu.se
Sweden has a long tradition in constructing historical national accounts. Recently, a
new reconstruction was completed by Olle Krantz and Lennart Schön1 which is the
fourth major set of historical accounts. The new series are also a substantial enlargement
with comprehensive accounts for the whole of the 19th and 20th centuries. These
accounts provide a basis for well founded analyses of long-term patterns of change and
transformation in the Swedish economy 1800-2000.
In this paper the historical national accounts and some trends in Swedish
economic development are presented. First, a short overview is provided of earlier
efforts to construct historical national accounts and comparisons are made between the
new series and some previous ones.2 After that, effects of the deflation techniques, i.e.
double deflation, are analysed. The new deflators are compared with those resulting
from single deflation, i.e. output deflators. In the last section periods of Swedish
economic growth are characterised on the basis of the new series.
Previous work on Swedish historical national accounts
The first construction of Swedish historical national product series was initiated by
Gösta Bagge, professor of economics in Stockholm, and published in the 1930s. The
work on national income was performed by a team of professor of economics affiliated
to the Stockholm School of Economics.3 The series should provide long term
perspectives on the period of rapid Swedish industrialisation.
The outcome of the project was two books on the Swedish national income
1861-1930. In one of them the main series are presented and analysed, while the other
volume, contains a great number of appendices with detailed accounts of the data and
sources. The series were estimated in current prices only, and no systematic calculations
in constant prices were made. The only deflation carried out was made with the help of
a cost of living index,4 the explicit aim being to provide a welfare view.
A major revision was made by Östen Johansson some thirty years later,
extending the series to 1955.5 This work was related to Simon Kuznets' attempts to form
an international network in order to create series for as many countries as possible.
Johansson relied heavily on the original National Income series but he revised them in
one important aspect, since he made a volume calculation. He assigned deflators for the
gross output of the various industries. The sector totals were, however, not aggregated
to form a GDP series in constant prices. Instead, the total GDP volume as well as the
sector totals were computed using a cost of living index.
The next estimate of Swedish historical national accounts was made in the first
half of the 1970s by Olle Krantz and CarlAxel Nilsson.6 The current value series were
1
Krantz, Olle and Schön, Lennart (2007, Swedish Historical National Accounts 1800-2000, Lund Studies
in Economic History 41, Almqvist & Wiksell International 2007. See also
http://www.ehl.lu.se/database/LU-MADD/National%20Accounts/default.htm.
2
This section is based on Lobell, Håkan, Schön, Lennart and Krantz, Olle, Observations from the new
Swedish Historical National Accounts, mimeo Department of Economic History, Lund University.
3
Lindahl, Erik, Dahlgren, Einar and Kock, Karin (1937), National Income of Sweden 1861-1930, I-II,
Stockholm and London. The National Income project with all its problems is described in Carlson, Benny
(1982), Bagge, Lindahl och nationalinkomsten. Om National Income of Sweden 1861-1930 (Bagge,
Lindahl and National Income. On National Income of Sweden 1861-1930), Meddelande från Ekonomiskhistoriska institutionen, Lunds universitet, Nr 27..
4
Myrdal, Gunnar (1933), The cost of living in Sweden 1830-1930, Stockholm.
5
Johansson, Östen (1967), The Gross Domestic Product of Sweden and its Composition 1861-1955,
Uppsala.
6
Krantz, Olle/Nilsson, Carl-Axel (1975), Swedish National Product 1861-1970. New Aspects on methods
and Measurement, Lund.
1
obtained from Östen Johansson's book, but some revisions, mostly minor, were made.
The emphasis was laid on constant price calculations, and, thus, the deflators were new
and more elaborated than in earlier computations. This is primarily true for the period
up to and including 1950 when all series both for current values and deflators were
linked to data taken from Statistics Sweden but reweighed. The study was to a great
extent preliminary and the intentions were two-fold; to raise some methodological
questions, and to come to terms with the most serious inadequacy in the earlier works,
deflation. It was, thus, clear and explicitly stated that Krantz/Nilsson's new volume
series had short-comings. The new deflators were for instance estimated only for the
expenditure side of the accounts and were then used for the production side as well. It
was made clear that studies on economic growth et cetera should be made using the
expenditure series and the series on the production side were only aimed for analyses of
structural change.
The new accounts
The methods of deflation adopted in Krantz/Nilsson's study formed one of the starting
points for the research project Structural Change in the Swedish Economy 1800-1980.
Construction and Analysis of National Product Series, conducted at the Department of
Economic History, Lund University. The project was carried out in the 1980s and early
1990s but for various reasons it was not accomplished until 2007. The intention was to
calculate completely new series for the 19th century up to 1861 and partly new, partly
revised series for the period thereafter up to 1950. For the time span after 1950 the
project was to rely on data in the contemporary national accounts computed by Statistics
Sweden.7 Current values as well as data used for constant price calculations were
published in nine volumes all with the main title Historiska nationalräkenskaper för
Sverige (Historical National Accounts for Sweden, HNS). Lennart Schön was
responsible for material production sectors (agriculture and industry) and for foreign
trade, while Olle Krantz was in charge of the service sector accounts. These volumes
were supplemented by Lars Pettersson on building and Jonas Ljungberg on deflators.8
The sector volumes are published only in Swedish and contain detailed presentations of
the extensive archival work performed as well as of the different techniques used to
estimate input and output in branches absent in contemporary statistics.
For the general design of the HNA it was decided to estimate gross output for
the various industrial sectors and branches and allocate it to different uses. Then
appropriate parts could be summed up to form aggregated series. Generally speaking,
the procedure means that a crude input-output approach is employed. Its origin is found
in Lindahl/Dahlgren/Kock´s work.
