Unleashing Society’s Innovative Capacity

Front matter

Pontus Braunerhjelm Magnus Henrekson

Unleashing Society's Innovative Capacity

An Integrated Policy Framework

Preface

Over the last several decades, most of Europe has experienced low growth characterized by poor firm-level productivity growth, fewer breakthrough innovations, a small number of rapidly growing firms, and continued obstacles to integrated and competitive markets. These problems have gradually been exacerbated through a series of crises. However, there are a few countries that deviate from that path, and Sweden is one of them. Even though this country is currently struggling with a number of problems related to faltering integration policies, an underperforming judiciary system, and lagging industrial dynamism, we argue that there are lessons to be learned from the transformative policy changes instituted there since the mid-1990s.

The deep crisis in the early years of that decade sparked a host of timely and radical reforms, particularly on the macrolevel, but some key microeconomic reforms were also implemented. These reforms halted and reversed a vicious circle of declining growth rates, rising unemployment, and rapidly increasing government debt, problems other countries are faced with today. This success can be attributed partly to a well-designed reform package, partly to a good measure of luck as Swedish industry was well positioned to meet rising demand in new sectors (telecommunications) and emerging markets (heavy manufacturing industry). During the subsequent crises that followed in 2001-2003 (the IT-crisis), 2008-2009 (the financial market crisis), and 2020-2021 (the pandemic), Sweden also managed rather well from an international perspective. The reforms set in place before these events occurred constituted a platform for continued modernization of the welfare state that had served Sweden well up to the 1990s.

However, there has been a marked slowdown in such reform ambitions in recent years. Hence, even though the Swedish economy experienced V-shaped downturns during both the financial market and COVID-19 crises, economic growth and dynamism have not returned to the levels achieved prior to 2008. Still, with few exceptions, most of the EU member countries report even weaker development. While stable government finances and credible inflation policies are necessary conditions for continuous dynamism and increased prosperity, they are not sufficient. To keep up with intensified competition in some markets, as well as protectionist measures

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Vili Preface in other markets, innovation is becoming an increasingly important factor in successful penetration of markets and the surmounting of entry barriers. There is a chorus of demands to strengthen innovation policy, not least from the European Union, but these calls are rarely coordinated across policy areas.

In this book, we argue that a holistic perspective is essential. Without such a comprehensive approach, measures implemented in one area risk becoming ineffective or even counteracting efforts in others, thereby weakening the overall conditions for innovation. The task is to create long-term institutions that are favorable to innovation and economic dynamism that partly build on previous reforms in Sweden, mostly implemented at the macrolevel, while concomitantly emphasizing the conditions for dynamism at the microlevel, i.e., promoting the forces of creative destruction. We propose to build on insights generated by recent research. Enabling a framework for innovative enterprise should make economies, irrespective of origin and traditions, better equipped to promote creativity and inventiveness and to cope with contemporary challenges.

It goes without saying that we do not claim to have all the answers, and we welcome suggestions to further concretize and strengthen our proposed framework.

Pontus Braunerhjelm is grateful for financial support from the Blekinge Institute of Technology and Vinnova. Magnus Henrekson acknowledges financial support from the Jan Wallander and Tom Hedelius Foundation and the Kamprad Family Foundation for Entrepreneurship, Research & Charity. We are also indebted to Klas Eklund for his contributions to our joint book published in Swedish in 2012, which has in part inspired our work in this book. Finally, we would like to thank David Crouch, Kathy Saranpa, Per Thulin, and Mikael Arvidsson Martins for comments and suggestions on earlier drafts of the manuscript.

Stockholm, Sweden Pontus Braunerhjelm August 2023 Magnus Henrekson

Acknowledgements

The authors acknowledge the Kamprad Family Foundation for Entrepreneurship, Research & Charity and the Swedish Innovation Agency (Vinnova) for funding this Open Access publication.

About This Book

This book examines policy measures that foster the creation of innovations with high inherent potential and that simultaneously provide the right incentives for individuals to create and expand firms that disseminate such innovations in the form of highly valued products. In so doing, we suggest an innovation policy framework based on two pillars: (1) the accumulation, investment, and upgrading of knowledge, and (2) the implementation of mechanisms that enable knowledge to be exploited so that growth and societal prosperity are encouraged. Knowledge is a necessary but far from sufficient condition for growth. To secure industrial dynamics and growth in the long term, institutions must be designed both to encourage sophisticated knowledge investments and to stimulate the creation, diffusion, and productive use of knowledge in all sectors of the economy. We argue that the latter area has been overlooked in policy discussions and that a coherent innovation policy framework must include tax policy, labor market regulations, channeling of savings, competition policy, housing market regulation, and infrastructure to foster growth and future prosperity.

