The Swedish state made great efforts to facilitate the acquisition of advanced foreign technology (including through industrial espionage, for a discussion of which see section 2.3.3). However, its emphasis on the accumulation of what the modern literature calls ‘technological capabilities’ was more notable still.[150] In order to encourage technology acquisition, the Swedish government provided stipends and travel grants for studies and research. A Ministry of Education was established in 1809, and primary education had already been made compulsory by the 1840s. The People’s High Schools were established in the’ 1860s, and a six-year period of compulsory education was introduced in 1878. At higher levels, the Swedish state helped the establishment of technological research institutes, the most famous being the Chalmers Institute of Technology in Gothenburg, and provided industry – particularly metallurgy and wood-related industries – with direct research funding.[151]
Swedish economic policy underwent a significant change following the electoral victory of the Socialist Party in 1932 (which since that date has been out of office for less than ten years) and the signing of the ‘historical pact’ between the unions and the employers’ association in 1936 (the Saltsjobaden agreement). The policy regime that emerged after the 1936 pact initially focused on the construction of a system in which the employers would finance a generous welfare state and high investment in return for wage moderation from the union.[152]
After the Second World War, use was made of the regime’s potential for promoting industrial upgrading. In the 1950s and 1960s, the centralized trade union, LO (Landsorganisationen i Sverige) adopted the so-called Rehn-Meidner Plan.[153] This introduced the so-called ‘solidaristic’ wage policy, which explicitly aimed to equalize wages across industries for the same types of workers. It was expected that this would generate pressure on the capitalists in low-wage sectors to upgrade their capital stock or shed labour, while allowing the capitalists in high-wage sectors to retain extra profit and expand faster than would otherwise have been possible. This was complemented by the active-labour-market policy, which provided retraining and relocation support to the workers displaced in this process of industrial upgrading. It is widely accepted that this strategy contributed to Sweden’s successful industrial upgrading in the early postwar years.[154]
Sweden's postwar industrial upgrading strategy based on the combination of solidaristic wage bargaining and active-labour-market policy differs quite considerably from the strategies adopted by other countries discussed here. Despite their differences, both types of strategy are in fact based on similar understandings of how real world economies work. They share the belief that a shift to high value-added activities is crucial for a nation’s prosperity and that, if left to market forces, this shift may not happen at a rate which is socially desirable.
2.2.6. Other Small European Economies
A. Belgium
We have already talked about the dominance of the fifteenth-century wool industry by the Low Countries. The industry, concentrated in what later became Belgium, subsequently went into a relative decline, not least because of the competition from protected British producers. However, Belgium maintained its industrial strengths and was the second nation – after Britain – to start an Industrial Revolution.
By the early nineteenth century Belgium was one of the most industrialized parts of Continental Europe, although it was significantly disadvantaged by its relatively small size and political weakness vis-a-vis France and Germany. At the time it was the world’s technological leader in certain industries, particularly wool manufacturing. Although some of its technological edge had been lost to its competitors by the middle of the nineteenth century, it remained one of the most industrialized and richest countries in the world, specialising in industries like textiles, steel, non-ferrous metals, and chemicals.[155]
Not least because of this technological superiority, Belgium remained one of the less protected economies throughout most of the nineteenth and early twentieth centuries (table 2.1). Hens and Solar argue that the country remained an ‘ardent free trader’, particularly between the 1860s and the First World War.[156]
However, before this period, Belgium was considerably more protectionist than the Netherlands or Switzerland (see below). During the first three-quarters of the eighteenth century, the Austrian government, which then ruled what was later to become Belgium, protected it strongly from British and Dutch competition and invested in industrial infrastructure.[157] During the early nineteenth century it was subject to active ITT policies as part of the United Kingdom of the Netherlands (1815-30) under William I (see below). Moreover, until the 1850s, some industries were quite heavily protected – tariffs reached 30-60 per cent for cotton, woollen and linen yarn, and 85 per cent on iron. Its Corn Law was only abolished in 1850.[158]
B. The Netherlands
During the seventeenth century the Netherlands was the world’s dominant naval and commercial power; during this period, its ‘Golden Century’, the Dutch East India Company outshone even the British East India Company. However, its naval and commercial strength showed a marked decline in the eighteenth century, the so-called ‘Periwig Period’ (Pruikentijd), with its defeat in the 1780 Fourth Anglo-Dutch War symbolically marking the end of its international supremacy.[159]
It is not easy to explain why the Netherlands failed to translate its naval and commercial strengths into industrial and overall economic domination. Part of the reason must have been that it was simply the natural thing to do – when you have a world-class commercial basis like, say, Hong Kong today, why bother about industry? However, the British government exploited similar strengths to the full in developing its industries (for example, it passed various Navigation Acts .that made it compulsory to ship goods in and out of Britain on British vessels). So why did the Netherlands not do the same? That they did not is especially puzzling, given that the Dutch state had not been shy of using aggressive ‘mercantilist’ regulations on navigation, fishing, and international trade when it was trying to establish its commercial supremacy in the sixteenth and early seventeenth centuries.[160]
Many explanations for this have been offered: high wages due to heavy consumption taxes; lack of coal and iron deposits; the decline of entrepreneurship and the rise of a rentier mentality; and conspicuous consumption, to name just a few. Some historians have also suggested that Belgium’s industrial strength was always an obstacle to neighbouring Netherlands’ industrial development.[161] Most interestingly, List suggests that the Netherlands’ relative decline was due to its failure to construct the set of public policies and institutions necessary for industrial development; Wright meanwhile proposes that low tariffs hampered the development of Dutch industries.[162]
151
For pioneering works on ‘technological capabilities’, see Fransman and King 1984; Lall 1992.
152
See Korpi 1983; Pekkarinen et al. 1992; Pontusson 1992. However, Pontusson (1992) points out that the work of the Rationalisation Commission (1936-9) established some principles underlying the so-called ‘active labour market policy’ of the postwar years (pp. 46-7).
159
Boxer 1965, chapter 10. Kindleberger estimates that the Netherlands’ economic strength had peaked by 1730 (1990b, p. 258).
160
Schmoller of the German Historical School provides a brief, but illuminating discussion of the Dutch policies used in order to establish its commercial supremacy - colonial policy, navigation policy, the regulation of the Levant trade and the regulation of the herring and whale fisheries (see Schmoller 1884, esp. pp: 52-3).