Sweden has among the EU’s lowest levels of national debt, low and stable inflation and a healthy banking system. But this wasn’t always the case. The Swedish economy used to suffer from low growth and high inflation, and the Swedish krona was repeatedly devalued. Sweden was also hit by a deep financial crisis in the early 1990s. Banks became unstable and two were nationalised, unemployment rose rapidly, government spending got out of control, and so did Sweden’s national debt.
— Swedish Institute, 2015

The history of Sweden as one of Europe’s poorest nations and then the development of freedoms of press, trade and the individual turned it into one of the wealthiest. Modern Sweden also has a very interesting story. Fundamental issues in the 1990s focussed their governments over the following decades into ensuring long term economic security and growth by supporting value added export industries.

Today, as you can see, they have a diversified high value export based economy. Unfortunately Australia has not done a good job of keeping our value-added export industries, a good example of this loss is Holden. Prior to the GFC it was poised to export the locally developed and built Commodore to the US and Europe in large numbers. It was not however the GFC that caused us to lose this opportunity, although that was the straw that broke the camel’s back. Successive government support for an uncompetitive local car industry in Australia to the tune of billions of dollars of taxpayer money and protective trade measures ensured that when GM restructured, Holden was not viable.

Don’t even get me started on the scale of this Innovation Statement. It should be 10 times larger, and faster and simpler to get world recognition for Australia. A $1 billion announcement (of which much was already pre-committed like wifi revenues from Aussie inventions) meanwhile a new $1 billion company is being created every four days in the USA and we should have $150 billion of our $2 trillion in superannuation into startups. We should be adding a zero or two and building the tech startup hub for Asia with 50 new incubators and a startup stock exchange.
— Pete Cooper, 2015

It started with the Button Car Plan in the 1980s when instead of allowing the car manufacturing sector to rationalise (by reducing 4+ manufacturers to 1 or 2) we tried to keep as many afloat via a plan that required brands to share models with a simple ‘badge engineering’ effort. A plan that was as silly as it sounds and one that made a mockery of consumers. This was not the last time we protected the industry and we learnt nothing from this continued failure. In the end the industry did what the government couldn’t, allowed economic forces to run their course.

Sweden on the other hand has lost Saab but retained Volvo Cars and Volvo AB (trucks, buses etc) not to mention Scania AB (the truck division of Saab). Imagine if Australia had retained local design and manufacturing with Holden or Ford (or both)! Our exports and balance of payments would be in a much better position had we approached this industry modernisation more like Sweden.

It’s safe to say that our political leaders have failed over the last several decades to position Australia for a post ag/mining based export economy. And while there has been a lot of talk and focus over the last several years in Australia about innovation, technology and startups, our economic diversity in terms of exports has become lower, not higher.

Pete Cooper has been an Australian leader in the startup scene for many years, and is a personal friend of mine. I wholly support his vision and that of several other key thought leaders and pathfinders in Australia. However we need to put the information technology-based startup opportunity as it applies to our export economy into perspective. Let’s look at Sweden.

In addition to maintaining competitiveness in goods and manufacturing, growth in modern service sectors such as information and communication technology has been strong in Sweden. Internet calling service Skype and online music streaming service Spotify are two examples, but Swedes haven’t stopped there. Since 2008 the ICT sector has grown by 16 per cent and now employs over 4 per cent of the Swedish workforce. The sector is characterised by its many new and small businesses, and Stockholm has become known as one of Europe’s hottest start-up cities for ICT companies.
— Swedish Institute, 2015

So information technology can become an important part of our export mix however we need to be doing a lot more than this when it comes to economic transformation. We need to be looking at our existing export successes and how we can bring them into the 21st century, because if we don’t disrupt ourselves, there are many other countries who will be in a position to do it to us. Japan and the rise of Korea and China are a great example of how fast this can happen.

This means that we should be supporting growth in the Australian information technology sector as a key pillar in a new value added export economy. But we need much, much more diversity to ensure we can maintain broad economic growth that is more resilient to sector specific downturns.

Sweden is known for value-added industries like its cars, trucks, furniture, pharmaceuticals, electronics and telecommunications. Sweden’s economic strength is due to their export diversity that includes a high percentage of value-added products and services.