Economic Development and Place Attractiveness: the Case of Karlskoga in Sweden

Rhiannon Pugh

Post doctoral researcher, School of Humanities Education and Social Sciences, Örebro University, Sweden

Mats Lundmark Professor of human geography, School of Humanities Education and Social Sciences, Örebro University, Sweden Corresponding author [email protected]

Economic Development and Place Attractiveness: The case of Karlskoga in Sweden

Keywords: regional economic development, population change, place attractiveness, old industrial towns

In this short paper we introduce a research pro- is a town that has experienced something of a ject currently underway exploring the industrial roller-coaster over the past few decades as its development, and accompanying socio-economic economic fate has risen and fallen in various changes, in an industrial town in Sweden: Karl- stages. Because of the dominance in the town skoga. Here we consider specifically the con- of one of Sweden’s oldest and probably best fluence of factors and issues around economic known manufacturing firms, the weapons development on the one hand, and population manufacturer Bofors, the story of the town and migration on the other hand. We illustrate, has been inextricably woven with the chang- through the Karlskoga case of a town that has ing fate of this company. We trace the story experienced profound ups and downs both in its of the company’s establishment and founda- economic trajectory but also in accompanying tion as a major employer in the town, through population and migration trends, the impor- to the crisis in the 1990s for the company and tance of considering these two elements in har- accompanying socio-demographic decline in mony. We posit that to undertake sustainable the town, to the rejuvenation of industry and economic development in the future, old indus- employment in the town today, and accompa- trial towns such as Karlskoga need to centre their nying stabilisation of the population. efforts around quality of life and place attractive- In this paper we present, briefly, the story ness, and not only think of industrial develop- we have pieced together through a combined ment in a narrow sense. This is an introductory programme of qualitative and quantitative work relating to a project which is ongoing. research, in our attempts to tell the economic story of the town. As economic geographers, Introduction our investigations were initially very economy and industry oriented, but as we delved This short paper introduces a case study further into the case study, and spoke to more currently underway into economic transfor- people involved in the Karlskoga economy, we mation in one of Sweden’s oldest industrial realised that the town’s story, and its fragile towns, which is located in a relatively periph- future trajectory, was also a migration story. eral location in central Sweden: Karlskoga. More specifically, we understood that the main The city is an interesting case study through challenge facing the town, and its planners which to examine issues of regional econom- today, is enhancing place attractiveness and ic development, path-dependency, migration increasing the working and living population and employment, and much more, because it of the town in order to sustain the (re)grow-

