Industrial History and Dynamics in Sweden

Swedish Industry and Industrial Revolutions

Introduction to Swedish Industrial Dynamics

This lecture provides a background to the industrial development in Sweden, offering an overview of Swedish industrial history. The aim is to understand how Sweden's industry is reacting to technological changes and shifts in the external environment. The lecture will cover the current state of Swedish industry, recap industrial revolutions, discuss their impact on Swedish industry, and examine specific industrial areas in Sweden. The primary literature is "Personal and Economic History of Modern Sweden" by Lennart Schön, particularly Chapter 1, which introduces the concept of development blocks from Schumpeter. Schön uses development blocks and structural cycles to explain dynamics in Swedish industry across different periods.

Key Concepts from Lennart Schön's Approach

  • Development Blocks and Disequilibria: Schön uses Schumpeter's terminology to describe Swedish industry.

  • Structural Cycles: Schön divides Swedish industrial development into structural cycles aligned with industrial revolutions.

  • Long Swings: Each structural cycle includes a crisis of structural crisis followed by transformation, rationalization, and then another structural crisis.

Prominent Swedish Companies

Familiarity with key Swedish companies is essential. Examples include:

  • IKEA

  • ABB

  • Atlas Copco

  • Volvo (split into Volvo Cars and Volvo Group, the latter focusing on trucks and heavy machinery)

These companies, founded at different times, reflect the evolution of Swedish industry from its roots in iron mines and forest industries in the 1700s.

Historical Overview of Swedish Industry

  • Early Era: Sweden was a major exporter of wood and iron. The roots of modern Swedish industry can be traced back to these resources.

  • First Industrial Revolution: Sweden was initially a laggard, adopting technologies like the steam engine and blast furnace in the mid-1800s.

  • Economic Liberalization: Institutional changes in the mid-1800s, such as strengthened property rights, facilitated company formation.

  • Peak Manufacturing: The 1960s and 1970s marked a peak in manufacturing.

  • Knowledge Economy: The rise of the knowledge economy in recent decades includes companies like Spotify.

Industrial Revolutions and Their Impact

Division of Industrial Revolutions

The lecture primarily uses a division of three industrial revolutions, aligning with Schön's ecological perspective. Each revolution is marked by the commercialization of general-purpose technologies related to communication, energy, or transport.

  1. First Industrial Revolution: Key technologies included the steam engine, blast furnace, railroads, and telegraph.

  2. Second Industrial Revolution: This phase saw the introduction of electric power, the internal combustion engine, the telephone, and electromagnetic waves (radio).

  3. Third Industrial Revolution: Originating in the 1950s with semiconductors and computers, its commercialization gained traction with the first commercial microprocessor in 1971.

Time Lag in Productivity Increase

Productivity increases typically lag 30-50 years after the initial commercialization of new technologies. This delay occurs because it takes time for inventions to integrate into a productive system. Each industrial revolution involves two structural cycles:

  1. An initial phase of commercialization and invention.

  2. A later phase where the full potential for production and efficiency increases is realized.

Current Context

Currently, Sweden is navigating the structural choices in the middle of the third industrial revolution, dealing with technologies like IoT and AI. The potential of these technologies, once envisioned in popular culture, is beginning to materialize.

Recap of the Industrial Revolutions

First Industrial Revolution

The first revolution was centered around the steam engine, blast furnace, railroads, and telegraph. The blast furnace increased steel manufacturing, while railroads improved transportation and communication. The first commercial railway for transporting people was in England, driven by institutional contexts and individual freedoms.

  • Institutional Context in England: Factors such as individual freedoms, the absence of serfdom, and the influence of Enlightenment ideas fostered market development.

  • Comparison with Eastern Europe: The lack of individual freedom and the persistence of serfdom hindered economic development in Eastern Europe.

  • Importance of Adaptable Institutions: Institutions must adapt to technological changes for successful commercialization and societal impact. Western Europe's cultural emphasis on reason, science, individualism, and skepticism facilitated this interplay between institutions and technology.

Transformation Pressure and Institutional Change

The most significant transformation pressure on society occurs 40-60 years after the start of an industrial revolution.

  • Example: In the first Industrial Revolution, the efficient construction of railways led to their adoption in countries with significant economic growth.

Crimean War Example

During the Crimean War (1853-1856), the British and French superiority was due to superior logistics enabled by railways and telegraphs. This marked the first instance of governments coordinating with remote computers in near-real-time.

Second Industrial Revolution

This revolution was characterized by electricity, the internal combustion engine, and the telephone. Thomas Edison's commercialization of the light bulb and the establishment of electric streetlights in New York in 1882 marked significant milestones.

  • Time Lag: Societal productivity increases occurred decades after the initial inventions.

  • Global Impact: Countries that adopted and integrated these technologies experienced significant economic development, leading to shifts in global power and increased tensions. Ideological battles from the first industrial revolution set the stage for the institutional differences demarcated by the second industrial revolution.

