Cycling through Swedish Economic History. Structural Transformation, Economic Growth and Technological Change in the Swedish Economy, 1870–1990
This article assesses the structural transformation perspective on macro-economic change, which dominates the literature on economic change in Sweden in the period 1870 to 1990. The so-called structural analytical school assumes a repetitive cycle of structural change, structural rationalisation and structural crisis, henceforth referred to as ”the hypothesis of structural transformation”, or HOST.
According to the hypothesis, cycles of structural transformation lasts approximately 40 years and resemble Kondratieff waves with respect to their duration and the importance of the diffusion of general-purpose technologies, or GPT. The diffusion of a new GPT gives rise to structural change as the factors of production are concentrated in the new economic sector whereas the old ones stagnate or decline. This is a process of approximately 20 years duration. In the next stage, also lasting about 20 years, the new economic sector is further rationalised as production factors are concentrated in the most efficient industries within the new economic sector. As this stage draws to a close, increasing overproduction occurs, leading to a structural crisis and pressure for new change. For a while, the crisis is held off by a shift of production to the export market and by the actions of diverse ”vested interests”. Eventually, however, the pressure for change mounts to the point where the old economic structure breaks down, clearing the way for a new cycle of structural transformation.
Despite its dominance, there are several reasons why HOST is problematic. From the perspective of standard economic theory it may be noted that crises do not serve as a catalyst for structural change in economic theory, nor is the concept of ”vested interests” in its present shape clearly compatible with mainstream theory. But HOST is also problematic from an empirical perspective. Strict testing of the HOST chronology is in fact not possible and there is also the possibility that the chronology has been built into the data-set on which the hypothesis rests.
On the basis of a critical assessment of HOST, the article provides an investigation of structural change of the Swedish economy that identifies a sequence of periods with different characteristics instead of a series of repetitive cycles. The main point of the article, however, is not so much to criticise HOST as to call for more debate on macro-economic interpretations in Swedish economic history.
2004. Vol. 124, no 4, 561-580 p.