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controlled and, although normally permitted, foreign capital (transactions and transfers must be licensed by the Swedish National Bank (Sveriges Riksbank). The policy toward foreign investment is generally liberal; foreign firms that operate through incorporated Swedish subsidiaries receive national treatment. However, foreign acquisition and exploitation of natural resources (mineral deposits, for example) and of certain services such as shipping are stringently controlled. Swedish law excludes foreigners from banking and insurance enterprises. The government also uses its authority to license firms to do business and uses its fiscal and exchange controls affecting disposition of business net income to control the extent of foreign investment in the economy.

1. Planning

Economic planning in Sweden is indicative in nature. In contrast to plans that establish rigid and comprehensive production targets, Swedish long-term (5-year) plans comprise a systematic study of the economy's future development, outlining a flexible strategy to achieve stated economic goals. Among these goals are full employment, rapid growth of output, a more equal distribution of incomes, price stability, and external payments balance. The government seeks to promote these goals through its fiscal, monetary, trade, and industrial policies. Promotion of investment and achievement of welfare objectives are given priority consideration. The balance of payments is also a matter of prime concern because of the importance of external economic transactions to the Swedish economy. Economic planning, which is less comprehensive than in France, involves greater interaction with groups in the private sector than in those European countries in which planning is limited largely to projections presented by the authorities.

Short-term planning consists basically of the formulation of a short-term economic forecast (embodies in the national budget) to provide an economic basis for the preparation of the Finance Bill. The national budget is prepared in the Economic Division of the Ministry of Finance and Economy, with the assistance of the National Institute of Economic Research. A Research Council, consisting of the heads of industrial, labor, and agricultural associations, is consulted in connection with preparation of the national budget, but the council bears no responsibility for the content of the report.

2. Implementation of policy

Relying primarily on monetary policy to promote full employment and rapid growth, Sweden generally followed an easy credit policy during the 1950's and early 1960's. Low interest rates and accelerated investment, however, combined with an increasingly tight labor market to produce spiraling inflationary pressures. Concerned with the need to restrain inflation, the government turned to countercyclical measures. The economic boom that began in mid-1968 was met with tight selective fiscal constraints and severe monetary restrictions. Imposed in late 1969 and early 1970, well after the boom peaked, these measures proved too restrictive and led to a strong downturn by 1971. The increasingly severe swings in Swedish economic activity since the mid-1960's have been accompanied by a falling investment ratio, slower real growth, spiraling cost-push inflation, and, except in the recession year of 1971, growing deficits in the current account of the balance of payments.

Reacting to these developments, Swedish planners have raised two major issues concerning demand management. The 1971-75 long-term plan recommends increased capital formation as a means of expanding exports and improving Sweden's international competitive position. Additionally, it proposes restriction of the growth of private consumption to make possible a shift a resources toward the export sector.

The policy measures introduced in 1971 aimed at stimulating industrial investment and employment at the expense of consumption expenditures. To promote balanced growth, a general price freeze, the first in the postwar period, was put into effect in October 1970 and was later extended from its original expiration date of 31 March 1971 through the rest of the year. In response to growing dissatisfaction over rapidly rising food prices, the government reinstitute a partial price freeze on essential food items in January 1973.

Government policy continues to stress a more equal distribution of income and rising levels of living. To this end, approximately one-fourth of the central government's expenditures are income transfers to households, including basic pensions, children's allowances, housing allowances, health insurance benefits, and unemployment compensation. Low-income groups, primarily farmers and fishermen, receive state subsidies in the interest of a "just income" for all. To maintain rising levels of living, the government strives to increase employment, particularly through training and retraining programs for farmers and for unskilled and handicapped workers.

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