This means that the value of the work performed decreased, as did the scope for higher real wages. Table 1. Capital intensity and productivity growth Industry  Business sector  Capital/ employee  Productivity  Capital/ employee  Productivity  1963-70  8.3%  7.6%  6.5%  5.3%  1970-80  6.3%  3.4%  6.2%  3.2%  1980-86  2.8%  3.2%  3.0%  2.0%  Source: Own calculations  The previous diagram also shows that the level of capital formation in relation to our total resources that we had during the 1960s has not returned but that the fluctuations have been larger after the mid 1970s. On average we have remained at approximately one-third of the level of resources that we previously had allocated to new capital. One difference is that saving has increased, but not investment. This means that we are exporting capital. Despite a continuation of relatively low capital formation, the weak trend seen in total Swedish labour productivity in recent years was broken during the first half of the 1990s when productivity growth increased. But it was other factors than capital formation that contributed to this. Among other things, the economic crisis at the beginning of the 1990s led to substantial rationalisation measures and the winding up of low-productivity operations, which resulted in increased productivity growth but also high unemployment. During the same period, there was also a shift in Swedish economic policy in order to create conditions for more sustainable long-term economic growth.
It is also important that economic policy is focused on finding ways to reduce the distortional effects of the tax and benefit system, not least as regards people’s willingness to work and the motivation of entrepreneurs to start up new businesses within all Swedish industries. It is mainly an increase in productivity that lays the foundations for long-term growth. Thus, a fundamental precondition for success is to re-establish a high rate of capital formation and thereby the introduction of new technology. But we do not primarily need to increase saving, since we have a substantial current account surplus. Investment in Sweden could replace capital exports. The evolution of basic industries also demonstrates that investment in R&D has the potential to yield considerable productivity gains and that old industrial sectors do not have to be written off. Therefore, it is important that we do not lose our traditionally successful basic industries and only focus on ICT and biotechnology, not to mention the so-called creative industries. Our basic industries  8  BIS Review 56/2003  have demonstrated their staying power; they have coped with major structural change and are growing steadily. They are also the industries in Swedish business that, compared with their counterparts in other countries, have come furthest in terms of technological level, productivity and innovation. So there is also scope for an expansion of the capital-intensive basic industries. Allow me to conclude by saying that we certainly have the potential to be among the best again.