One issue that perhaps by some scholars will be conceived as inadequate and,
thus, criticised is that methods, arrangements, and terminology of the modern national
7
The background, method, and empirical approach of project are described in Krantz/Schön (2007).
The volumes are 1) Schön. Lennart, Jordbruk med binäringar 1800-1980 (Agriculture and Ancillaries),
Lund 1995; 2) Schön, Lennart Industri och hantverk 1800-1980 (Manufacturing Industry and Handicrafts
1800-1980) Lund 1988; 3) Pettersson, Lars, Byggnads- och anläggningsverksamhet 1800-1980 (Building
and construction 1800-1980), Lund 1987; 4) Krantz, Olle, Transporter och kommunikationer 1800-1980
(Transports and Communications 1800-1980), Lund 1986; 5) Krantz, Olle, Privata tjänster 1800-1980
(Private Services 1800-1980) Lund 1991; 6) Krantz, Olle, Husligt arbete 1800-1980 (Domestic Work
1800-1980), Lund 1987;7) Krantz, Olle, Offentlig verksamhet 1800-1980 (Public Services 1800-1980),
Lund 1987;8) Schön, Lennart, Utrikeshandel 1800-1870 (Foreign Trade 1800-1870), Mimeo 1984; 9)
Ljungberg, Jonas, Deflatorer för industriproduktionen 1888-1955, (Deflators for Industrial Production
1888-1955) Lund 1988.
8
2
accounts developed in several editions of System of National Accounts (SNA) are not
used in the new Swedish HNA. The last edition of SNA is from 1993 and, thus, it
appeared a long time after the design of the present project. It would of course have
been possible to transform the data to comply with the modern principles but it was
decided not to do so. Instead the original design was employed for the present HNA.
Thus, the division into sectors and branches is consistent with the Swedish statistical
design mainly from the 1910s up to the 1960s and used in the earlier versions of
Swedish HNA.
The method of deflation opted for was chain indices with yearly links of a
Paasche type as deflators. Furthermore, all value added series in constant prices are
calculated by means of double deflation. Thus, input and output of all branches are
deflated separately by their respective set of price series. Value added in constant prices
then appears as deflated output minus deflated input. It was possible to follow this
procedure for all sectors back to 1800 thanks to the price material and the input and
output data collected in the sector volumes. 9
Some comparisons with other series
The most frequently used of the earlier HNA are Johansson’s from 1967 and
Krantz/Nilsson’s from 1975. Here some comparisons will be made between the new
series and these predecessors.
Over the long term and at the GDP level, the differences in growth rates are not
very great (table 1). The long term growth rate 1861-1950 are very similar to the one in
Krantz/Nilsson while it is 0.2 lower than in Johansson. It differs particularly to
Johansson 1930-1950. There is also a substantial difference to both Krantz/Nilsson and
Johansson in the second half of the 19th century, up to the 1890s. According to the new
series, the GDP growth in the second half of the 19th century was decisively slower thus the acceleration in Swedish growth from the end of the century becomes more
pronounced.
Table 1. Annual growth rates of GDP per capita in constant prices according to
Johansson, Krantz/Nilsson and the new series respectively, 1861-1970.
1861-1890
1890-1910
1910-1930
1930-1950
1950-1970
1861-1950
1861-1970
The new series
1.3
2.6
1.9
2.6
3.8
2.0
2.3
Krantz/Nilsson
1.7
2.5
1.9
2.8
3.2
1.9
2.1
Johansson
1.8
2.6
1.7
3.6
2.2
-
Sources: Johansson (1967), Krantz/Nilsson (1975), Krantz/Schön (2007)
Note: Growth rates are estimated as trends in lin-log regressions.
9
The basic data from the present project have been used in works by Kander (2002), Economic growth,
energy consumption and CO2 emissions in Sweden 1800-2000. Lund Studies in Economic History, Lund,
and Vikström, P. (2002), The big picture: a historical national accounts approach to growth, structural
change and income distribution in Sweden 1870-1990. Umeå Studies in Economic History. Umeå 2002.
They have also been utilized by Edvinsson, Rodney (2005), Growth, Accumulation, Crisis: with new
Macroeconomic Data for Sweden 1800-2000, Stockholm: Almqvist & Wksell International, where he,
however, uses other methods and principles than in the present project .
3
Table 2. Annual growth rates of sector output in constant prices in building and
construction and in transport and communication according to Johansson (ÖJ),
Krantz/Nilsson (KN) and the new series 1861-1970.
1861-1890
1890-1910
1910-1930
1930-1950
1950-1970
1861-1950
1861-1970
ÖJ
%
3.7
2.9
4.0
2.9
-2.6
--
R2
0.48
0.57
0.57
0.55
-0.87
--
Building and construction
KN
New
2
%
R
%
2.1
0.52
2.0
2.5
0.58
3.1
2.2
0.29
-1.7
2.7
0.55
4.1
3.7
0.93
4.7
1.7
0.85
1.1
2.1
0.91
1.8
R2
0.51
0.59
0.29
0.81
0.99
0.66
0.78
1861-1890
1890-1910
1910.1930
1930-1950
1950-1970
1861-1950
1861-1970
ÖJ
%
6.0
4.4
3.3
3.7
-4.1
--
Transport and communication
KN
New
R2
%
R2
%
0.96
6.5
0.96
4.4
0.99
6.1
0.98
5.2
0.85
4.7
0.60
4.0
0.96
3.8
0.82
6.2
-4.0
0.99
4.2
0.98
4.9
0.98
4.4
-4.8
0.99
4.6
R2
0.91
0.97
0.77
0.96
0.99
0.99
0.99
Sources and note: See table 1.
