Finance Minister Sträng When our last issue on the international capitalist economy appeared (June 1975), Sweden (along with Norway) was only just beginning to be affected by the generalized international recession. For most branches of the Swedish economy, 1974 was still a boom year. Industrial production increased 7.4% over the year, and all the major export-oriented companies reported big increases in both profits and sales. This was in stark contrast to the prevailing situation in the major imperialist countries. Several factors explain this "exceptional" character of the Swedish economy, some of them structural, others purely conjunctural: 1. The Swedish economy is strongly dependent on exports, which is shown by the fact that 40-45% of industrial production is sold on foreign markets. The exportoriented industries are mainly comprised of two different sorts of production: raw materials and semifinished goods on the one hand and highly specialized metal and engineering products on the other. In both these
exceptlen sectors, the international recession developed in a way that was favorable for the Swedish capitalists. There was a special conjunctural lag in iron, steel, and paper pulp production, which postponed the downturn in Sweden. The same goes for the highly specialized products of the metal and engineering industries; the products of these industries had fitted into the markets in countries with the least bad conjunctural situations. These factors have smoothed out the conjunctural ups and downs of the Swedish economy ever since the secand world war. 2. The rate of inflation during 1973 and 1974 was among the lowest in the imperialist countries (along with Germany and Switzerland), varying between 7% and 9%. In 1974, exports were divided in the following way: EFTA (European Free Trade Association) 22.3% of which:
Norway 10.4%
Finland 7.1% swedeni onene 30 n by BENNY ASMAN EEC 48.0% of which: West Germany 9.8% Britain 13.2% USA/Canada 6.7% Others 23.0% Developments in the two biggest markets for Swedish exports aided in delaying the downturn in Sweden. The ongoing boom in Norway played an important role, which is shown by the fact that in 1975 Norway replaced Britain as Sweden's single biggest export market. And the favorable evolution of the exchange rate in relafion to the German mark helped Swedish capitalists to increase their share of the shrinking British market at the expense of their principal competitors (West Germany, for example). This, along with relative "labor peace, " which inade it possible for the Swedish capitalists to hold strictly to contract delivery dates, gave them yet another advantage over their competitors during the beginning of the recession, another factor that delayed the downturn.
Unionization: 90% of manual workers are members of unions affiliated to the Landsorganisationen (LO - Trade Union Confederation), and more than 50% of salaried employees belong to unions that are members of the TCO (Central Organization of Salaried Employ-
SWEDEN 3. The situation of the internal market has also had an effect. After the rather deep recession on the domestic market in 1971-72 (which was out of phase with the international situation), private consumption increased during late 1973 and throughout 1974; this was reflected in a 4.5% increase in the gross national product in 1974 (compared with a 1.7% increase in 1973). In 1974 only one major branch was hit decisively by the international recession: the wood industry. Some 70% of production in this branch is exported, and beginning in late 1974 the sharp downturn in construction internationally threw this branch into its deepest crisis since 1945. Bourgeois illusions and hard reality By the middle of 1974, all the representatives of industry, as well as bourgeois economists, members of the Social Democratic government, and representatives of the trade unions were asking one big question: Would the international recession end rapidly enough for the Swedish export industries to be able to tough it out until the next upturn or not? Nearly all these people misjudged the international situation. As of autumn 1974 they began predicting an upturn in early 1975. But these predictions (held in common with not a few international pundits) proved to be pure wishful thinking. In fact, the ongoing international recession, with its decline in the absolute figures of world trade, has now hit all the important sectors of Swedish industry, just as the wood industry was hit as long ago as 1974.
The recession has arrived - and much more violently than had been anticipated. This is reflected in many indicators:
BASIC FACTS ABOUT SWEDEN Population (os of 1974): 8, 177,000 Total number employed: 3,900,000 Percentage distribution of employed by sector: Agriculture, forestry, and fishing Mining and manufacturing Construction Trade Transportation Banking and insurance Public administration and other services ees). 4.4 Swedish kroner = US$1.
