Anneli Xie
SASE10: Swedish Economic Development
2019/10/21
SASE10: Swedish Economic Development
2019/10/21
Momentums of Change: The impact of the 1973 Oil Crisis
on the Netherlands and Sweden
In times of crises and rapid change, economies are often forced to
undergo drastic transformation. In many cases, the period of transformation
– despite its instability and turmoil – can lead to great innovation
as nations are forced to re-evaluate their current state of affairs. An example
of this is the Oil Crisis of 1973, in which oil supply to Northwestern Europe
was abruptly stopped after an embargo was placed by the Organization of the
Petroleum Exporting Countries (OPEC). With every industrialized country in
Northwestern Europe being heavily reliant on a steady access to imported oil,
the embargo caused deep consequences. Despite this, economies managed to both
survive and adapt to the new circumstances. This paper will focus on detangling
the impact of the 1973 Oil Crisis in Sweden and the Netherlands; the latter
being specifically targeted by the OPEC embargo. Comparing and contrasting
Sweden and the Netherlands reveals two nations differently addressed by – and
with different approaches to – the crisis. Despite the difference in response,
an argument will be made that the oil crisis meant a turning point in economic,
political, and environmental policy for both nations, and that these can be
seen, to some extent, as convergent.
When the Arab coalition, led by Egypt and Syria, surprise attacked Israel on October 6, 1973, The Netherlands were quick to take a stance. With a full-blown war having just started, the Dutch cabinet, led by head of the Labour Party (PvdA) Joop den Uyl, openly expressed their sympathy for Israel only three days after the war broke out. (Licklider 1988, 209) Not only through political statements, the Dutch support for Israel was also carried out militarily, through the export of ammunition and spare parts. As declared by Ahmed Zaki Yamani, the Saudi Arabian Minister of Oil and Mineral Resources, the Dutch support for Israel was the main reason the Dutch were specifically targeted in the embargo. Importing 130 million tons of oil in 1972, with two-thirds coming from the OPEC region, the Port of Rotterdam was the biggest oil refinery in the world at the time; a pit-stop for oil before continuing transport to Northwestern Europe. With 46% (59 million tons) being immediately transported onwards and c. 70% of the remaining 71 million tons being exported after Dutch processing, it is no surprise that the embargo placed against the Netherlands also came to greatly affect the rest of Europe. For the Dutch, too, the embargo proved undoubtedly limiting. Road traffic, transport, and the chemical industry, all hugely important for the Dutch economy, were running on oil. (Hellema, Wiebe, and Witte 2004, 99) In Rijnmond, the urban area surrounding Rotterdam, around 20,000 people were directly dependent on the import and processing of oil. As the embargo was placed – with an almost quadrupling of oil prices, escalating from a cost of 3.06 USD in October to 11.60 USD in December – unemployment and inflation rose. (Pearson and Nyden 1980, 418) Regardless, the government enacted several social reforms, and the 1970s, despite its economic turmoil, became a planting seed for the Dutch welfare state that can be noticed today. (European Economic Community 1974)
To the issue of oil scarcity, the Dutch retained a laissez-faire approach, perhaps due to their access to locally sourced natural gas, which satisfied 45% of the country’s energy consumption.[12]Being less dependent on oil than many other European countries, the Netherlands managed to survive the crisis largely with the help of oil shares from multinational oil companies; being home to Rotterdam and owning shares of the big oil company, Shell, the Netherlands held a great economic advantage. (Pearson and Nyden 1980, 409) Politically, too, the Dutch held friendly diplomatic relations with the United States – another pro-Israeli country targeted by the embargo – and received help in OPEC negotiations from the US National Security Advisor, Henry Kissinger. (Hellema, Wiebe, and Witte 2004, 148) However, oil remained a scarce resource, and the Netherlands were put under great pressure from other European nations to reconciliate with OPEC and change their openly pro-Israeli stand.[16]With no such inclinations, the Dutch government instead announced new measures to cut energy consumption – such as car-free Sundays and gasoline rationing – on October 22, something that did not go unnoticed by the press, who “reproached the Cabinet for its rather spineless attitude” and for “underestimat[ing] the gravity of the situation.” (Hellema, Wiebe, and Witte 2004, 103-108) Sure enough, the gasoline rationing was a fiasco, and the car-free Sundays, operating from November 4, 1973 until January 6, 1974 are estimated to have decreased fuel use by only 15%. (Blessing 2003) Nevertheless, the empty roads were portrayed in a cheerful light by media, with car-free Sundays cumulating in a national solidarity of sorts as people took to the streets with their bicycles. In the 1980s, large investments were made to make the streets more bicycle-friendly, turning people away from the private use of gasoline-powered cars. (van der Zee 2015) Although lasting for only two months, this laissez-faire“spineless” response to the crisis – complementary to a welfare approach – managed to change the Dutch perception of car-use as a whole, arguably turning the nation into the egalitarianist bicycle haven that it is today.
