Swedish Economists in the 1930s Debate on Economic Planning

Benny Carlson

• Publisher: Palgrave Pivot
• Year: 2018
• ISBN:
  9783030037000
• Topic: Economics
• Subtopic: Economic History
• Index: Economics

The 1930s, characterised by repercussions from World War I and the Great Depression, was an era of populism, nationalism, protectionism, government intervention and attempts to create planned economies. The perceived need for economic planning emerged in Sweden in part due tothe increasing political strength of the Social Democratsand their evolution from a party hampered by Marxist fatalism to a pragmaticmass movement. The Swedish debate continued beyond World War II and is still relevant to today's economic crises, which have resulted in a demand for action coming from below (populism) and above (elitism).

Carlson surveys the arguments for and against economic planning as they were put forward by leading Swedish economists in the 1930s, with a focus on the thoughts ofGustav Cassel, Eli Heckscher, Gösta Bagge, Gunnar Myrdal and Bertil Ohlin, among others. In so doing he provides a timely exploration of the debate on the necessary and desirable extentof state intervention in market economies.

© The Editor(s) (if applicable) and The Author(s), under exclusive licence to Springer Nature Switzerland AG 2018

Benny CarlsonSwedish Economists in the 1930s Debate on Economic PlanningPalgrave Studies in Economic Historyhttps://doi.org/10.1007/978-3-030-03700-0_1

Begin Abstract

1. Introduction

Benny Carlson¹

(1)

Lund University, Lund, Sweden

Benny Carlson

Email: [email protected]

Abstract

In times of crisis, demand for government action in general and economic planning in particular is sure to surge. The interwar era is a classic example. After the outbreak of the Great Depression in 1929, demand for planning—in contrast to capitalist market “anarchy”—was voiced in many quarters. And not only voiced. The 1930s was an era of populism, nationalism, protectionism, government intervention and attempts to create planned economies. With the Great Recession of 2008, structural change due to globalization, waves of migration and impending climate change, a new era of populism, nationalism, protectionism and demand for planning has begun. The ambition of this book is to survey the arguments for and against economic planning as they were put forward by leading Swedish economists in the 1930s and to put these arguments into a context of events and inspirational sources. Developments in Sweden were, according to political scientist Leif Lewin’s classic exposition of the debate on economic planning in Sweden, “something extraordinary also from an international perspective”.

Keywords

Economic planning1930sGreat DepressionGreat RecessionSwedish economists

End Abstract

Why, When, What, How?

In times of crisis, demand for government action in general and central planning in particular is sure to surge. The interwar era is a classic example. After the outbreak of the Great Depression in 1929, demand for economic planning—in contrast to capitalist market “anarchy”—was voiced in many countries. And not only voiced. The 1930s was an era of populism, nationalism, protectionism, government intervention and attempts to create planned economies. To some extent, the planning ideas were based on experiences from (not always successful) economic mobilization during World War I.

After World War II, the debate on economic planning resurged. This time, the impulse came not from an actual crisis, but from fear of a post-war depression like the one after World War I, and from (fairly successful) economic mobilization during the war. However, this thrust for planning pretty much stalled when the crisis refused to appear and when Keynesian crisis management overtook the scene.

After some “golden” decades, characterized by robust economic growth, crisis symptoms reappeared in the 1970s, this time in the shape of runaway oil prices and stagflation. Now the diagnosis of what was wrong went in the opposite direction: sclerosis due to heavy taxes and regulation. Keynesian policies gave way to monetarism and supply-side economics. With the downfall of the Soviet empire, ideas of economic planning seemed to belong to the past. Sweden at the same time experienced a largely home-made crisis, but since both state (expanding public expenditure) and market (a deregulated credit market) could be blamed, no distinct ideological overturn occurred.¹

With the Great Recession of 2008, structural change due to globalization, waves of migration and impending climate change, the tide turned again. A new era of populism, nationalism, protectionist threats and demand for planning began. Soviet style planning was out of the picture, but planning advocates had a new “role model” in sight. How come Chinese “state capitalism” could achieve such high rates of growth, construct so much infrastructure and (plan to) tackle environmental challenges?

