s corporate sector, which stemmed from the 1960s, simply did not work. if anything, the devaluations meant that the problems persisted and were accentuated. with the lack of investment in new products and the dependence on an increasingly outmoded structure of production, the entire nation ’ s material standard had to be adjusted. for many years, growth in sweden was weaker than in the world around us. this example shows how a “ new economy ” at that time posed problems for the swedish economy rather than opportunities. the lack of change, because wage formation did not function properly, resulted in an economy that was weaker and more susceptible to inflation. the period clearly illustrates how globalisation, increased competition and new technology can lead to lower growth and higher inflation if changes are not made sufficiently quickly. if the economy is under pressure from strong competition as well as poorly functioning wage formation, economic renewal may lag behind. it is therefore gratifying that the labour market organisations seem to be increasingly in favour of the inflation target policy. many representatives of trade unions and employers express a strong ambition and determination to arrive at wage increases that are commensurate with the macroeconomic situation. this is all to the good. but the fact remains that even in recent years, the rate of wage increases in sweden has been higher than in major competitor countries and also above the macroeconomic potential. real wage increases in excess of productivity growth enlarge the wage share and reduce the gross profit share. that is what is happening now in sweden. bit by bit, at least a part of the increased profit margin that resulted from the krona ’ s fall in the autumn of 1992 is being eroded. this is a difference from the united states. there the economy has entered what might be described as a good spiral, where higher productivity increases and comparatively moderate wage increases have generated profits that help to drive new investment in advanced technology. in such a process, unduly high wage increases can bring the changes to a halt, as happened in sweden in the late - 1960s and early - 1970s. present economic assessments do not generally suggest that a break is imminent in the path of swedish wage formation. so will this have a negative impact on the propensity of firms to invest in the new technology? the financial system this brings me to the significance of the financial system and access for corporate financing in the transitional phase. are there differences between europe and the united states that may have a bearing on the pace with which new technology

is introduced? and what part does emu play in this context? one important factor in the process of industrialisation in the late nineteenth century, when sweden was transformed from poor country into a wealthy nation with almost the world ’ s highest growth rate, was the contemporary development of the financial system. banks were established and financial know - how grew when interest controls had been abolished. as a result, inventions could be exploited and investment in the nascent industries could be financed. a mounting body of research findings published in the 1990s indicates that economic growth in various countries is appreciably affected by how the financial system works : the more highly - developed the financial system, the greater the stimulus to economic growth. an accessible banking system and efficient financial markets contribute to the development of investment and thereby to the economy ’ s growth trend. one conceivable reason why the us economy is being transformed more rapidly than is the case with sweden and, even more so, the european community, is the efficiency with which the us financial system works. corporate financing may well be facilitated by the breadth and liquidity of diverse financial markets. with the rapid development of information technology, moreover, a new type of company has emerged. it differs from the traditional pattern in that its operations involve highly mobile human capital. the financing of these companies accordingly imposes different requirements in markets for risk capital and loans. the us markets for risk capital appear to be more highly developed and more focused on the financing of high - risk projects than seems to be the case in europe, where bank loans predominate and a larger proportion of financing goes to reliable, established firms. with the advent of the euro, the financial system in europe may become more developed and, like its counterpart across the atlantic, offer more alternative forms of financing. with a single currency in the euro area, the capital markets will gradually become more liquid and thereby more efficient. there will probably be more corporate financing with bonds and equity, forms of financing that are less common at present in europe than in the united states. signs of this are already evident. there is reason to make a deeper analysis of the financial system ’ s contribution to the changes that are needed in the swedish economy. the introduction of a single currency may come to play a more important part in this transformation in that it influences the development of europe ’ s financial system. this is an argument in the discussion about emu that i have not encountered hitherto. conclusion sweden has already come a long way