Unflattered Sweden

I

IT has become a fashion in social and economic writing to pave the road to Utopia with Swedish panaceas. The habit started with the liquor problem. Then, when the economic depression began to spread over the entire world, and reformers were looking afield for methods first of conquering the monster and then of clipping his claws, it was Sweden that they invoked. Sweden was ‘managing’ her recovery. She was likewise laying the foundation for the ‘ management’ of her economy against a recurrence of chaos. So, the habit of regarding Sweden as a trail blazer having been learned, the ‘Swedish experiments’ in reflation, housing, coöperatives, and money policy (to mention only the more renowned of these experiments) were put in writing, and now fill a fair-sized library.

Now such adulation, coupled with the sincerest form of it, should surely have turned the blond head of the Norsemen. On the contrary: in a visit that I paid to Sweden this summer, I found the Swedes somewhat irritated, if anything, by the praise that has been bestowed upon them.

My interest lay particularly in the ‘answers’ that Sweden had provided to the problem of monetary management. Upon this subject alone volumes have been put out by American and British writers. In 1934, for instance, Professor Irving Fisher wrote: ‘Whatever the future holds in store, this achievement of Sweden will always be the most important landmark up to its time in the history of stabilization.’ He referred to the 1931 announcement following Sweden’s abandonment of the gold standard — namely, that henceforth the country’s monetary policy should aim at the maintenance of the internal purchasing power of the krona.

However, the Swedes in the ‘managing’ positions with whom I talked refused to accept any such accolade. I nearly had my head bitten off for using the word ‘experiment’! It was not modesty on their part; only the natural riposte of people who, when seen at home, have long ago abandoned the 1931 declaration, and are wrestling with the same monetary problems that afflict less fortunate democracies. In such circumstances they simply don’t like being put in a glass bowl by the world’s reformers.

Obviously Swedish ‘management’ of recovery is praised on the basis of results. These are, indeed, handsome. In the last quarter of 1932, the ratio of trade-unionists registered as unemployed reached the high average of 25 per cent. Joblessness in the country as a whole must therefore have been fully equal to the American record of one in three of the potential working population. Nowadays, however, Sweden is probably the only industrial country that may be described as fully employed. I was told that Professor Bertil Ohlin estimates the out-of-work at 70,000. But personal observation convinces me that the person who cannot get a job in present-day Sweden must be in hiding. So short of workers are the industries that, while I was in Sweden, factories were running buses into the farm regions trying to entice the farm hands to take factory jobs. The buses used to come back almost empty. For the farmers themselves are fully and remuneratively employed.

The same thing is true in that category of work known as ‘services,’ covering office workers and shop assistants. Entering Stockholm by water, I fell into conversation with a business man from Gothenburg, and he almost distracted my attention from the capital’s beautiful approach by lamenting his inability to get office help. His tale was quickly borne out in Stockholm. There I had dinner with a leading citizen whose daughter, the assistant to a personnel director for a chain of restaurants, excused herself after the meal on the ground that she had to spend her evenings trying to connect existing jobs with nonexisting workers. Happy land! Little wonder that the British Hugh Dalton, one of the pillars of the Labor Party, calls the situation ‘an economic miracle.’

II

Naturally, if a recovery comes after a programme of recovery, the public will give the credit to the managers. Mr. Landon could testify to this elementary political truth. In Sweden, as in the United States, there was such a programme. And, since it was born with a flourish of trumpets, most of ‘the Swedish experiments’ are hailed as the achievements of the recovery administration. This happens to be a Socialist administration. At the nadir of the Swedish depression, in September 1932, a Labor (Social Democratic) government came in, headed by Mr. Per Albin Hansson. Not so much is heard of Premier Hansson as of some of his Cabinet, notably Foreign Minister Richard Sandler and Finance Minister Ernest Wigforss. It is the latter, I should imagine, who most properly could be described as President Roosevelt’s opposite number. For it is Mr. Wigforss’s pronunciamentos that embellish the latter-day history of Sweden. Much more quickly than Mr. Roosevelt, he came out boldly for expansion, the weapons of recovery being that trio of panaceas which were subsequently transplanted in America — namely, public relief financed by loans, low interest rates protected by official policy, and subsidized agriculture.