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Contents

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Chapter 1 A The Challenge beg

During recent years, challenges have emerged on an unprecedented scale, affecting nearly all countries of the globe: climate change, energy supply, geopolitical tensions, protectionist measures, demographic changes, and a seemingly infinite demand for human capital, to mention but a few. Until recently, the most compelling challenge seemed to be increased globalization and intensified competition at all stages of the value chain. This threatened the privileged position of industrialized economies and their businesses, prompting measures to enhance efficiency and competitiveness at both the policy and firm levels, while, at the same time, creating opportunities for developing countries. Even though the world economy currently seems to be in a phase of decoupling, deglobalization, and increased state intervention, we believe that in the medium to long term, the global economy will continue to embrace openness. Hence, fortune favors the well-prepared, and both countries and businesses are likely to benefit by positioning themselves for a return to the prospect of increasingly competitive markets.

Coming to grips with the present challenges requires well-reasoned and substantiated policies, and here, innovation is a key factor. To express the matter differently, creative and fresh thinking will help develop policies that incentivize individuals and businesses to envision new products, services, and business models. Such creativity and innovation will also help transform these ideas into dynamic businesses that will succeed in attaining a size at which significant economies of scale can be realized. This requires entrepreneurship.

Our point of departure will be our native country, Sweden, which experienced dwindling growth rates and lackluster industrial dynamism between the 1970s and the mid-1990s. The country managed to realize an impressive economic turnaround through an ambitious reform package implemented in the aftermath of the deep economic crisis of 1991—1994. The first reform wave strengthened the macroeconomic side of the economy by making the country more resilient in the face of financial and debt crises. Subsequent reforms had a more microeconomic profile by targeting areas decisive for essential creative destruction processes, notably taxation, social security, entrepreneurship, labor markets, innovation, and venture

© The Author(s) 2024 1 P. Braunerhjelm, M. Henrekson, Unleashing Society’s Innovative Capacity, capital. More recently, new problems have emerged that need to be solved. Unemployment, particularly among the young, remains at a high level; an aging population puts pressure on the welfare state; certain key competencies are in short supply; uniquely rapid net immigration has caused massive integration problems; educational standards have deteriorated; and the judicial system is increasingly troubled and overburdened—phenomena that fuel populist tendencies in the political landscape. Yet, we believe that there are lessons to be learned from the turnaround of the Swedish economy which provide valuable insights for other economies as well.

Economies need to be equipped with adequate instruments to cope with these current challenges. In fact, economic growth is a prerequisite for resolving many of these issues. But growth in the sense of “more of the same” is not the solution. Increased production with current technology would exacerbate environmental problems. The export sector will rapidly become obsolete if it continues to manufacture the same products it always has. In sectors such as education and health and social care, quality is more important than volume. Continued renewal and transformation of the economy are therefore the keys to prosperity and sustainable growth. New technology, new knowledge, new working methods, and new organizational forms are needed to make economies competitive, lower the thresholds to the labor market, create new resources and further prosperity without compromising the environment. In other words, the dynamics of the business sector must be strengthened, with a particular focus on the conditions for innovation.

Innovation does not simply concern new high-tech goods, but rather all manner of changes—in production methods and organizational forms—which ultimately lead to increased value for society. Such innovations require carriers; entrepreneurs who drive change, confront tradition, and experiment with new ideas are essential in this respect. They can be lone wolves or work in teams; they can serve as the engine for large projects; they can be small business owners or enthusiastic intrapreneurs who renew and improve the functioning of incumbent firms; and they can work in the private or public sector. Entrepreneurs are driven by different goals: some are passionate about an idea, some want to launch a new product, some wish for financial gains and still others may be entrepreneurs by necessity in a tough labor market where they cannot find permanent employment.

