• Sweden edition
 
JobTalk Sweden
'Too few of Sweden's billionaires are self made'

'Too few of Sweden's billionaires are self made'

Published: 28 Apr 2014 11:20 GMT+02:00
Updated: 28 Apr 2014 11:20 GMT+02:00

“I want more entrepreneurs to dare to invest, create businesses based on their ideas and win ground in the international competition," wrote Fredrik Reinfeldt in the technology magazine NyTeknik earlier this month. The Swedish prime minister continued to list a number of reforms that the government has launched to reach this goal.

But many of policies, such as tax breaks making it more affordable to renovate a house or buy cleaning services, have more to do with encouraging self-employment than entrepreneurship.

At first glance, Reinfeldt's line of argument seems quite plausible. The government has introduced various measures to encourage work and business ownership. In a time when much of Europe is still struggling in the aftermath of the crisis, Sweden's economy is performing relatively well.

Reinfeldt makes the common mistake, however, of equating self-employment with entrepreneurship. In reality, the two are quite dissimilar. Reforms that encourage more people to work as taxi-drivers or start small cleaning companies are vital for promoting employment, but do not necessarily affect entrepreneurship.

In some ways entrepreneurship is like an elephant, hard to define exactly, but easy to recognize once you see it.

Starting a company may not really qualify as entrepreneurship if the company is a one-man operation. Even creative individuals cannot be described as entrepreneurs if they lack the skills required to convert a creative idea into a functioning business. Entrepreneurs are the rare individuals who combine these features, creating innovative businesses that manage to expand and create employment opportunities for others.

Self-employment is high in countries such as Turkey, Greece, Spain, and Portugal – which have low rates of innovative entrepreneurship. On the other hand, the US, which has high levels of innovative entrepreneurship, has a low share of self-employed individuals. Within the US, the entrepreneurial hotbed Silicon Valley has half the self-employment rate compared to the Californian average.

Why should we be concerned? The reason is simple: Successful entrepreneurs such as Ikea founder Ingvar Kamprad create job opportunities for others. Some who would otherwise have been small business owners instead become local managers. Others who would have been forced into self-employment as a last resort before unemployment, can find stable jobs in companies such as Ikea.

Although it's tricky to measure entrepreneurship, it is possible. One way is to look at all the people who have amassed a fortune of at least one billion dollars, and who have appeared on the Forbes lists of the world’s richest people since the mid-1990s.

It turns out that Sweden over the years has had 11 billionaires. But only four of them are self-made - hedge fund manager Thomas Sandell who is worth $1.3 billion, Gustaf Douglas who has amassed $4.2 billion through his security ventures, businessman and investor Melker Shorling who is worth $5.8 billion, and of course, Ingvar Kamprad who has gained $4.2 billion by supplying home furnishing to the world.

But that means only 36 percent of Sweden's billionaires are self-made.

This is slightly below the 42 percent average for Western European countries, and half the US 70 percent average.

The share of high-impact entrepreneurs in a population varies significantly across the world. Countries with high levels of entrepreneurship are characterized by low taxes and limited regulatory burdens. This suggests that the liberalizations and tax reductions introduced by the Reinfeldt government can have some effect on promoting entrepreneurship.

At the same time, the government has done little to reduce the high marginal taxes that affect in particular people who are creating new wealth. The financial benefits for an entrepreneur thus remain low in Sweden. Of course, financial incentives are not the only key factor. Entrepreneurship depends both on incentives and knowledge. Many high-impact entrepreneurs are themselves highly educated, and they often if not always rely on co-workers with expert knowledge.

Recent Swedish governments on both the right and the left have been unsuccessful preventing the deterioration of learning in the Swedish school system. Higher education is also lagging behind. As The Local recently reported, two out of the three Swedish universities have dropped out of the top 100 in the Times Higher Education’s 2014 World Reputations Rankings.

So, while the conditions for businesses have overall been improved, the same cannot necessarily be said about entrepreneurship.

Sweden has a long history of entrepreneurship and has the potential to foster new innovative businesses. But to reach that goal we must increase the rewards to the people who create new wealth and substantially increase the quality of education and research.

Otherwise, entrepreneurs from other parts of the world are likely to increasingly win ground on the competitive international marketplace.

Nima Sanandaji is a regular op-ed contributor to The Local. His latest book is called “Renaissance for Reforms”, co-authored with Stefan Fölster.
 

The Local (news@thelocal.se)

Your comments about this article

Today's headlines
Science
Swedes discover rare Antarctic fossils

Swedes discover rare Antarctic fossils

Researchers from Sweden have been speaking about a rare discovery of mammal fossils in the Antarctic. READ  

Ukraine conflict
Sweden Democrats reject EU-Ukraine pact
The Sweden Democrats have two MEPs, seen here with the party's leader Jimmie Åkesson. Photo: TT

Sweden Democrats reject EU-Ukraine pact

BREAKING: The European Parliament has backed an 'historic' agreement to allow closer trade between the EU and Ukraine, but the nationalist Sweden Democrats were among those trying to block the deal on Tuesday. READ  

Elections 2014
Löfven to get no help from Sweden's Liberals
Liberal party leader Jan Björklund. Photo: Jessica Gow/TT

Löfven to get no help from Sweden's Liberals

UPDATED: Liberal Party leader Jan Björklund says he has no plans to join a government with the election-winning Social Democrats, as Sweden's political future remains uncertain. READ  

Analysis
'Evolution' for Sweden's crowd-funding scene
Photo: Victor1558/Flickr

'Evolution' for Sweden's crowd-funding scene

The Local checks out crowd-funding in Sweden as US giant Kickstarter announces plans to launch in Scandinavia. READ  

Opinion
Scandinavia and Scotland: closer links?
Brit Kester Gibson (left) thinks Scotland should split from the UK but Swede Mimi Coglianos disagrees. Photos: private

Scandinavia and Scotland: closer links?

