About 90 percent of Swedes earn their living in agriculture. Consolidation of farmland convinces many to emigrate, mainly to North America. More than one million out of a population of five million leave in the late 19th and early 20th centuries. Sweden remains neutral during World War I, and the country prospers as export industries develop around its plentiful supplies of iron ore and wood.
Industrial development continues, and the labor movement grows apace. The Social Democrats enter government. The party will become dominant; it has strong ties to labor, with support among blue-collar workers and public-sector employees. Women gain the right to vote in 1921, and parliamentary government takes firm hold. Sweden is a constitutional monarchy, with the king's powers largely symbolic.
Sweden weathers the Great Depression relatively well, in part due to a 1931 devaluation of the krona, which boosts exports. The country's famed social welfare system has its roots in the late 19th century, and when Social Democrats take power in 1932, more extensive plans are formed. With a break of only a few months in 1936, the Social Democrats will hold power for 44 years.
As World War II begins, Sweden declares neutrality. By 1940, Finland and Norway are occupied by Germany, and Sweden struggles to maintain its status. It allows some movement of German troops and exports iron ore to Germany, yet also accepts refugees from neighboring countries. In the last years of the war, Swedish diplomat Raoul Wallenberg and others rescue thousands of Hungarian Jews.
An economic boom follows the war. Sweden, with its rich mining and forestry industries, plentiful hydropower, and long exports tradition, is in position to take advantage of European rebuilding. The social welfare system grows under Social Democratic Prime Minister Tage Erlander, who remains in office 20 years. Laws establishing a national basic pension and national child allowance pass in 1947.
"The Swedish model" -- a market economy coexisting with a universal and compulsory social welfare system -- becomes the envy of many. The country is second only to Japan in growth of per capita income, and social programs that include pensions and child and housing allowances grow just as quickly. To pay for such programs, Swedish taxes and employer payroll fees are among the highest in Europe.
GDP continues to grow, reaching 4.6 percent during the '60s. Engineering and technology sectors gain importance. The state considers adding parental leave insurance and state-supported child care, and does so in the early '70s. Tage Erlander resigns in 1969, and Olof Palme becomes prime minister. In 1971 Sweden rejects membership in the European Community as incompatible with neutrality.
A steep rise in oil prices and resulting global slowdown hurts export-dependent Sweden. The government offers subsidies to industry in an effort to stave off unemployment, but the dramatic rise in living standards that marked the '50s and '60s slows. In 1974, after years of discussion, Sweden makes parliamentary democracy with a ceremonial monarchy the clear system of government.
Facing economic stagnation, the Social Democratic government resigns. For the first time in 40 years a non-socialist coalition rules. It repeatedly devalues the krona, which improves competitiveness only temporarily. Concern over rising unemployment and budget deficits as well as a split over nuclear energy bring the Social Democrats, and Olof Palme as prime minister, back to power in 1982.
A rebound in international business helps Sweden balance its budget and further expand the public sector. In 1986 the country is stunned when Olof Palme is assassinated; his killer remains unknown. Palme's successor, Ingvar Carlsson, continues his policies. Economic growth is on par with the rest of Europe, but prices and wages rise faster in Sweden, and unemployment is relatively low.
Global recession hits Sweden especially hard. Between 1990 and '93 GDP drops 5 percent, and the number of jobs falls almost 10 percent. One of every four industrial jobs dries up. The '91 elections bring a non-socialist coalition to power, with Carl Bildt as prime minister. The economy does not immediately respond to his efforts to cut taxes, curb public spending, and encourage private enterprise.
Social Democrats win the 1994 elections. The government institutes tax increases and spending cuts. In a referendum in November 1994, a scant 52.3 percent of voters choose European Union membership. On January 1, 1995, Sweden joins the EU, but membership remains controversial. In 1997 the government declines to join the Economic and Monetary Union, and will not immediately adopt the euro.
Spending cuts trim social programs. In the 1998 elections, the Social Democrats retain power in a coalition but post their weakest showing ever, losing support to the former Communists. Despite cutbacks, the public sector employs about a third of workers; 87 percent of the labor force is unionized. The technology sector booms. The government works toward tax reform, attempting to lower tax rates.
Unemployment falls to about 4 percent, inflation is low, and the budget runs a surplus. But the global economic slowdown affects Sweden's important high-tech sector. The International Monetary Fund advocates reducing taxation and public spending. Prime Minister Goran Persson is reelected in 2002 with a minority coalition. He announces a referendum on joining the European single currency, the euro.
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