Sweden’s Älvsborg Ransoms and Fiscal Reforms

In a 16th century war, Sweden lost control of a fortress at Älvsborg to the Danes and had to pay a ransom to recover it. Four decades later, it again lost the Älvsborg fortress and again had to pay a ransom to Denmark, this time a much larger one. Sweden was then a growing but relatively poor country. Without immensely profitable colonies, any large trade, or a numerous middle class, the Swedish state had particularly limited fiscal capacity. So, paying off the Älvsborg ransoms tested the limits of this country then just leaving the medieval world for the modern one.

First Älvsborg Ransom

From the 16th to the early 18th centuries, several wars were fought by Sweden against variations of Denmark, Poland, Prussia, and Russia. To summarize crudely, in the first half of this period, or before the Thirty Years’ War (1618-1648), Sweden was generally successful expanding in the Eastern Baltic, in places like Finland, Estonia, and Russia but struggled against the Danes to their west. The Northern Seven Years’ War, between Sweden and Denmark, was one such war, fought between 1563 and 1570. It was partially the result of the beginnings of this Swedish empire in the Baltic, intended by Sweden to give it more control over Russian trade and reduce its own reliance on other trading cities, most notably Lübeck.

The war ended with the Treaty of Stettin which was generally unfavorable to Sweden; it required that Sweden pay 150,000 riksdaler to Denmark. Until then, Denmark would continue to occupy a fortress they had captured during the war, the fortress of Älvsborg, near modern Göteborg (Gothenburg). The fortress was one of Sweden’s few defensive structures in the west of the country and an outlet to the western world that allowed Sweden to bypass the Danish controlled Øresund strait. At the time, Denmark also controlled the parts of modern-Sweden across the Øresund strait that connects the Baltic to the North Sea and Denmark collected a toll on ship traffic through those waters. Given the important location of the Älvsborg fortress, it was crucial that Sweden pay the ransom and recover the fort.

Älvsborg (Elfsborg in Danish), as would appear later, in the mid-17th century (from Erik Dahlbergh’s Suecia antiqua et hodierna)

Second Älvsborg Ransom

Another war between Denmark and Sweden was fought from 1611 to 1613, again over Swedish expansion, both in the Baltic and this time in northern Norway too. Most of the war took place early in the reign of the new king Gustavus Adolphus. It ended with the Treaty of Knäred, again relatively unfavorably for Sweden.

Sweden renounced all claims to an Artic coastline, the reason for the shape of modern Norway; this blocked one more potential route around the Øresund strait to the wider world. The Älvsborg fortress, captured by Denmark during the war, was again ransomed, this time for one million riksdaler to be paid over six years. The penalty was such a large sum that the Danes likely thought it would be impossible to pay and the fortress would certainly be theirs for the future. Though, despite Sweden’s limited financial resources, the ransom was paid.

Gustavus Adolphus II (1594–1632), King of Sweden (retrieved via National Trust UK, unknown artist of the Dutch school)

Swedish Economy

In the early 17th century, Sweden had a population of less than one-and-a-half million people. It had a mostly agrarian economy, with a particularly short growing season, in which mining iron and copper was also an important economic activity. On a positive note, there was no serfdom, in contrast to other parts of the Baltic. Nevertheless, it does not mean Sweden was richer, or getting richer.

Swedish industry was small, and to a large extent oriented around producing weapons for the army, but growing. Still, most economic activities took place in the hinterland. There was little international commerce, no large middle class, and few cities or large towns. It has been assumed that the cold temperatures and dependance on wood fuel in a time of high transportation costs limited the size of towns until the Industrial Revolution. Any place home to more than 5,000 people was a very large settlement in Sweden at this time.

Data on wages for unskilled workers in Stockholm from the mid-16th century onward shows that wages fell in the aftermath of the Northern Seven Years’ War and did not recover for decades. That said, even in 1750, only 5% of Sweden’s population lived in urban areas, one of the lowest rates in Europe. Regardless, later data comparing rural and urban wages shows they tended to move similarly so the urban data is still valuable as a rough indicator of standards of living more broadly. Not only were conditions worsening, it also appears that Sweden was poorer than most or all parts of Western and Southern Europe around 1600 and this was not only because of crop failures between 1596 and 1603 but seems fairly persistent until much later in the 17th century by which point Sweden was noticeably more prosperous.