At sector level, however, differences between the national accounts are considerably
larger. In table 2, a comparison is made between the growth of the output of two sectors
- building and construction as well as transport and communication - according to the
three HNA estimates. To a minor extent these differences occur due to revisions of
output in current prices, but mainly the differences are due to the deflation procedure.
One such difference is of course that Krantz/Nilsson made major revisions of the
deflators in each sector in relation to Johansson. Furthermore, in the new series double
deflation is performed. The effect of that is discussed more in detail in the next section
of this paper. Due to rapid relative price changes between the input and output side,
growth rates may shift considerably when single or double deflation is performed. That
is the case in the periods 1910-1930-1950 marked by two world wars – the shift is most
dramatic in building and construction during the 1910s and the 1920s. Growth rates are
strongly positive in Johansson’s old estimate to become decisively negative in the new
double deflated series.
In one of the sectors, building and construction, there is an apparent peculiarity
which should be commented on. The growth rates for the long periods, 1861-1950 and
1861-1970, are lower than could be expected from the rates for the various sub-periods.
In other words, the average for these periods is higher than the rate calculated for the
longer time-span. This has to do with the very great fluctuations in this sector’s output,
4
especially in the early part of the 20th century. This is clear from the R2 coefficients of
the linlog estimates of growth trends.
Double deflation of value added
In the new set of aggregate HNA (Krantz/Schön 2007), all value added series in
constant prices are calculated by means of double deflation. This means that output and
input are deflated separately with deflators constructed from their respective set of
products. Value added in constant prices then appears as deflated output minus deflated
input. This is considered as the best procedure for value added deflation and it is
followed in modern national accounts. In historical national accounts the procedure of
double deflation is very unusual. The reason is of course that for double deflation you
need a very detailed set of annual inputs as well as annual prices. Double deflation is
thus a specific asset of our series and has been possible to accomplish due to both the
meticulous sector volumes containing material for the input structure and to the supply
of historical price series. Such series has been obtained from Jörberg and Ljungberg10
and has been complemented by a large number of price series constructed in the sector
volumes by Krantz and Schön.
Usually in single deflation value added in constant prices are calculated by
means of output deflators of the sub-branches which are aggregated to sector deflators
or GDP deflators with their respective shares of value added in the base years as
weights. This is a second best solution that gives product price based value added series
at all levels of the historical national accounts. This procedure was followed in the
sector volumes of the present HNA before the input-output structure of the whole
economy was balanced.
Every deflation is a calculation keeping certain factors constant. Whenever the
same set of series in current prices is deflated with two different techniques, a new
possibility of analysis appears. Differences in outcome measure the importance of such
factors. The so called Gerschenkron effects from shifting base years in fixed price
calculations - or shifting from Paasche to Laspeyre price indexes - is a well known
means to identify changes in the price and quantity structure of production. Comparison
of single and double deflation gives other possibilities. Basically a difference between
the two deflators indicates the compound effect of input prices on output prices and on
output volumes. Single deflation reflects influences on output prices and volumes both
from input prices and from contributions of the factors in the production sector per se.
Doubly deflated volumes give a more strictly defined value added volume by deducting
the volume of inputs and hence a fixed price measure of the combined capital and
labour contribution to the product value in each sector. Accordingly, it is a better basis
for any productivity estimate.
Comparison between the two deflators gives, evidently, an estimate of the
impact from all input factors at different levels of aggregation of the economy. If the
value added deflator (i.e. from double deflation) increases in relation to the product
value deflator (i.e. from single deflation), there is a relative price increase in labour and
services performed within the sector, in relation to input prices, for a certain volume of
goods. Thus, there is a positive contribution from input to the product based
productivity measure and to the volume of value added. Hence, productivity decreases
when this contribution is withdrawn in double deflation. If the value added deflator
10
Jörberg, Lennart, A History of Prices in Sweden 1732-1914. Gleerups Lund 1972. Ljungberg, Jonas,
Priser och marknadskrafter i Sverige 1885-1969. En prishistorisk studie. Skrifter utgivna av Ekonomiskhistoriska föreningen, Lund 1990.
5
decreases in relation to the product based deflator, the effect runs of course in the
opposite direction. In the latter case, product prices are inflated by relatively rising input
prices and such deflation of the value added will indicate a too low productivity.
Table 3. The ratio between double deflated value added price indices and product based
value added price indices at sector level and GDP level 1800-1950. Ratio in annual
percentages effect.
Agriculture
Industry
Building
Transport
Private services
Public services
GDP
1800-1875
0.00
0.58
0.26
0.60
-0.05
-0.03
0.04
1875-1950
0.22
0.05
1.20
-0.37
0.02
0.80
0.17
1800-1950
0.07
0.18
0.61
0.16
-0.04
0.49
0.11
Source: Material to Krantz/Schön (2007).
In the long run 1800-1950 the double deflated value added deflator at the GDP level has
increased annually by 0.1 percent in relation to a product based value added deflator.
This means basically that there has been a positive contribution to growth from inputs.
This effect was on the whole negligible before the 1870s but increased to close to 0.2
percent 1875-1950. To a large extent, the difference in input and output price indicis
stems from differences between imports and exports. Thus, the relative price decrease of
inputs is a variant of positive terms of trade for Sweden in the period of industrialisation
and expanding foreign trade. It is not directly terms of trade, though, since it involves
not only the import and export sectors but the total price structure of the economy.
