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They didn't have the EU's "illegal state rules" stacked against them.

Remember the EU-mandated closure of the Croatian shipyards?

Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010

by Migeru (migeru at eurotrib dot com) on Fri Dec 24th, 2010 at 06:49:22 AM EST
[ Parent ]
On the other hand they didn't have massive EU transfer payments either, even if trade was as free and liberalised as it is today, if not even more (basically I'm talking about something like the 1830-1920 period here).

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Dec 24th, 2010 at 06:53:25 AM EST
[ Parent ]
trade was as free and liberalised as it is today, if not even more

What? No tariffs? No state funding of industry? Free cross-border movement of capital?

Of all the ways of organizing banking, the worst is the one we have today — Mervyn King, 25 October 2010

by Migeru (migeru at eurotrib dot com) on Fri Dec 24th, 2010 at 06:57:17 AM EST
[ Parent ]
And of people too...

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri Dec 24th, 2010 at 10:02:49 AM EST
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Pretty much, yes.

Of course there's a couple of differences too. The most important difference is that Scandinavian economies at the time were not credit economies. Deflation is a problem in a credit economy because it provides unpredictable windfall transfers from debtors to creditors. Deflation in a pre-credit economy isn't much of a problem, because the volume of debtors is not very great, and creditors have already priced in a high default risk.

And indeed the tether to the gold standard involved deflationary periods, and those deflationary periods caused defaults - sometimes even sovereign defaults. But if you have defaults on the same scale (relative to the size of the monetary part of the economy) in a fully monetary economy you'd break it.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Dec 25th, 2010 at 05:11:49 PM EST
[ Parent ]
I can't speak for the other Scandinavian countries, but for Sweden credit played a huge role in the industrialisation, especially from 1890's and forward. Before that local businessmen and local banks were more or less the same thing and had large amounts of co-ownership and insider loans. Due to the social conventions of the time (even after the limited liability corporation was introduced in the 1840's), this was no problem as default was the same thing as social suicide, a horrible almost sinful thing.

But as the 19th century drew to a close, the face of Swedish industry started changing, away from things like textile mills and basic manufacturing. Instead the Swedish economy turned into a raw material play: iron and timber, and then these thing were refined, into steel, pulp and matches. This meant immense capital intensity and start-up costs, which just couldn't be borne by local businessmen/bankers, nor could it be financed with cashflow from existsing companies.

So yes, Sweden was certainly a credit economy already a 100 years ago.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Dec 26th, 2010 at 01:44:34 PM EST
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It is more accurate to say that Sweden (like Denmark) became a credit economy 100 years ago, as part of the process of industrialising. Moreover, most households did not have mortgages on purely residential property even by the end of the period.

If they had started out as a credit economy, in which every business and almost all households had non-negligible liabilities, the deflationary bias inherent in the gold standard would have been a much greater drag on the industrialisation process.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Dec 26th, 2010 at 02:09:29 PM EST
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