Economists distinguish between different kinds of innovations: process innovations (which improve the production process) and product innovations (which lead to new products), as well as between gradual improvements (incremental innovation) and radically and disruptive new products and services. Our purpose here is not to delve into the taxonomy of innovation, but rather to discuss how innovation activities in general can be stimulated and how a policy for innovation in the broadest sense should be formulated. The task is obviously not simple. By definition, innovations concern the creation of something new. This means moving past old and established patterns, exercising creativity, and breaking with tradition, activities often attributed to the entrepreneur. Mapping the factors that promote such creativity is complex. It is even more difficult to formulate a policy that makes new ways of thinking easier and more widespread; in a certain sense, we are seeking to create a “routine” for something that is, de facto, about the very breaking of routines.

We maintain that the policy debate on innovation is often too narrow. It tends to concentrate on research and development, R&D, for the development of new, high-tech products and how these products can be successfully marketed. Therefore, policy recommendations are often about how support for R&D should be organized and financed, and how to raise capital in the early stages of the life cycle of a business. In the political debate, the question is often formulated in terms of how to boost skills and then turn them into new high-tech products.

These measures are important, but far from sufficient—a broader approach is required. Innovation is about significantly more than creating the knowledge to develop new products. Innovation can also mean that existing knowledge is diffused throughout an economy and used in new areas, new organizations, and in new ways. To support innovation in this broad sense, policies must create structures that facilitate the dissemination of knowledge and promote entrepreneurship in both large and small organizations. The goal is not only to develop new breakthrough products with a high technology content, but also to stimulate many small steps in the improvement of “ordinary” products and services, regardless of their technology content, and to make organizational forms and production processes more efficient throughout the economy.

Neither the creation of new knowledge nor its application takes place in isolation, i.e., exogenously, nor does it automatically benefit society. For this to happen, society as a whole—and not least of all economic policy—must value, support, promote, and stimulate knowledge accumulation, education, entrepreneurship, and competition. Our policy recommendations are therefore more comprehensive and all-embracing than is usually the case in discussions surrounding innovation and entrepreneurship. They cannot be limited to simple volume targets for R&D investment or the supply of early-stage financing. They must extend much further.

We therefore argue that innovation policy rests on two pillars:

1. Building and strengthening the knowledge base and 2. Creating conditions for the dissemination, application, and commercialization of knowledge

The purpose of this book is to describe this approach and identify which policy tools can and should be used to stimulate innovation in this broad sense. We believe that systemic weaknesses must first and foremost be remedied by an innovation policy that promotes continued renewal by strengthening incentives for experimentation, innovation, and entrepreneurship. In this respect, our proposal differs from the traditional “innovation system” approach, which is more focused on the structure of innovation than on the forces that drive it.

This introductory chapter explores some of the challenges outlined above and explains why innovations are so important for Western welfare societies, using Sweden as an example. Chapter 2 describes the dominant theoretical growth models and the model that we advocate, while Chap. 3 provides a general overview of the conditions for entrepreneurship. In Chaps. 4 and 5, we present a detailed analysis of the conditions in which Swedish entrepreneurship is embedded. This analysis then provides the basis for our policy recommendations. These are generalized and summarized in the form of an innovation policy framework in Chap. 6—in other words, in clear rules to be used in policymaking.

1.1 The Swedish Example

Since the mid-1990s, Sweden has enjoyed quite positive economic development, both compared to most small countries with similar conditions and to itself during the two preceding decades. Up until the 2008-2009 financial crisis, the Swedish economy had grown more rapidly than the economies of both the United States and Europe. Nevertheless, between 2010 and 2021, the United States has grown at a faster pace whereas Swedish growth is essentially on a par with the EU average. At the same time, the domestic financial situation has become significantly more robust due to the reforms implemented in the 1990s, and Sweden has shown healthy surpluses in the current account and the public sector, while at the same time having a stronger banking system. For several years, in fact, Sweden has enjoyed one of the strongest financial positions within the EU and has also been far more resilient to crises, as clearly manifested during both the IT and financial market crises as well as during the pandemic.

There are several reasons for this positive turn in the Swedish economy. Most important is arguably the deep crisis of the early 1990s, which eliminated the least productive parts of industry and sparked a series of structural reforms that marked a radical break with much of the economic policy of the 1970s and 1980s. Stricter budget rules, tax reform, deregulation, stricter competition legislation, EU membership, an independent central bank with inflation targets, a floating exchange rate, and pension reform—within a mere few years’ time, radical economic policies came into effect. The new frameworks established for monetary policy (inflation targets with guidelines for interest-rate setting) and fiscal policy (notably surplus targets and expenditure ceilings) were particularly important. At the same time, Sweden was—at least in the short term—helped by a weaker currency, strong growth in the global economy, and favorable positioning regarding new information technology. Both government expenditure and taxes as a share of GDP have declined since then, and in recent years, tax rates on labor have been significantly lowered.!