There might, for instance, be input price effects on output prices in forward linkages
that deviate from price effects of the internal production factors. This effect is clear at
sector levels.
On sector level, the relationship between double and single deflators varied
considerably. In the first period 1800-1875, there was a strong positive effect from input
in industry and transportation. Thus, in industry annual output growth was 2.6 percent
measured by products but only 2.0 percent measured as manufactured value added. A
considerable part of early industrial growth depended upon imports of input material at
falling prices. It is clearly so in the case of raw cotton and cotton yarn imported in
increasing quantities. It goes also for tobacco and sugar and of course for coal.
Quite naturally the effect is about as equally as strong in transport and
communication. Annual growth rates of this sector fall from 2.1 percent to 1.5 percent
when going from the output price based deflator to the new value added deflator. Also
in building the effect was considerable but in the case of constructions, the positive
input effect came mainly from relatively falling prices of domestic input and
transportation. To some extent, the effect of falling import prices may have been
distributed further to domestically produced inputs but the price fall may also have been
due to internal productivity increases in sectors delivering input
In agriculture and services the effect was negligible. One can conclude that the
two most expansive sectors in the Swedish economy 1800-1875 - transportation and
industry - received the strongest positive contribution from international market
integration and from technological change and industrial growth in other countries.
6
As indicated above, the overall positive influence increased considerably in the
period 1875-1950. The sectoral composition of this influence changed however
drastically. Now the effect of relatively decreasing input prices appeared in the typically
domestic sectors of building and public services. In building the effect was particularly
strong. Thus, while the product based volume output of building and construction
increased by 2.2 percent annually, the value added of the sector grew by only 1.0
percent. The reason is clearly that new industrial input such as steel and cement became
increasingly cheaper in relation to labour. Furthermore this effect came very
dramatically in the 1920s. On one hand, raw material prices fell internationally after the
First World War. By 1925, the price of steel and cement, for instance, hade fallen to ½
or 1/3 of the 1920 prices.11 On the other hand, nominal wages for urban workers fell
only by roughly 1/10 according to wage indexes,12 so hourly real wages soared
particularly after the new regulations of working hours in 1920. Thus, while industrial
input prices in constructions had a downward influence on output prices, a handicraft
production process with rising wages increased the price of the sectors compound value
added. The same is basically true for public services although the effect was somewhat
weaker - in all 0.8 percent annually.
In agriculture a similar effect becomes more pronounced from the 1930s. A new
agricultural price and income policy raised the internal price level while there was a
positive input effect from industry and transportation in the modernisation of the
agricultural sector.
In both these cases - as well as in agriculture and on the GDP level - the slower
growth of doubly deflated value added volume is particularly pronounced from the
1910s. Thus, for the period 1910-1950 we have the following relations between annual
change in the doubly deflated value added indices and product based value added
indices: GDP 0.28; agriculture 0.38; building 1.60; public services 1.01. Thus, the
tensions grew between, on one hand, inputs from industry, transportation and imports at
relatively falling prices and, on the other hand, labour in non-mechanised sectors at
relatively rising prices.
Within the domestic sectors of industry and transportation technological
development within each sector neutralises any positive effects from inputs. In
transportation development actually reverts. There is an annual positive effect from
internal sector value added formation of 0.4 percent upon growth that becomes
particularly strong from the 1890s onwards. Thus, the downward pressure on prices
came primarily from technological change and productivity increases through the
sustained modernisation of the transportation and communication infrastructure and
equipment. In particular, the complementarity between railways, urban networks of
trams and the flexible system of automobiles as well as the telephone network gained
momentum in the first half of the twentieth century.
Swedish growth and transformation 1800-2000
Modern economic growth in Sweden took off in the middle of the19th century and in
international comparative terms Sweden has been rather successful during the past 150
years. This is largely thanks to the transformation of the economy and the society from
agrarian to industrial. Sweden is also a small economy that has been open to foreign
influences and highly dependent upon the world economy. Thus, successive structural
changes have put its imprint upon modern economic growth. In this section there is,
11
12
Ljungberg (1990) a.a.
Bagge Gösta et.al., Wages in Sweden 1860-1930,Vol I-II. Stockholm 1933, 1935. Krantz (1987) a.a.
7
firstly, an overview of Swedish economic growth performance internationally and
statistically and, secondly, an account of major trends in Swedish economic
development during the 19th and 20th centuries. 13
Swedish growth in an international perspective
The century long period from the 1870s to the 1970s comprises the most successful part
of Swedish industrialisation and growth. On a per capita basis only Japanese economic
growth performed equally well. (Table 1) The neighbouring Scandinavian countries
were also among the rapidly growing economies but they grew at a somewhat slower
rate than Sweden. Growth in the rest of industrial Europe and in the USA was clearly
outpaced. Growth in the entire world economy, as measured by Maddison, was even
slower.
Table 4. Growth rates per capita in various industrial nations and in the world economy
1871-2005.
Year
Sweden
1871/1875- 2,4
1971/1975
1971/1975- 1,7
2001/2005
Rest of
Nordic
countries
2,0
Rest of USA
Western
Europe
1,7
1,8
Japan
World Economy
2,4
1,5
2,2
1,9
2,2
1,6
2,0
Sources: Maddison (2006); Krantz/Schön (2007); World Bank, World Development Indicator 2000;
Groningen Growth and Development Centre, www. ggdc.com.
Note: Rest of Nordic countries = Denmark, Finland and Norway. Rest of Western Europe = Belgium,
France, Italy, the Netherlands, Switzerland, Great Britain, Germany, Austria.
