Two Out of Three

In January 1932 Sweden slid off the gold standard and into a bold experiment in "managed currency" as the world's economists held their breath. By last week Sweden was so solvent that it moved to redeem the last $13,000,000 of a $30,000,000 bond issue marketed in the U. S. in 1924 and not due until 1954. For the first time taciturn Swedish officialdom, through the National Debt Office, gave credit to the managed currency system. Last week some economists agreed with the Debt Office while others were not so certain.

Sweden's currency management is a very conservative affair. The "manager" is the Swedish Riksbank's Governor Ivar Rooth, who has far fewer powers than the U. S. Federal Reserve now has. Studious, young (46) Governor Rooth's first objectives were to prevent inflation and keep prices stable inside Sweden. By May 1932. with inflation averted, Governor Rooth attacked his third objective--to raise the level of wholesale prices slowly and firmly, without increasing the cost of living. He cared nothing for what foreigners were willing to pay outside for Swedish kronor, except as foreign exchange affected internal prices. No modern nation had ever presumed formally to try to control wholesale prices. Governor Rooth's tools were only the usual central bank's powers to fix the bank rate, to buy gold and deal in foreign exchange.

Last week most economists agreed that Sweden's managed currency had achieved two out of three objectives. It had prevented inflation and it had stabilized the krona's purchasing power inside Sweden. But it had failed to raise wholesale prices. As to whether it had materially helped Sweden's Depression, Swedish economists could not agree. Nor could they agree as to whether it was responsible for the excellent financial shape that had led to last week's bond redemption.

Opponents of the managed currency were obliged to admit that Sweden's production index, as compared with 100 in 1928, has come back to 95, highest of all Western nations except Russia (Britain-- 92; U. S.--66). Furthermore, Sweden's unfavorable balance of trade dwindled from 203,000,000 kronor ($52,780,000 Roosevelt) in 1932 to only 11,800,000 in 1933. But for Sweden's upturn they had many other reasons: the great public works program begun in 1933; the thrift and conservatism of Swedes; the exemplary caution of Swedish savings banks; the huge cooperative union controlling nearly one-half of Sweden's trade in food and clothing; and Government ownership of the Swedish railways, telegraph and most of the telephone system, one-third of the mines and 80% of household electricity.

Fortnight ago Swedes showed that they like what is going on in Sweden by voting into the provincial parliaments (Landstings) a huge majority of the present Government party, the Social Democrats.

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