Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2024-12-26T06:35:27.420Z Has data issue: false hasContentIssue false
  • English
  • Français

Financial revolution and economic modernisation in Sweden

Published online by Cambridge University Press:  18 March 2009

Anders Ögren
Anders Ögren
Affiliation:
EHFF – Institute for Economic and Business History at the Stockholm School of Economics and Histoire et Théorie Economique – EconomiX Université Paris X La Defense Nanterreanders.ogren@hhs.se
Get access Rights & Permissions [Opens in a new window]

Abstract

The development of a well-adapted financial system was a main part of the successful Swedish economic modernisation in the latter half of the nineteenth century. In this article it is shown that this development followed the pattern of a financial revolution. Major institutional and organisational changes that took place roughly between the late 1850s and early 1870s led to a rapid increase in liquidity and financial services. This financial revolution preceded the acceleration in economic growth in general and in the modern, industrial sector in particular. Monetisation especially encouraged growth, both in the industrial sector and in GDP as a whole. The basis of the financial system, measured as commercial bank assets and equity capital, affected overall GDP growth. The results also clearly promoted the importance of the development of the financial sector and monetisation as an interlinked and complementary process.

Résumés

Le développement d'un système financier bien adapté a constitué la partie principale de la modernisation économique suédoise réussie dans la deuxième partie du dix-neuvième siècle. Cette communication montre que ce développement a suivi le modèle d'une révolution financière. Les changements majeurs institutionnels et organisationnels qui ont eu lieu en gros entre la fin des années 1850 et le début des années 1870 ont conduit à une augmentation rapide de la liquidité et des services financiers Cette révolution financière a précédé l'accélération de la croissance économique en général et dans le secteur moderne industriel en particulier. Spécialement, la monétisation a encouragé la croissance, à la fois dans le secteur industriel et dans le PIB entier. La base du système financier, mesurée par les biens bancaires commerciaux et les capitaux propres, a touché la croissance totale du PIB. Les résultats ont également clairement promu l'importance du développement du secteur financier et la monétisation comme processus reliés et complémentaires.

Abstrakte

Die Entwicklung eines gut angepassten Finanzsystems bildete einen Hauptbestandteil der erfolgreichen Modernisierung der schwedischen Wirtschaft in der zweiten Hälfte des 19.Jahrhunderts. Diese Studie zeigt, dass diese Entwicklung dem Muster einer finanziellen Revolution folgte. Wichtige institutionelle und organisationelle Veränderungen, die ungefähr zwischen den späten 1850-er Jahren und den frühen 1870-er Jahren stattfanden, führten zu einer schnellen Erhöhung der Liquidität und des Angebots im Bereich Finanzdienstleistungen. Diese finanzielle Revolution ging dem beschleunigten Wirtschaftswachstum im Allgemeinen und insbesondere dem beschleunigten Wachstum im modernen industriellen Bereich voraus. Insbesondere die Monetarisierung bewirkte eine Wachstumsförderung – sowohl im industriellen Bereich und auch in Bezug auf das Bruttoinlandsprodukt (BIP) insgesamt. Die Basis des Finanzsystem – die in Form von gewerblichem Bankkapital und Aktienkapital gemessen wurde – beeinflusste das allgemeine Wachstum des BIP. Die Ergebnisse dessen unterstrichen ebenfalls die große Bedeutung, die der Entwicklung des Finanzbereiches zukommt, sowie der Monetarisierung als damit verkettetem Komplementärprozess.

Resúmenes

El desarrollo de un sistema financiero bien adaptado fue una parte principal de la exitosa modernización económica sueca en la última mitad del siglo diecinueve. En esta ponencia se muestra que su desarrollo siguió la pauta de una revolución financiera. Los grandes cambios institucionales y organizativos que tuvieron lugar aproximadamente entre la década de los 50 y principios de la década de los 70 condujeron a un rápido aumento en liquidez y servicios financieros. Esta revolución financiera precedió la aceleración en crecimiento económico, en general, y en el moderno sector industrial, en particular. La monetización en especial favoreció el crecimiento, tanto en el sector industrial como en el producto interior bruto en conjunto. La base del sistema económico, medido en bienes de banco comercial y en neto patrimonial afectó el crecimiento global del PIB. Además los resultados claramente promocionaron la importancia del desarrollo del sector financiero y de la monetización como un proceso interrelacionado y complementario.

