Ericsson in the struggle against depopulation

Sweden, 1969, the PM tries the picture phone

When the major wave of decentralization began in the 1960s, a state location policy had been developed in Sweden, which was aimed at stopping the depopulation of the areas based on forestry and agriculture, particularly in the north of Sweden. The authorities used a number of instruments to achieve this aim, providing in particular stimulation for industrial investments.

Building regulations were no longer being applied and instead, the primary measure was to offer various kinds of relief for the companies' acquisition of capital. There were beneficial state loans or pure capital subsidies, but particular use was made of the newly created investment funds.

Since 1955, Swedish companies had had the right to make tax-free allocations in special funds, part of which had to be placed in blocked accounts with the Bank of Sweden. The companies could only make use of these investment funds after receiving permission from the government, which was able to use this authority to influence the economy as a whole and also to direct the corporate investments to special support areas.

From the beginning of the 1960s, Ericsson reached a series of agreements with the Swedish Finance Ministry and the National Labor Market Board, which resulted in the company receiving authorization to invest in its main plants on condition that efforts were also made in areas where the authorities wanted to create jobs. It is difficult to find a more brilliant example of the way in which the Swedish mixed economy functioned during the peak of the "Swedish model" than the package brokered in conjunction with these investments. In 1964 and 1965, for example, Ericsson needed to increase its Swedish production capacity. Since the economy was buoyant, it was difficult to find labor in southern and central Sweden, but certain investments there were more or less urgent, including central warehouses in the vicinity of Stockholm and in the Mölndal plant.

Rube Johansson, the Minister for the Interior, and Bertil Olsson, the head of the National Labor Market Board, visited Ericsson in September 1964 and stressed the desirability of industrial investment in Norrland, in view of the high levels of unemployment there. At Ericsson, an investment plan was prepared, which Björn Lundvall, Hans Werthén and Hugo Lindberg presented when they called on Gunnar Sträng, the Minister of Finance. The plan was based on Ericsson receiving almost 50 percent in government grants to construct two plants in Norrland, including one in Norrbotten, at a cost of SEK 5 M each. In addition, the company wanted to have SEK 35 M from its investment fund at its disposal for investments in the other parts of Sweden.

Sträng disliked the linking of state contributions and the investment funds, but when he later visited Midsommarkransen, an agreement was reached that Ericsson would be permitted to use SEK 50 M from its investment fund on condition that it made total investments of SEK 67 M. Of this sum, SEK 5 M was for a cableworks for Sieverts in Piteå. It was completed in 1966 and was later used by the parent company for its own production. In addition, a plant was built in Hudiksvall for SEK 5 M and was completed in 1967. A total of SEK 10 M was used for investments in Gränna, Kalmar and Mölndal, but the remainder "about SEK 47 M" ended up in the Stockholm region, mainly for a central warehouse in Flemingsberg and expansion at Midsommarkransen. The government and the major company had both had their wishes fulfilled.

Over a period of eight years, twelve new regional plants were started. Some were located in southeast Sweden (Olofström, Visby, Ronneby, Norrköping, Kristianstad, Ingelsta, Oskarshamn and Vedeby) and the others in northern Sweden Delsbo, Östersund, Hudiksvall and Piteå. Ericsson preferred the plants to be in southeast Sweden, where there was plenty of labor, wages were low and transport distances were reasonable.

The government, on the other hand, strove to attract investments in the north, where unemployment and depopulation were even greater as a result of the transformation of Swedish industry.

When the 1960s major wave of decentralization was over, Ericsson's parent company had more than three-quarters of its Swedish manufacturing capacity in a total of 18 plants outside the Stockholm region, regardless of whether capacity was measured in floor space or the number of employees. To the extent that it is possible to compare the productivity and profitability between Stockholm and the rest of the country, the result was in favor of the relocated plants. It was less expensive to produce there, as long as it was a matter of relatively straightforward production. That is why the pattern became such that this work was carried out at the plants outside the major urban areas, while more advanced and administrative operations were located in Stockholm and Mölndal.

The huge expansion which Ericsson's Swedish production underwent during the first three post-war decades Sweden's "Golden Era" was made possible by the almost explosive growth of the number of plants outside the Stockholm region. Ericsson's foreign sales grew considerably faster during this period than sales in Sweden, but the Swedish portion of the company's total production was maintained. At the start of the 1970s, the company was still supplied at a level of almost 50 percent by the Swedish plants, although 75 percent of sales were made abroad. This means that the production conditions in Sweden were still considered competitive and that Ericsson became one of the country's most important exporters.

Author: Ulf Olsson


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