Structural Changes during the Financial Crisis
– a Survey
This report analyzes the structural changes in the Swedish economy during the period 2000–2011, focusing on the effects of the financial crisis of 2008–2009. This delimitation precludes a deeper analysis of the potential secondary effects of the financial crisis that might permeate the global economy but are yet fully to reach that of Sweden.
The analysis is broad and focuses on a number of different structural dimensions. The financial crisis led to one of the deepest recessions ever experienced by the Swedish economy. Industrial production took the brunt of the decline, while exports and investments also dropped sharply. The crisis was relatively short-lived, however, and the Swedish economy grew rapidly in 2010. Despite the financial crisis leading to a deep fall in GDP, domestic demand – both private and public – was not adversely affected.
The recent financial crisis shows much similarity to that of the early 1930s, with one exception: a lower rise in unemployment. This can be explained by labor-intensive industries in both private and public service provision being less severely affected by the crisis, reinforcing the image of a crisis generated by international factors.
The manufacturing sector was greatly affected, with the volume of industrial production lower in 2011 than pre-crisis, despite a rapid recovery. The sector had been showing signs of reduced importance for the Swedish economy even before the crisis. The report discusses this development, and raises a number of objections to the apprehension of manufacturing’s declining importance. Some methodological issues are also discussed concerning how one should measure industrial development. If constant prices are used instead of current prices, for example, manufacturing’s share of GDP increases somewhat. This indicates that prices for manufacturing industry have developed less strongly than prices for the rest of the economy.
Effects of outsourcing are also discussed, together with how this might affect employment in manufacturing. One of the fastest-growing industries during this period was the private health care and education sector. This industry is largely financed by public funds, and one can see that public consumption has grown faster than public production. This means that some growth of private services is attributable to institutional changes rather than to a real shift among different types of production/consumption patterns.
Throughout the period 2000–2011, the Swedish economy experienced a historically high level of trade surplus in relation to GDP. The Swedish economy can therefore be seen in an international context of imbalances in which some countries have shown a steady trade surplus while others have shown a deficit. An important issue for the future is thus how these trade imbalances will evolve and how the Swedish economy might cope with a potential shift from export-led growth to increased reliance on domestic demand.