21 ing industrial clusters that are located there. ventions. The legacy of Alfred Nobel is at the We increasingly realised that we cannot un- heart of how the town of Karlskoga presents derstand economic geography and economic and markets itself to residents, tourists, and development without paying due attention to also to companies, drawing on the rich histor- issues of population and migration. ical and industrial legacy of being the Swed- The paper uses information from a lon- ish residence and commercial centre for the gitudinal geo-referenced micro data on indi- famous man. An active place branding strat- viduals that covers the period 1990–2014. The egy is being pursued in Karlskoga around the database (Bergslagsdata/BeDa) is compiled person of Alfred Nobel. from a number of administrative registers Karlskoga is located in central Sweden, held by Statistics Sweden, and consists of lon- between the cities of Örebro and Karlstad gitudinal information, for every third year, (around 45 minutes travel time from each) for all individuals (16 years of age and old- and around three hours travel from both er) working and/or living in one of the four Stockholm and Oslo. It is still an industri- counties (Värmland, Örebro, Västmanland al town today, with industrial sites, some of and Dalarna) in Central Sweden. We also use which are heavily securitised and inaccessi- information collected from 10–15 interviews ble to civilians, dominating the city centre with representatives from the larger firms and lake-side locations. In addition to the and business associations in Karlskoga. industrial manufacturing and testing sites in the city, just outside Karlskoga is one of Economic History the largest and most accessible commercial testing sites, which companies from all over Our story begins in 1646 when a hammer mill Europe visit to test their products and this was established in Karlskoga, on a conven- represents an important economic source for ient lake-side location, as a company called the town and its resident companies. The Bo- Boofors. The business made bar iron and had fors Test Center (co-owned SAAB and BEA) of- some manufacturing of tools for farmers. The fers, among other things, test firing, destruc- turning point was in 1879 when a man called tion, tests with unmanned aircraft systems, Carl Danielsson managed to make cast steel safety tests and environmental impact. at Bofors which had a strength superior to the Moving to more modern times, perhaps pig iron which had been standard material Bofors is most well known for the Bofors gun. for guns up till then. This made the military Bofors is also well known for a high profile authorities interested and Bofors would soon scandal which caused political turmoil in start manufacturing cast steel for the gun both Sweden and India: a contract signed be- manufacturing firm Finspång in Östergötland. tween Sweden and India in 1986 was found In 1883 Bofors started their own gun manufac- by Radio Sweden journalists to have involved turing firm. In 1884 the first cannon workshop heavy bribes at the highest political level to was opened. These are the roots of the world-fa- Indian politicians. This moment is key in the mous Bofors weapons manufacturer. modern history of Bofors and in our research Around this time, there is a twist in the sto- with those employed at Bofors was pinpointed ry of Karlskoga’s (and Bofors’) development, as the turning point that led to the following when the most famous of Swedes Alfred No- break up of Bofors and ”scattering” of the eco- bel steps into the picture. In 1893 he became nomic system of the town that we see today. interested in finding a company to purchase, In 1999 the other famous Swedish defence and the following year purchased the iron- company SAAB bought the Celsius group, works at Bofors, which soon became the Bo- which was the parent company of Bofors. In fors arms producer we know today. It was not 2000 United Defence Industries (USA) bought only explosives that Nobel tested and devel- Bofors Weapons Systems, the heavy artillery oped in Karlskoga: he also made several other division. Saab retained the missile division. inventions such as artificial silk and leather In 2005 BAE systems acquired the whole of and registered altogether over 350 patents UDI including the Bofors subsidiary. The di- in different countries. But he remains most vide between heavy artillery (to BAE systems) famous for his pioneering work developing and missiles (SAAB) remains today. These are explosives, which were of course used in the now the two large employers in Karlskoga production of Bofors weapons. (outside of public sector activities, of course), The presence of Nobel looms over Karlsk- but the economic system today is much more oga today: its premier tourist and histori- diverse than this. cal destination is the home of Alfred Nobel, So, the previously monolithic company which today houses a museum complete got split into these two parts, but what we with the original, and largely unchanged, discovered upon interviewing actors in the workshops where Nobel developed his in- Karlskoga system is that the story is much

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Figure 1. Manufacturing workplace structure in Karlskoga 1990 and 2014. Number of employed (left hand scale) and cumulative percent (right hand scale). Source: BeDa/Statistics Sweden. more complex and diverse. The Bofors split ac- fors companies (BAE and Saab). The following tually catalysed a huge amount of change and charts illustrates how the Karlskoga economy diversity in the economic system of the town. has become increasingly characterised by Companies moved in, some from abroad, to several smaller firms rather than the mono- acquire different parts of the old business, for lithic employment structure of the past. The example units of technologies. One example is labour market in Karlskoga was in the early a medical company that acquired technology 1990s clearly dominated by one single work- and staff to make blood centrifuges. A dental place, accounting for roughly 40 % of all man- implant company was created from old Bofors ufacturing employment. In 2014 the largest staff and technologies, also chemical produc- manufacturing workplace had approximate- tion companies. An interesting development ly 10 % of total employment (see Figure 1). recently is the growth of a small but leading within Europe 3D printing cluster with staff and technologies from the old firm in com- Table 1. Self-employment (1990 and 2014) and foreign ow- bination with new people and ideas. Some of nership (2002 and 2014) in Karlskoga, (%). the old Bofors employees we interviewed left the Bofors firm and began a new career as Employment type 1990 2014 entrepreneurs using their contacts and engineering know how to start up businesses in Employed 99,2 97,3 areas as diverse as electronic shop displays Self-employed 0,8 2,7 and innovative ways of printing envelopes. Total, % 100,0 100,0 It is very difficult to capture the full extent of the changes that happened following the Ownership 2002 2014 break-up of Bofors, and everyone we spoke to had a different view of exactly what hap- State owned firms 3,6 0 pened and why and how. But we can catego- Swedish independent firms 13,9 8,0 rise it broadly thus: there was a large scale Swedish firms part of a larger group 42,1 30,7 movement of people, knowledge, and tech- Foreign owned firms 38,6 59,2 nologies. We heard several different stories Other 1,9 2,1 of people who had moved to new companies, Total, % 100,0 100,0 started their own companies, and those who remained in the much smaller remaining Bo- Source: BeDa/Statistics Sweden.