24
1. Exports declined at an accelerated pace during the first three quarters of 1975. In the first quarter, they were down 7% compared with the first quarter of 1974; the decline in the second quarter was 12%; for the third quarter it was 20%. For the whole of 1975 this will represent a decline of 8-10% in export volume. The depth of the downturn is shown by the fact that this will be the first year since 1952 to register a decline in export volume compared with the preceding year. This will result in a decline of about 3% in industrial production. The growth rate of the GNP will be zero (for the first time since 1951); it is only domestic consumption, which remains rather high, that will prevent the drastic fall in exports from causing an actual decline in the GNP. 2. Signs of this downturn could already be seen of the end of 1974 and the beginning of 1975, when the order stocks of the export industries began to fall. The second quarter of 1975 showed a decline in new orders for all sectors, a decline that has continued drastically. In the middle of November, one-seventh of all metal and engineering companies reported that they were planning to institute short workweeks or retraining programs for their employees. Hopes of hitching onto an international upturn in early 1975, which were reflected in the very small reduction in production and a consequent enormous buildup of inventories, faded away during the spring and summer of 1975 and resulted in a rapid decline of production during the autumn. This will in turn result in increased unemployment during the next three to six months. 3. The varying inflation rates between Sweden and its main trade partners disappeared during the summer of 1975, and the Swedish rate of inflation increased to o yearly rate of 13.9% during the third quarter. This, combined with the drastic fall in sales on foreign mar-
1970 1974 8.1 6.7 28.8 29.6 9.6 7.4 14.4 14.1 6.9 6.8 5.0 5.4 27.2 30.0
kets, forced reconsideration of profit prognoses for the main export industries. Every single one of them had made overly optimistic predictions at the beginning of 1975. This goes both for the well-known companies like SKF, Volvo, Saab, Alfa-Laval, and LME and for the primarily nationally based companies like LAB (iron), ASEA (high-power electrical equipment), SCA (a pulp and paper trust). This is the picture as it appears at the end of autumn 1975, and it is a picture nobody had painted eight months ago. The duration of the generalized international recession finally took its toll and swept away one of the exceptions. The downturn by sector The downturn occurred over a twelve-month period, working its way from sector to sector, with a consequent cumulative effect on the domestic market for investment goods. 1. The wood industry was the first branch to be hit, a result of the big international decline in housing and industrial construction in 1974 and a similar decline domestically. During 1972 and 1973 the prices of wood products were marvellously high for the capitalists; then they tripled. During the winter of 1974-75 production was able to be kept up to levels that were not disastrous because of international speculative stock building, especially in Britain. When this came to a halt, exports to Britain came to a virtual standstill in May 1975. Prices dropped heavily, declining from 600 kroner per cubic meter in September 1974 to 360 kr per cubic meter in September 1975, which is reported to be 80 kr per cubic meter below production costs. Total production will thus fall 30% during 1975, and a large porfion of current production is going into stocks. 2. Raw materials exports (such as iron ore) and semifinished products (pulp, paper, wrapping paper; iror and steel), the traditional backbone of Swedish industry, have also been hit. For raw materials, the decline in incoming orders began during the first quarter of 1975; for the semifinished products industry it began during the second quarter of 1975. Incoming orders for the paper industry in May 1975 were down 60% compared with May 1974, 3. In September 1975 the metal and engineering companies were hit by a very rapid decline in incoming orders from foreign markets; they were also affected by postponements or cancellations of investment plans in the previously mentioned sectors. During the first half of 1975 this sector was still able to register a 3% increase in production compared with the same period of 1974. For the second half of 1975, this will fur into a decline. Since this sector accounts for 43% of total exports, the bottom of the recession has not yet been reached, and this will in tum result in an increase in unemployment in this sector.
