Five important ideas
Purification of spirits
In 1855, a new law made it illegal for individuals to produce their own alcohol. From then on, only a few distilleries had the right to manufacture spirits. Purified through so-called cold treatment, they were generally of low quality and could be hazardous to health. L.O. Smith saw the situation as a business opportunity. He started investigating how he could purify the vodka that he was selling. In France, he was introduced to the latest purification methods. This is where he learnt that impurities could only be removed by heat. He also came across a machine that could isolate impurities with such precision that only pure ethanol remained. As the machine was expensive to operate, the theory had never been tested in reality. For a wealthy, ambitious man like L.O. Smith, however, the cost was not a problem. He started a debate in Sweden about the danger of impure alcohol. The purpose was to position his own production against his competitors. Finally, he had everything he needed to offer his own, unique solution.
Sugar beet cultivation
In 1867, Smith took an interest in French sugar beets. Following a tax raise, French farmers had started to produce spirits from beets instead of wheat. Smith’s interest in beets was not just about production of liquor, however. Perhaps sugar mills would have a positive effect on Sweden’s unemployment rate? Soon enough, he was convinced that sugar was the answer. Nobody had tried to grow sugar beets so far north before. After getting advice from the Swedish University of Agricultural Sciences, Smith distributed information and seeds to the farmers. As he needed capital, he partnered with Consul General Johan Wilhelm Smitt, who had already offered to invest in Smith’s liquor company. Smitt found the sugar industry idea interesting and decided to help out financially. In the autumn of 1867, Smith and Smitt formed the limited company Inedals Sockerfabriks AB and established a factory at Kungsholmen in Stockholm. They ordered machines from Prague and signed contracts with sugar beet farmers in Västerås and Uppsala. The company gained a positive reputation, and was introduced on the stock market. Already in the spring of 1869, however, the company ran into problems. The farmers complained of meagre crops and had to raise the price to make the work worthwhile. The beets were also of poor quality and had a mild taste of tobacco, probably because the soil had been used to grow tobacco previously. At the same time, the factory appeared to be partly misconstructed, which led to costly repairs as equipment had to be replaced. Only one year after it opened, the factory faced severe financial problems. Following a disagreement within the board, Smith resigned as chairman. In 1872, Inedals Sockerfabriks AB went bankrupt. The business venture was heavily criticized, but Smith was also praised for introducing a new root vegetable and for supporting technical innovation.
L.O. Smith never forgot his modest background. He cared about the living conditions of the working class, and was very involved in workers’ rights. In the middle of the 1880s, Smith gathered workers from all over the country to discuss how to improve their situation. On a trip to Manchester 23 years earlier, Smith had come across consumer groups and steam kitchens, and was keen to create his own Swedish version. The result was so-called labor groups; associations that aimed to improve the living conditions of the working class. The groups had names like Avsky krogen (Hate the pub), Undfly krogen (Escape the pub) och Enighet (Unity), and there was a clear connection to the temperance movement. It was easy to join a labor group and it usually cost only one Swedish krona (around 10 cents in today’s value). At first, Smith’s worked with the labor groups on his own. When he realized how appreciated the initiative was, he requested support from King Oscar II. Even though His Majesty was slightly suspicious, he said ”Well, as long as you don’t do anything illegal, you don’t have to be scared of me.”
The post bank
Smith’s labor groups often discussed how they could improve workers’ financial situation.
Some members suggested setting up consumer groups, which would aim to push the prices down by making joint purchases in selected stores. Smith was not too keen on the idea of consumer groups. Instead, he presented an idea that had been tested in countries like Italy, Holland and Canada: The so-called post bank. By converting post offices around the country to banks, banking services would be more readily available and have longer opening hours. This would encourage workers to save more, buy cheaper spirits, consume less and lower their living costs. To get a better understanding of the phenomenon, Smith offered to pay economist Dr. J.A. Leffler to make a study trip to the countries that had such a system in place. Leffler accepted the proposal and returned with positive results. Through a politician from the province of Kronoberg, Smith submitted a proposal to start a Swedish post bank. On March 6, 1883, the King Oscar II submitted a proposition to the Swedish parliament. However, L.O. Smith was never recognized for the initiative of introducing the Swedish post bank.
L.O. Smith was a busy man. He was often involved in several projects at the same time, and his work with the labor groups was no exception. Without a suitable leader, the groups dissolved. Smith felt that he did not have the workers’ confidence, and he wanted them to contribute more. Although the labor groups disappeared, their ideas remained and were soon embraced by the socialists. Perhaps Smith’s stern attitude encouraged the workers to get more organized? Smith continued to support workers’ rights politically by endorsing their right to vote. At a meeting on April 6, 1889, the Swedish parliament raised the question whether all men should have the right to vote. Smith voiced his opinion loud and clear:
”What are we industrialists without our workers? Nothing. We would neither earn a fortune nor what is needed to enter this chamber, without the help of our workers. We mainly live on their work, and how many of us are not completely dependent on their skills and diligence? It is our workers that enabled us to enter this chamber, and fulfill our mission that the nation has imposed upon us. Why should we deprive those who pay their taxes the right to take part in at least some of the country’s cases and the elections, even if they cannot be elected themselves? I would like to emphasize the danger of not offering the public the right to vote. Sooner or later, people will become resentful. I appeal to your hearts, Members!”
The next speaker, Baron and Colonel Klinkowström accused Smith of evading the subject. The important thing, he said, is the morals of those who have the right to vote. He defended the older system where voting rights are granted those who earn at least 800 SEK per year. Smith was quick to respond:
Smith’s proposal was rejected at the meeting by 93 votes to 14.