Economy Of Sweden: Exploring The Swedish Economy

Sweden should be known as the start-up nation. The Swedish economy is set up in a way which promotes starting up a business and getting very rich from it. People assume the Swedish economy is socialist, they couldn't be more wrong.

The Swedish economy has produced one of the highest standards of living in the world and Sweden generally ranks highly for human development, happiness levels and life expectancy. I think the Swedish economy is best described as a trend setter. Founded in 1688, the Swedish Central Bank is the oldest central bank in the world. Now a days, every country has a central bank and policy makers are increasingly relying on monetary policy to get them out of a jam.

Sweden is a high tax, high spend country where employees receive generous social benefits. Economic orthodoxy would suggest that this would be detrimental to entrepreneurship. When people think of entrepreneurial countries, they think of the USA, Singapore and Hong Kong. And yet, Stockholm is one of the cities that has produced the most business unicorns.

The early 1990s were a tough time for the Swedish economy. Pretty much everything you would want to avoid if you were in charge of an economy happened. GDP fell by 5% and unemployment rose to over 10%. The Central Bank had to raise interest rates to 500% to try and protect the currency and Swedish bonds came under pressure. The welfare system was already on the higher end in the good times, but it exploded when the Swedish economy went into recession. This was obviously a tough time for the Swedish economy, but it did lead to important reforms which helped it become the start-up nation that it is today.

The Swedish economy was reformed to favour start-ups and a competitive market over protecting large businesses. Another reform which helped create the dynamic Swedish economy that we know today was a reduction in red tape.

The biggest barrier for people creating a business is the risk associated with it. Setting up a business is actually encouraged by the state. Workers in the country are given some of the most generous leave policies in the world and part of that leave policy includes taking a sabbatical to try and start a business venture.

All of these measures have helped the Swedish economy to grow quicker than the USA and Europe for the last 20 years.

The Swedish economy of course has problems. Trying to recruit talented employees from abroad can be a struggle. Income taxes for the middle class are very high compared to other countries. And stock options are taxed as if they are income, which would normally be used as compensation for the risk of joining a start-up.

Despite this, Sweden does prove the orthodoxy doesn’t always apply. The Swedish economy is known for its high taxes and robust safety net yet produces some of the biggest and best businesses in the world.

The question is will other countries follow the model of the Swedish economy?

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#Sweden #SwedishEconomy #EconomiesAroundTheWorld

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