🇸🇪 👨💻 🦄 A country of high taxes, free childcare and strong social protection? Or a happy haven for modern tech entrepreneurs? You can’t usually have both, but, according to Reuters, Sweden’s famed welfare system not only co-exists with red-toothed digital-era capitalism, it spawned it.
The key was to put a computer in every home, a government policy in the late 1990s. Coupled with investment in internet connectivity, it explains why Stockholm has become “such rich soil for start-ups, birthing and incubating the likes of Spotify, Skype and Klarna, even though it has some of the highest tax rates in the world”.
In 2005, when the “shop now, pay later” fintech firm Klarna was founded, World Bank data shows there were 28 broadband subscriptions per 100 people in Sweden, compared with 17 in the US and a global average of 3.7.
Reuters interviewed leading Swedish VCs and entrepreneurs who credited the country’s income insurance scheme. This guarantees up to 80% of an individual’s previous salary for the first 300 days of unemployment, if their business fails or they lose their job.
As a result – or partly, at least – Sweden has the third highest start-up rate in the world, behind Turkey and Spain, and the highest three-year survival rate for start-ups anywhere. After Silicon Valley, Stockholm has the highest number of unicorns (start-ups valued at $1bn or more) per capita.
Selling out the gold standard
🤑 💵 The 50th anniversary last Sunday of the decision by Richard Nixon to abandon the gold standard and end the era of fixed exchange rates prompted many commentators to reflect on the lessons for today’s investors. John Stepek in MoneyWeek challenged the naivety of “goldbugs” who argue that a gold standard acts as a check on government over-reach. “History amply demonstrates that it does no such thing – given the choice between waging war or maintaining a gold standard, governments have ditched gold every time.” Stepek’s bigger takeaway, citing the regulators who want to stop any form of digital currency from usurping the status quo, is that we should never underestimate the ability of those in power to upend the financial arrangements we take for granted.
Claire Jones in the FT adds that while she wouldn’t bet the house on the current “paper stuff” reaching a century, her best guess is that cash is “not going anywhere for the time being”.
The triple lock is doomed
📈 🧓🏻 Chancellor Rishi Sunak is considering “fiddling the figures” so he doesn’t have to give pensioners an 8.8% income boost, the Telegraph reports. Under the controversial “triple lock”, the state pension must rise by the rate of inflation, earnings growth or 2.5%, whichever is the highest. Earnings data published on Tuesday by the Office for National Statistics showed growth up by 8.8% – which would adding £822 to the state pension in 2022.
For a second month running, however, the ONS has published a metric for “underlying” earnings that strips out the abnormal effects of the pandemic such as last year’s mass redundancies, wage cuts and furlough arrangements. Earnings growth using this calculation was between 3.5% and 4.9%, which would allow Sunak to raise the state pension by a relatively modest £327.
Pension experts told the Telegraph that the triple lock can’t survive in its current form. One estimates that, without a compromise, it could cost the Treasury up to £9bn.