1  6  Svensk Basindustri , Ds 2001:63 (Basic industries in Sweden, Ds 2001:63)  BIS Review 56/2003  Figure 2. Capital stock per employee  M a n u fa c tu rin g  300  300  P a p e r a n d p u lp M e ta l w o rk s a n d m e ta l p ro d u c t in d u s try  250  250  1993  1991  1989  1987  1985  1983  0 1981  0 1979  50  1977  50  1975  100  1973  100  1971  150  1969  150  1967  200  1965  200  1963  SEK million  M in in g  Sources: Statistics Sweden and the Riksbank  So basic industries in Sweden have undergone the necessary adjustment to a modern structure and have subsequently performed very well in relation to international competitors. The contrast is striking compared with the rusting steel-industry and the problem-ridden forestry industry in the United States where attempts have been made to circumvent the necessary adjustment by way of import tariffs. While Swedish industry as a whole lost just under 20 per cent of its world market shares in relation to other OECD countries between 1970 and 1990, basic industries recovered towards the end of the 1980s.
As we know, demand and growth have been high there for many years without inflation accelerating. Demand has been stimulated by high share prices and the private sector’s financial balance has decreased markedly. The strong credit expansion that preceded the bank crises in Sweden at the beginning of the 1990s took place at the same time as a strong increase in private consumption and investments, which led to an increasing deficit in the balance of trade, considerable overheating and high inflation in the Swedish economy. It is reasonable to assume that a large expansion in credit would create inflationary pressure now as well that would motivate restrictions in monetary policy. In this way, the credit expansion should be dampened and the risk for problems in the bank system reduced. On the other hand, it cannot be excluded that situations will arise with strong credit expansion, for instance based on increasing asset prices without an increase in inflation being anticipated. Strong international competition combined with low, stable inflation expectations could possibly mean that inflation would not accelerate despite increased use of resources. It is also possible to conceive of situations with a credit expansion driven by high turnover on the asset markets. It is thus far from self-evident that a monetary policy based on stable prices would automatically be a guarantee against financial crises. These are questions to which there are no certain answers although they are discussed and investigated internationally as well as in Sweden.