In contrast, Sweden – a country similar to The Netherlands in many regards, also being a well-established welfare state – did not have the same political leverage in the crisis of 1973, and thus had to act in other ways to transform and adapt. Furthermore, Sweden was more dependent on oil than the Dutch, relying on imported oil for 75% of all energy needs in 1972, (Schön 2017, 330) almost all of it coming from the Rotterdam complex. (Pearson and Nyden 1980, 409) With its notorious and argued neutrality in both world wars, Sweden was economically stable in comparison to many other European countries, with a flourishing industry during the post-war years. The oil crisis in 1973 put an abrupt stop to that, accompanying declining growth and high unemployment with rapid inflation; stagflation, the same as could be seen in the Netherlands. (Schön 2017, 374)
Similarly to the Dutch, Sweden tried to adapt to the crisis by rationing private use of oil, as well as implementing gas and electricity rations. (Pearson and Nyden 1973, 414) However, in contrast to The Netherlands, with little leverage in negotiations with multinational oil companies, Sweden saw little meaning in retaining the oil business as it was, instead seeking out other alternatives to satisfy energy consumption. (Karlsson and Mårtensson 2006, 11) In addition to Sweden’s lesser position in oil negotiations, the turn to new innovation, rather than the Dutch approach of continuing dependence on oil and working to restore things back to normal, might have been due to the green wave of the 1960s, with the first bill on environmental policy being introduced in 1962 and the Environmental Protection Act being implemented in 1969. (Miljöskyddslagen 1969:387) With oil having notable effects on both environment and public health, the crisis thus became an opportunity to further the environmental discussion, and the expansion of hydro- and wind power, as well as further development of nuclear plants, became heavily debated in the parliament. (Karlsson and Mårtensson 2006, 13) Despite strong disagreement among the political parties, investing in both hydropower and nuclear became strategies that Sweden employed to rid itself from the dependence on imported oil, opening two new nuclear reactors in 1975 (Schön 2017, 376) and inaugurating Sweden’s biggest turbine in 1978. (Vattenfall 2019)
Whereas the oil crisis was not expected to impact Sweden’s economic growth in the long-term, the issue of stagflation would remain throughout the 1970s. With 40 years of Social democratic rule, and the Social Democratic Party currently in government, a welfare approach was taken in the bridging policies of 1974-1975, in which investments were made in stockpiling and subsidies for “crisis-ridden sectors,” (Schön 2017, 404) in an attempt of stimulating domestic demand during a global recession; the SEK was also devalued between 1977 and 1982 to maintain export competitiveness. These measures lead only to further inflation and government debt in the long-run, leading to Sweden’s steady decline in economic growth until the financial crisis of the 1990s. Above all, these measures were all short-term solutions, perhaps due to the expectation of the oil crisis having little effect on Sweden in the long-term, as well as the peculiar politics of the time: the 350 seats of parliament being equally divided across the two blocks, meaning some decisions were made by lottery, and leading to the right block forming government in 1976. (Bergh 2011, 18) Despite the more protracted impact that the oil crisis came to have on Sweden, the later part of the 1970s became a defining start for the Swedish work regarding sustainability and fossil-free energy consumption, as well as the end of a 40-year long social democratic rule: two defining moments in Swedish economic development.
Today, Sweden is working towards becoming oil-free by 2020, a goal in the works since 2006. (Sveriges riksdag 2006) The Netherlands, on the other hand, still depends greatly on oil, although has worked “to develop an oil crisis policy” (Government of the Netherlands): a lesson learned from the 1973 crisis. These two different attitudes to the future once again exemplify the different approaches to energy policy that Sweden and the Netherlands held throughout the 1973 crisis; Sweden quickly turning from oil to hydropower and nuclear and the Netherlands taking smaller measures, such as implementing car-free Sundays, while attempting restoration of the status quo by continuing import of oil from multinational companies. However, in terms of opposing the economic recession that came with the loss of oil, both countries chose a welfare approach. In modern times, the Dutch are often cited for appropriating ‘the Swedish model’ in the build-up of their welfare state, starting in 1970s. Sure enough, the welfare state had since long been established in Sweden, but the 1973 split elections led to short-termism in Swedish parliament, marking the beginning of the more neoliberal market-driven economy that is visible in the nation today. Examining the impact of the 1973 oil crisis on Sweden and the Netherlands reveals the responses of two nations with both converging and diverging policies and ideas; marking a pivotal moment for change and structural transformation, impacting the politics and economics of both countries in ways still noticeable today.
