I am referring to the deregulation of the financial markets and the development of these in recent years. A number of international studies indicate that a deregulated and well-functioning financial market clearly stimulates the development of factor productivity. With regard to a more efficient use of the labour force, several changes have been implemented that have probably stimulated development. These include reforms in the pension system, the tax system and the social insurance system. The burden of taxation has been subdued and the economic return on higher education has increased - in particular in technical education. In addition, wage formation has been improved, which should have been facilitated by the monetary policy focus on price stability. At the same time, the pressure on companies to use resources efficiently has increased during the 1990s. Tougher competitive pressure as a result of both increased internationalisation and deregulation in a number of sectors has increased the need for companies to economise with scant resources. Less wastefulness with resources means that labour force and capital are employed in other areas, where they can better contribute to the national economy. The development of investment is another factor that may have contributed, even if capital intensity has increased at a very slow rate. One factor that has not contributed to a long-term improvement in resource allocation is the development of the exchange rate. The devaluations in the 1970s and 1980s have been followed by a floating exchange rate, but with an undervalued Swedish krona.

BIS Review 78/2001  3  we probably still have approximately 17.5 percentage points of the 18 percentage point difference in food prices. Another field in which competition appears to be weak is the construction sector, and in particular the construction materials sector. This area is characterised by a high company concentration with considerable entry barriers to new companies and weak import competition. With regard to prices for construction materials, one can also see a much more rapid price rise than for other industrial products over a number of years, which may indicate rising profit margins or considerable inefficiency in resource utilisation. In some further fields, such as telecommunications services and electricity, deregulation had a pronounced dampening effect on price development for some time. This is no longer the case. The most recent statistics available indicate price increases of 7 per cent and 20 per cent respectively for these areas. In addition, Telia has announced a large rise in its subscriber fees with effect from October. I therefore see it as natural that there are investigations underway and planned into competition conditions in these markets. Vested interests versus consumer interests Although we have thus achieved improvements in certain areas, it appears to me that the description in the Economics Commission's report of 1993 (page 10) still applies to large parts of the economy. "It is evident that a number of important markets in the Swedish economy function poorly and that this leads to considerable wastefulness with resources and to large costs for the national economy.