Due to the far-reaching reform agenda successively implemented since the mid-1990s, Sweden was able to cope with the ensuing crises from a position of strength. Today Sweden has significantly better financial buffers than virtually all other European countries. The Swedish economy has also climbed in international rankings of competitiveness, attractiveness to business and innovativeness—characteristics that are important for the maintenance of a strong position in the globalized

'For an analysis of this development, see Bergh (2014) and Heyman et al. (2019).

1.1 The Swedish Example 5 world economy. However, to sustain such a position requires continual policy reforms adapted to the ever-changing circumstances in the global economy, and here we fear that Sweden is losing ground even though the state of affairs is still strong, see Table 1.1.

The rankings in this table depict the top 20 countries according to the most commonly used measures of competitiveness and innovativeness. Sweden is ranked number one among EU countries in three of the five measures. Switzerland, a small open economy albeit not part of the EU, is also ranked highly according to all five measures. The Asian powerhouses Singapore and Hong Kong are at or near the top based on several measures. Nonetheless, half of the top 20 countries in all rankings are European Union members; in particular, the Nordic and Western European

Table 1.1 Country ranking according to the five most common measures of national innovativeness, top 20 countries for the latest available year

IMD World WEF Global Global No. of triadic | R&D spending Competitiveness | Competitiveness | Innovation patents per as a share of Rank | Ranking 2022 Index 2019 Index 2020 capita 2022* | GDP 2021 1 Denmark Singapore Switzerland | Switzerland Israel 2 Switzerland USA USA Japan South Korea 3 Singapore Hong Kong Sweden Sweden Taiwan 4 Sweden Netherlands UK Israel USA 5 Hong Kong Switzerland Netherlands | South Korea | Sweden 6 Netherlands Japan South Korea | Denmark Japan 7 Taiwan Germany Singapore Finland Belgium 8 Finland Sweden Germany Germany Switzerland** 9 Norway UK Finland Luxembourg | Austria 10 USA Denmark Denmark Netherlands | Germany 11 Ireland Finland China Austria Finland 12 UAE Taiwan France USA UK* 13 Luxembourg South Korea Japan Belgium Denmark 14 (| Canada Canada Hong Kong __| Singapore Iceland 15 Germany France Canada France Netherlands 16 Iceland Australia Israel UK Singapore* 17 China Norway Austria Ireland France 18 Qatar Luxembourg Estonia Norway Slovenia 19 Australia New Zealand Luxembourg | Canada Czechia 20 ‘| Austria Israel Iceland Italy Norway

Note: *2020; **2019; *Triadic patent families are a set of patents filed at three of the major patent offices: the European Patent Office (EPO), the Japan Patent Office (JPO), and the United States Patent and Trademark Office (USPTO). Patents included in the triadic family are typically of higher economic value

Source: IMD World Competitiveness Yearbook 2022; WEF Global Competitiveness Report 2019; The Global Innovation Index 2020—What is the Future of Innovation Driven Growth?; Triadic patents (https://data.oecd.org/rd/triadic-patent-families.htm) and population from the OECD; R&D spending/GDP from the World Bank (https://data.worldbank.org/indicator/GB.XPD.RSDV. GD.ZS ?end=2016&start=2016)

countries continue to do well. By contrast, southern and eastern EU member states are absent in the rankings, which bears witness to Europe’s well-known core/periphery pattern. Thus, the EU’s alleged “innovation emergency” (European Commission 2015) is far from uniform, and if this stark inequality is allowed to persist, it is likely to result in increased tension between countries and regions within the Union. Currently, internal tensions within the EU risk being aggravated by its larger members calling for more interventionistic industrial policies and more generous possibilities to use state aid and subsidies granted at the EU level. That is likely to favor the larger and northern EU countries. Hence, a lessening of these tensions and a strengthening of innovativeness in countries and regions that are experiencing less economic success cannot be achieved without an improved understanding of what policies and framework conditions are necessary for innovation and commercialization.

