Sweden Should Go For Growth
Sweden has long enjoyed greater economic importance than its small size alone would have justified. It has been the home of world-class companies that have supported a high standard of living and nurtured a corps of well-regarded executives.
But the country is at a crossroads now. Its big companies are being broken up and acquired by global competitors. Businesses and entrepreneurs are leaving--partly to escape punitively high taxes. There is widespread fear that this could aggravate unemployment, already at 10%, and turn Sweden into an economic backwater.
That does not have to happen. Grouping some of Sweden's big engineering companies with global players could be the best way of sustaining jobs. And Sweden, with its love of the Internet and mobile phones, could be well positioned to become a world leader in new industries. Venture-capital pools, though still modest, are growing. And a new generation of Swedes prefers starting its own businesses to working in big companies or as government bureaucrats.
But substantial changes in government policies are needed. Personal income taxes approaching 60%, a 1.5% tax on wealth, and heavy social-security levies discourage growth. The time has come for Social Democratic Prime Minister Goran Persson, who has shown courage in curing Sweden's fiscal deficits, to cut taxes and go for growth. He also should give serious consideration to joining the euro bloc quickly. If Persson doesn't act, Sweden's more creative people and companies will continue to vote with their feet.