Everyone has heard of Spotify, the popular web player app. Many, however, are not aware that it is a Swedish creation. It was developed not in Silicon Valley, not in China but yes, in Sweden. This shouldn’t be surprising. According to a recent article in The New York Times, “the Nordic country has a roster of high tech entrepreneurs that is the envy of its neighbours.”

Sweden has produced more tech start-ups per capita valued at over US $1-billion than any other European country after Estonia. It ranks fourth in the total number of start-ups after Britain, Germany and France, countries with six to eight times its population. With a population of only 10 million, it has a tech sector twice as productive as the European Union’s average. The Times article suggests Sweden could “show Europe how to compete again” in the hi-tech economy.

And why is Sweden such a hi-tech entrepreneurial success? According to some of the entrepreneurs, a major reason is the country’s expansive social welfare system. According to Fredrick Cassel, a partner at venture capital firm Creandum, “You can afford to take risks, you will not be on the street” if you fail.

Sebastian Siemiatkowski, The founder of Klarna, a financial tech company, said even though his immigrant parents were often unemployed when he was a child, he was able to get health care, attend good schools and get a home computer. The Swedish governments’s initiative in the 1990s of getting a personal computer into every home gave the country an engineering edge. Furthermore, Sweden (along with Belgium) spends more on education as a percent of GDP than any other member of the EU.

The success of Sweden’s social welfare system in providing opportunity is illustrated by the country’s social mobility. In 2020, the World Economic Forum created a mobility index to show why economies benefit from fixing inequality. They set five criteria: 1. Health; 2. Education (access, quality and equity, lifelong learning); 3. Technology; 4. Work (opportunities, wages, conditions); 5. Protection and Institutions (social protection and inclusive institutions).

Sweden ranked fourth, behind only three fellow Scandinavian countries. Canada ranked 14th, the U.S. 27th. As some wit remarked, if you want to enjoy the American dream, go to Sweden.

For a tiny county, Sweden has been remarkably successful at creating hugely successful multinational companies. Firms like IKEA, Volvo and Ericsson are household names. Over half of the country’s gross domestic product comes from exports. (Canada’s make up one-third.)

According to conservative economic dogma, all this should not be happening. Sweden is a high tax country and conservative business people, politicians and economists insist on telling us that high taxes preclude a prosperous economy.

As evidence from Sweden’s economic success indicates, the opposite is more likely. A country’s best economy is achieved by a healthy, well-educated population in which every citizen has an opportunity to fulfill their potential.

Sweden’s hi-tech excellence in particular demonstrates that good social programs encourage entrepreneurship and innovation. Taxes are high, but the rewards are also high, socially and economically.