The fact that Sweden has done so well in the aftermath of the 1990s crisis is partly due to the reforms that paved the way for continued structural transformation during subsequent decades, and partly due to the fact that the specialization of Swedish industry happened to fit well with increased global demand (notably IT/ telecom, machine tools, and pharmaceuticals). This has delivered export successes and boosted domestic purchasing power. The Swedish labor market has also succeeded relatively well in terms of rehiring or retraining workers who have been laid off without the government needing to provide extensive industrial subsidies or other public support programs, apart from the measures taken during the pandemic.

1.2 The Challenges Ahead

1.2.1 Globalization or Deglobalization?

In 2009, Sweden’s Globalization Council—an inter-ministerial unit working for the Swedish government—presented its concluding report on reforms required for Sweden to retain its position as an innovative knowledge economy.” The work was commenced in 2007, when globalization was at its peak. A large number of high-quality commissioned reports, conducted by renowned European and U.S. scholars, constituted the core of the analysis. The concluding report stressed microeconomic reforms to improve framework conditions for a dynamic, experimental, and innovative business sector. Such reforms would help in coping with both accelerating global competition for capital investments and the risk of a potential brain drain. Low-cost competition implied continued pressure on companies in which jobs could be moved abroad, while at the same time the competition for talent, entrepreneurs, technology, and investment from more mature industrialized countries was expected to intensify. Approximately 50% of the 118 policy recommendations in

?Braunerhjelm et al. (2009).

1.2 The Challenges Ahead 7 the concluding report had been instituted ten years later (Braunerhjelm 2020), roughly half of them fully and the rest partially.

Overall, the dip in global trade in 2008-2009 was viewed as a temporary phenomenon, and as the crisis diminished, a return to business as usual was expected. However, that did not occur. Instead, world trade levelled out and then began to decline (Fig. 1.1). This decline coincided with the United States entering a more protectionist phase during Donald Trump’s presidency, which was maintained by the Biden administration. National security concerns and the increasing role of digitization and digitized devices in surveying and generating information across borders have accelerated protectionism and led to the characterization of “strategic sectors.” This term reflects claims that such fields should be shielded from foreign ownership and influence. In addition, it involves export restrictions on goods and components considered strategically important. According to Global Trade Alert, protectionist interventions (both tariffs and other measures) have increased since 2008.

To focus now on goods and services, the former has decreased whereas the opposite is true for the latter, even though service trade is more difficult to trace in the statistics. It has been argued that the falling trade in goods simply reflects lower global growth, which is associated with a few countries, especially China and the United States. Hence, the fall in trade from 61% of global GDP in 2008 to 56% in 2021 is claimed to mirror a move back to normal after the hyper-globalization of the mid-1980s through 2008.

100 90 teet a Ye =

80 ae

70 es

60 50 40 ontan

20 United States 10

Fig. 1.1 Trade (export plus import) as a share of GDP, 1980-2021 (%). Note: Data for the European Union include intra-EU trade. Source: OECD

3 See https://www.globaltradealert.org/.

On the other hand, rising incomes and a rapidly growing middle class in developing countries should boost the demand for imports and induce more trade. At the same time, technological advances, digitization, and (previously) increased globalization intensified competition and resulted in a fragmentation of supply chains. When economists previously spoke of “comparative advantages” in foreign trade, they typically referred to entire industries or countries. In recent decades, the meaning has shifted to specific tasks within an industry—even within a firm or within an individual department of that business: crucial tasks necessary to produce a final product could be performed on the other side of the globe as part of a fully integrated production system. The increased partitioning of the value chain risks being halted due to escalating trade barriers and geopolitical tensions. To reorganize production will take time. Companies are also urged or incentivized to resume production domestically or at least in countries that are geographically closer. Overall, the strong trend towards outsourcing has been stopped in the last few years and the development of the so-called kaleidoscopic comparative advantages has been stalled, at least temporarily.

Interestingly, even though trade in final goods has regressed to some extent, no similar pattern can be found for trade in intermediate goods. As Fig. 1.2 shows, trade in intermediate goods has grown rapidly following the sharp downturn caused by the onset of the pandemic in the first half of 2020. This suggests that production is still dependent on the supply of intermediate goods through global distribution channels.