Bergh, Andreas. “The rise, fall, and revival of a capitalist welfare state: what are the policy lessons from Sweden?” IFN Working Paper no. 873, 2011: 1 – 29.
Bergquist, Ann-Kristin and Kristina Söderholm. “Industry Strategy for Energy Transition in the Wake of the Oil Crisis.” Business and Economic History, vol. 12, 2014: 1-18.
Blessing, Maurice. “De Oliekrisis in 1973.”Historich Nieuwsblad. 4, 2003. https://www.historischnieuwsblad.nl/nl/artikel/6121/de-oliecrisis-in-1973.html.
European Economic Community. Report on the Development of the social situation in the Community in 1973., Brussels, 1974. http://aei.pitt.edu/9801/1/9801.pdf.
Hellema, Duco, Ceese Wiebe, and Tony Witte.The Netherlands and the Oil Crisis: Business as Usual. Amsterdam: Amsterdam University Press, 2004.
Karlsson, Henrik and Daniel Mårtensson. “Oljekrisen 1973 – En studie i ekonomi kring förlopp och effekter i Sverige och Danmark.” Master’s thesis, Lund University, 2006.
Licklider, Roy. “The Power of Oil: The Arab Oil Weapon and the Netherlands, the United Kingdom, Canada, Japan, and the United States.” International Studies Quarterly, 32, no.2 (June, 1988): 205 – 226.
Pearson, Frederic S, and Michael Nydén. “Energy crisis and government regulations: Swedish and Dutch responses in 1973,” West European Politics3, no. 3: 406 – 420.
Schön, Lennart. Sweden’s Road to Modernity: An Economic History. Malmö: Holmbergs, 2017.
Sveriges Riksdag.Miljöskyddslagen (1969:387). https://www.riksdagen.se/sv/dokument-lagar/dokument/svensk-forfattningssamling/miljoskyddslag-1969387_sfs-1969-387.
Sveriges Riksdag.På väg mot ett oljefritt Sverige: Kommissionen mot oljeberoende Juni 2006. Stockholm, June 28, 2006. https://www.regeringen.se/informationsmaterial/2006/06/pa-vag-mot-ett-oljefritt-sverige/.
Van der Zee, Renate. “How Amsterdam became the bicycle capital of the world.” The Guardian. May 5, 2015. https://www.theguardian.com/cities/2015/may/05/amsterdam-bicycle-capital-world-transport-cycling-kindermoord.
Vattenfall AB. “Juktan Kraftstation.” Accessed October 17, 2019. https://powerplants.vattenfall.com/sv/juktan.
When the Arab coalition, led by Egypt and Syria, surprise attacked Israel on October 6, 1973, The Netherlands were quick to take a stance. With a full-blown war having just started, the Dutch cabinet, led by head of the Labour Party (PvdA) Joop den Uyl, openly expressed their sympathy for Israel only three days after the war broke out. (Licklider 1988, 209) Not only through political statements, the Dutch support for Israel was also carried out militarily, through the export of ammunition and spare parts. As declared by Ahmed Zaki Yamani, the Saudi Arabian Minister of Oil and Mineral Resources, the Dutch support for Israel was the main reason the Dutch were specifically targeted in the embargo. Importing 130 million tons of oil in 1972, with two-thirds coming from the OPEC region, the Port of Rotterdam was the biggest oil refinery in the world at the time; a pit-stop for oil before continuing transport to Northwestern Europe. With 46% (59 million tons) being immediately transported onwards and c. 70% of the remaining 71 million tons being exported after Dutch processing, it is no surprise that the embargo placed against the Netherlands also came to greatly affect the rest of Europe. For the Dutch, too, the embargo proved undoubtedly limiting. Road traffic, transport, and the chemical industry, all hugely important for the Dutch economy, were running on oil. (Hellema, Wiebe, and Witte 2004, 99) In Rijnmond, the urban area surrounding Rotterdam, around 20,000 people were directly dependent on the import and processing of oil. As the embargo was placed – with an almost quadrupling of oil prices, escalating from a cost of 3.06 USD in October to 11.60 USD in December – unemployment and inflation rose. (Pearson and Nyden 1980, 418) Regardless, the government enacted several social reforms, and the 1970s, despite its economic turmoil, became a planting seed for the Dutch welfare state that can be noticed today. (European Economic Community 1974)
To the issue of oil scarcity, the Dutch retained a laissez-faire approach, perhaps due to their access to locally sourced natural gas, which satisfied 45% of the country’s energy consumption.[12]Being less dependent on oil than many other European countries, the Netherlands managed to survive the crisis largely with the help of oil shares from multinational oil companies; being home to Rotterdam and owning shares of the big oil company, Shell, the Netherlands held a great economic advantage. (Pearson and Nyden 1980, 409) Politically, too, the Dutch held friendly diplomatic relations with the United States – another pro-Israeli country targeted by the embargo – and received help in OPEC negotiations from the US National Security Advisor, Henry Kissinger. (Hellema, Wiebe, and Witte 2004, 148) However, oil remained a scarce resource, and the Netherlands were put under great pressure from other European nations to reconciliate with OPEC and change their openly pro-Israeli stand.