SKF
Adlists a la adiCracion del pimes Anions. dariodo la fanta de Solitue y folmala volos poid cala de his olgelicos RODAMIENTOS SIF CHILE S.A. Comparative strength and stability Overall industrial production began to decline only during the second half of 1975, which will probably result in an overal yearly decline of 3%. By international standards, this is a small decline. And from other points of view, it could appear that there is no real recession in the Swedish economy. The rate of unemployment, for example, is low by international standards. As of November, there were about 70,000 unemployed, about 1,7% of the work force registered for unemployment insurance. This figure is not significantly higher than the 1974 figure. And for the whole of 1975, industrial investments will increase in volume by 5-7%. There are several reasons for these apparently paradoxical facts: 1. The situation of the domestic market has partially compensated for the effects of external markets. Private consumption increased 3% during the first half of 1975, with, for example, a 10% increase in automobile sales for the first seven months of the year compared with the corresponding period of 1974. 2. The relatively small decline in industrial production can be explained mainly by the extraordinary buildup in stocks among all branches of export industries. During the first six months of 1975 stocks of industrial products increased by 2,500 million kronor (in 1968 prices), and most of the big export companies are now holding inventories at levels 20% higher than normal. This policy was determined by the hope that an international uptur would be just around the corner and that it would
25
SWEDEN thus be cheaper to go on producing stocks and to avoid laying off workers who might soon be needed again. This practice has been strongly stimulated by another factor, which is the economic policy of the Social Democratic government. 3. For the Social Democrats, it has traditionally been very important to hold down the rate of unemployment. This is one of the major historical merits of the Social Democracy in the eyes of the workers, The Social Democrats have tried to do this by granting direct support to the capitalists, especially in the export sector, This has been combined with big efforts to shift workers away from stagnant sectors, the textile industry for example, and letting such industries meet their fate. During the past year, the troditional battery of subsidies has been augmented by an extra set of subsidies. When all the big companies reported extraordinary profits for 1974, Finance Minister Gunnar Sträng took the wind out of the sails of critics and blunted trade-union demands by proposing a way of "cutting superprofits. " All componies with more than 1 million kr in profits, he proposed, should be forced to set aside 15% of their profits in a special investment fund. Naturally, this plan was hailed by the capitalists, who could avoid paying taxes on that part of their profits and simultaneously add to their liquidity. A big part of this capital was used during the first half of 1975, which helps to explain the still rather high industrial investments for 1975. In October, when definite signs of a downturn in all the major sectors become clear, the government presented a special "support package" to keep employment up. It amounts to a total extra direct support of 2,000 million kr. The bulk of this is divided in the following way: a. 200 million kr in increased support to stock building, plus additional guarantees for bank loans; b, special support to stock building in the wood indus26 try (paying for up to 20% of the stock); c. 250 million kr in lower taxes on energy consumption; d. 140 million kr for energy-saving investments; e. 300 million kr for additional state jobs;
300 million kr for advancing the dates of already planned public investments. As of the autumn of 1975, these three factors have held back the fall in production and the increase in unemployment. But this selective pump-priming was based on the assumption that the international recession would end much sooner than will actually be the case. Thus, when these hopes were dashed, there was a wave of reports (during November and early December) that companies, especially metal and engineering companies, were canceling planned investments in productive copacity and were preparing layoffs. Taking account of the extremely high levels of excess capacity both nationaily and internationally, it seems very unlikely that the optimistic prognosis mode by the Konjunkturinstitutet (Conjuncture Institute) for 1976 — on 11% increase in exports - will be realized. Further, and this is certain, the present high excess copacity in Swedish industry (especially metal and engineering) and the extraordinary large inventories will lead to an almost total lack of increase in productive investments for 1976. The obvious result of the still high domestic consumption and the rapid fall of exports is a large balance of payments deficit. The deficit was 4, 495 million kr in 1974; for 1975 it will be on the order of 9,000 million kr. This figure should be compared with the most pessimistic prognosis that had been made at the beginning of the year: a deficit of 7,000 million kr. For 1976 there will be a further worsening of this deficit, resulting in a total 1974-76 deficit of about 20,000 million kr, Up till now, this deficit has been covered by heavy loans on foreign credit markets.
УОЛУФ A long-term structural problem During the first week of December the finance department presented its "Five-year plan," that is, the progmosis for 1976-80. The central goal is to increase productive investment in the export industries (thus leading to increased exports) and concurrently to hold down the increase in consumption by lowering wage increases and enacting no new social reforms. The balance of payments deficit is supposed to be overcome in this way. In itself, this plan is an irony and constitutes the clearest exposure of Social Democratic rhetoric about controlling the development of the capitalist economy. It is a plan that is almost identical to the one presented in 1970 for the period 1971-75, which set the main goal as eliminating the balance of payments deficit by increasing the competitiveness of the export industries. This plan was so realistic that it ended up producing the biggest balance of payments deficit since 1945. Behind this development Ile some structural problems for the Swedish economy. The government's prognosis is based on two major assumptians: 1. That the copitalists in the export industries are prepared to increase productive investment to counter the deficit in the trade balance; that is, that there will be a sufficiently rapid increase in productivity and a sufFiciently low increase in production costs to create exponding production in Sweden for profitable export for the copitalists; 2. That the workers, both in the export industries and in the home industries, will accept on increase in living standards lower than that to which they are accustomed, Bath these assumptions appear unrealistic, because they do not take account of non-conjunctural trends that undermine them. First, most of the big companies in the export sector are increasing their investments outside Sweden faster than their investments in Sweden. Political uncertainty about he state of foreign markets, however, may slow down