Survey and Raising Money

After the Treaty of Stettin in 1570, Sweden raised a tax on movable property. Of course, any tax on something with uncertain value, or even uncertain location or ownership, requires that a survey and appraisal be carried out. So, to collect this tax, a survey of the country was conducted. To pay the ransom, rural communities paid one-tenth of the value of their property and urban communities between one-twelfth and one-eighteenth depending on the damage sustained by them during the war.

After the Treaty of Knäred, new taxes had to be raised once again. Sweden had very limited fiscal resources and the ransom was large enough to strain the kingdom. To find the money, a survey was again conducted. People were classified into fifty-five social categories and taxed according to their categorization. In addition, the rich had an individual assessment of their income drawn up and their tax was based on that. Only certain peasants and personal servants were exempt from tax.

These special taxes raised 365,000 riksdaler from over 200,000 taxpayers. Consider this number as a proportion of the country’s population; a very large fraction of households in Sweden paid some part of the ransom. It is rather broad participation for a tax from four centuries ago. Nearly half of these taxpayers were landed peasants, who contributed approximately 55% of the taxes raised. Nobles, servants, townspeople, and clergymen made up much of the rest.

Taxes were not the only means of coming up with the money. The government owned a copper mining company, Stora Kopparberg, which operated the largest copper mine in Europe. Production was increased and copper exported to markets across Europe in order to obtain more money. Spain was a particularly big buyer since it was migrating towards a partly copper-based monetary standard. Armies across Europe used copper in their weapons and the early 17th century saw some large wars and modernizations of militaries and associated investment. This sent copper prices rising. The boom in copper had a not inconsiderable role in making Sweden wealthy.

In any case, on the back of copper exports, a trade deficit turned into a large trade surplus and because the mine was state owned, it reduced the government’s reliance on new taxes. A large source of non-tax income made relations between the king and parliament in Sweden more harmonious than in other parts of Europe. Still, the ransom was very large and to make the payment, a loan was raised in Amsterdam, a loan that was never fully repaid. Regardless, Sweden never had the sort of access to credit that a country like Spain did, limiting the damage.

Significantly, paying the second Älvsborg ransom left a lasting impact on Swedish government. The administration of the Stora Kopparberg mine had been reformed back in the late 16th century but further reforms came, as did additional capital invested in new equipment for the mine. Production approximately quintupled between 1600 and the mid-1640s. An important figure, Axel Oxenstierna, was appointed chancellor by Gustavus Adolphus, and he further modernized the country through administrative and economic reforms.

The treasury was reorganized in 1618; double-entry bookkeeping and formal state budgets were introduced. The second Älvsborg ransom was successfully paid in 1620, shaping the future of both Sweden and Denmark. In Sweden, the early 17th century marked a turning point, both politically and economically. The country’s public finances became a source of strength, not weakness, and wages did eventually recover. The subsequent decades saw Swedish power increase and the period became known as Sweden’s stormaktstiden or ‘Great Power Era’.

Lesson

Countries typically test the limits of their fiscal systems the most during times of war. Sweden strained its fiscal system dealing with the consequences of war. Taxes were raised to ransom the fortress of Älvsborg on two occasions; all of the money may have gone to Denmark but not all of the benefits. To implement the taxes required, Sweden modernized aspects of its administration and boosted the fiscal capacity of the state with enormous results for the subsequent hundred years. This can be compared to the manner in which the Nine Years’ War in Britain led to the creation of the Bank of England or the Napoleonic Wars meant the levying of an income tax in the same country for the first time.

More from the Tontine Coffee-House

Read about other ‘indemnities’ or ‘reparations’ in the aftermath of war and how they were paid or refinanced, from indemnities due in the aftermath of the Napoleonic Wars, the Franco-Prussian War, and the First World War. Consider subscribing to this blog’s newsletter or checking out book recommendations, which include many of the sources often referenced in my posts.