Should we therefore attribute Sweden’s success to the Socialist government? No doubt Mr. Wigforss, if he were making a political speech, would advance the same claims that Mr. Roosevelt himself advanced in 1936. Listen to him, however, during the Parliamentary recess, in a speech delivered to the students at Upsala University, as reported by the Nya Tidning, of Upsala, August 12, 1937: —

The party politician had been left at home in the Ministry of Finance and Dr. Wigforss in the rostrum of the university was extremely anxious to correct what he called the ‘mistaken and exaggerated statements regarding our country which have been disseminated all over the world.’ Mr. Wigforss started by saying that Sweden is among those countries which have come most rapidly out of the world depression. But (he continued) that did not happen with such epoch-making methods as had been stated. The economic policy introduced after the change of government in 1932 was not a break with the previous development. It was a continuation of it. For, if they called the economic policy the measures undertaken to provide reëmployment and to increase prices for primary goods, then that dated back to 1930. The aid to agriculture which was started in 1930 was merely one illustration. In regard to the effects of the Swedish depression policy, how was it possible, he asked, to tell how much this or that factor influenced the result? ‘The way of Sweden out of depression is the consequence of many coöperating circumstances.‘

The italics are mine. Diogenes in his mythological search for an honest man would certainly have recognized Mr. Wigforss.

Among these ‘many coöperating circumstances’ Mr. Wigforss himself pays handsome tribute to the works of his predecessors. When the depression hit Sweden, a Conservative administration was in office. It was succeeded in 1930 by a Liberal administration formed by the People’s Party. Both of them refused to let nature take its course. What was lacking in both administrations was any schematic approach to the problem of conquering depression. Like Mussolini in his march on Rome, the Conservatives and Liberals acted first and rationalized afterwards. Moreover, it was a year before the advent of the Socialists, back in 1931, that Sweden fell off the gold standard, and thus allowed the primary conditions of recovery to develop.

This rationalization of old acts is belatedly making its appearance in Scandinavian publications. One of them only can I quote. In the May issue of the review Baltic and Scandinavian Countries, published by the Baltic Institute, at Gdynia, a Swedish economist, Professor Arthur Montgomery, offers an objective view of the pre-1932 steps. His analysis supports Mr. Wigforss’s avowal. It goes further, and shows that it was the predominant system in vogue for many months after its sponsors had left office. ‘The system existing prior to the Socialist programme,’ Professor Montgomery says, ‘was not definitely superseded till the end of 1933,’ or a year after the Socialists came to power. This was mainly due to a building strike lasting from March 1933 to February 1934, which inhibited expansion. By that time, moreover, recovery in Sweden was well under way.

Lest I may seem to be going to the other extreme, and giving too much credit to pre-Socialist administrations, let me say that the very manner of the Socialists’ pledges helped Sweden even more than their performances. At least they filled in the breach till government expansion could be realized.

For psychology is the twin sister of economics. Wicksell, Sweden’s most distinguished economic thinker, once combated the mechanistic approach to economic phenomena in these words: ‘The real cause [of boom and slump] lies in the irregularity of technical progress and the influence of psychological elements’ The italics again are mine.

Such an influence helped President Roosevelt in the spring of 1933, when he announced his intention of putting up prices, and again in the winter of 1934, when he declared that he would use the budget to that end. On both occasions he assumed the mantle of Moses, in calling upon a dispirited country to follow him to the promised land. The same kind of leadership was used as a recovery weapon in Sweden. The Swedish Socialists in 1932 and 1933 came out for both the Roosevelt end and the Roosevelt means with Rooseveltian resonance. That is to say, they abandoned the price-stabilization policy, which later was to elicit Professor Irving Fisher’s praise. Socialist policy sought to raise prices (and therefore profits) as an engine for restoring financial investment and business enterprise. Naturally such a programme, laid down with all the fanfare and emphasis necessary to impress the public, provided an initial stimulus to activity, especially when conditions in the building industry allowed the Socialists to live up to their expansionist promises.

But other ‘ coöperating circumstances ’ were already playing their part — circumstances having little to do with ‘management.’ They came from the outside world. Recovery in Sweden got its real impetus from the rise in Swedish exports due to a fortuitous conjuncture in world demand.