At all times, the notion of economic planning or planned economy has triggered ado. “The whole subject remains highly controversial, and ideologies of both left and right heavily influence both policies and theoretical formulations”.² “The term ‘planning’ often stirs emotions”.³ What then is economic planning? A straightforward definition is “the allocation of resources by means other than markets”. “For academic economists, including those involved in the debates of the 1930s, this definition is the usual one and uncontroversial”.⁴

A recurring pattern during economic and other upheavals is demand for action coming from below (populism) and above (elitism). As Sheri Berman puts it, these two demands feed of another: “As should by now be painfully clear, technocracy and populism are mutually reinforcing; they feed of and strengthen one another”.⁵ They can be seen as “evil political twins”.⁶ At the end of the day, these two seemingly opposite currents tend to merge. With populism, the frustrated masses serve as a springboard for authoritarian leaders. With elitism, the ignorant masses are to be excluded from political decision-making in favour of enlightened technocrats.⁷ In both cases, top-down economic policies with restrained democratic deliberation will result. A market economy may prevail, in some cases (like in today’s United States) even get more leeway, but political democracy will be suppressed since it is associated with either too much talk and too little action (populism) or popular ignorance (elitism) and might obstruct unequivocal commands from above. The major difference is that in the first case, people abdicate from their democratic rights voluntarily—they might, in the worst case, move into a state of “acclamatory democracy” (with a strong man ranting from a tribune surrounded by a hysterical crowd)—whereas in the second case, people will probably try to revolt. In the first case, the leader(s) will often be ignorant and in the second case, knowledgeable. In both cases, they will inevitably, as time goes by, be corrupt.

The ambition of this book is to survey the arguments for and against economic planning as they were put forward by leading Swedish economists in the 1930s and to put these arguments into a context of events and inspirational sources.⁸ The choice of time period is motivated by the fact that this was the first extensive Swedish debate on economic planning—most arguments were repeated in the 1940s and by then, the Swedish debate was heavily influenced by arguments from abroad, particularly by Friedrich von Hayek’s The Road to Serfdom (1944)⁹—and that it unfolded during and after a Great Depression; it thus seems relevant in comparison to our own time, in the aftermath of a Great Recession.¹⁰ The choice of leading economists as key players is motivated by a desire to intercept stringent arguments and by the fact that I am myself an economic historian.

The Swedish debate on economic planning began in the mid-1920s, took off in 1930, culminated in 1934 and then gradually receded. This can be illustrated by a graph (Fig. 1.1) displaying the number of mentions of the word planned economy (in Swedish: planhushållning) in the database of digitized Swedish newspapers provided by the Swedish Royal Library.¹¹

Fig. 1.1

The word “planhushållning” in Swedish newspapers 1929–1939

(Source https://​tidningar.​kb.​se [August 12, 2018])

The ambitions and limitations of the book can furthermore be stated as follows:

Firstly, this field of study requires considerable delimitations. One must focus upon certain features of central and long-term planning and—to make things simple—upon contexts where the terms economic planning or planned economy (planhushållning) are actually used. One cannot plunge into all kinds of policy debates on fiscal, monetary, social, agricultural, trade, crisis and unemployment policies, to name a few. Now, these delimitations are not always clear-cut. In particular, crisis/business cycle/unemployment policy is sometimes difficult to separate from economic planning, especially since Keynesian ideas first inspired and later somewhat eclipsed planning ambitions. However, one cannot, without deviating from the main theme, go into deep discussions of “Keynesianism” (countercyclical or full employment policies), which, just like the debate on economic planning, took place between older market liberal and younger state interventionist economists.¹²

Secondly, the Swedish debate must be put into a context of events and debates abroad. When glancing in different directions, one must draw a line between pure socialist/communist planning—where state ownership of the means of production and central planning go hand in hand—and economic planning in market (or rather, mixed) economies. For this reason, I will try to stay away from discussions of socialism in general, which is tricky when planning represents one side of the socialist coin, and from the vast literature on Soviet style planning. This kind of planning, of course, to some extent, served as a source of inspiration for socialists in Western countries like Sweden, but not for Swedish economists.¹³ The impetus in the Swedish debate on economic planning came mainly from Britain and the United State...

Table of contents

• Cover
• Front Matter
• 1. Introduction
• 2. The International Context
• 3. The Swedish Economists
• 4. Economists in the Swedish Debate
• 5. Summary and Conclusions
• Back Matter