Sweden needs a better business climate

The new government has made job creation a major priority. But, argues Nima Sanandaji of think-tank Captus, they are still doing too little to make life easier for businesses.

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After their first year in power, the center-right alliance claims that their policies have successfully achieved their main aim: to create more jobs. It is true that some constructive reforms, including tax cuts, have been implemented that increase the incentives to work rather than live off the government. It is partly due to this economic liberalisation that 100,000 new jobs have been created since the election.

But given how important it is for the center-right to create employment, it is remarkable how little has been done to improve the situation for Swedish business.

For a successful market economy it is vital to create good conditions for entrepreneurship. However, the Swedish government has been quite passive when it comes to reducing the extensive bureaucracy that faces Swedish businesses. At the same time the government has shown a lack of ambition in its reforms of the labour market.

A popular survey conducted by Skop for The Federation of Private Enterprises (Företagarna) recently concluded that 69 percent of Swedish corporate leaders hold the view that the center-right Alliance's policies have not made it any easier for small businesses to hire.

This lack of action has over time reduced the popularity of the government’s policies among Swedish entrepreneurs. A survey by Sifo soon after the election showed that only 10 percent of those running small businesses had low trust for the government’s corporate policies. Six months later this figure had climbed to 27 percent.

Swedish policy-makers have long been influenced by a technocratic way of thinking in which the role that entrepreneurs play in economic and social development has been disregarded. This is a likely explanation for the government's muted interest in implementing reforms that make the life of entrepreneurs easier. Swedish decision-makers would be wise to read the newly published book 'Entreprenörskap' ( 'Entrepreneurship'), written by economic researchers Professor Magnus Henrekson and Dr Mikael Stenkula. Based on modern research, the authors explain the importance of entrepreneurship for innovation and a dynamic economy.

The authors note that 34 of the 100 companies that hire the most workers are run by entrepreneurs. However, not a single one of these companies was founded after 1970. Perhaps a sign that Sweden is not the best environment for growing companies.

It is of the utmost importance to work towards creating a better business climate in Sweden. Policies must be reformed in such a way as to make it easier to hire and fire workers.

But as Henrekson and Stenkula write, we also need to look beyond the economical dimension. Entrepreneurship is about making dreams come true, and is thus to a large extent a social issue. The sometimes negative attitudes towards entrepreneurship and profits that are sometimes found in Sweden can unfortunately discourage individuals who have the potential to create and run businesses. A positive business climate is thus something that we must work for both in the political and the social arena.


Nima Sanandaji

Nima Sanandaji is president of the Swedish free market think tank Captus and publisher of Captus Magazine.