Swedish economic history: 1969-1985

When the 1960s turn into the 70s, the Swedish economy loses its steam. Some of the first to experience the new tougher times are those who work in the shipyards. Salaries in Sweden have been going up for many years, to the joy of the employees. But now, new shipyards have been built in other countries. There, salaries are much lower, and Swedish shipyards don't stand a chance to compete with the low prices.

The shipyards are major employers, and when they shut down business, many are affected. It's not just heavy industry that takes a beating in Sweden during the 1970s. The once successful textile and clothing industry, is also struggling to manage the competition from countries with low salaries. A total of about 70 000 jobs are lost in this industry, and towns like Borås, Malmö, and Norrköping suffer badly. At the same time, a new war breaks out in the Middle East, in 1973, between Israel and its Arab neighbours.

The United States supports Israel; and the Arab states who export oil, protest by refusing to export oil to the USA, and several other western countries. The consequence is a shortage of oil, and prices go up quickly. The Oil Crisis of 1973 affects large parts of the world. Sweden is dependent on oil, and suffers. For the first time, Sweden and the rest of the world experience increased unemployment, at the same time as increased inflation.

The combination of unemployment and inflation is dubbed stagflation, and stagflation turns out to be difficult to deal with, using the political and economic tools that are available. The fact that it had gone so well for the Swedish economy, it turns out, was not solely thanks to political policy - "the Swedish model". The growth during the record years depended just as much on favourable external conditions. Now, when the conditions aren't as favourable anymore, times are getting tougher. In order to help the Swedish economy, the government chooses to change the exchange rate, so that the Swedish kronor gets cheaper for those who buy with US Dollars for example.

By devaluing the krona like that, it becomes easier for exporting companies to sell goods, since Swedish goods are now cheaper for those who buy them using another currency. But it's also more expensive to import things into Sweden. Optimism about the Swedish economy is falling, unemployment rises, and in 1976 the Social Democrats lose power - for the first time since before World War II - to the center-right coalition. In 1979 there's a revolution in Iran, and another oil crisis starts, with increased energy prices as a consequence. When unemployment increases, some of those who came to Sweden to work return to the countries they came from.

But some stay here, establish families, and become part of a new Sweden. While people lose their jobs in private industry, the public sector, in contrast, grows. At the start of this period - 1969, one adult in five works in the public sector. At the end of the period - 1985 - that proportion has increased to one in three. Among the industrial and technology companies, things look better than they do for the shipyards and textile companies.

Ericsson, Volvo, Saab, Asea and SKF are still important for Sweden. They export goods, and employ a lot of people. But now, the competition from other countries gets tougher. At the end of World War II, Sweden's economy had an advantage, since the factories weren't bombed to the ground. But now, when other countries have rebuilt their industries, Swedish factories suddenly appear old and ineffective, compared to many of the new ones, down in Europe.

It's mainly heavy industry that performs poorly. The Swedish companies that do best, are those involved in advanced technology and electronics. There is a glimmer of hope for the Swedish economy.