The Crystal ball and economic policy: The coordination of the economic policy and the making of a national institute for economic analysis 1908-1937

A rational planning of public works and a counter cyclical economic policy contributed to the building of a Swedish public monitoring system of the economy during the first three decades of the twentieth century. The starting point in the development of this monitoring system was the proposal for an economic barometer on a French model in 1910 and the end-point was the establishment of the National Institute of Economic Research (NIER) in 1937. Both the barometer and the NIER shared a common purpose to inform the public and the business community of the current economic situation, and above all, to work as tool for the government to control and regulate the trajectories of business cycles. The analysis of a vast amount of documentation presented in this essay provides new insights into the development of economic policy in Sweden during this period of time and contributes to our understanding of the emergence of Keynesian economic policy during the interwar period.There was an attempt to meet the demand for a counter-cyclical economic policy in 1910 with the suggestion for a public economic barometer and the creation of a permanent institution assisting the government in mitigating unemployment. The purpose was to prevent unemployment by calculating the turning points in the business cycle and thereby to facilitate a counter-cyclical economic policy. Parliament rejected the proposal referring to the difficulty to determine the turning points and to its own ability to determine the proper time to starting and redistribute planned public works. However, in 1914 Parliament made a concession by replacing the economic barometer with a series of economic indicators intended for the public and the business world. During the first world war the question lay dormant. However, signs of raising unemployment in some sectors of the economy in early 1920 resulted in a bill submitted to Parliament suggesting the establishment of a permanent body with the aim to increase the mobility of labour. References were made to the debate in Parliament prior to 1914, but the bill was not adopted. Instead, Parliament decided to submit the question to the parliamentary Committee of Social Insurance for further examination. Although the economic depression in 1921 and 1922 in fact lead to an increased public albeit descriptive statistical surveillance of the Swedish economy it was not until 1925 that the sudden signs of backlash and increasing unemployment convinced the government that the labour market was in need of greater examination. This resulted in the appointment in 1927 of a new parliamentary committee, the Commission of Unemployment. The sources show that from the outset of its work the commission considered the question of improved economic statistics and of counter-cyclical policy as important means to prevent long-time unemployment. Some of these documents also contain references to the pre-1914 proposal for an economic barometer. The advent of the economic depression in the beginning of 1930 gave an impetus to the idea of establishing a permanent institute to assist and guide the government in formulating its economic policy against unemployment. Between 1932 and 1934 the outline of an economic information office was worked out mainly within the Commission of Unemployment. Its report was published in 1935 with a draft proposal for a national economic information office. The sources indicate that the planning of the new institution was carried through in conjunction with the Ministry of Finance as a part of launching the new economic policy against unemployment. In 1937 Parliament decided to establish a national institute of economic research (NIER).