• expansion of this investment. In 1961 direct foreign restments amounted to 150 million kr. They have exceeded 1,000 million kr in every year since 1970. In 974 they reached 2,600 million kr. In 1970 Swedish companies employed 180,000 people outside Sweden. By 1973 this figure had risen to 260,000 among the seenty-five largest foreign investors alone. Of the fifseen largest foreign investors, all except Volvo and
ASEA have more than 50% of their employees outside Sweden. And this development has not been accompanied by an increase in employment in Sweden. On the contrary. The number of workers employed in industrial production has decreased. During the period 1970-73 the total number of hours worked decreased 5% in the manufacturing industries. This trend has been countered by increases in productivity, but these increases have been much lower than those registered during the middle and late 1960s. Second, the possibilities for expanding exports on the world market have been vastly overestimated. The present international recession is seen as a serious but "normal" one, and business is expected to be back to usual soon. In fact, however, the much slower expansion of world trade today compared with the 1950s and 1960s and the resulting sharpening of interimperialist competition will hit both the traditional export products and the specialized metal and engineering products and make rapidly expanding exports less probable. Third, the possibility of holding the increase in imports below the level of exports and of thus eliminating the balance of payments deficit is undermined by the rapidly rising number of people employed in nonproductive sectors, primarily the so-called public sector. The number employed in state and communal apparatuses increased 74% between 1960 and 1970 (From 420,000 to 736, 000); average annual increase during the 1970s has been 43,000. This is to be compared with the decrease of the number of employees in the manufocturing industries (by about 70,000 during 1965-73) and in construction (35,000 during the same period), Obviously, this undermines any fall in the rate of increase of the import of consumer goods, which in fact can be achieved only through a direct attack on the real living standards of the working class. Thus, the prognosis that must be made is that once again the "plans" for the Swedish capitalist economy will fail. Instead, there will be a progressive erosion of the strength of Swedish capitalism in coming years. Neither the prospect of rapidly increasing exports and strengthening the competitive position of Swedish companies on the world market nor the prospect of having the working class occept a much slower increase in living standards is likely to be realized. The very slow progress of industrial production and new productive investment in all the imperialist countries today and the prospect of a slow upturn during the coming six months will render the pump-priming measures and the government support to Swedish industry insufficient. The rate of unemployment will increase rapidly during the coming six months, especially in the metal and engineering industry. The only branch for which there is an immediate prospect for a relatively rapid increase in exports is the wood industry, for construction is beginning to rise in foreign markets. But this will in no way alter the present trend of the economy as a whole. The bottom of the recession in Sweden has yet to be reached.
(a) Figures not strictly comparable due to different bases of calculation.
The current indices of the economic crisis of British imperialism are of great simplicity. Industrial production, having fallen 8% during the post year, is now at a lower level than in 1970, Productivity has fallen 4.4% in one year. Inflation has been running at 26%. Unemployment stands at 1,125, 000(5%); the balance of payments deficit was E3, 660 million last year and is running at a Imperialism's situation as is follows (November): (See Table 1) In short, although the decline in production and the rate of increase in unemployment are slowing up, on virtually every major index the position of British capitalism is the worst in West Europe. But the state of the British economy is such that the figures on inflation, unemployment, industrial production, or the balance of payments are no longer the crucial indices. These are merely the symptoms of a far more profound crisis of profits and of the rate of exploitation, the ramifications of which are felt throughout the enfire organization of the economy. This is what has produced a situation in which, as one of the bourgeoisie's chief theoretical organs, The Economist, put it "During the last two years Britain's financial system has trembled on the brink of collapse. " (November 29, 1975.) It is at this level that the underlying elements of the crisis, and the solutions to it, must be sought.
Industrial Production Prices W. Germany +3% + 4.3% France -2% +10.0% Italy -5% + 8.0% Britain -5% +13.0% Note: Figures for industrial production and prices are monthly, extrapolated over year. 1. THE CRISIS 1. The crisis of profits The chief specific cause of the exceptional severity of the crisis of British imperialism lies in the fact that the British working class has not suffered a qualitative defeat for more than forty years — since the outcome of the crises of 1926 and 1931(1) As a consequence of this, Britich imperialism never achieved the huge increase in the rate of profit that developed in the rest of West Europe and Japan under conditions of fascism and/or Nazi occupation. In the postwar period conditions of full employment, numerical expansion of the proletariat, and development of the organizations and militancy of the working class have prevented any sig-
28