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Laxå Hallsberg Degerfors Hällefors Ljusnarsberg Örebro Kumla Askersund Karlskoga Nora Lindesberg

Figure 2. Relative population change (%) 1968 to 2017 in municipalities in Örebro County. Source: Statistics Sweden.

We can also see changes in the economic in decline of population, which can be com- structure of the town in terms of self-employ- pared to the significant decline in manufac- ment and foreign ownership of companies, turing employment in the town. both of which have increased in recent years, The deep crisis for Bofors in the early adding to the picture of a more diverse and 1970s is mirrored in a massive deficit in net fragmented economic system: The increase migration during a a couple of years (see Fig- in self-employment is, however, modest and ure 3). The rest of the 1970s and large parts still clearly below the average for the country of the 1980s show a more moderate negative as a whole. There is a huge variation between net migration. Since the turn of the century, municipalities in the region, some having net migration has been more balanced, and more than 20 % self-employed in the manu- even showing a net gain between 2010 and facturing industry. Karlskoga is, however, at 2015. Manufacturing employment in gener- the lower end of the scale. In the case of for- al has been decreasing since 1990 (Figure 3), eign ownership, the increase is related not but a slight upturn is evident since 2014. The only to the take-over by British BEA Systems, curves in Figure 3 indicates that covariation but also to other acquisition by owners from between manufacturing industry and migra- Norway, France and India. tion is becoming less directly related, reflect- ing a transformation into a service economy The Population and Migration Story even in municipalities like Karlskoga. It should be mentioned that during the As was the case in other towns in this region, good years after the Second World War Bofors, Karlskoga experienced quite significant pop- like most iron and steel producing compa- ulation decrease from the 1970s to the pres- nies in the Bergslagen region, relied heavily ent day, whereas the largest municipality in on labour migration from other countries in the region, Örebro city, experienced rapid Europe, mostly from Finland, but also from increases (see Figure 2). This decline in Karl- countries like Yugoslavia, Italy, Germany and skoga has begun to stabilise and turn around, Austria (Lundmark 2018). Since the 1970s, but there has definitely been an overall trend in-migration to Karlskoga (as in the rest of

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Figure 3. Net migration (1968–2018, right hand side) and employment in manufacturing industry (1990–2017, left hand side) in Karlskoga. Source: Statistics Sweden.

