reflected in a corresponding increase in industrial employment. manufacturing occupied over 30 % of the labour force in the 1950s when this part of sweden ’ s corporate sector was largest in terms of employment. thereafter, the proportion of employed in this sector has fallen. finally, the really dramatic development as regards increased employment is the expansion of the service sector. at the end of the 20th century, the service sector provides employment for over two - thirds of the labour force in comparison with around 20 % at the beginning of the century. in the beginning, it involved expansion of the private service sector, but from the late 1950s and the beginning of the 1960s, public employment grew at a fast rate. the share rose from around 10 % to approximately a third of the labour force in the 1990s. an important factor behind the rapid expansion of the service sector is that women started to take paid employment. this created a demand for the production of both public and private services. women ’ s entry into the labour market meant that a previously untapped labour reserve was used. these changes have meant large transformations which have had an impact on people ’ s everyday lives. however, these have probably been necessary to bring about the marked increase in material prosperity. figure 6. volatility in inflation and growth 6. volatility in inflation and growth standard deviation per decade cpi inflation 1950 1860 1990 1880 1900 1930 gdp growth finally, i should like to illustrate the fact that the transformation of the economy in the 20th century has not always taken place in calm and harmonious forms. there have been some large ups and downs. the situation was most turbulent in the early 1910s and the 1920s. a period of high inflation and rapidly growing demand was followed by deflation and a large fall in total production. otherwise, development has been relatively uniform and stable since the breakthrough of industrialism in the mid - 19th century apart from the 1870s and also the early 1930s, which is not so clearly visible in the diagram. challenges on the threshold to a new millennium at the end of the 20th century, the new information technology is making rapid progress. as far as we can see today, it will affect production and distribution processes as well as consumer behaviour. that in turn makes the environment more competitive and calls for further change in sweden ’ s corporate sector. put to good use, this transformation can probably create stronger potential growth, lead to higher productivity growth and lower inflation, and benefit employment. the favourable changes that have occurred over a number of years in the swedish economy

. structural changes generate developments that are often referred to at present as a new “ economy ”. the marked improvement in productivity maintains profits and keeps prices down. during the transformation, a good circle is created but it is difficult to tell how long it will last. it can be described, if you like, as a period of extensive rationalisation and heightened efficiency. the growth trend is raised for an indefinite period, enabling the economy to expand more rapidly without inflation taking off. it should be borne in mind that the adaptation to the new information technology does not occur automatically. it is not the case that one day we suddenly find the new technology has begun to be implemented in ways that are leaving their mark on economic developments in general. during recent decades economists have increasingly highlighted institutional aspects in a broad sense as an explanation as to why some economies grow more rapidly than others. this approach underlines that the rate of economic growth is related to the system of rights and incentives that is adopted in a country and the determination to maintain this system in a credible way. in economic jargon, it is usually asserted that the incentive structure and its impact on economic growth is formed by the existing institutional structure. the late 19th century provides important lessons about the necessary conditions for this good circle. at the beginning of the 1800s, as i said before, sweden was still a poor country with an unstable form of government, a chaotic monetary system and a general shortage of credit facilities. ninety years later the swedish economy had undergone a dramatic transformation. inflation was low, with an orderly monetary system. the nation was bursting with vitality in every field. an impressive range of products, many of them world leaders, were being developed on the basis of swedish inventions. swedish financial experts were engaged in the exploitation of the inventions at an early stage. employment was provided for more and more people, living standards rose and growth was among the highest in the world. opinions about the causes of the pronounced change in the swedish economy are not completely unanimous. an increasingly stable form of government presumably contributed. a series of constitutional reforms provided a guarantee of stability. the stable prices presumably played a part. when inflation is low or the price level is stable, those who have to plan for the longer run face less uncertainty. after a rather chaotic period in the history of the monetary system, the introduction of the silver standard in the early 1830s and subsequently the gold standard led to price stability. another significant factor was probably the credit system ’ s development. banks were established and