THUS PASSES THE LEFT'S LAST BEST HOPE:

Scaling back socialism: Sweden looks to fuel growth via economic, market reforms (Annie Helstrom, Feb. 8, 2006, MarketWatch)

Largely dependent on foreign markets, Sweden has benefited from an economic upswing that began in 2004. Research and development investment is among the highest in the world at 3.7% of gross domestic product in December 2005. And few other countries have a higher patent filing per capita.

Yet many innovations have been commercialized abroad and not enough entrepreneurs are starting new companies within the Swedish borders.

"People do business in Sweden and it goes well; they may try launching the product in Denmark instead of considering a global business plan. On the financing side, VCs require too much downside protection and are not willing enough to take risks," said Zennström.

It's not that investors can't find good Swedish companies. Volvo AK and retailer Ikea have helped Sweden become internationallly reknown for advanced research and internationally successful business ideas.

A changing political scenario may be good news for investors looking to invest in a few more Swedish names. And it comes amid moves to privatize companies away from government ownership, increase foreign venture capital and develop a more attractive combined pan-European capital market.

Sweden endured a deep financial crisis in the early '90s, with sluggish growth and high unemployment, but this provided an impetus to new approaches in fiscal policy. As a result, the central bank became independent and set a low inflation target of 2%. Centralized salary negotiations were abolished and the labor market developed into one of Europe's most flexible.

Large companies have long been the major driving force behind the Swedish economy, but attention is now focused on the lack of small and emerging companies. Growth of new European Union members is creating more competition and increased mobility across borders; the Swedish Trade Council expects one in four Swedish companies to transfer production abroad in the coming years.

When socialism can't work in a completely homogenous state of just 9 million, perhaps it's time to stick a fork in it once and for all?

Posted by Orrin Judd at February 8, 2006 10:33 PM