the country) has been totally dominated by well paid and highly educated workforce they refugees from countries like Bosnia, Somalia, need to attract for the industry there. and more recently from Syria. A problem that the Karlskoga planners Although in the past there was a decline in currently perceive is that the thriving Karlsk- employment in manufacturing in the town oga industry is attracting many people to of Karlskoga, today the economy is looking commute to the town, but because of the way to be in a much better situation. The firms in taxation is constructed in Sweden this means Karlskoga reported to be doing well, and told the municipality misses out on tax dividends us that their main challenge or issue at the that it would gain if those people were actu- present time is actually finding scientifical- ally resident in the town. This is the conun- ly and engineering educated workers to fill drum planners are faced with, and are work- the vacancies they have. Today in Karlskoga ing in partnership with the firms who are there are more jobs than there are qualified facing recruitment challenges to address. Fig- people to fill them. Thus, the major concern ure 4 shows that when it comes to the highly for those managing businesses in Karlskoga skilled workers in the science and technology but also the public sector economic and town sectors, a higher proportion of these are com- planners, is trying to attract more highly muting from other cities and towns rather qualified personnel to move into the area. To than residing in Karlskoga. do so, they are currently planning an ambi- tious regeneration programme for the whole Discussion: Karlskoga’s challenges as a town. This includes building a new railway place attractiveness problem? to connect Karlskoga to the mainline Stock- holm–Oslo route, physically expanding the Karlskoga town is currently suffering from city centre to be nearer to the lake side, and the effects of previous decades of decline and thus more attractive, and building whole new out-migration, and a lacking focus on place attractive neighbourhoods with villas and attractiveness leading to a situation where the lake side views to make the property offering town is lacking essential elements to make it of Karlskoga more attractive to the relatively attractive to the well paid workers it is trying to

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Figure 4. Place of residence for science and technology educated working in Karlskoga 2017, compared to the rest of the workforce. Source: BeDa/Statistics Sweden.

attract to live there. Interviewees we spoke to It is not a Karlskoga only problem, over highlighted broader issues such as the town’s Sweden there are reports of technical and en- under-performing school system, the roll- gineering sectors, including even the Stock- back of public services such as the closure of holm ICT cluster, reporting skills and worker the town’s maternity ward in the hospital, and shortages A recent report into the Swedish IT an old fashioned and unattractive housing sector found a need for 70 000 more employ- stock. The physical environment of the town ees in this sector by 2022 (IT & Telekomföreta- was also mentioned: the prominence of both gen, 2017). Clearly programmes for technical dilapidated and also currently used industrial education need addressing on a national lev- sites around the town which are inaccessible el as well as ease of recruiting highly skilled and often on contaminated land due to the in- workers from outside. However, towns like dustrial heritage of the town meant residents Karlskoga suffer especially from these issues were excluded from large areas of the city and due to their peripheral locations and lack of in particular old industrial areas near the at- place-attractiveness. By place attractiveness tractive lakeside area of the town. Also, previ- we do not only mean in the limited “creative ous generations of ill thought out planning class” sense of Florida (2002) whereby a “hip- meant the town is divided in half by a large sterisation” and neo-liberalisation of urban highway which is very difficult to navigate on space is taking place, but in terms of making foot or cycle. These issues highlighted to us the sure the correct public and community ser- fact that we cannot see the economy and its vices are in place to ensure a good quality of development in isolation, because if these oth- life for perspective employees and their fam- er underlying place attractiveness factors are ilies. In towns such as Karlskoga, addressing not taken care of, they will ultimately put the the place attractiveness and quality of life for brakes on economic growth. That is the situa- families and young people is key, to ensure a tion facing Karlskoga today. healthy population structure to support the

26 Figure 5. Age profile for science and technology educated working in Karlskoga 2017, compared to the rest of the workforce. Source: BeDa/Statistics Sweden.

