Protectionism Is an Economic Dead End, Booming Sweden Says

(Bloomberg) -- Globalization and technological change are unstoppable processes that need to be managed using market forces and the welfare state, according to Sweden’s prime minister.

Stefan Lofven, a former trade unionist who now heads a left-of-center coalition, says protectionism is not the answer. He also believes that a healthy dose of optimism is needed to counter the doom and gloom offered by the growing number of politicians who oppose immigration or free trade.

Attending the World Economic Forum in the Swiss resort of Davos, Lofven was asked what liberals can do to ensure that the weakest members of society aren’t overwhelmed by the whirling pace of change caused by technological innovation and a more connected world.

"We need to change these worrying, uncertain times into more certain times" and display a "positive attitude to the future," Lofven said in an interview on Bloomberg TV Wednesday.

Brexit and Trump

Britain’s decision to leave the EU and Donald Trump’s election to the U.S. presidency are among the most evident signs of growing anxiety about globalization.

Asked by Bloomberg’s Tom Keene how to respond to the shift, Lofven stressed that governments need to make sure that those who feel they are losing out are made part of a project.

"It means decent jobs, it means equality, social equality, and a welfare that gives you trust in the future," Lofven said.

Lofven heads a coalition comprising his Social Democrats party and the Green Party. The government is overseeing an economic boom that has turned Sweden into one of Europe’s few success stories. Unemployment is falling in the Nordic region’s largest economy, which relies on trade for growth and is also one of the few to have retained a AAA rating during the global financial crisis.

Still, the prime minister has concerns of his own. A record number of refugee arrivals during Europe’s migration crisis of 2015 has boosted public support for the anti-immigration Sweden Democrats, who are eyeing the top prize in the 2018 elections.

Market Forces

Lofven favors market solutions when it comes to responding to the challenges posed by technological change.

"Protecting jobs. That’s a dead-end street," he told a panel discussion in Davos. "You can’t tell the market what to do or not to do." That is why his government focuses on "protecting individuals” by providing them with training and financial help while they look for a new job, he said.

While Trump’s rise to power on an America-first platform has Europe worried, Lofven argues that the solution is to maintain transatlantic ties that are "beneficial for both parties." That requires unity on the part of Europeans. Not easy given upcoming elections in France, the Netherlands and Germany, as well as Brexit negotiations that are likely to cause rifts within the EU.

"We need to focus on the big picture," Lofven said. Part of that is "cooperation with the United States."

Lofven also confirmed that Sweden isn’t about to join NATO and suggested that sanctions targeting Russia following its actions in eastern Europe should remain in place.

"Nothing can defend the actions from the Russian side: the aggression towards Ukraine, the annexation of Crimea," he said. "You can’t just change borders with violence." That means that "as long as a country does not adhere to international law, we need to be prepared to use sanctions."

To contact the reporter on this story: Johan Carlstrom in Stockholm at jcarlstrom@bloomberg.net. To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Nick Rigillo