The Swedish advance in a global perspective is illustrated in figure 1. In the mid-19th
century the Swedish income level was close to the average global level, the latter
according to Maddison. In a European perspective Sweden was a rather poor country
with less than two thirds of the average income. By the 1970s, however, the Swedish
income level was more than three times higher than the global average and among the
highest in Europe.
To some extent this was a catch-up story. Sweden was able to take advantage of
the technological and organisational advances that were made in Western Europe and in
North America. Furthermore, Scandinavian countries with resource bases such as
Sweden and Finland had been rather disadvantaged as long as agriculture was the main
source of income. The shift to industry inflated the resource base and industrial
development directed both to a growing domestic market but even more to a widening
world market became the main lever of growth from the late 19th century. Thus, while
foreign trade put a downward pressure on imported goods, it also increased the price of
natural resources for exports.
13
This section is primarily based upon Schön, L. (2000) En modern svensk ekonomisk historia. Tillväxt
och omvandling under två sekel, (A modern Swedish Economic history. Growth and transformation in
two centuries), SNS, Stockholm., and on Schön, L. (2007). "Sweden – Economic Growth and Structural
Change, 1800-2000". EH.Net Encyclopedia, edited by Robert Whaples. January 28, 2007. URL
http://eh.net/encyclopedia/article/schon.sweden
8
Figure 1. Swedish GDP per capita in relation to World GDP per capita 1870-2004.
Nine years moving averages.
3.5
3.0
2.5
2.0
1.5
1.0
1850
1875
1900
1925
1950
1975
2000
Sources: Maddison (2006); Krantz/Schön (2007).
Note. The annual variation in world production between Maddison’s benchmarks 1870, 1913 and 1950 is
estimated from the series with annual data.
Catch-up is not the whole story, though. In many industrial areas Swedish companies
took a position at the technological frontier from an early point in time. Thus, in certain
sectors there was also forging ahead,14 quickening the pace of structural change in the
industrialising economy. Furthermore, during a century of fairly rapid growth new
conditions have arisen that have required profound adaptation and renewal of
entrepreneurial activity as well as of economic policies.
The slow down in Swedish growth from the 1970s may be considered in this
perspective. While in most other countries growth from the 1970s fell only in relation to
growth rates in the golden post-war ages, Swedish growth fell clearly below the
historical long run growth trend. It also fell to a very low level internationally. The
1970s certainly meant the end to a number of successful growth trajectories in the
industrial society. At the same time new growth forces appeared with the electronic
revolution as well as with the advance of a more service based economy. It may be the
case that this structural change hit the Swedish economy harder than most other
economies, at least of the industrial capitalist economies. Sweden was forced to a
transformation of its industrial economy and of its political economy in the 1970s and
the 1980s that probably was more profound than in most other Western economies.
A statistical overview 1800-2000
All periodization is to some extent arbitrary but Swedish economic development since
1800 may be divided into six periods with different growth trends as well as different
composition of growth forces (table 5).
Cf. Abramovitz (1986) Abramovitz, M. (1986), “Catching Up, Forging Ahead and Falling Behind”,
The Journal of Economic History, vol. 46.
14
9
Table 5. Annual growth rates in per capita production, total investments, foreign trade
and population in Sweden 1800-2000.
Period
1800-1840
1840-1870
1870-1910
1910-1950
1950-1975
1975-2000
1800-2000
Per capita GDP
0.6
1.2
1.7
2.2
3.6
1.4
1.9
Investments
0.3
3.0
3.0
4.2
5.5
2.1
3.4
Foreign trade
0.7
4.6
3.3
2.0
6.5
4.3
3.8
Population
0.8
1.0
0.6
0.5
0.6
0.4
0.7
Source: Krantz/Schön (2007).
In the first decades of the 19th century the agricultural sector dominated and growth was
comparatively slow in all aspects but in population. Still there was per capita growth,
but this was to some extent a recovery from the very low levels during the Napoleonic
wars. Investments grew slowly and were dominated by land reclamations in agriculture.
The acceleration during the next period around the mid-19th century is however marked
in all aspects. Investments and foreign trade became very dynamic ingredients with the
early onset of industrialisation. They were to remain so during the following periods as
well. Up to the 1970s per capita growth rates increased for each successive period. In an
international perspective it is most notable that per capita growth rates increased also in
the interwar period, despite the slow down in foreign trade. Domestic investments kept
rising to an even higher level. The interwar period is certainly crucial for the long run
relative success of Swedish economic growth. The decisive culmination in the post-war
period with high growth rates in investments and in foreign trade stands out as well as
the deceleration in all aspects in the late 20th century.
An analysis in a traditional growth accounting framework gives a long term
pattern with certain periodic similarities (table 5). Thus, total factor productivity growth
has increased over time up to the 1970s only to decrease to its long run level in the last
decades. This deceleration in productivity growth may be looked upon either as a failure
of the “Swedish model” to accommodate new growth forces or as another case of the
“productivity paradox” in lieu of the IT revolution.15
Table 6. Total factor productivity (TFP) growth and relative contribution of capital,
labour and TFP to GDP growth in Sweden 1840-2000.
Period
1840-1870
1870-1910
1910-1950
1950-1975
1975-2000
1840-2000
TFP growth
0.4
0.7
1.0
2.1
1.0
1.1
Capital
55
50
39
45
44
45
Labour
27
18
24
7
1
16
TFP
18
32
37
48
55
39
Source: See table 5.
15
Cf. David, P.A. (1990), The Dynamo and the Computer: a Historical Perspective on the Modern
Productivity Paradox, American Economic Review, vol. 80.