27 industry and economic development of the ing a more beautiful physical environment town. These are two sides of the same coin, exploiting the lakeside location of the town which cannot be looked at in isolation. Figure and proximity to nature reserves and forests 5 illustrates this point, firstly by showing the may tempt more workers away from the more narrowing population pyramid of the town, expensive cities of Örebro and Karlstad which which is of course a concern, but also the fact are both within commuting distance. It is that the science and technology educated clear that investment in public services such workforce is ageing, and as these workers re- as healthcare and school is key in developing tire and leave the system, the Karlskoga econ- the place attractiveness and making the city omy is in danger of struggling even more to an attractive place for the well paid and high- grow and sustain itself. ly educated workforce of the town’s engineering based industries to locate their families. Conclusion: How can Karlskoga When we think about place attractiveness overcome its place-attractiveness we need to think holistically about jobs, cre- challenges to thrive as an industrial ating an attractive and creative city (as per town in the future? Florida, 2002) but also investing in decent housing stock for all and good public ser- The industry and economy of Karlskoga is ex- vices. Criticisms have been made (Peck, 2005; periencing an upturn at the present time. In- Dorling, 2016) against Florida in particular teresting new developments are taking place for promoting a vision of place attractive- in the town such as the development of one ness that is elitist and does not focus on this of Europe’s leading 3D printing clusters with holistic perspective on what makes a city an the inception of innovative new firms in the attractive place to live for everyone and not town drawing on previous engineering skills only a narrow class of workers often from a and heritage. Also, the incumbent companies certain demographic. This critical perspec- such as SAAB and BAE systems which bought tive on place attractiveness is, we argue, key up the main parts of the old Bofors company to understanding the Karlskoga case and in remain in the town as large employers. There turn the Karlskoga case provides a perfect il- is also an increasing diversity of the town’s lustration about why we need to think about economic ecosystem following the decline place attractiveness in this linked up manner of Bofors, and increased foreign investment which appreciates the importance of afford- into Karlskoga companies and increased lev- able housing, good public services, access to els of entrepreneurship. safe nature spaces, in addition to thinking However, Karlskoga is facing problems in about jobs and economic development. growing its population, and challenges in funding and supporting the services in the References town. Interviewees in the town highlighted the closure of hospital functions such Dorling, Danny (2017). The new urban crisis as the maternity ward in the town and the by Richard Florida review – ‘flawed and elit- under-performing school system as partic- ist ideas’. The Observer, 26.09.2017. Available: ular challenges facing the town. In terms of https://www.theguardian.com/books/2017/ the physical fabric of the town, planners are sep/26/richard-florida-new-urban-crisis-re- facing huge projects to update the housing view-flawed-elitist-ideas. Accessed 22.01.2020. stock, and to “move” the city centre closer to Florida, Richard (2002). The Rise of the Crea- the attractive lakeside of the town and clean tive Class: And How It’s Transforming Work, up old industrial sites that are dotted around Leisure, Community and Everyday Life. New the city due to its industrial heritage. None of York: Basic Books. these measures come cheaply, and Karlskoga IT & Telekomföretagen. (2017). The IT Skills faces the problem that many of its well paid Shortage: A report on the Swedish Digital Sec- (i.e. high tax paying) workers are not resident tor’s Need for Cutting-Edge Expertise. Availa- in the city but instead commute from other ble: https://www.almega.se/app/uploads/ neighbouring settlements which have higher sites/2/2018/06/ittelekom_rapport_brist_ levels of place attractiveness. pa_it-kompetens_eng_webb.pdf. Accesed Finding solutions to these place attrac- 22.01.2020. tiveness issues is, as mentioned, costly and Lundmark, Mats (2018). Arbetskraftsinvan- time consuming but measures are underway. dring till Bergslagen. In Mia Geijer & Maths Adding Karlskoga to the Stockholm–Oslo Isacson (eds.), Det svarta järnet: Bergslagens mainline will be an important development vapenindustri under 1900-talet. Stockholm: in the town’s future but is a long term project. Walborg Bokförlag och Länsstyrelsen i Öre- Through upgrading housing stock and creat- bro.

28 Peck, Jamie (2005). Struggling with the crea- In particular, we would like to thank Mika tive class. International Journal of Urban and Raunio for the invitation and inspiration for Regional Research, 29(4), 740–770. this paper, as well as the other presenters and attendees for their feedback and thought pro- Acknowledgements voking questions that have helped us to push forward our thinking on this project. We The authors would like to thank the Migra- would also like to thank Cecilia Beckmann of tion Institute of Finland for the invitation Örebro University for providing information and opportunity to present this work in pro- about the historical development of Bofors gress at the International Seminar on Migra- that we used in this paper. tion and Regional Economic Development.

Seminar attracted full house of experts and other stakeholders to discuss on highly topical matter. Picture: Toni Ahvenainen.