Erik Hoglund, a commercial artist, brought a new style to the old art of making crystal in Sweden 30 years ago. He did it with a potato.

He threw the potato into a pot of molten glass, creating air bubbles. But when glassblower Ruben Hjelm began to shape a piece at the end of his five- foot-long iron pipe, he became enraged.The crystal had bubbles in it and wasn't clear as good crystal should be, Mr. Hjelm told Mr. Hoglund, and stormed out.

The story goes that it took a bottle of schnapps to get Mr. Hjelm back, and thus was created a style of crystal bowl and vase - with bubbles frozen into the thick glass - that has distinguished Sweden in the art of glassmaking.

The story of the potato and the air bubbles has entered local folklore in Smaland, a southern province in Sweden known as the Crystal Kingdom.

Here, glassblowing is a matter of pride, tradition and economic survival.

Smaland, which is too hilly, rocky and forested for farming, has lived

from glassmaking for 100 years. The industry has suffered some hard times, but the marriage of artistry, craftsmanship and export marketing has helped bring a revival.

Glassmaking employs some 2,500 of Smaland's 700,000 people, and earned $180 million in export income during the first 10 months of 1987.

Tableware from the Orrefors and Kosta Boda companies appear in homes from Tokyo to Topeka and can sell for as much as $80 a glass. One vase made by Orrefors in 1939 fetched $93,000 at an auction this past November.

Glassblowing is a craft that generally takes 10 years to master. It's a tricky art to breath a bubble of air into molten glass to give the edge just the right thickness, Awirl the fiery mass on the end of the pipe, shape it, cool it and cut it.

It's an art still passed on from father to son in Smaland. But some aspects of the industry are changing as big companies and high-powered managers take over.

When I first started working here in 1959 this was a family-owned company, said Gunnar Cyren, one of eight designers for Orrefors.

All the youth in the village gathered in the blowing hall to keep warm by the ovens. The door was always open. Today there is a fence around the factory.

Half a million tourists a year come to the village of Orrefors, which has a population of 1,000, to see the glassworks.

Smaland once had as many as 60 glass factories with 4,000 workers. Many companies closed during Sweden's economic crisis of the 1970s, and now only 20 remain.

Orrefors, which began as an ironworks in 1726 and turned to glassmaking later, was bought in 1971 by Incentive, one of Sweden's largest holding companies. Kosta Boda was acquired by Uppsala-Ekeby, another multi-company group.

Anxious to keep employment high, Sweden's Social Democratic government subsidized the industries and pressured the larger companies to buy up the smaller factories to keep them open.

They were afraid that the villages would die if the plants closed, Orrefors' president, Goran Bernhoff, said in an interview.

A 1982 devaluation of the Swedish krona, together with the big-scale management and marketing of the new owners, turned around the industry.

Now the numbers are climbing again. About 40 young artists have opened studios to sell to tourists and other small markets, says Gunnel Holmer, curator of the Smaland Museum here in Vaxjo, the regional capital.

The threat to the hand-blown glass industry today comes from new technologies, said Mrs. Holmer.

If we make good tableware here, others soon copy it with machines and sell it much cheaper. But the unique pieces, the 'art glass,' that's something else, she said.

Glassmaking is a symbiosis between the artist and the artisan.

You don't do any of the craftwork yourself, says designer Erika Lagerbielke.

You make a sketch and try to explain to the glassblower what is to be done. When you work well with someone, one plus one sometimes adds up to three or four. Sometimes you both end up surprised.

That was the way it was 30 years ago with Erik Hoglund, Ruben Hjelm and the hot potato.