[16]With no such inclinations, the Dutch government instead announced new measures to cut energy consumption – such as car-free Sundays and gasoline rationing – on October 22, something that did not go unnoticed by the press, who “reproached the Cabinet for its rather spineless attitude” and for “underestimat[ing] the gravity of the situation.” (Hellema, Wiebe, and Witte 2004, 103-108) Sure enough, the gasoline rationing was a fiasco, and the car-free Sundays, operating from November 4, 1973 until January 6, 1974 are estimated to have decreased fuel use by only 15%. (Blessing 2003) Nevertheless, the empty roads were portrayed in a cheerful light by media, with car-free Sundays cumulating in a national solidarity of sorts as people took to the streets with their bicycles. In the 1980s, large investments were made to make the streets more bicycle-friendly, turning people away from the private use of gasoline-powered cars. (van der Zee 2015) Although lasting for only two months, this laissez-faire“spineless” response to the crisis – complementary to a welfare approach – managed to change the Dutch perception of car-use as a whole, arguably turning the nation into the egalitarianist bicycle haven that it is today.
In contrast, Sweden – a country similar to The Netherlands in many regards, also being a well-established welfare state – did not have the same political leverage in the crisis of 1973, and thus had to act in other ways to transform and adapt. Furthermore, Sweden was more dependent on oil than the Dutch, relying on imported oil for 75% of all energy needs in 1972, (Schön 2017, 330) almost all of it coming from the Rotterdam complex. (Pearson and Nyden 1980, 409) With its notorious and argued neutrality in both world wars, Sweden was economically stable in comparison to many other European countries, with a flourishing industry during the post-war years. The oil crisis in 1973 put an abrupt stop to that, accompanying declining growth and high unemployment with rapid inflation; stagflation, the same as could be seen in the Netherlands. (Schön 2017, 374)
Similarly to the Dutch, Sweden tried to adapt to the crisis by rationing private use of oil, as well as implementing gas and electricity rations. (Pearson and Nyden 1973, 414) However, in contrast to The Netherlands, with little leverage in negotiations with multinational oil companies, Sweden saw little meaning in retaining the oil business as it was, instead seeking out other alternatives to satisfy energy consumption. (Karlsson and Mårtensson 2006, 11) In addition to Sweden’s lesser position in oil negotiations, the turn to new innovation, rather than the Dutch approach of continuing dependence on oil and working to restore things back to normal, might have been due to the green wave of the 1960s, with the first bill on environmental policy being introduced in 1962 and the Environmental Protection Act being implemented in 1969. (Miljöskyddslagen 1969:387) With oil having notable effects on both environment and public health, the crisis thus became an opportunity to further the environmental discussion, and the expansion of hydro- and wind power, as well as further development of nuclear plants, became heavily debated in the parliament. (Karlsson and Mårtensson 2006, 13) Despite strong disagreement among the political parties, investing in both hydropower and nuclear became strategies that Sweden employed to rid itself from the dependence on imported oil, opening two new nuclear reactors in 1975 (Schön 2017, 376) and inaugurating Sweden’s biggest turbine in 1978. (Vattenfall 2019)
Whereas the oil crisis was not expected to impact Sweden’s economic growth in the long-term, the issue of stagflation would remain throughout the 1970s. With 40 years of Social democratic rule, and the Social Democratic Party currently in government, a welfare approach was taken in the bridging policies of 1974-1975, in which investments were made in stockpiling and subsidies for “crisis-ridden sectors,” (Schön 2017, 404) in an attempt of stimulating domestic demand during a global recession; the SEK was also devalued between 1977 and 1982 to maintain export competitiveness. These measures lead only to further inflation and government debt in the long-run, leading to Sweden’s steady decline in economic growth until the financial crisis of the 1990s. Above all, these measures were all short-term solutions, perhaps due to the expectation of the oil crisis having little effect on Sweden in the long-term, as well as the peculiar politics of the time: the 350 seats of parliament being equally divided across the two blocks, meaning some decisions were made by lottery, and leading to the right block forming government in 1976. (Bergh 2011, 18) Despite the more protracted impact that the oil crisis came to have on Sweden, the later part of the 1970s became a defining start for the Swedish work regarding sustainability and fossil-free energy consumption, as well as the end of a 40-year long social democratic rule: two defining moments in Swedish economic development.
