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LIECHTENSTEIN

Condemn the Swedish model, not Kamprad

Rather than denounce Ikea founder Ingvar Kamprad, people should instead take aim at the Swedish system that forced him to move the company's fortunes abroad and replace it with a culture of charitable giving, argues business school professor Hans Sjögren.

Condemn the Swedish model, not Kamprad
Kamprad at opening of Sweden's northernmost store in Haparanda, November 2006

The criticism of Ingvar Kamprad and his empire reveals ignorance and repeats the old Swedish scorn for business owners. The criticism should instead be turned against the Swedish model, which forces those who run successful family business into exile in order to secure their legacy. The view of family-owned businesses is not that they bequeath, but that they borrow that company from their children! Even the Rausing family realised early on that the family business centred on Tetra Pak would be put at a disadvantage if the company remained in Sweden.

The cases of Kamprad and Rausing show that Sweden must adapt its rules so that new family dynasties can emerge in Sweden based on the groundbreaking innovations that spring from advanced research and development. The quid pro quo is to make charitable donations tax deductible and thus provide an incentive to private capitalists to give back some of what they earned as a show of thanks to their homeland.

The world is full of dynasties, many of which we find in the business world: Rockefeller, Rothschild, Morgan, Ford, Porsche, Agnelli (Fiat), Toyoda (Toyota) and Bombardier. Many have started in trade and finance, as trading houses, brokerage firms, and investment banks. Other family dynasties have built their fortunes around the exploitation of natural resources during the industrial revolution, such as oil in the case of Rockefeller. We also find several family dynasties from the expanding automotive industry of the 20th century.

Sweden has a few – but sizeable – dynasties. If the requirement is at least four generations, we’re talking about Bonniers, the Wallenbergs and Johnson. Thus, we consider Kamprad and his sons as a potential dynasty.

The debate surrounding Ikea’s billions must be seen in light of the spirit of family-owned enterprises. Let us first note that Kamprad has been a pioneer and catalyst for a new view of industrial logic in his field, characterised by flat packages and new distribution technologies. Instead of battling for better market conditions and tax laws in his home country, Kamprad decided early on to challenge his competitors by placing a large part of his production abroad, at first to low-cost Poland. Kamprad had no state monopoly to contend with and the Ikea profit machine wasn’t dependent on the highly regulated credit market in the postwar period or on access of capital via the stock exchange.

A common feature of Swedish family dynasties is that they broke with the usual rules of the game and the logic in the market in their field. They have in opposition to or cooperation with the powers that be changed market conditions and created room for opportunities from which they could grow. In order to bring about these changes in market conditions, they had to act lobbyists or create strong ties to political powerbrokers.

With their companies, they have created new markets and the economy has been rewarded with a growing number of jobs. As companies have grown into major employers and thus become important for the country’s labor market, they have also ended up operating in the interests of politicians. The owners have become part of the establishment and developed goodwill with both politicians and the public, which in most cases, helps to strengthen the brand for both business and the family dynasty.

In the Anglo-Saxon world, family dynasties and major financial titans have always been expected to return some of their wealth to society through donations: in the United States, the volume of annual donations reaches levels comparable to Sweden’s gross domestic product.

Sweden had a donation culture in the early 1900s, but after World War II it became extinguished by government transfer systems, high income and corporate taxes, and the regulation of capital markets. Recent deregulation and the abolition of the inheritance and wealth taxes lays the groundwork for a donation culture renaissance in Sweden.

What that cases of Percy Barnevik and now Kamprad show is that Sweden needs to build a thriving donation culture. Role models can be found in the United States, with Bill Gates and Warren Buffet the most shining examples. The means is a the creation of tax- deductible donations for research, education, hospitals and infrastructure. And increasing pressure on Kamprad and other newly rich to donate. Doing so would then transform self-made business tycoons from the victims to the heroes of the welfare society.

Hans Sjögren is a professor of economic history and institutional economics at Linköping University as well as director of the Institute for Economic and Business History Research (EHFF) at the Stockholm School of Economics.

This article was first published in the Svenska Dagbladet (SvD) newspaper on January 29th, 2011. English translation by The Local.

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IKEA

Ikea will buy back your used furniture at up to half the price

In the run-up to what would in normal times be the festive season sales rush, Ikea has vowed to buy back used furniture from customers to resell – and pay up to 50 percent of the original price.

Ikea will buy back your used furniture at up to half the price
Got any pieces of Ikea furniture at home? You may be able to get rid of it and get money back. Photo: Fredrik Sandberg/TT

Ikea, the world's largest furniture chain, said Tuesday it would begin buying back used furniture from customers to resell – and pay up to 50 percent of the original price.

The “Buy Back Friday” scheme, timed to coincide with the “Black Friday” pre-Christmas retail frenzy, will run from November 24th and until December 3rd in 27 countries.

“Rather than buy things you don't need this Black Friday, we want to help customers give their furniture a second life instead of making an impulse buy,” said Stefan Vanoverbeke, deputy retail operations manager at Ingka Group, Ikea's parent company.

To address concerns its affordable, flat-pack products encourage overconsumption and waste, the Swedish company had previously said it would start renting and recycling furniture as part of an eco-drive.

Under its buyback scheme, the group said that “anything that can't be resold will be recycled or donated to community projects to help those most affected by the Covid-19 pandemic”.

“Some countries like Australia and Canada for example are currently testing different buyback services, but BuyBack Friday will be the first time that 27 countries do this together,” the statement added.

The Swedish giant employs over 217,000 people and has more than 50 outlets. Its annual turnover is around 40 billion euros ($46 billion).

The group did not specify how it would determine the price paid for second-hand furniture and customers will receive a voucher, not cash, for their products.  

As part of efforts to reduce waste, Ikea has already begun repairing and re-packaging products in every store that have been damaged in transit, as well as allowing customers to return products – including furniture – for resale or donation to charities.

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