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Banking and Economic Growth in Sweden before World War I

Published online by Cambridge University Press:  11 May 2010

Lars G. Sandberg
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Extract

The article sketches the history of Swedish commercial banking from 1656 until World War I, with special attention to the post-1850 period. Emphasis is placed on the relationships between economic growth and banking. International comparisons based on the quantitative measures developed by Rondo Cameron and Raymond Goldsmith are made. It is concluded that at all stages of its early industrialization Sweden had a remarkably large and efficient banking system. This, in turn, was largely the result of the general population's long experience with banking and paper money and their generally high levels of literacy and education.

Type
Articles
Information
The Journal of Economic History , Volume 38 , Issue 3 , September 1978 , pp. 650 - 680
Copyright
Copyright © The Economic History Association 1978

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References

1 Cameron, Rondo et al., Banking in the Early Stages of Industrialization (New York, 1967)Google Scholar; Cameron, Rondo, ed., Banking and Economic Development (New York, 1972)Google Scholar; Tilly, Richard H., Financial Institutions and Industrialization in the Rhineland, 1815–1870 (Madison, 1966)Google Scholar; Rudolph, Richard, Banking and Industrialization in Austria-Hungary (Cambridge, 1976)CrossRefGoogle Scholar; Tortella-Casares, Gabriel, Los origenes del capitalismo en Espana (Madrid, 1973)Google Scholar.

2 In this paper, “banking” and “commercial banking” are used interchangeably.

3 Furthermore, the extensive Swedish literature on the subject is virtually devoid of international comparisons. Recent Swedish work consists almost entirely of individual bank histories. See Gasslander, Olle, History of Stockholms Enskilda Bank to 1914 (Stockholm, 1962)Google Scholar; Soderlund, Ernst, Skandinaviska Banken, 1864–1914 (Stockholm, 1964)Google Scholar; and Hildebrand, Karl-Gustav, I omvandlingens tjanst (Stockholm, 1971)Google Scholar.

4 The Union with Norway (1814–1905) was a personal one and the two countries remained essentially separate.

5 Carlsson, Sten. Soensk historic II (Stockholm, 1961), pp. 33–35Google Scholar

6 Ibid., p. 40

7 Ibid., pp. 78–79 and Samuelsspn, Kurt, From Great Power to Welfare State (London, 1968), p. 146Google Scholar

8 , Carlssoh, Svensk historia, pp. 454–62Google Scholar.

9 This conclusion also depends on the extent to which emigrants continued to support dependents left behind.

10 See Table 1 and Cole, W. A. and Deane, Phyllis, “The Growth of National Incomes,” in Habakkuk, H. J. and Postan, M. M., eds., The Cambridge Economic History of Europe, Vol. VI, Part I (Cambridge, 1965), p. 26Google Scholar.

11 Jorberg, Lennart, “Structural Change and Economic Growth: Sweden in the Nineteenth Century,” in Crouzet, Francois, Chaloner, William, and Stern, William, eds., Essays in European Economic History (London, 1969), p. 276Google Scholar.

12 Gardlund, Torsten, Svensk industrifinansering under genombrottsskedet, 1830–1913 (Stockholm, 1947), pp. 123–26Google Scholar.

13 , Jörberg, “Structural Change,” pp. 267–68.Google ScholarSee also Samuelsson, Kurt, Det stora köpmanshusen i Stockholm, 1720–1815 (Stockholm, 1951), esp. pp. 196–97Google Scholar.

14 Sundbom, Ingvar, “Sveriges kapitalimport fran Frankrike, 1870–1914,” in Studier i ekonomi och historia (Uppsala, 1944), p. 232Google Scholar.

15 These individuals and partnerships are very similar to what are called private bankers in the Cameronian studies of other countries.

16 , Gårdlund, Svensk industrifinansering, ch. 4Google Scholar

17 Ibid., ch. 6

18 For a broader theoretical and empirical discussion of this question, see my paper, “The Case of the Impoverished Sophisticate: Swedish Industrialization Before World War I, ” forthcoming in this JOURNAL, 39 (03 1979)Google Scholar

19 Brisman, Sven, Sveriges affarsbanker, Del I (Stockholm, 1924), p. 224Google Scholar; and , Soderlund, Skandinaviska Banken, pp. 84–89Google Scholar

20 Flux, Alfred, The Swedish Banking System (Washington, 1910), pp. 13–17Google Scholar; and , Samuelsson, From Great Power, p. 11Google Scholar.

21 , Flux, Swedish Banking, pp. 18, 22–23, 27–28Google Scholar.

