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Response to Review of An Economic History of Modern Sweden

I find the review very insightful, relevant and well done, so I am happy to accept it.

The reviewer raises one general question that I could have dealt with more at length, namely the relationship between development in economic thought and the wider economic transformation in crucial periods, especially in the 1930s. This is of course particularly relevant in Sweden with the contemporaneousness and obvious similarities between Keynesian economics and the Stockholm School of Economics, both having an impact upon Swedish economic policy over the next decades.

Going at length into this question might have distracted the discourse of the book somewhat, though, but the question raises clearly very important perspectives on thoughts, paradigms and structural changes. It is both specific to the inter-war period in Sweden and more generally relevant to recurrent events globally.

To the first question, why the Stockholm School appeared so vigorously in Sweden, one has to go back to the developments after the First World War in the 1920s. For the first time, a Swedish money market arose due to a reverse of capital flows during the war, while at the same time industrial dynamics was strong in Sweden. Suddenly, Swedish economic theorists entered the international scene with names such as Wicksell, Bagge, Heckscher, Ohlin etc, covering a rather great span of thought,with some profound differences between them. Orthodoxy still reigned both in economic thought and in politics but there were important currents beneath the surface within the group of Stockholm economists, and particularly of course within the Social Democratic Party. With the open crisis in the early 1930s, these currents lifted in a paradigmatic shift behind economic policy – although it is clear that the short term effect of the new economic policy upon the recovery out of crisis was weak.  

This shift took place of course in many other countries, but the interplay (which is the focus of my book) between industrial dynamics, institutional change with the Swedish model and economic policy/economic thought was probably stronger and more remarked upon in Sweden than anywhere else.

One can even draw more general conclusions from the long-term perspective of the (roughly) 40-year structural cycles that I have identified in Swedish development, as reflecting mainly global development. A similar development took place internationally, with much weaker Swedish participation though, during the structural crisis of the 1970s when the monetarist undercurrent of the 1960s came to the surface. And now, in the global structural crisis of the early 2010s, the orthodoxy of economic theory is under heavy fire again.

The relationship between economic thought, crisis and structural change is certainly a field worth exploring more deeply, beyond modern Swedish economic history.