Forecasting Eye
The joke about Sweden used to be ‘Question: What do famous Swedes have in common? Answer: They don’t live in Sweden’. Bjorn Borg, IKEA founder Ingvar Kamprad, film director Ingmar Bergman and sports stars like skier Anja Paerson and Zlatan Ibrahimovic have lived elsewhere partly to avoid tax. Abba stayed in Sweden using aggressive tax avoidance and nearly went to jail.
But today the Swedes have made peace with capitalism and developed a middle of the road system that appears to work. The latest OECD data on new business births has Sweden in the lead with an index number of 172.3 in Q4 2017, just ahead of the UK. Sweden forms 4 times as many new enterprises per head as the US. And Sweden has the second largest Flat White Economy in Europe.
On a flying visit to talk to the Swedish Royal Academy of Engineering in front of an audience much more distinguished than the speaker about my forthcoming book ‘The Inequality Paradox’ and how it related to last Sunday’s election results, I was impressed by: 1) the proportion of top female executives; 2) the high speed train to Stockholm airport; 3) the evidence of strong economic activity – the crane count looked higher than London; 3) the extent of labour saving automation; 4) the full breakfast room in my hotel at 6:45am – most unusual in Continental Europe; and 5) the fact that so many seemed relatively relaxed about the election result.
The headlines about the election result focussed on the rise of the Sweden Democrats, the anti immigration party, to 17.6% of the vote and the near dead heat of the major Centre Right and Centre Left parties. Worrying, though less commented on, was the Green and Left vote which gave the parties about the same number of seats as the Sweden Democrats. Top executives expect a government to be formed, though they are unclear about its composition. A feature of the Swedish system is that if deadlock remains after four attempts to form a government, new elections are mandatory. No one wants that since the results would probably be the same.
Yet Sweden is actually doing pretty well. Policy is a smart mix of right and left. On the right, the extortionate tax rates that caused so many exiles have ended and the system is fairly flat, though the top rate of income tax remains high at 56.4. Taxes on entrepreneurs are favourable with a corporate tax rate of 22% and exemptions. The economy has deregulated since the 1990s. GDP growth has slowed from 4% in 2015 but should average above 2% for the next three years. On the left, education is still one of the best systems in the world. And free childcare and widespread use of paternity leave mean that Swedish women play a fuller part in the workplace than in any other country. And an expensive labour force has forced automation. I checked in and out of my hotel, onto the Arlanda Express and on to my flight back without any other human intervention.
Immigration has focussed attention since Sweden has taken proportionately more migrants than any other country. Crime has grown with a range of incidents. But Swedish migrants certainly contribute to the economy – at the event where I was the speaker, the highly impressive Mohammed Homman presented the story of his startup Vironova, which has just signed a deal with Hitachi. I argued that the key was to focus enough attention and resources to make integration work, since immigration does so much to encourage creativity and hence economic growth that it should be possible to finance this with boosted tax revenues.
Sweden combines micro policies from the right with redistributive policies from the left. Perhaps we can learn something…..
Contact: Douglas McWilliams, dmcwilliams@cebr.com 0207 324 2860