10
In terms of relative contribution to overall growth, TFP has increased its share for every
period. The TFP share was low in the 1840s but there was a marked increase with the
onset of modern industrialisation from the 1870s. In absolute terms TFP clearly
culminated in the post-war period of Golden Ages for growth with high productivity
increases. In relative terms, however, TFP reached its highest level in the last period
from the 1970s, thus indicating an increasing role of human capital, technology and
knowledge in economic growth. The role of capital accumulation was markedly more
pronounced in early industrialisation with the build-up of a modern infrastructure and
with urbanisation, but still capital did retain much of its importance during the 20th
century. Thus its contribution to growth during the post-war Golden Ages was
significant with very high levels of material investments. At the same time TFP growth
culminated, as noted above, with positive structural shifts as well as increased
knowledge intensity complementary to the investments. Labour has in quantitative
terms progressively reduced its role in economic growth. One should observe, however,
the relatively large importance of labour in Swedish economic growth during the
interwar period. This was largely due to demographic factors, with the positive
influence of the demographic transition upon the active population share concentrated to
these decades, and to the employment situation that will be further commented upon.
Growth and transformation in the 19th and 20th centuries
During the first half of the 19th century the agricultural sector and the rural society
dominated the Swedish economy. Thus, more than ¾ of the population were occupied
in agriculture while roughly 90 percent lived in the countryside. Growth was still led by
the primary production of agriculture, accompanied by services and transports. (Table
7) Many non-agrarian activities such as the iron industry, the saw mill industry and
many crafts as well as domestic, religious and military services were performed in rural
areas, making urban agglomerations few and small. Secondary production in
manufacturing and building was very stagnant. In industry, the historically leading
branch of bar iron production was under a new competitive pressure from the British
iron industry and overall growth was slow both in industry and in foreign trade as was
noted from table 5.
Although growth was slow, a number of structural and institutional changes
occurred that paved the way for future modernisation. In particular, agriculture was
transformed and commercialised and market integration increased. From the 1840s the
industrial sector accelerated, increasingly supported by building and infrastructural
investments, transport and communications as well as by private services. For the
domestic market, mechanised factories appeared in textile production with the growth of
industrial centres.16 Exports expanded strongly with both industrial products, primarily
sawn wood, and agricultural products, notably oats to the British market. The expansion
of foreign trade took place by leaps and bounds in the 1850s and 1860s. With new
export sectors, industrial investments increased. Furthermore, railways became the most
prominent proponent of a new infrastructure and with these constructions a new
component in Swedish growth was introduced, heavy capital imports initiated by the
State and in cooperation with an emerging commercial banking sector.
16
Schön (1980), British Competition and Domestic Change. Textiles in Sweden 1820-1870, Economy
and History, vol. XXIII:1.
11
Table 7. Growth rates of industries 1800-2000.
Period
Agric.
Transp.
& Com
1.1
Build.
1.5
Indus.
& Hand
0.3
Public
Serv.
1.5
GDP
-0.1
Private
Serv.
1.4
18001840
18401870
18701910
19101950
19501975
19752000
18002000
2.1
3.7
1.8
2.4
2.7
0.8
2.3
1.0
5.0
3.9
1.3
2.7
1.0
2.3
0.0
3.5
4.9
1.4
2.2
2.2
2.7
0.4
5.1
4.4
3.8
4.3
4.0
4.3
-0.4
1.9
2.6
-0.8
2.2
0.2
1.8
0.9
3.8
3.7
1.8
2.7
1.7
2.6
1.3
Source: See table 5.
Note: Private services are exclusive of real estate services.
In the late 19th century, particularly in the 1880s, international competition became
fiercer for agriculture and for the early industrial branches. The integration of world
markets led to falling prices and stagnation in the demand for Swedish staple goods
such as iron, sawn wood and oats. Profits were squeezed and expansion thwarted. At the
same time emigration from Sweden reached very high levels in the 1880s. The
compound effect of capital imports, labour emigration, investments and increasing
supply of imported goods was increasing wages. New markets arose, both for
investment and consumption. Increasing wages intensified mechanisation in agriculture
and in industry. The demand increased for more sophisticated machinery equipment. At
the same time consumer demand shifted towards better foodstuff - such as milk, butter
and meat - and towards more fabricated industrial goods.17
The decades around the turn of the century 1900 meant a profound structural
change in the composition of Swedish industrial expansion that was crucial for long
term growth. New and more sophisticated enterprises were founded and expanded from
the 1890s, in the upswing after the Baring crisis. In particular, the breakthrough of the
electrical motor and the new technology for electricity transmission became central to
Swedish industrialisation. Energy intensive processes had for long been part of Swedish
industry with the iron industry and the growth of pulp and paper industries. While the
country lacked any resources of coal, hydropower was abundant. Demand and supply
factors stimulated the growth of electricity utilities and electrical engineering as well as
the engineering industry at large. Apart from the electrical company ASEA (ABB)
17
Cf. Schön, L. (1997), External and Internal Factors in Swedish Industrialization, The Scandinavian
Economic History Review, vol. XLV:3, and Schön, L. (2006), Swedish Industrialization 1870-1930
and the Heckscher-Ohlin Theory, in Findlay, R. et.al (eds.), Eli Heckscher, International Trade and
Economic History. MIT Press, Cambridge Mass.
12
innovative industries such as Ericsson, Separator (Alfa Laval), AGA and SKF were
founded.
The sectoral shift from agriculture to industry became even more pronounced
when also transportation boomed while agricultural growth decelerated into subsequent
stagnation. It is also worth noting that private services expanded quite strongly at the
turn of the century (see table 7). There was a decisive modernisation of services with the
growth of banking and insurance companies, urban administration, retail trade, health
and education services etc. while the weight of domestic work and religious services
decreased.