Third Industrial Revolution

The third revolution is marked by the introduction of the microprocessor, particularly the Intel 4004 CPU in 1971. Similar to previous revolutions, productivity increases lagged until fully developed systems were built around these innovations.

  • Example: Despite widespread computer use in the 1980s, productivity increases weren't evident until the late 1990s because technology of computers was not fully developed.

Schön's Division of Historical Periods

Schön divides Western Europe and Swedish industrial history into periods:

  1. Early Industrialization: Transformation of agriculture, associated with steam engine and blast furnace innovations.

  2. Modern Industrial Society Breakthrough: Development of electricity and combustion engines.

  3. Grooming Service Production: Service economy and post-industrial society.

Demographic and Economic Shifts

  • Agriculture to Industry: Initially, most of the population working in agriculture shifted to industry after the Industrial Revolutions.

  • Rise of the Service Sector: By the 1960s, the service sector became dominant with the largest workforce.

Mapping Inventions and Innovations

  • The transformation of agriculture coincides with steam engine and blast furnace innovations.

  • Developed railroad systems appear decades later.

  • Electric and combustion engines in the 1890s lead to development blocks in the 1920s and 1930s.

Economic Growth and Stability

  • Annual Growth: Roughly 2% annual growth during this period.

  • Biggest Economic Boom: The early 1900s before World War II was Sweden's largest economic boom.

  • Post-World War II: Sweden's intact industries allowed significant development in the 1950s and 1960s, making it a wealthy export country.

Energy Consumption

  • Biomass was used for a long time.

  • Coal and oil were introduced after the first industrial revolution.

  • Hydropower expanded from the early 1900s, becoming crucial for industry.

  • Nuclear power was introduced later, helping substitute oil.

  • Oil Crisis of the 1970s: Sweden was highly dependent on oil imports, leading to an economic crisis when oil prices increased sharply.

Factors for Increased Economic Productivity

According to Lennart Schön, the key factors are: Investments, Innovations, and Institutions. Investments require innovations, which in turn require stable institutions. Institutions must also co-develop with technological and organizational changes. Both renewal and increased efficiency through competition and rationalization are necessary for economic growth.

Pre-Industrial Sweden

Sweden was one of the poorest countries in Europe in the 1800s. However, Sweden experienced a rapid transformation, due to:

  • Efficient Farming: Shift movements made farming much more efficient.

  • Culture of Collaboration: Short summers necessitated collaboration among farmers, giving them a strong political voice.

  • Lutheran Protestant Society: Emphasized individual belief, simplicity, work ethic, education, and literacy.

Industrial Takeoff in Sweden

Rrailroads were introduced in the 1850s and contributed to Sweden leapfrogging onto the first and second industrial revolutions. The late 1800s marked an industrial takeoff fueled by:

  • Improved transport via railroad.

  • Increased mechanization.

  • Improved communication.

The engineering boom lead to the formation of companies like LM Ericsson, SKF, and Alfa Laval.

  • Electrification: Industries became increasingly electrified through hydropower, coal, and biomass.

Electric Power and Automotive Development Block

Sweden had a complete electric power and automotive development block. This period was characterized by:

  • Rapid export growth based on domestic resources.

  • Innovative engineering products.

Improved transportation and power supply reduced the importance of localization, allowing smaller towns to compete. Traditional handcraft areas, like Tibro, become industrialized due to improved transports and electricity. Small and medium sized companies grew due to a spirit of culture and improved transports, communications, and power supply.

Servitization and Microelectronic Revolution

The period from 1975 to 2010 saw the breakthrough of servitization together with The microelectronic revolution of the 1970s. The oil crisis and industrial crises took place. The 1980s saw a new economic political regime in place (liberal ideologies) and increased economic liberties, a decrease in industrialization, and the increase in companies based on microprocessors (IT, ICT, etc.).

Historic Transformation of Automotive and Shipbuilding Industries

  • Automotive Development Block: A lot of companies surged into the market (innovation, diversification, etc.).

  • Shipbuilding Industry: There was a lot of bankruptcy that took place within the sector . Over 40,000 suits were employed in the shipbuilding industry at its peak.
    Key Issues:

  • Global oil crisis.

  • Less global market demand (oversaturated market).

  • Competition from Asia (lower wages, direct government support, etc.).

Green Boom in North of Sweden

There has been a hike and there has more or less been no end to all these big large-scale industrial projects that all have a green image ( wants to substitute oil cultures with green electricity/ manufacture products that allow for more renewables and less emissions). There is a lot of question marks concerning this industry.

Conclusion

This lecture provided an overview of Swedish industrial history and gave context to key companies. The course will further analyze these industries and companies using analytical tools and concepts, focusing on transformation pressure, development blocks, and structural tensions.