In the case of Sweden, which is still dependent on a relatively small number of large multinational firms (e.g., Ericsson, ABB, Atlas Copco, Sandvik, SKF, Hexagon, IKEA, and H&M), the intensification of international competition can have rapid and direct effects. Disturbances in the flow of intermediate products would be detrimental to these companies. Similarly, should some of these national “crown jewels” relocate production or lose their competitive edge, the ecosystems built around these firms, and therefore the Swedish economy, could experience significant negative impacts. The situation is exacerbated by the fact that over the last decades, the aggregate share of sales in the domestic market of Swedish multinational companies has decreased considerably. The same is true for foreign-owned companies with a high volume of manufacturing located in Sweden.

Hence, the decision about relocating manufacturing or R&D is not a particularly difficult one. Domestic companies so important to Sweden are being challenged by new competitors, increasingly so by businesses from China and India. The pattern of competition is changing rapidly, and the competitive advantages enjoyed by mature industrialized countries in advanced production have been challenged for some time.

To conclude, the benefits or disadvantages of globalization have not yet been assessed adequately. First, globalization takes several forms, and trade in goods is merely one aspect. Migration, foreign direct investment, and capital flows are other components of globalization that have arguably remained at the same level or even increased (Baldwin 2022; Dadush 2022). Hence, despite a possible slowdown in global exchanges, we argue that global competition can be expected to continue even though it may take on a different guise. Nations and businesses consequently need to prepare for continued competitive pressure and restructuring.

1.2 The Challenges Ahead 9

World Asia =Ħ— Europe »+®-- North America

Fig. 1.2 Trade in intermediate goods (excl. fuel) for the world and regionally, Q2 2019-Q4 2022 (2019 = 100). Source: WTO information note on trade in intermediate goods: fourth quarter 2022 (https://www.wto.org/english/res_e/statis_e/miwi_e/info_note_2022q4_e.pdf)

1.2.2 The Growing Service Sector and the Labor Market

The service sector is increasingly exposed to forces of competition, and this calls for capacities to adapt and restructure in order for companies to survive. Since the service sector has been shielded from competition to a greater extent than goods production, the potential for improvement tends to be greater. Sweden’s service sector is significantly larger than its goods-producing sector, and, on average, service sector productivity is lower. However, there are also highly productive service industries that are well-positioned to meet fiercer competition, especially in business-related services.

The service sector includes both private and public providers, sometimes operating on the so-called quasi-markets defined by a public agency acting as a link (in the capacity of client and/or financier) between customer and producer (Le Grand 2009). Among the latter are services such as education, health, and social care, which are in need of renewal, quality improvements, and greater efficiency in order to meet future challenges. These service sectors are central to a nation’s knowledge base, and, despite consuming considerable resources, they suffer from significant quality problems. Such problems in the educational system are particularly serious, as they are likely to induce path dependency leading to a deterioration in subsequent links of the nation’s knowledge base (Henrekson and Wennström 2022; Heller Sahlgren and Jordahl 2023).

As the population ages, it requires more of several different types of care, including healthcare, meal services, and cleaning. This means a demand for more resources—both in terms of hours worked and financial resources—and greater efficiency. In this area, demand is growing much faster than the aggregate economy; one reason for this is that technological advances in medicine and medical technology are creating the possibility of new treatment methods. Since it is generally more difficult to increase productivity in care services than in manufacturing, relative costs tend to increase in line with the so-called Baumol’s Cost Disease (Baumol 1967).* Here too, innovation, especially organizational innovation, is required to increase quality and efficiency.

A better functioning service sector is also necessary to reduce unemployment and the exclusion of marginalized groups, thereby enabling more individuals to become self-sufficient. The service sector accounts for 75-80% of employment in most developed countries, and its employment share is expected to increase further in the future. If unemployment is to fall—not least among young people—more service jobs are needed. In manufacturing, most unqualified entry-level jobs have been phased out as starting wages have risen, and production processes have become increasingly mechanized, digitized, and sophisticated. Meanwhile, jobs requiring little training have been transferred to low-wage countries. The same is partly true in the service sector, where many simple jobs—which previously served as entry-level positions—have disappeared. This is the case although demand is high (not least of all in health and social care) and there are a plethora of basic tasks to be performed. Many service jobs simply cannot be outsourced; a nurse in Sweden, or for that matter a police officer, cannot perform their duties from Guangdong or Phnom Penh.