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CHAPTER II
ECONOMIC SITUATION
1.
GENERAL SUMMARY OF ECONOMIC DEVELOPMENT AND PRESENT ECONOMIC SITUATION.
Swedish economy developed gradually and systematically throughout Sweden's
more than a century of freedom from war. By 1830, when the industrial revolution
had already shown its effects on the economies of England and the continent of Europe,
Sweden still remained rural and isolated with more than 80 percent of its population
deriving its living from agriculture. By 1870 the rural population still constituted 72
percent of the total.
Industrialization was hastened, after 1870, by the discovery (outside of Sweden)
of a new method of smelting iron ore, and by the increasing utilization in England and
the countries of the continent of Swedish forest products. By the beginning of the
century Sweden was well on the road to a balanced economy, and by 1930 had brought
its industries to a high level of development. Economic growth was accomplished in
part through the ability to export iron ore and forest products, two of Sweden's greatest
natural resources. The abundant water supply also contributed a great deal to in-
dustrialization, forming an important source of energy.
Although Sweden did not participate in the war and suffered only slight physical
damage, its economy was adversely affected. Its greatest and practically only direct
war loss was the destruction of 600,000 gross tons, or more than one-third, of its mer-
chant fleet. Indirect losses resulted from interferences with the country's foreign
trade and from the necessity of maintaining a high state of military preparedness.
Before the end of the war the Swedish Government prepared plans for a postwar
economic policy, whose object was to combat an expected boom caused by high demand
for peacetime goods, to avoid employment difficulties during the period of demobiliza-
tion and reconversion of industry from wartime to peacetime production, and to insulate
the domestic economy against the effects of depression in other countries, principally
the United States. The measures taken by Sweden after the war to implement this
policy have included: (1) extension of credits to European countries; (2) appreciation
of the krona to offset price increases abroad and to encourage imports; (3) negotiation
of a series of bilateral trade and payments agreements with several European countries,
and (4) immediately after the war, a relaxation of foreign exchange and import
controls.
The failure of Sweden's postwar policies to have the anticipated effect, together
with the slow recovery of Western Europe, were the principal factors contributing to the
rapid depletion of gold and foreign exchange reserves built up during the war when,
because of the blockade and concentration of other countries' production on armaments,
Sweden was prevented from spending its foreign earnings. Other factors which have
contributed to this result have been an excessive internal purchasing power and the
15
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"ocrText": "SECRET\nCHAPTER II\nECONOMIC SITUATION\n1.\nGENERAL SUMMARY OF ECONOMIC DEVELOPMENT AND PRESENT ECONOMIC SITUATION.\nSwedish economy developed gradually and systematically throughout Sweden's\nmore than a century of freedom from war. By 1830, when the industrial revolution\nhad already shown its effects on the economies of England and the continent of Europe,\nSweden still remained rural and isolated with more than 80 percent of its population\nderiving its living from agriculture. By 1870 the rural population still constituted 72\npercent of the total.\nIndustrialization was hastened, after 1870, by the discovery (outside of Sweden)\nof a new method of smelting iron ore, and by the increasing utilization in England and\nthe countries of the continent of Swedish forest products. By the beginning of the\ncentury Sweden was well on the road to a balanced economy, and by 1930 had brought\nits industries to a high level of development. Economic growth was accomplished in\npart through the ability to export iron ore and forest products, two of Sweden's greatest\nnatural resources. The abundant water supply also contributed a great deal to in-\ndustrialization, forming an important source of energy.\nAlthough Sweden did not participate in the war and suffered only slight physical\ndamage, its economy was adversely affected. Its greatest and practically only direct\nwar loss was the destruction of 600,000 gross tons, or more than one-third, of its mer-\nchant fleet. Indirect losses resulted from interferences with the country's foreign\ntrade and from the necessity of maintaining a high state of military preparedness.\nBefore the end of the war the Swedish Government prepared plans for a postwar\neconomic policy, whose object was to combat an expected boom caused by high demand\nfor peacetime goods, to avoid employment difficulties during the period of demobiliza-\ntion and reconversion of industry from wartime to peacetime production, and to insulate\nthe domestic economy against the effects of depression in other countries, principally\nthe United States. The measures taken by Sweden after the war to implement this\npolicy have included: (1) extension of credits to European countries; (2) appreciation\nof the krona to offset price increases abroad and to encourage imports; (3) negotiation\nof a series of bilateral trade and payments agreements with several European countries,\nand (4) immediately after the war, a relaxation of foreign exchange and import\ncontrols.\nThe failure of Sweden's postwar policies to have the anticipated effect, together\nwith the slow recovery of Western Europe, were the principal factors contributing to the\nrapid depletion of gold and foreign exchange reserves built up during the war when,\nbecause of the blockade and concentration of other countries' production on armaments,\nSweden was prevented from spending its foreign earnings. Other factors which have\ncontributed to this result have been an excessive internal purchasing power and the\n15\nSECRET"
}