Type
Articles
Information
Financial History Review , Volume 16 , Issue 1 , April 2009 , pp. 47 - 71
Copyright
Copyright © European Association for Banking and Financial History e.V. 2009

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

2 North, D. C. and Weingast, B. R., ‘Constitutions and commitment: the evolution of institutions governing public choice in seventeenth century England’, in Alston, L. J. et al. (eds.), Empirical Studies in Institutional Change (Cambridge, 1996)Google Scholar; and Rousseau, P. L. and Sylla, R., ‘Emerging financial markets and early US growth’, Explorations in Economic History, 42 (2005), pp. 1–26CrossRefGoogle Scholar.

3 Rousseau, P. L. and Sylla, R., ‘Financial systems, economic growth and globalization’, in Bordo, M. D., Taylor, A. M. and Williamson, J. G. (eds.), Globalization in Historical Perspective (Chicago, 2003)Google Scholar.

4 Levine, R., ‘Financial development and economic growth: views and agenda’, Journal of Economic Literature, 35 (1997), pp. 688–726Google Scholar.

5 Rousseau and Sylla,'Emerging financial markets'.

6 See for instance P. Temin and H-J. Voth, ‘Financial repression in a natural experiment: loan allocation and the change in the usury laws in 1714’, CEPR Discussion Paper no. 4452 (2004).

7 Schumpeter, J. A., The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle (1911; reprinted Cambridge, MA, 1934)Google Scholar.

8 Sandberg, L. G., ‘Banking and economic growth in Sweden before World War I’, Journal of Economic History, 38 (1978), pp. 650–80CrossRefGoogle Scholar, and ‘The case of the impoverished sophisticate: human capital and Swedish economic growth before World War I’, Journal of Economic History, 39 (1979), pp. 225–41.

9 Fisher, D. and Thurman, W. N., ‘Sweden's fnancial sophistication in the nineteenth century: an appraisal’, Journal of Economic History, 49 (1989), pp. 621–34CrossRefGoogle Scholar.

10 Hansson, P. and Jonung, L., ‘Finance and economic growth: the case of Sweden 1834–1991’, Research in Economics, 51 (1997), pp. 275–301CrossRefGoogle Scholar, and Det finansiella systemet och den ekonomiska tillväxten: Svenska erfarenheter 1834–1991 (Stockholm, 2000).

11 Gårdlund, T., Svensk industrifinansiering under genombrottsskedet 1830–1913 (Stockholm, 1947)Google Scholar.

12 Rousseau, P. L. and Wachtel, P., ‘Financial intermediation and economic performance: historical evidence from five industrialized countries’, Journal of Money, Credit and Banking, 30 (1998), pp. 657–78CrossRefGoogle Scholar.

13 Ögren, A., ‘Free or central banking? Liquidity and financial deepening in Sweden, 1834–1913’, Explorations in Economic History, 43 (2006), pp. 64–93CrossRefGoogle Scholar.

14 Hansson and Jonung, ‘Finance and economic growth’; Jörberg, L., Growth and Fluctuations of the Swedish Industry, 1869–1912: Studies in the Process of Industrialisation (Stockholm, 1961)Google Scholar; Sandberg, ‘Banking and economic growth’; Schön, L., En modern svensk ekonomisk historia. Tillväxt och omvandling under två sekel (Stockholm, 2000)Google Scholar.

15 Ignoring the first years of non-growth shows that GDP grew at 1.2 per cent per year between 1846 and 1869.

16 Extending the middle period until 1894 increases growth in the middle period to a yearly average of 1 per cent and decreases the average between 1895 and 1913 to 2.35 per cent.

17 There is a possibility that the so-called service revolution of the economy is due to this phenomenon, see Schön, En modern svensk ekonomisk historia.

18 Ögren, ‘Free or central banking’, pp. 87–8, and A. Ögren, ‘The rationale of private note issuance: note issuing commercial banks in the economic and financial development of nineteenth century Sweden’, unpublished working paper (EconomiX/Université de Paris X – Nanterre, 2008).

19 A. Ögren, ‘Lender of last resort in a peripheral economy with a fixed exchange rate: financial crises and monetary policy in Sweden under the silver and gold standards, 1834–1913’, in Cottrell, P. et al. (eds.), Centres and Peripheries in Banking: the Historical Development of Financial Markets (Aldershot, 2007)Google Scholar, and Ögren, ‘The rationale of private note assurance’.

