Sweden’s economic transformation
In the mid-1850s, Sweden was still a poor agrarian country on Europe’s periphery. Just 120 years later, it had become one of the world’s wealthiest nations measured by GDP:GDP Per capita:per capita. This dramatic transformation was driven by reforms, technological advances, and structural changes that laid the foundations for industrialization.
Rapid economic growth
Between 1850 and 1970, Sweden had the highest economic growth rate in the world next to Japan and became one of the world’s wealthiest nations in terms of GDP:GDP Per capita:per capita. What factors influenced this process?
Early entrepreneurship
An important factor in Sweden's successful economic development has been an abundance of natural resources, such as iron ore and forests. In the early 19th century, the Swedish business system was more or less founded on resource based commodities in addition to a number of traditional industrial communities built around e.g. foundries all over the country. Thus, there was a long tradition of refinement and Export:export of metals such as iron and copper. The parts of Sweden where metals were not available instead had long traditions of handicraft based on textiles and wood.
However, despite a foundation of entrepreneurial activity, economic life remained heavily regulated well into the mid-19th century. The guild system strictly controlled which professions individuals could pursue and under what conditions. A decisive step toward economic freedom came with the liberal reform of 1846, which abolished the guild system and opened the way for modern entrepreneurship.
Industrialization begins
When industrialization reached Sweden in the mid-19th century, the country entered at a moment of strong international demand. Steam-powered manufacturing expanded rapidly, particularly in sectors producing goods for Export:export, steel, iron, and sawn timber. Britain and other industrialized nations became important markets. Although Sweden industrialized later than many of its European neighbours, once the process began, development proved both rapid and far reaching.
These changes also increased the income of land owners, which in turn created a higher demand for consumption goods and new machinery in the form of industrial products. In that sense, the agricultural and industrial sectors together created a positive environment for economic growth.
These changes also increased the income of land owners, which in turn created a higher demand for consumption goods and new machinery in the form of industrial products. In that sense, the agricultural and industrial sectors together created a positive environment for economic growth.
Free trade and new technology
The free-trade movement in Europe during the late 1800s was central for Sweden’s Export:export industries. Lower trade barriers strengthened Sweden’s position as a supplier of raw materials to the rest of Europe. Around 1890, the second industrial revolution introduced electricity and combustion engines. Industrial production became more urban, and new, knowledge-intensive sectors, such as pulp, paper and engineering grew rapidly.
The rise of large corporations
The second industrial revolution saw the birth of a new type of enterprise: the joint stock company, which enabled larger capital investments and contributed to the formation of major industrial groups. Many of Sweden’s future multinational companies were founded during this period, including LM Ericsson, ASEA/ABB, SKF, Alfa Laval, Aga and Dyno Nobel. Their development was closely tied to Swedish technical Innovation:innovation.
A changing economy
Electricity production, particularly from hydropower in northern Sweden, provided industry with relatively cheap energy. This increased competitiveness and strengthened Export:export capacity. Several broader developments also supported Sweden’s rapid growth:
large infrastructure projects, especially railways
continued agricultural rationalisation
strong population growth and rising urbanisation
improved communications, including the telegraph
growth of the daily press
the 1842 reform introducing compulsory primary education
Around 1900, more than half the population still worked in agriculture, but the transition to an industrial economy was well underway.
Sweden had all the ingredients required for stable, long-term economic growth. In the early 1900s, the characteristically Swedish industrial mix of engineering, mining, steel and pulp industries, which is still in place today, was beginning to take form.