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Sweden’s simple but effective law to help entrepreneurs

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There’s been widespread and welcome comment on an analysis piece published on the BBC’s website, “Sweden’s surprising rule for time off”, starting with Cory Doctorow on the highly popular Boing Boing, as well as this from the World Economic Forum, about a law dating back two decades that allows employees to take up to six months off to start a business, to study, or to take care of a sick family member, while their post is kept open for them.

Interestingly enough, the Swedish case is not surprising for the average Spanish reader: Spain also has a similar law dated from long time ago that allows workers to take an even longer unpaid leave of absence, in Spanish known as “excedencia”, that spans from a minimum of four months and up to five years, as soon as the worker has spent a minimum of one year working for the company and has not taken any other leave of absence in the previous four years. However, truth is that not many Spanish workers make use of such periods to become entrepreneurs: obviously, it takes more than just one element to conform an entrepreneurial ecosystem.

Most commentators agree on the leveling effect of the law when it comes to generating new ideas: the simple truth is that unless one is able to temporarily leave one’s job in this way to start a business (as long as it’s not in direct competition to one’s employer), the only people in society who will be able to do so will be those who are either wealthy enough and who has a result may very well already have better access to capital to finance their venture, or the truly determined or reckless. This is a law that goes far beyond simply distributing subsidies, which can often involve much red tape or are simply incentives for those seeking easy money, and instead seeks to spread entrepreneurial risk throughout society, helping to reduce the perception that embarking on a business project means leaving everything behind.

Two decades after the law was introduced, Sweden now ranks second after Silicon Valley per capita in the creation of highly capitalized companies (so-called unicorns), thanks to global success stories such as Spotify, Skype, Mojang and many others. Sweden also ranks fifth in the Global Competitiveness Report, offering ideal conditions for entrepreneurship. Obviously, the law is only part of the picture: widespread access to tertiary education, high speed internet connections and for some years now, significantly lower company tax rates than many other countries (down from 52% in 1990 to 22% today).

Sweden’s success in creating an ecosystem conducive to entrepreneurship underscores the value and impact of well-planned public policies. The recent executive order signed by Donald Trump to promote the development and regulation of artificial intelligence in the United States, reflects a global trend in monitoring and prioritizing policies related to technology and their impact on society.

Laws are not written in stone and must be modified from time to time to adapt to the environment in which we live, which is conditioned to a large extent by technological development. When these types of policies are implemented in an agile manner and with proper management, all the indications are that they work. Let’s hope that other countries take up Sweden’s example.


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