Today, Sweden is working towards becoming oil-free by 2020, a goal in the works since 2006. (Sveriges riksdag 2006) The Netherlands, on the other hand, still depends greatly on oil, although has worked “to develop an oil crisis policy” (Government of the Netherlands): a lesson learned from the 1973 crisis. These two different attitudes to the future once again exemplify the different approaches to energy policy that Sweden and the Netherlands held throughout the 1973 crisis; Sweden quickly turning from oil to hydropower and nuclear and the Netherlands taking smaller measures, such as implementing car-free Sundays, while attempting restoration of the status quo by continuing import of oil from multinational companies. However, in terms of opposing the economic recession that came with the loss of oil, both countries chose a welfare approach. In modern times, the Dutch are often cited for appropriating ‘the Swedish model’ in the build-up of their welfare state, starting in 1970s. Sure enough, the welfare state had since long been established in Sweden, but the 1973 split elections led to short-termism in Swedish parliament, marking the beginning of the more neoliberal market-driven economy that is visible in the nation today. Examining the impact of the 1973 oil crisis on Sweden and the Netherlands reveals the responses of two nations with both converging and diverging policies and ideas; marking a pivotal moment for change and structural transformation, impacting the politics and economics of both countries in ways still noticeable today.
References
Bergh, Andreas. “The rise, fall, and revival of a capitalist welfare state: what are the policy lessons from Sweden?” IFN Working Paper no. 873, 2011: 1 – 29.
Bergquist, Ann-Kristin and Kristina Söderholm. “Industry Strategy for Energy Transition in the Wake of the Oil Crisis.” Business and Economic History, vol. 12, 2014: 1-18.
Blessing, Maurice. “De Oliekrisis in 1973.”Historich Nieuwsblad. 4, 2003. https://www.historischnieuwsblad.nl/nl/artikel/6121/de-oliecrisis-in-1973.html.
European Economic Community. Report on the Development of the social situation in the Community in 1973., Brussels, 1974. http://aei.pitt.edu/9801/1/9801.pdf.
Hellema, Duco, Ceese Wiebe, and Tony Witte.The Netherlands and the Oil Crisis: Business as Usual. Amsterdam: Amsterdam University Press, 2004.
Karlsson, Henrik and Daniel Mårtensson. “Oljekrisen 1973 – En studie i ekonomi kring förlopp och effekter i Sverige och Danmark.” Master’s thesis, Lund University, 2006.
Licklider, Roy. “The Power of Oil: The Arab Oil Weapon and the Netherlands, the United Kingdom, Canada, Japan, and the United States.” International Studies Quarterly, 32, no.2 (June, 1988): 205 – 226.
Pearson, Frederic S, and Michael Nydén. “Energy crisis and government regulations: Swedish and Dutch responses in 1973,” West European Politics3, no. 3: 406 – 420.
Schön, Lennart. Sweden’s Road to Modernity: An Economic History. Malmö: Holmbergs, 2017.
Sveriges Riksdag.Miljöskyddslagen (1969:387). https://www.riksdagen.se/sv/dokument-lagar/dokument/svensk-forfattningssamling/miljoskyddslag-1969387_sfs-1969-387.
Sveriges Riksdag.På väg mot ett oljefritt Sverige: Kommissionen mot oljeberoende Juni 2006. Stockholm, June 28, 2006. https://www.regeringen.se/informationsmaterial/2006/06/pa-vag-mot-ett-oljefritt-sverige/.
Van der Zee, Renate. “How Amsterdam became the bicycle capital of the world.” The Guardian. May 5, 2015. https://www.theguardian.com/cities/2015/may/05/amsterdam-bicycle-capital-world-transport-cycling-kindermoord.
Vattenfall AB. “Juktan Kraftstation.” Accessed October 17, 2019. https://powerplants.vattenfall.com/sv/juktan.