Indians know very little about Scandinavia--the four nations of Sweden, Norway, Denmark, and Finland in northern Europe. Some Indian males fantasize about glamorous Swedish blondes. Others lust over the latest Nokia phone from Finland. Geography enthusiasts know it as the place where the sun never sets in the summer. Old liberals like me remember Scandinavia for its over-regulated, over-taxed, bureaucratic economies that drove away the great film maker, Ingmar Bergman, and the tennis legend, Bjorn Borg.

All this changed, however, after their economic reforms. Scandinavia now combines the best in socialism and capitalism. It has the most caring societies--providing cradle to grave security for their citizens—which are now also amongst the best places to do business. It takes only a day to start a business and a day to close it. You can hire and fire workers with ease. They have cut red tape ruthlessly, almost wiping out bureaucratic corruption. And so Scandinavia is today the envy of the world, with the highest living standards combined with the most caring governments.

The most striking lesson for India is from Sweden's education reforms in the early 1990s. They decentralized the system--shifting control of schools from the centre to the municipalities—and gave parents a choice to send their children to state or private schools (but paid by the state with a voucher). As a result, many innovative, for-profit schools have opened up, who compete for the vouchers. The number of students in private schools has gone up ten fold, from less than one to over ten percent.

One of the most successful is a chain of 30 private schools, which encourages children to learn in small groups and lets them progress at their own speed. Children spend 15 minutes each week with a tutor, reviewing last week's progress, and agreeing to next week's goals. This information goes up on the website for parents' review. Successful teachers earn bonuses based on the children's performance. 90% of the parents stated in a recent survey that “school choice” and competition have improved the overall quality of education. The poorest are the happiest for their children can now go to the best schools for free. The ability to exit a bad school gives a poor child the same chance as a rich one to rise in the world.

Sweden's school model is made for India, where government schools have failed, teacher absenteeism is rampant, and there is no accountability to parents or the community. As a result even the poor are withdrawing their kids from state schools and putting them into cheap private schools (that charge Rs 100-200 per month). If any politician in India were to advocate Sweden's model--fund children, don't fund schools—poor parents would be so grateful that the politician would never lose his seat. The poorest child would have the same opportunity as a middle class one, and government schools would improve because teachers' salaries would be paid by parents' vouchers. It would be a Diwali everyday!

In Sweden, the Left's initial hostility has also diminished. Social Democrat politicians do not dare criticise what is popular with voters. Teachers are happier as they have more opportunities to change schools. Government's budgets have not been hurt by having to finance children in private schools because municipalities have managed to close or cut expenses of the lower performing government schools.

Sweden's school reforms are a good example of what is attractive about the Scandinavian model. Unlike India, it is not riddled with red tape, nor is it hostile to private enterprise. Yet, it gives the state an important role in setting a socially responsible context within which private enterprise flourishes. In the case of schooling, the Swedish government provides the resources and sets some basic guidelines -- and then lets the private sector go to work. It is the perfect public-private partnership.