The early postwar period was a difficult time for small export-dependent countries such as Sweden. As Erik Lundberg notes, "The strong deflation, the big decline in production (25 percent in the volume of industrial output), and the tremendous rise in unemployment were generally considered to be the natural and unavoidable consequences of the post-war boom of 1918–20." Nothing was done to cushion these blows and austerity was allowed to run its course. Real wages fell by 30 to 35 percent from fall 1920 to summer 1922, and contrary to liberal expectations, unemployment got worse rather than better. Like the British Labour party, the governing Swedish Social Democrats (SAP), lacking any other ideas about what to do, saw no alternative but to continue with austerity, accepting the recommendations of leading Swedish economists such as Gustav Cassel, who argued that "deflation, unemployment, falling prices and wages … were required" to cure the depression.

Mark Blyth, Austerity, loc. 519