The most notable feature of long term Swedish growth is the acceleration in
growth rates during the period 1910-1950 that in Europe at large was full of problems
and catastrophes.18 Thus, Swedish per capita production grew at 2.2 percent annually
while growth in the rest of Scandinavia was a few points below 2 percent and in the rest
of Europe hovered at 1 percent. The Swedish acceleration was based on mainly three
pillars.
Firstly, the structure created at the end of the 19th century involved many new
industries that were viable with long term growth potentials. Secondly, the First World
War meant an immense financial bonus to the Swedish market. A huge export surplus at
inflated prices during the war led to the domestication of the Swedish national debt and
the financial market became liquid in a period of reduced international capital flows.
Thirdly, the demographic development also favoured Swedish growth. The share of the
economically active age group 15-64 grew substantially. Both the labour market and
domestic demand was stimulated in particular during the 1930s when the household
forming age group of 25-30 years increased.
The supply of both capital and labour stimulated the domestic market in a period
when international market integration deteriorated. Above all it stimulated the diffusion
of American style mass production of consumption goods at a comparatively early date
in Europe. It also stimulated the development of modern transport and communication
networks. Significant new enterprises that emanated from the interwar period were very
much related to the new logic of the industrial society, such as Volvo, SAAB,
Electrolux, Tetra Pak and IKEA.
Swedish economy was clearly part of the European Golden Age of growth,
although Swedish acceleration from the 1950s was less pronounced than in the Europe
that to a much larger extent had been plagued by wars and crises. 19 In the post-war
period the volume of services, both private and public increased strongly, although still
not outpacing industry. The Swedish post-war period was characterized primarily by
two phenomena - the full fruition of the development blocks based upon the great
innovations of the late 19th century (the electrical motor and the combustion engine) and
the cementation of the “Swedish Model” for the welfare state. These two phenomena
were highly complementary. Hence, during the Golden Age of growth the development
blocks around electrification and motorisation matured in a broad modernisation of the
society, where mass consumption and mass production was supported by social
programs, by investment programs and by labour market policy.
From the 1970s the focus shifted to private services and to transport and
communications, indicating fundamental new prerequisites of growth. A number of
18
On the European interwar period, see Svennilson (1954), Growth and Stagnation in the European
Economy. UN Publication, Geneve.
19
As in most of Europe the shift from agriculture to industry accelerated but to a lesser extent in Sweden
since industry had been quite expansive also in the interwar period. Cf. Temin (2002), The Golden Age of
European growth reconsidered, European Review of Economic History, vol.. 6:1.
13
industries - such as steel works, pulp and paper, shipbuilding, mechanical engineering ran into crisis in the 1970s and early 1980s. New global competition, changing
consumer behaviour and profound innovative renewal with microelectronics made some
of the industrial pillars of the Swedish model crumble. At the same time the
disadvantages of the old model became more apparent. It put obstacles to flexibility and
to entrepreneurial initiatives and it reduced individual incitements to mobility. Thus,
while the Swedish Model did foster rationalisation of existing industries well adapted to
the post-war period, it did not support more profound transformation of the economy.
One should not exaggerate the obstacles to transformation, though. The Swedish
economy was still very open at the market for goods and many services and the
transformation pressure increased rapidly. During the 1980s a far-reaching structural
change within industry as well as in economic policy took place, engaging both private
and public actors. Shipbuilding was almost completely discontinued, pulp industries
integrated into modernised paper works, steel industry concentrated and specialised on
high quality steel, mechanical engineering digitalised. New and more knowledge
intensive growth industries appeared in the 1980s such as IT-based telecommunication,
pharmaceutical industries, biotechnology as well as new service industries.
It is also clear that the period from the 1970s to the early 2000 comprises two
growth trends, before and after 1990 respectively (table 8). During the 1970s and 1980s,
growth in Sweden was very slow and marked by the great structural problems that the
Swedish economy had to cope with. The slow growth prior to 1990 does not signify
stagnation in a real sense, however. It was rather a period of transformation of industrial
structures and of reformulation of economic policy, which did not immediately result in
a speed up of growth. Such periods tend to be characterised by imbalances and bottle
necks in in this case it took some decade to eliminate or reduce them. From the 1990s
up to 2005 Swedish growth accelerated quite forcefully in comparison with most
Western economies.20 Thus, the 1980s may be considered as a Swedish case of “the
productivity paradox” with innovative renewal but with a delayed acceleration of
productivity and growth from the 1990s - although a delayed productivity effect of more
profound transformation and radical innovative behaviour is not paradoxical.
Table 8. Annual growth rates per capita 1971-2005
År
Sweden
Rest of
Western
Europe
1,8
USA
World
Economy
1,2
Rest of
Nordic
countries
2,1
1971/19751991/1995
1991/19952001/2005
1,6
1,4
2,4
2,5
1,7
2,1
2,1
Sources: See table 4.
The recent acceleration in growth may also indicate that some of the basic traits from
early industrialisation still pertain to the Swedish economy. A small open economy
20
In manufacturing industry there was also a sharp increase in TFP from the 1990s up to the TFP levels
of the golden post-war period. Schön (2004), Total factor productivity in Swedish manufacturing in the
period 1870-2000, in Heikkinen, S. / van Zanden, J.L. , Exploring Economic Growth. Essays in
measurement and analysis. A Festschrift for Riitta Hjerppe on her 60th Birthday. Aksant Amsterdam.
