Forestalling the Business Veto: Investment Confidence and the Rise of Swedish Social Democracy, 1932–1936

Objective. We investigate the causes of the stability of Swedish business confidence in the early 1930s. Surprisingly, investors seemed unruffled by the Social Democrats' heterodox "Crisis Program," a proto–Keynesian response to the Great Depression. This research allows a productive modification of the argument that the state is dependent on private capital formation. Methods. Analysis of stock markets, currency prices, patterns of domestic investment, as well as written primary sources in Swedish and English. Results. The cross–class cooperation practiced by the Social Democrats, and the lack of a threat of radicalization, had an important calming effect on investors. Conclusions. To avoid capital flight and resulting economic dislocation, reformist governments must cooperate with business and conservatives, and turn away from workers and revolutionaries.