Stagnation in your Swedish town? Blame Florida

American academic Richard Florida has gained international attention for his theories about the "creative class". According to the bestselling author of The Rise of the Creative Class, the key to urban success lies in attracting certain groups of people, such as artists, scientists and twentysomething singles.

Florida insists that this can be accomplished through nursing a specific type of culture within a city. For example, he places an emphasis on hip cafes, art galleries and other manifestations of indigenous street-level culture.

Florida´s theories have become rather popular in Sweden, the country that tops his creativity index, and have come to influence policy decisions about urban planning. The Social Democrats go as far as to quote Florida in a parliamentary bill.

In Sweden, Florida´s ideas are used by those who wish to argue that public funding of cultural events, rather than a competitive business climate, is the way to achieve economic growth.

Swedish cities quote Florida in their strategies for urban development, shifting the focus from business-friendly reforms to attracting "unusual shops" in order to bring development to communities hit by high unemployment and other social ills.

An international perspective however shows that such policies can prove risky. Take Berlin, for example, where the focus of administrators for many years has been to attract art galleries, fashion shows and hip cafes but where the basic conditions for development have been neglected.

The Berlin bureaucrats have a less than business-friendly attitude, and taxes for normal income earners as well as for entrepreneurs remain high.

The result of these policies, aiming to market Berlin as "a city of glamour" and attracting the creative class, has been rampant unemployment. Between 2000 and 2006, the European Union spent 1.3 billion euros attempting to curb Berlin's economic crisis.

Sydney and San Fransisco are two other cities that fit very well into Florida's concept of creative environments. True, both cities are widely known for their cultural life. However, local politicians have shifted the focus away from a business friendly environment, maintaining high taxes and making it difficult to gain building permits. As a result, both cities have experienced sluggish development.

A comparison of job creation in American cities in the period 1983-2003 shows that the ten cities that Florida lists as the most creative in the US had a slower development than the rest of the country. At the same time, the cities he lists as the least creative had stronger job creation than average.

International experience teaches us to be cautious when basing urban policy on Florida's ideas. Recently however Florida teamed up with a group of people, including two Swedish co-authors, to publish an index of creativity in Swedish local councils, or kommuner.

According to observations made by Harvard professor Edward L. Glaeser, Florida´s definition of the creative class is largely based on the proliferation of well-educated people. Councils containing large numbers of educated people are defined as being creative.

However, in many cases the ranking in Florida´s Swedish index has little to do with actual creativity or the foundations for growth and progress. So which councils are at the top of the creativity index in Sweden?

Of Sweden's 290 local councils, the one that most closely matches Florida´s creative criteria is Södertälje. This is quite astonishing, since Södertälje is seldom seen as a role model for other towns to follow.

In fact, the town has become famous for high unemployment, segregation and stagnant development. Among the 26 municipalities in the Swedish capital region, Södertälje has the second highest unemployment rate.

The business climate there ranks, according to the Confederation of Swedish Enterprise, as only the 199th most business-friendly amongst Swedish councils.

The council with the highest unemployment rate in the capital region is Botkyrka, which ranks a lowly 233rd in terms of business climate. In Florida´s index however, Botkyrka attains a respectable position as the 22nd most creative council.

While places that are failing to develop economically can be defined as creative by Florida´s Swedish index, actual creativity is not always acknowledged.

Enter Gnosjö. In this small southern town often used as an example of how the spirit of entrepreneurship can lift a community, the unemployment rate is much lower than in the rest of Sweden.

Gnosjö is indeed full of creativity, but in Florida´s index it only ranks as the 141st most creative council. Florida´s index fails to catch the real origins of creativity and cultural development in Sweden.

Abroad, many believe Sweden to be the very epitome of a successful social democratic welfare state. However, ambitious reforms implemented during the past few decades have transformed Sweden into a competitive economy with an increasing degree of economic freedom and strong growth.

In the wake of this development, culture, fine food and the arts have all developed well in Swedish cities. Tourists as well as businesses are attracted not least to the capital city of Stockholm.

However, the strategy underlying this development has been based on a sound policy platform prioritizing business and growth, rather than a Berlin-style attitude emphasizing public subsidies of culture over conditions for families and businesses. Cultural development has occurred in the wake of a growing economy, not the opposite.

So Sweden really is a good example of the interaction between creativity and development, but Swedish fans of Richard Florida are interpreting the causality in the wrong way.

Nima Sanandaji is president of Swedish free market think tank Captus and publisher of the weekly online Swedish magazine Captus Tidning.

The above article is based on an urban development report prepared for the Stockholm Chamber of Commerce by Nima Sanandaji and Johnny Munkhammar.