Swedish economic history: 1914-1945

At the outbreak of World War I, about half of the Swedish population is still occupied in the agricultural sector. The rest of the people work mainly either in industry - often in a factory - or with services, working for example as a carpenter, hairdresser, doctor or perhaps an errand boy. Sweden does not take part in World War I, and to begin with that benefits the Swedish economy. The countries at war need a lot of material, and Sweden can export a lot of it, especially to Germany. But all is not well.

There's a massive crop failure, and due to the war in Europe, it's difficult to import enough food. Big fights erupt in the streets, riots, and people talk about revolution, like in Russia. The government, led by the Right wing party, is under pressure and loses influence. The Social Democrats and the Liberals take the opportunity to force through the introduction of equal and universal suffrage. In 1921 women can vote for the first time in Sweden.

After World War I, it's peace in much of Europe for 20 years, but it's still hard times. Two deep economic crises hit during this period, that affect most of the world. During one of them, the 1920's crisis, unemployment rises in Sweden to over 30 per cent, and many companies go bankrupt. During this time, there is almost no support nor subsidies available to the unemployed and the poor. It's a time filled with conflicts, between the government and the people and between employers and workers, often represented by their labour unions.

Those Swedish companies that have not gone bankrupt, recover pretty quickly, and emerge from the crisis even stronger than before. But for the people it takes a long time before the tough years are over and unemployment drops again... And ten years later, it's time again! During the 30's crisis, unemployment again rises, so high that one out of four adults is without a job. Just as during the 20's crisis, the 30's crisis is a tough period for people and companies.. ...

but it's also a period where Swedish companies develop faster than ever, compared to the rest of the world. It's perhaps not really noticeable yet, but Sweden is on its way to becoming a rich country. During the 30's crisis, the government is more active than during the 20's crisis. They provide special jobs - relief work - in order to keep unemployment down. This is a big change in how the economy is dealt with, and the government's role.

Now, a theory spreads, saying that the government can and should take an active role in affecting the economy. In bad times, the government should assist, by jump-starting the economy again; building roads and bridges, making sure people have jobs and get paid - so that they can start shopping, giving jobs to more people. And in good times, the government should put a bit of a brake on the economy, reducing its investments, so the economy doesn't run too fast, Both the labour unions and the leading economists agree that this is good economic policy. Thanks to these policies, the 30's crisis doesn't lead to such big conflicts as the 20's crisis did. The Swedish labour market is more and more characterized by consensus, and less by conflict and strikes.

In 1938, the labour unions and the employers meet in Saltsjöbaden outside of Stockholm, to sign a treaty, the Saltsjöbaden Agreement. It's an agreement on how the employers and the unions shall negotiate and agree without having to resort to strikes, lockouts, and other types of conflict. When World War II erupts, Sweden again stays neutral. Even if times are tough, with high unemployment, Sweden avoids the enormous destruction that sweeps across Europe and the world. And again the Swedish economy benefits by increased demand for ore, steel, wood, grain, and machines.

When the war is over, Europe is in ruins, and many of the Swedish companies' competitors have no factories left. The Swedish economy continues growing.