Are there differences between Europe and the United States that may have a bearing on the pace with which new technology is introduced? And what part does EMU play in this context? One important factor in the process of industrialisation in the late nineteenth century, when Sweden was transformed from poor country into a wealthy nation with almost the world’s highest growth rate, was the contemporary development of the financial system. Banks were established and financial know-how grew when interest controls had been abolished. As a result, inventions could be exploited and investment in the nascent industries could be financed. A mounting body of research findings published in the 1990s indicates that economic growth in various countries is appreciably affected by how the financial system works: the more highly-developed the financial system, the greater the stimulus to economic growth. An accessible banking system and efficient financial markets contribute to the development of investment and thereby to the economy’s growth trend. One conceivable reason why the US economy is being transformed more rapidly than is the case with Sweden and, even more so, the European Community, is the efficiency with which the US financial system works. Corporate financing may well be facilitated by the breadth and liquidity of diverse financial markets. 3  BIS Review 129/1999  With the rapid development of information technology, moreover, a new type of company has emerged. It differs from the traditional pattern in that its operations involve highly mobile human capital.
In an attempt to maintain growth in the traditional industries, economic policy responded with a series of devaluations. Each devaluation was invariably said to be the final one but the cycle of rising wage  BIS Review 129/1999  2  costs and a devaluation was still repeated again and again. The aim of compensating for the lack of change in Sweden’s corporate sector, which stemmed from the 1960s, simply did not work. If anything, the devaluations meant that the problems persisted and were accentuated. With the lack of investment in new products and the dependence on an increasingly outmoded structure of production, the entire nation’s material standard had to be adjusted. For many years, growth in Sweden was weaker than in the world around us. This example shows how a “new economy” at that time posed problems for the Swedish economy rather than opportunities. The lack of change, because wage formation did not function properly, resulted in an economy that was weaker and more susceptible to inflation. The period clearly illustrates how globalisation, increased competition and new technology can lead to lower growth and higher inflation if changes are not made sufficiently quickly. If the economy is under pressure from strong competition as well as poorly functioning wage formation, economic renewal may lag behind. It is therefore gratifying that the labour market organisations seem to be increasingly in favour of the inflation target policy.