22 Brisman, Sven, Vet moderna affdrsbankerna (Stockholm, 1915), pp. 18–19Google Scholar.

23 , Gårdlund, Svensk industrifinansering, pp. 65, 69–70Google Scholar.

24 , Flux, Swedish Banking, pp. 21–26Google Scholar.

25 Ibid., pp. 26–27.

26 , Brisman, Del I, p. 93Google Scholar.

27 , Flux, Sivedish Banking, pp. 30–31Google Scholar.

28 Ibid., p. 35.

29 Ibid., p. 32.

30 See Jaffe, Dwight and Russell, Thomas, “Imperfect Information, Uncertainty and Credit Rationing,” Quarterly Journal of Economics, 90 (11. 1976), 651–66CrossRefGoogle Scholar.

31 , Gårdlund, Svensk industrifinansering, pp. 83–84Google Scholar.

32 , Soderlund, Skandinaviska Banken, p. 187Google Scholar.

33 In the absence of economies of scale or barriers to entry, none of the benefits would have accrued to the bank stockholders.

34 , Flux, Swedish Banking, pp. 45–48Google Scholar.

35 Nygren, Ingemar, “Aspekter på Norrländsk kapitalmarknad, 1870–1905,” mimeo., pp. 8–9Google Scholar.

36 Ibid., pp. 44, 47, 49.

37 , Gasslander, History of Stockholms, p. 187Google Scholar.

38 , Söderlund, Skandinaviska Banken, pp. 307–11Google Scholar.

39 , Flux, Swedish Banking, pp. 72–73Google Scholar.

40 , Gasslander, History of StockholmsGoogle Scholar.

41 Cameron, Rondo, France and the Economic Development of Europe, 1800–1914 (Princeton and London, 1961), p. 491Google Scholar; , Hildebrand, I omvandlingens, pp. 79–83;Google Scholarand , Soderlund, Skan-dinaviska Banken, pp. 302–04Google Scholar.

42 , Gårdlund, Svensk industrifinansering, p. 75Google Scholar.

43 Ibid., pp. 160–61, and , Soderlund, Skandinaviska Banken, pp. 299–300Google Scholar.

44 , Gasslander, History of Stockholms, p. 29Google Scholar.

45 Ibid., p. 614. Marcus Wallenberg's most valuable talent seems to have been his ability to recognize outstanding talent and ruthlessly to replace those who failed to meet his high standards. Friendship and kinship counted for nothing in the absence of talent. See Gårdlund, Torsten, Marcus Wallenberg (Stockholm, 1976)Google Scholar.

46 See Sbderlund, Skandinaviska Banken, and Hildebrand, omvandlingens.

47 , Hildebrand, 1 omvandlingens, pp. 54–61Google Scholar.

48 , Gasslander, History of Stockhohns, p. 613Google Scholar.

49 Gerschenkron, Alexander, Economic Backwardness in Historical Perspective (Cambridge, Mass., 1962), ch. 1Google Scholar.

50 Gerschenkron also recognizes a supply side effect when he argues that some countries (e.g., Russia) were too backward to develop efficient, non-state banking systems. The point I am making, however, is that a country may be much less backward in one sense than in another, and that the usefulness of the relative backwardness concept is reduced if a single composite index of backwardness is allowed to obscure such differences.

51 The only useful result of government regulation was a decrease in the public's fear of bank failure. See , Gårdlund, Svensk industrifinansering, pp. 161–62Google Scholar.

52 , Flux, Swedish Banking, p. 91Google Scholar.

53 Brisman, Sven, Sveriges affarsbanker, Del II (Stockholm, 1934), pp. 134–38Google Scholar.

54 , Cameron, Early Stages, p. 297Google Scholar.

55 Ibid., pp. 297–98.

56 , Rudolph, Banking and Industrialization, p. 190. In this case, the numbers may be exaggerated by the provision of bank services to the entire empire by the Viennese banks, especially the official Austro-Hungarian bankGoogle Scholar.

57 , Cameron, Early Stages, pp. 307–08Google Scholar.

58 Ibid., pp. 293, 295, 313.

59 Ibid., p. 320.

60 Goldsmith, Raymond, Financial Structure and Development (New Haven, 1969)Google Scholar.

61 Ikle, Max, Switzerland: An International Banking and Finance Center (Stroudsburg, 1972), ch. 1Google Scholar.

62 In 1913, the ratio of time deposits in commercial banks to the sum of those deposits and the assets of savings banks was 61 in Sweden but only 42 in Norway and 34 in Denmark. Including mortgage bank assets would further increase these differences.