Sweden is an export oriented market economy featuring a modern distribution system, excellent internal and external communications, and a skilled labour force. Timber, hydropower, and iron ore constitute the resource base of an economy heavily oriented toward foreign trade. Sweden's engineering sector accounts for 50% of output and exports. Telecommunications, the automotive industry and the pharmaceutical industries are also of great importance. Agriculture accounts for 2% of GDP and employment.

According to the book, The Flight of the Creative Class, by the U.S. economist, Professor Richard Florida of George Mason University, Sweden is ranked as having the best creativity in Europe for business and is predicted to become a talent magnet for the world’s most purposeful workers. The book compiled an index to measure the kind of creativity most useful to business – talent, technology and tolerance – and found Sweden to be the number one spot in Europe and the world. The top ten countries, in descending order, are: Sweden, Japan, Finland, the US, Switzerland, Denmark, Iceland, the Netherlands, Norway and Germany.[59]

Sweden's industry is overwhelmingly in private control; unlike some other industrialized Western countries, such as Austria and Italy, publicly owned enterprises were always of minor importance. 80% of the workforce is organized through the trade-unions which have the right to elect two representatives to the board in all Swedish companies with more than 25 employees.

Sweden is known for its high taxes and large public sector. According to the statistics collected by the Organisation for Economic Co-operation and Development (see List of countries by tax revenue as percentage of GDP), Sweden has the highest total tax revenue, as a share of the country's income, of any ranked country (as of 2005). It is also the only country in the world with a total tax revenue higher than 50%.

The Swedish Riksbank – founded in 1668 and thus making it the oldest central bank in the world – is currently focusing on price stability with its inflation target of 2%. Growth is expected to reach 3.3% in 2006. High taxes have however ensured a higher degree of government influence on household consumption decisions than in most other Western nations. Public sector spending amounts to 53% of the GDP; the high figure primarily reflects the large transfer payments of the Swedish welfare state.

Swedish unemployment figures are highly contested, with the Social-Democrats defending the official figure of 5.4% (as of 2006) and the centre-right Alliance for Sweden claiming a much higher figure. These numbers do not, however, include people in government unemployment programmes (about 2% of the workforce), people on extended sick-leave, those in early retirement or those outside the unemployment system. Unemployment is higher amongst younger people. Many Swedes work abroad in Denmark, Norway and the UK, where they are desired and viewed as a skilled workforce.[citation needed] Because of the contradiction – unemployment despite a growing commercial enterprise economy – politicians and analysts often speak of the "jobless growth". According to Eurostat the unemployment rate in February 2007 was at 6.7% down from 7.4% from February 2006.

Sweden also still bears scars from an economical crisis in the 1990s, which resulted in thousands of people unemployed and a great national debt. Two remnants are an increase in socioeconomic segregation [citation needed] and a national debt of approximately 1,248 billion Swedish Kronor (approx. €134 billion, 01.2007)

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In recent years, economic liberalization has ensured that Sweden is now more similar to other European countries with comparatively high tax rates. However, some still claim that the Scandinavian model is mid-way between socialism and capitalism, i.e. a mixed economy.[attribution needed] The Swedish "welfare state" model of the 20th century is an example (some economists and socialists said) of effective use of national taxes, although others disagree about its continuing effectiveness. The Swedish welfare system remains extensive, but a recession in the 1990s forced an introduction of a number of reforms, such as education vouchers in 1992 and decentralization of some types of healthcare services to municipal control. While similar in form to other governments in Western Europe, the Swedish state is among the most active in the scope of government services provided. These include tax-funded childcare, parental leave, a ceiling on health care costs, tax-funded education (all levels up to, and including university), retirement pensions, tax-funded dental care up to 20 years of age and sick leave (partly paid by the employer).

Hjalmar Branting, the first democratically elected Prime Minister of Sweden.

Since the late 1960s, Sweden has had the highest tax quota (as percentage of GDP) in the industrialized world, although today the difference between other high-tax countries such as France, Belgium and Denmark has narrowed. Sweden has a two step progressive tax scale with a municipal income tax of about 30% and an additional high-income state tax of 20–25% when a salary exceeds roughly 300 000 SEK per year. The employing company pays an additional 32% of an "employer's fee". In addition, a national VAT of 25% or 18% is added to many things bought by private citizens, with the exception of food (12% VAT), transportation, and books (6% VAT). Certain items are subject to additional taxes, e.g. electricity, petrol/diesel and alcoholic beverages.

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As part of its social welfare system, Sweden provides an extensive childcare system that guarantees a place for all young children from 1-5 years old in a public day-care facility (förskola or dagis). Between ages 6-16, children attend compulsory comprehensive school, divided in three stages. After completing the ninth grade, 90% continue with a three-year upper secondary school (gymnasium) leading sometimes to a vocational diploma and always to qualifications for further studies at a university or university college (högskola). Both upper secondary school and university studies are financed by taxes. Some Swedes go straight to work after secondary school. Along with several other European countries, the government also subsidizes tuition of international students pursuing a degree at Swedish institutions, although there has been talk of this being changed

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Before the eleventh century, Swedes adhered to Norse paganism, worshiping Æsir gods, with its centre at the Temple in Uppsala. With Christianization in the 11th century, the laws of the country were changed, forbidding worship of other deities into the late nineteenth century.

After the Protestant Reformation in the 1530s, the Church and State were separated and the authority of Roman Catholic bishops abolished, allowing Lutheranism to prevail. This process was completed by the Uppsala Synod 1593. During the era following the Reformation, usually known as the period of Lutheran Orthodoxy, small groups of non-Lutherans, especially Calvinist Dutchmen, the Moravian Church and Walloons or French Huguenots from Belgium, played a significant role in trade and industry, and were quietly tolerated as long as they kept a low religious profile. The Sami originally had their own shamanistic religion, but they were converted to Lutheranism by Swedish missionaries in the 17th and 18th centuries.

Not until liberalization in the late 18th century, however, were believers of other faiths, including Judaism and Catholicism, allowed to openly live and work in Sweden, although it remained illegal until 1860 for Lutheran Swedes to convert to another religion. The 19th century saw the arrival of various evangelical free churches, and, towards the end of the century secularism, leading many to distance themselves from Church rituals. Leaving the Church of Sweden became legal with the so-called dissenter law of 1860, but only under the provision of entering another denomination. The right to stand outside any religious denomination was established in the Law on Freedom of Religion in 1951.

Today about 75% of Swedes belong to the Church of Sweden, but the number is decreasing by about 1% every year, and Church of Sweden services are sparsely attended (hovering in the single digit percentages of the population).[65] The reason for the large number of inactive members is partly that until 1996, children became members automatically at birth if at least one of their parents were a member. Since 1996, all children that are baptised become members. Some 275,000 Swedes are today members of various free churches (where congregation attendance is much higher), and, in addition, immigration has meant that there are now some 92,000 Roman Catholics and 100,000 Eastern Orthodox Christians living in Sweden.Due to immigration, Sweden also has a significant Muslim population. As many as 500,000 are Muslims by tradition[67] and between 80,000 - 400,000 of these are practising Islam. (See also Islam in Sweden)

According to the most recent Eurostat "Eurobarometer" poll, in 2005,[68] 23% of Swedish citizens responded that "they believe there is a god", whereas 53% answered that "they believe there is some sort of spirit or life force" and 23% that "they do not believe there is any sort of spirit, god, or life force". Sweden ranks aside with France and Russia on having a large minority of its citizens who have no religion. Independent of these statistics, it is generally known that Swedish society, collectively, is comparatively secular and non-religious.

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