Scotland votes on whether to become independent this week and the Scottish National Party has suggested closer ties with Scandinavia if the 'yes' camp wins. The Local asked two readers if they agreed with Scotland splitting from the UK. READ  

Sport
Malmö gear up for Champions League
Sweden's biggest club Malmö face Juventus on Tuesday. Photo:TT

Malmö gear up for Champions League

Malmö are the first Swedish club in the Champion's League for more than a decade but they face a tough debut fixture against Italian champions Juventus in their Group A opener. READ  

Sweden earthquake 'was strongest in 100 years'
The town of Mora, near where the earthquake hit. Photo: Shutterstock

Sweden earthquake 'was strongest in 100 years'

An earthquake measuring 4.1 on the Richter scale shook parts of central Sweden on Monday and experts have revealed it was the strongest in a century. READ  

Elections 2014
Löfven rules out making government with the Left
Left Party leader Jonas Sjöstedt. Photo: TT

Löfven rules out making government with the Left

Election winner Stefan Löfven announced on Monday that he would not form a government with the Left Party, a move that party's leader called a "huge mistake". READ  

Elections 2014
Six big headaches for Stefan Löfven
Stefan Löfven: a man with a lot on his plate. Photo: Sören Andersson/TT

Six big headaches for Stefan Löfven

Stefan Löfven has started talks to form a new government, but the former welder faces huge challenges in bringing together an administration that will work. The Local explains why. READ  

Business
Microsoft to buy Swedish Minecraft makers

Microsoft to buy Swedish Minecraft makers

UPDATED: Microsoft announced on Monday that it was buying Swedish company Mojang, which was behind the hit game Minecraft, for $2.5 billion (17.9 billion kronor). READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Sponsored Article
How to start a business in Stockholm
Society
How I became a surf blogger when I moved to Sweden
Gallery
People-watching: September 13th
Society
Why is Stockholm's Södermalm so cool?
Gallery
People-watching: September 11th
Blog updates

15 September

Liten, litet, små & lilla (The Swedish Teacher) »

"Hej igen! Have you ever been confused about when to use “liten”, “litet”, “små” and “lilla”? Today I’m going to sort out how use the adjective “liten” (small) and the different forms of it. Liten or litet? “Liten” is the form we will use when referring to a noun with the gender “en”. For example: Min pappa har en..." READ »

 

12 September

EU sanctions: necessary, effective and timely (The Diplomatic Dispatch) »

"Regular readers of this blog know I’ve written about the Russia-Ukraine crisis here. Today I’ve chosen to share an article by the UK Minister for Europe, David Lidington, with my readers: This week the European Union imposed further sanctions on Russia. This decision followed months of destabilisation of Ukraine by Russia, and months of political..." READ »

 
 
 
Gallery
People-watching: September 13th
Politics
Five possible election outcomes
Politics
Sweden elections: How do they work?
Politics
Sweden elections: Who's who?
Lifestyle
What's on in Sweden
Gallery
Property of the week - Hornstull, Stockholm
Analysis
Five differences between the UK and Sweden
Welshman Jonny Luck is now a chef in Sweden
Society
How I opened my own restaurant in Sweden's Malmö
Sponsored Article
Stockholm tech fest: relive the magic
Gallery
People-watching September 8th
Photo: TT
Politics
Feminists fight for first seats
Politics
Immigration cut push from Sweden Democrats
Sheryl Sandberg says women have "low expectations"
Tech
Facebook exec talks women's limits in Swedish business
Politics
Left Party calls for justice and equality
Politics
Green Party wants 'better world' for kids
Lifestyle
The five best Swedish songs of the month
Sponsored Article
Introducing… Insurance in Stockholm
National
Huge clear up underway after Skåne floods
Politics
Sweden's Alliance reveals full manifesto
Tech
Sweden's highest peak to lose title next year
Politics
How immigration became a key election issue
Sponsored Article
Graduates: Insure your income in Sweden with AEA
Sponsored Article
Introducing...Your finances in Stockholm
Sponsored Article
Introducing...Housing in Stockholm
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Germany

More news from Germany at thelocal.de

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

857
jobs available
Swedish Down Town Consulting & Productions
Swedish Down Town Consulting & Productions is an innovative business company which provides valuable assistance with the Swedish Authorities, Swedish language practice and general communications. Call 073-100 47 81 or visit:
www.swedishdowntown.com
PSD Media
PSD Media is marketing company that offers innovative solutions for online retailers. We provide modern solutions that help increase traffic and raise conversion. Visit our site at:
http://psdmedia.se
If you want to drink, that’s your business.
If you want to stop, we can help.

Learn more about English-language Alcoholics Anonymous in Sweden. No dues. No fees. Confidentiality assured.
AA-EUROPE.ORG/SWEDEN