7 Swedish economic growth in an international perspective

This paper analyses the growth of production and income in Swe-den in comparison to other OECD countries since 1970. It starts by discussing the nature of economic growth, its measurement and the problems associated with various measurements. While Sweden’s economy was growing faster than nearly all other presently developed countries during the 1870-1970 period, the reverse has been the case after 1970. Measured in constant domestic prices, Sweden’s annual GDP growth rate per capita was 1.3 per cent per year during the pe-riod 1970-98 as compared to the OECD average of 1.8 per cent. The lag is larger if we measure GDP in constant international prices (PPP-adjusted GDP). One reason is that Sweden experienced a successive term-of-trade deterioration of about 30 per cent during the 1970s and 1980s. As a result, Sweden fell from its position as the fourth richest nation among the OECD countries in 1970 to the bottom one-third of the group. For real disposable household income, the lag has been even larger. The lag in real disposable household income is not compen-sated by a more rapid increase in (statistically recorded) public-sector consumption during the 1970-1998 period. The paper also discusses alternative or complementary explana-tions for the relatively slow growth in Sweden after about 1970. I hy-pothesise that the poor growth record is related to the pronounced centralisation of the economic system in Sweden in the late 1960s and early 1970s. If this is a realistic explanation, the future growth pros-pects for Sweden should be considerably brighter due to recent liber-alisation in the regulatory framework and reforms in the tax and wel-fare-state systems