14
fosters transformation and put great demand on the ability to adapt human skills to new
circumstances. Such abilities make up a major force behind long term economic growth.
15
References
Abramovitz, M. (1986), Catching Up, Forging Ahead and Falling Behind, The Journal
of Economic History, vol. 46.
Bagge Gösta et.al., Wages in Sweden 1860-1930,Vol I-II. Stockholm 1933, 1935.
David, P.A. (1990), The Dynamo and the Computer: a Historical Perspective on the
Modern Productivity Paradox, American Economic Review, vol. 80.
Edvinsson, Rodney (2005), Growth, Accumulation, Crisis: with new Macroeconomic
Data for Sweden 1800-2000, Stockholm: Almqvist & Wksell International.
Johansson, Östen (1967), The Gross Domestic Product of Sweden and its Composition
1861-1955, Uppsala.
Jörberg, Lennart, A History of Prices in Sweden 1732-1914. Gleerups Lund 1972.
Kander (2002), Economic growth, energy consumption and CO2 emissions in Sweden
1800-2000. Lund Studies in Economic History, Lund 2002.
Krantz, Olle (1986), Historiska nationalräkenskaper för Sverige: Transporter och
kommunikationer 1800-1980 (Transports and Communications 1800-1980), Lund
1986.
Krantz, Olle (1987), Historiska nationalräkenskaper för Sverige: Husligt arbete 18001980 (Domestic Work 1800-1980), Lund 1987;
Krantz, Olle (1987), Historiska nationalräkenskaper för Sverige: Offentlig verksamhet
1800-1980 (Public Services 1800-1980), Lund 1987.
Krantz, Olle (1991), Historiska nationalräkenskaper för Sverige: Privata tjänster 18001980 (Private Services 1800-1980) Lund 1991.
Krantz, Olle (2001), Swedish Historical National Accounts – Aggregated Output Series,
Preliminary version, Mimeo, Umeå.
Krantz, O. (2002) “Svensk ekonomi under 1900-talet: en omväxlande historia” in
Andersson-Skog & Krantz (red.) Omvandlingens sekel. Perspektiv på ekonomi och
samhälle i 1900-talets Sverige. Studentlitteratur, Lund.
Krantz, Olle/Nilsson, Carl-Axel (1975), Swedish National Product 1861-1970. New
Aspects on methods and Measurement, Lund.
Krantz, O. & Schön, L (2007, Swedish Historical National Accounts 1800-2000, Lund
Studies in Economic History 41, Almqvist & Wiksell International 2007
Ljungberg, Jonas (1988), Historiska nationalräkenskaper för Sverige: Deflatorer för
industriproduktionen 1888-1955, (Deflators for Industrial Production 1888-1955)
Lund 1988.
Ljungberg, Jonas, Priser och marknadskrafter I Sverige 1885-1969. En prishistorisk
studie. Skrifter utgivna av Ekonomisk-historiska föreningen, Lund 1990.
Lindahl, Erik, Dahlgren, Einar and Kock, Karin (1937), National Income of Sweden
1861-1930, I-II, Stockholm and London.
Maddison, A. (2006) The World Economy. Vol 1-2, OECD.
Myrdal, Gunnar (1933), The cost of living in Sweden 1830-1930, Stockholm.
Pettersson, Lars (1987), Historiska nationalräkenskaper för Sverige: Byggnads- och
anläggningsverksamhet 1800-1980 (Building and construction 1800-1980), Lund
1987.
Schön, L. (1980), British Competition and Domestic Change. Textiles in Sweden 18201870, Economy and History, vol. XXIII:1
Schön, Lennart (1984), Historiska nationalräkenskaper för Sverige: Utrikeshandel
1800-1870 (Foreign Trade 1800-1870), Mimeo 1984.
16
Schön, Lennart (1988), Historiska nationalräkenskaper för Sverige: Industri och
hantverk 1800-1980 (Manufacturing Industry and Handicrafts 1800-1980) Lund
1988.
Schön. Lennart (1995), Historiska nationalräkenskaper för Sverige: Jordbruk med
binäringar 1800-1980 (Agriculture and Ancillaries), Lund 1995.
Schön, L. (1997), External and Internal Factors in Swedish Industrialization, The
Scandinavian Economic History Review, vol. XLV:3.
Schön, L. (2000) En modern svensk ekonomisk historia. Tillväxt och omvandling under
två sekel, (A modern Swedish Economic history. Growth and transformation in two
centuries), SNS, Stockholm.
Schön, L. (2004), Total factor productivity in Swedish manufacturing in the period
1870-2000, in Heikkinen, S. / van Zanden, J.L. , Exploring Economic Growth.
Essays in measurement and analysis. A Festschrift for Riitta Hjerppe on her 60th
Birthday. Aksant Amsterdam .
Schön, L. (2006), Swedish Industrialization 1870-1930 and the Heckscher-Ohlin
Theory, in Findlay, R. et.al (eds.), Eli Heckscher, International Trade and Economic
History. MIT Press, Cambridge Mass.
Schön, L. (2007). "Sweden – Economic Growth and Structural Change, 1800-2000".
EH.Net Encyclopedia, edited by Robert Whaples. January 28, 2007. URL
http://eh.net/encyclopedia/article/schon.sweden
Svennilson, I. (1954) Growth and Stagnation in the European Economy. UN
Publication, Geneve.
Temin, P. (2002), The Golden Age of European growth reconsidered, European Review
of Economic History, vol. 6:1.
Vikström, P. (2002), The big picture: a historical national accounts approach to
growth, structural change and income distribution in Sweden 1870-1990. Umeå
Studies in Economic History. Umeå 2002.
17