20 North and Weingast, ‘Constitutions and commitment’.

21 Talia, K., Monetary Integration and Disintegration: Studies in the Scandinavian Currency Union, 1873–1924. (Stockholm, 2004)Google Scholar. The Scandinavian Currency Union was established in 1873. It consisted of Denmark, Norway (joined in 1875) and Sweden. Originally it only included coins valued at par, but from 1894 the SCU included notes as well.

22 Ögren, ‘Lender of last resort’.

23 Ögren, ‘Free or central banking’.

24 Brisman, S., ‘Den stora reformperioden 1860–1904’, in Sveriges Riksbank 1668-1924-1931. Bankens tillkomst och verksamhet, part IV (Stockholm, 1931)Google Scholar; Ögren, Empirical Studies and ‘Free or central banking’.

25 It has been argued that the Office did not cooperate with any Swedish commercial banks, but in the 1860s the Office was criticised for its close ties to one of the major commercial banks, the Skandiaviska Kredit AB, on the board of which several of the Office's board members were also represented. This bank was involved in the 1861 loan according to the loan contracts of the National Debt Office.

26 Hildebrand, K., Riksgäldskontoret 1798–1934 (Stockholm, 1934)Google Scholar.

27 Ögren, ‘Lender of last resort’ and ‘Sweden's monetary internationalization under the silver and gold standards’.

28 Ögren, ‘The rationale of private note issuance’ and Schön, L., ‘Kapitalimport, kreditmarknad och indutrialisering 1850–1910’, in Dahmén, E. (ed.), Upplåning och utveckling. Riksgäldskontoret 1789–1989. (Stockholm, 1989)Google Scholar.

29 Engdahl, T. and Ögren, A., ‘Multiple paper monies in Sweden, 1789–1903: substitution or complementarity?’ Financial History Review, 15.1 (2008)Google Scholar. The so-called Authorised Assignment was a form of non-interest-bearing cheque that was drawn on the issuer's credit (or deposits) in the Riksbank. In accordance with the law, these cheques could be issued by the holder of the credit taking the time of circulation into account. In practice this meant that there was no limit to the issuance of cheques as long as the issuer was not declared bankrupt. If this happened, the holders of the cheques would be the ones to carry the costs. This occurred en masse during the crises of 1848 and the Authorised Assignments lost popular trust. Brisman, S., Sveriges Affärsbanker. Grundläggningstiden (Stockholm, 1924), pp. 9–11, 18Google Scholar.

30 Kock, K., Skånska Privatbanken. Minnesskrift (Stockholm, 1931)Google Scholar.

31 Ögren, Empirical Studies and ‘The rationale of private note issuance’.

32 Ögren, ‘Free or central banking’ and ‘The rationale of private note issuance’.

33 Hellgren, H., Fasta förbindelser: en studie av låntagare hos sparbanken och informella kreditgivare i Sala 1860–1910 (Uppsala, 2003)Google Scholar; and Petersson, T.Framväxten av ett lokalt banksystem: Oppunda sparbank, Södermanlands enskilda bank och stationssamhället Katrineholm 1850–1916 (Uppsala, 2001)Google Scholar. The savings banks were successful in competing for funds from the public and as the use of deposits grew in importance, the groups in parliament that had an interest in working for credit market liberalisation in the case of the commercial banks argued for restrictions on the savings banks' ability to run banking business. The result of this was a new savings bank law in the mid 1890s that forced the savings banks to end their loan business and return to the ‘old values’ of philanthropically fostering the virtue of saving. As a consequence, a large number of savings banks reformed into small local joint-stock banks, so-called folk banks (Folkbanker). Sjölander, A., ‘Att reglera eller inte reglera – En undersökning av Sparbanksfrågan i Riksdagen 1882–1939’, Uppsala Papers in Financial History, 13 (2000)Google Scholar.

34 Ögren, ‘Free or central banking’.

35 See Ögren, ‘Sweden's monetary internationalization’ for a deeper study of this issue.

36 See Jonung, L., ‘Swedish experience under the classical gold standard 1873–1913’, in Bordo, M. D. and Schwartz, A. (eds.), The Classical Gold Standard in Retrospective (Chicago, 1984)Google Scholar; and Ögren, ‘Sweden's monetary internationalization’.