Introduction

In the middle of the nineteenth century, Sweden was among the poorest countries in Europe. Approximately 80 per cent of the population was engaged in the agricultural sector. Signs of a take-off in economic growth emerged in the 1850s. In the early 1870s, industrialization based on raw materials, notably iron ore and lumber, provided a base for sustained economic growth, which continued largely uninterrupted for one hundred years. The Swedish economic growth rate was the highest of all industrialized countries during the period 1870–1970 (Maddison, 1990). This exceptional and remarkably smooth growth made Sweden one of the most affluent countries in the world by the late 1960s. Since then economic performance has been weak compared to other industrialized countries, and in terms of GDP per capita Sweden is now no more than average among the OECD countries.

This long-run development makes Sweden an interesting case. How can we explain this pattern of rapid economic growth, sustained for an extraordinarily long period of time, which was interrupted fairly abruptly and followed by the current period of slow growth and relative decline? Much of the industrialized world has experienced a slowdown since the early 1970s, but in Sweden this development has been particularly pronounced.

The purpose of this study is to identify the ‘ultimate’ causes of Swedish growth performance relative to other OECD countries in the postwar period. We aim to explain the slow economic growth since the early 1970s. The analysis is largely exploratory. We can only roughly, if at all, quantify the relative importance of the various explanations we shall put forward.