Why is Sweden number one?

Those unfamiliar with this sparsely populated country perched in the Northeast of Europe will be surprised to learn that Sweden, sandwiched between Norway and Finland, bounced back in a robust and dynamic manner after experiencing a huge downturn during the 2008 international economic crisis. Sweden was as severely affected by the crisis as several other economies in Europe, Latin America, Africa and Asia were. Its GDP plummeted by 5.8% in 2009 with unemployment zooming to double digit figures. However in the following years, Sweden has been able to pull itself up and emerge at the top of the pecking order in Europe along with Germany with a GDP growth of 5.2% in 2010 and 4.9% in 2011. The prudent fiscal and monetary policies adopted by Anders Borg, the Swedish Finance Minister of course had an important role to play in this recovery. Not for nothing was Mr Borg elected as Europe’s best Finance Minister in both 2010 and 2011!

But to find the real reasons for the rapid recovery of Sweden, it would be useful to peep into the make-up of the Swedish mind. Why is it that other countries which have experienced similar downturns have seen their citizens come out on the streets to protest, damage and destroy private and government property refusing to undertake any austerity measures, while in Sweden, people have focussed on doing what needed to be done and have in a determined and steadfast manner, been able to achieve remarkably positive results.

It is not widely known that till about a century ago, Sweden was also a poor country. Their prosperity and riches are of recent origin. No one knows it better than the Swedes themselves. They have not forgotten, nor do they wish to forget that in the latter half of the nineteenth century, more than one million people migrated from Sweden to the United States to escape hunger and famine and to eke out a better living on shores far away.

So what are the underlying reasons that within a short span of a hundred years, Sweden has emerged as one of the foremost leaders in creativity and innovation, high development indicators in education, healthcare, impressive levels of prosperity, high economic growth, etc.? What is it that makes this land of 9.1 million people stride majestically at the top of several international rankings like being No. 1 in Global ICT Ranking (WEF), 2^nd in Global Innovation Index (INSEAD), 2nd in Global Competitiveness Ranking (WEF), 1^st as intellectual capital of the world, health and security (PwC and Partnership for NY City), most respected country in Nation Brand Survey etc.? How is it that this country has produced top world brands in diverse sectors ranging from Ericsson, ABB, Atlas Copco and Sandvik to Volvo, Scania, IKEA and Alfa Laval?

Some of the following factors could assist us in understanding the reasons why Sweden has managed to acquit itself so creditably in the most challenging of circumstances.

Trust: Like many other countries, Sweden is a democracy. What however sets it apart from several others which profess to follow the same political system is the level of mutual trust, confidence and respect between the common people and the government, between the citizens and the rulers, between those in authority and those whom they govern. Politics is not a subject that consumes the ordinary people of the country. By and large people are happy to leave the task of governance to their elected representatives. People have the confidence that decisions taken by their elected representatives will be to their benefit and advantage. Mutual trust and respect are among the most essential elements of the social compact between the rulers and the ruled that informs the democratic system of the country.
High Taxes: Minimum level of Income tax is around 30%. With increasing income this goes up to higher slabs of 50% and 55%. The incidence of tax payable becomes much higher when compounded with the VAT rate of 25%. The overall tax burden is among the highest in the world at 51.1%. Two things are particularly noteworthy. One that people pay their taxes and are happy to pay them. Secondly they are happy with the high rate of taxation. I have spoken to a large number of people across wide cross sections of society in different parts of the country. I have not come across a single person who has told me that they would like the taxes to be lower. Reasons are simple to understand. People are satisfied because, with the high taxes they pay, they get world class service in the field of education, health-care, excellent infrastructure, child-care, social security benefits (unemployment, sickness, disability etc.) and everything else that goes to make a happy, secure and safe life. They are mindful of cases like the United States where taxation levels are lower but people have to pay heavy and exorbitant amounts for receiving quality health-care as also for higher education.
Gender Equality: Sweden is one of the most gender-friendly and gender-balanced countries in the world. The ratio of women in Parliament is 47%. In 1921, Sweden became the first country to vote to its women. Number of women ministers is 12 out of a total of 24. Number of County Governors is 11 out of the total 21. Ratio of women working is more than 80% as against the proportion of less than 60% for rest of Europe. Difference between ratio of men and women working is less than 5%. Sweden has been able to harness its women in the work force to contribute to economic production, consumption and growth. In addition to opportunities available to women for higher education, this has been made possible by the State stepping in to take care of children when women are expected to be in offices and factories. Employers also provide paid leave of fifteen months to be shared between the mother and father to take care of their children. Parental leave allowance is up to SEK 910 per day. State provides an allowance of about SEK 1000 (Rs 7500) per month per child to help parents better take care of their needs up to the age of 18 years. Public child-care institutions make it easier for women to work outside the home. There is a lingering impression that women get paid less for same work than men, are not adequately represented at higher levels in company boards and are not employed adequately in the private sector. These deficiencies are likely to be addressed through suitable State intervention.
Jantelagen or Jante’s Law: This is a Swedish expression which emphasises equality between individuals and frowns upon people either trying to stand out or outperform others in any discipline or field of activity. Conspicuous consumption or ostentatious behaviour of any nature is frowned upon. It is an unwritten but widely held and practiced concept. Often however the expression is used with negative connotations. The spirit of equality that this philosophy inculcates has often been credited with the innovative spirit and creativity of the Swedish entrepreneur. The society supports egalitarianism as a result of which blue collar workers and other members of workforce have the possibility, opportunity and confidence to walk up to CEOs or Heads of Organisations to share any thoughts or ideas for improvement or enhancing performance of any machine or process.
Nordic Model or Swedish Model: This is characterised by a mixed market economy with Universalist social security features. It encompasses an elaborate social safety net in addition to public services such as free education and universal healthcare. It covers generous public pension schemes with extremely high public spending of around 57% of GDP. One key reason for this high level is the very large number of public employees. They often have lifelong job security and make up around a third of the workforce. The public sector’s low productivity has to a significant extent been compensated by an increase in the private sector’s share of government financed services which includes outsourcing. Use of unemployment and sickness benefits were extremely high in the past but have been brought down in recent years on account of adverse impact of the economic crisis. No government can however contemplate jettisoning the system which has been extremely successful and has helped the Swedish economy to acquire this dominating position.
Low level of Corruption: Sweden is by and large a corruption free society. There is very little, if any, corruption at lower levels. Public tolerance for corrupt people in positions of power and authority is very low. Hence, politicians make all efforts to stay clean and also are perceived to be above board. Sweden is the land which initiated the Office of Parliamentary Ombudsman in 1809. This institution has not only survived till today but its functions and responsibilities have continued to expand. This institution is credited with having contributed to the high level of probity and uprightness in public life. According to Transparency International 2011 Corruption Perception Index, Sweden is the 4^th least corrupt nation in the World among 182 countries that it assessed.

The above strains of character and a desire to lead a frugal and disciplined life have contributed to Sweden occupying the enviable position that it finds itself in today.

The way of life practiced in Sweden has useful pointers and indicators for adoption and adaptation, not only by developing countries, including India, but also by several developed countries in Europe and elsewhere.

Ashok Sajjanhar is India’s ambassador to Sweden and Latvia.

This article was exclusively written for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.

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