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Wednesday 18 March 2020 08.30 - 10.30
A-1 ECO29 State Building, Inter-Regime Competition and the Great Depression of the 1930s
P.N. van Eyckhof 1, 003C
Network: Economic History Chair: Jarmo Peltola
Organizers: Jari Eloranta, Matti Hannikainen, Aappo Kähönen Discussant: Jarmo Peltola
Sergio Espuelas : A Difficult Consensus: the Making of the Spanish Welfare State
Before 1977, the Spanish government was unable (or unwilling) to increase taxation to finance new social programs. As an alternative to this lack of fiscal capacity, Spanish policy makers in the early 20th century promoted contributive social insurance schemes (mostly financed from employers’ and employees’ contributions). To avoid social conflict ... (Show more)
Before 1977, the Spanish government was unable (or unwilling) to increase taxation to finance new social programs. As an alternative to this lack of fiscal capacity, Spanish policy makers in the early 20th century promoted contributive social insurance schemes (mostly financed from employers’ and employees’ contributions). To avoid social conflict in rural areas, rural laborers were also included in these programs. This, however, generated strong business opposition, especially from rural landowners and small-sized, labor intensive businesses (which were predominant in Spain). With the advent of democracy in 1931 new social plans were devised, but redistribution demands focused on land reform. After the Spanish civil war, Franco’s dictatorship consolidated a conservative social insurance model. Social benefits were kept very low and funding relied on employers’ and employees’ compulsory contributions. Labor movement repression and trade protectionism allowed companies to easily transfer the cost of social insurance to wages and consumer prices. The introduction of income tax, after the restoration of democracy in 1977, gave way to a new social protection model. Tax-funded, non-contributory programs increased and social protection was extended to those without stable ties to the labor market. By 1977 wage dispersion had replaced property incomes concentration -particularly land ownership- as the main source of income inequality, and demands for tax-and-transfer redistribution replaced 1930s expropriation demands. Social spending growth, however, stagnated after the signing of the Maastricht treaty, before Spain reached the European levels. (Show less)

Henric Haggqvist : Economic Crises and the Rise of the Social State – Sweden 1920–1938
With the tumultuous period of WWI in the rearview mirror, the interwar period (1920–1938) would come to pose new economic, political, and social challenges. Sweden faced two recessions during the period, in 1921 and during the Great Depression 1931–1932. These two economic slumps would come to be catalysts for changes ... (Show more)
With the tumultuous period of WWI in the rearview mirror, the interwar period (1920–1938) would come to pose new economic, political, and social challenges. Sweden faced two recessions during the period, in 1921 and during the Great Depression 1931–1932. These two economic slumps would come to be catalysts for changes to the political system that would echo throughout the 20th century. This paper will look at the development of state expenditure between 1920 and 1938, with special focus on social spending and military expenditure. The trends will be connected to the major political discussions taking place particularly during the two crises. Especially discussions on new welfare programs and extensions of existing ones were the results of the hardships experienced by the public during the two recessions.

The Swedish economy contracted by close to 5 percent in the crisis of 1921, and by a total of 7.5 percent during the Great Depression (Schön & Krantz, 2015). Arguably the single largest side effect of these two recessions was the large rise of unemployment, which among the unionized workforce would jump to over 20 percent in both cases and remaining rather high also in the years thereafter (Häggqvist, 2018). The problem of unemployment during the early 1930s would spark discussions on ways to mitigate the negative side-effects of economic slumps. It would result in the first form of government subsidized unemployment benefits being adopted in 1934. Sweden was hence the last of the Nordic countries to implement such a welfare program, even though the insurance was a voluntary one and was never transformed into a obligatory scheme (Alber, 1981). It did however, together with the extension of social security benefits, give rise to increased social spending during the 1930s. This growth in costs of welfare programs would be the main reason why Swedish state expenditure grew in the interwar period. In some way the economic crises of the interwar period gave rise to the modern Swedish welfare state and would form discussions over the state’s role and size over the remainder of the 20th century. (Show less)

