"A Swedish Wal-Mart and Nintendo should not be impossible", writes associate professor Nils Karlson, CEO of the Ratio Institute.

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Sweden is doing great – high growth, fiscal stability and a rising employment. Despite this, there is a shortage of new jobs in growing firms

A main results in modern economic growth research, among other conducted at The Ratio Institute, is that a small number of companies, so called gazelles, create almost all new jobs. These companies constitute only one percent of the companies in total. And they are both large and small, a can be found in all sectors.

There is no support for the idea that high-tech firms are more successful. High growth firms are equally common in the resale and service industries, as in the engineering- and manufacturing industries. Innovations in logistics, business models, marketing and design are equally important as innovations from new technologies. 

What Sweden needs is industrial policies that creates the conditions which make It possible for these high growth firms to reach industrial scale, with a large number of employees in Sweden, a high value-added and a large exporting share. The working conditions must be significantly improved for companies which can and want to grow and employ. Today the conditions are inadequate.

The Swedish industrial base of large manufacturing companies has in an accelerating phase been moving abroad. Employment well as the ownership and head quarters of these companies are to a substantial extent gone. There is no net contribution of new jobs from this sector.

However, the companies in this sector still contribute with the lion’s share of the Swedish export, productivity gains and economic growth. Even the stock market increase in 2010 can in large be contributed to the success of the manufacturing industries.

This development is not sustainable, a fact that cannot be missed by anyone. Sweden needs more large and successful companies, in more sectors.

If possible in new sectors, but also within the increasingly service-producing manufacturing sector.

What is needed is nothing less than a major shift of political perspective in the field of industrial and growth policies. A new model for Swedish industrial development is needed.

Subsides for start-ups and support for small firms, policies which today are embraced by almost all political parties in parliament is partly misplace – no less than 20 billion SEK (3 bilion $)  is spent on this each year. An increased number of self-employed is, however, hardly  the answer to Sweden’s persistent unemployment problems. Furthermore, the new “innovation strategy” announced by the government, risks leading in the wrong direction, unless its perspectives are broadened.

Instead , the general conditions of all enterprises must be improved. Neither politicians and bureaucrats, nor scientists or experts can predict which new companies, sectors, innovations, business ideas or technical solutions will be the most important for future growth and job creation. The focus on state planning and subsidies in Swedish industrial and growth policy must come to an end.

Let the companies that manage to attract capital and customers themselves grow, make money, invest, employ, develop and drive the ones who cannot out of business. Let the market decide which businesses are needed to create new, larger firms.  It is also necessary to improve the conditions for the existing large manufacturing firms in order to make them stay in Sweden. Today they most often develop in symbiosis with firms in the service sectors.

Such change of perspective means that a number of taxes, laws and regulations need to be changed. Most importantly, a new view on private capital accumulation and risk capital is needed. Moreover, there is an need to realize the importance of profits, free prices and export in new areas such as medical care, schools and welfare.

A “neo-industrialization” of this kind would mean that the original meaning of the word industry (Latin’s industria) “entrepreneurial, hard working, initiative” will be restored. Imagine , healthcare-industries, computer gaming-industries, health-industries, security-industries, school-industries, trade-industries, and experience-industries.

There is no lack of good examples. Securitas AB s the Swedish company with most people employed (although most of them not in Sweden). A Swedish Wal-Mart and Nintendo should not be impossible.

The Swedish successes might give an unique opportunity to make a shift like this. The question is only whether today’s politicians will accept the challenge to create the new industrialized Sweden?

Nils Karlson,
Economist and political scientist, associate professor Uppsala University.
 Founding president and CEO of the Ratio Institute in Stockholm.

The Ratio Institute is an independent research institute in Stockholm, Sweden. It is our mission to develop and distribute new knowledge about the conditions for enterprise, entrepreneurship and how political change can be achieved.