Sweden is heavily dependent upon the industries connected with her immense forests. Half of Sweden is clothed in forest; and lumber products, in a more or less finished state of manufacture, — such as sawn and planed timber, wood pulp, and paper, — make up about half of Sweden’s exports. It so happened that when Great Britain released her economy from the thrall of the gold standard, in 1931, a great building boom was generated, and the benefits inured to Swedish exporters no less than to British householders.

The remainder of Swedish exports consist mainly of iron and steel. The recovery in which the world finds itself to-day is half compounded of rearmament activity. And it is in Sweden that the rearmers are obtaining both the raw material for their guns and the guns themselves. A great anti-aircraft gun factory in Värmland is selling its entire output to Britain; Germany has money only for the raw material, and one may see the iron ore of northern Sweden in constant shipment to Germany, along both the North Sea and the Baltic.

The profits from these aggregate sales provide Sweden with a good quarter of her national income. Far from helping Sweden ‘a little,’ as Dr. Dalton once put it, they have generated internal prosperity in Sweden, in the opinion of Swedish authorities on the spot.

III

Fortunate, as well as happy, Sweden! Has she, however, been altogether fortunate?

As I heard this story of prosperity unfold, I seemed to recall at least one unfortunate episode in recent Swedish history — namely, the Kreuger boom and collapse. I mentioned it in conversation with a well-known economist. In reply the economist gave me a syllogistic accounting of the benefits that the life and death of the Swedish match king had rendered to the land of his birth. Later I discovered that the accounting is a stock joke among the Swedish literati.

First, said the economist, Kreuger tempered the pre-depression boom in Sweden by exporting Swedish capital. This could not be gainsaid. Before I went to Sweden I had looked into the Swedish Year Book. This invaluable publication puts the matter as follows: ‘The internal soundness of Swedish industry and finance may certainly be considered as one of the reasons why Sweden was struck by the depression at a comparatively late date and recovered more quickly than most other countries.’ Then, the economist said, Sweden was able to stay on the gold standard as long as Britain because of the foreign payments remitted to Sweden out of the antecedent export of capital. From this, too, there could be no dissent. ‘Now, lastly,’ he wound up, with a wry smile, ‘Kreuger’s suicide, in March 1932, depreciated the krona in sterling, and so enabled Sweden to minimize the fall in prices, and further promote the conditions necessary to recovery ’! In addition to good fortune, then, Lady Luck has smiled upon Sweden.

The ‘managers’ of Sweden’s prosperity, as I have said, are the first to remind you of these ‘coöperating circumstances’ in accounting for Sweden’s recovery. ‘God,’ as one of them put it to me, ‘was on our side. The greatest demands of the world were precisely for those commodities which we supply in finished and unfinished form without any coöperation from other countries’ — meaning any prior import of the raw material.

Even the Swedish monetary policy does not look much of an ‘experiment’ in Sweden itself. Here again John Bull has played the significant rôle. Great Britain’s contribution to Swedish prosperity does not end with the fillip which British building gave to Swedish exports. Sweden is a member of that loose monetary bloc known as Sterlingaria. That is to say, the Swedish krona is pegged to the pound. To read some articles on Swedish experimentation, one would get the impression that the krona moves in a monetary world of its own, with sole regard for Swedish internal conditions. The krona, however, has been pegged to the pound since mid-1933.

It could scarcely be otherwise in a country in Sweden’s position. Not only is her economy bound up with Britain’s, but her exports are of such a character that stability of exchange is of singular importance. It was not till I talked to Swedish business men that I realized that the forward contracts with some of their customers extend for eighteen months. Those buyers conceivably might turn elsewhere if the krona were a fluctuating currency. Understandably, therefore, a theorist who had much to do with the elaboration of the Socialist monetary policy could say: ‘I am grateful that our central bank has clung to Montagu Norman’s coat, instead of swimming around on its own’ — in other words, instead of experimenting.

What is happening in Sweden is, of course, of great interest to other countries engaged in making democracies function progressively in a complex economic world. It can furnish more lessons than the Swedes in their present state of mind are prepared to admit. Also, I came away from Sweden with a great deal of respect for the Swedish managers, especially for the way they have followed their own expansionist logic of bringing the budget back into balance with the return of prosperity; Sweden’s budget, tell it not in Gath, is now overbalanced,

In due course I hope to look into these lessons. For the present this self-debunking by the Swedes may be set against the dithyrambs of ‘our foreign friends.’