Matti Hannikainen : Between Stronger States? Finland, Sweden and the Soviet Union during the Interwar Period
The result of the Great Depression of the 1930s was visible in economic policy and societal development. This meant increased protectionism and state intervention in the economy e.g. in the form Keynesianism, increased public spending in the New Deal policy in the U.S. or an anti-democratic alternative in the Nazi ... (Show more)
The result of the Great Depression of the 1930s was visible in economic policy and societal development. This meant increased protectionism and state intervention in the economy e.g. in the form Keynesianism, increased public spending in the New Deal policy in the U.S. or an anti-democratic alternative in the Nazi Germany. Instead in Finland, earlier research does not find similar turning point in the role of the state during and after of the Depression. One important explanation is the rise of right-wing hegemony after the 1918 Civil War, and this movement intensified during the Depression years. It seems that Finland was falling behind in general government expenditure in relation to GDP especially in the 1930s. This is interesting because of the political self-understanding of a ‘strong state’ based on earlier autonomy in Finland and the fact that in the latecomer countries, despite political ideologies, the state could create preconditions for development.
In this paper we analyze the Great Depression and the state (public sector) development in Finland in the comparative context of its neighbors, the Soviet Union and Sweden. After c. one hundred years period of autonomy in the Russian empire Finland received its independence (1917) with the collapse of the empire in the World War I, after which the Soviet Union seemed to become the challenger of capitalism by building a socialist command economy. Finland had also a longer common past with another neighboring country Sweden, as part of the kingdom for almost six hundred years. After the global crisis of the 1930s, the long-lasting period of the welfare state construction (the ‘Nordic Model’) intensified in Sweden, and the construction of a state-owned socialist system began in the Soviet Union during the interwar years. Therefore, a new independent state, Finland, was between the two economies, where the state played an increasingly strengthening role.
We concentrate two different aspects of state development: 1) state planning and political discourse and, 2) fiscal policy and the extent of public expenditure. The extent to which economic and societal policy was recognized as a means for state-building varied in these three countries, but it is important to take into account, however, that the development was still cautious in Sweden in the 1930s and the Soviet Union was not immediately and totally a command economy. Our preliminary results indicate that considering the stage of social development, the various dimensions of the public sector and the ‘real development of the state’, Finland appeared less exceptional as often interpreted. (Show less)

Gudmundur Jonsson : The Emergence of an Agrarian Welfare System in Iceland
The interwar saw the consolidation of two major power blocs in Icelandic politics. On the one hand were the liberal business class united in the Independence Party, on the other hand were the agrarian interests, organised around the Progressive Party and the co-operative movement. The third political bloc was the ... (Show more)
The interwar saw the consolidation of two major power blocs in Icelandic politics. On the one hand were the liberal business class united in the Independence Party, on the other hand were the agrarian interests, organised around the Progressive Party and the co-operative movement. The third political bloc was the Social Democratic Party and the trade union movement which had much less clout than its counterpart in the other Nordic countries.

The balance of power shifted in favour of the agrarian interests during the interwar period. The Progressive Party became the dominant party in government between 1927 and 1942 and had greatest influence on public response to the Great Depression. As in the other Nordic countries a red-green coalition was formed with the government of the Social Democrats and the Progressive Party in 1934. The paper argues that in contrast to the other Nordic countries, the outcome of the political compromise in Iceland was to greater extent influenced by the agrarian interests, leading to vastly increased public support for agriculture and the rural areas.

The paper explores the emergence of an agrarian welfare system during the 1930s, a formative moment in the development of Icelandic capitalism during which a complex policy regime was established through public agricultural support of various kind. Simultaneously, the co-operative movement enjoyed a strong public support, its nationwide network including wholesale and retail co-operatives, banking and insurance, transportation, oil distribution, and other activities. (Show less)



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