Volvo’s luxury XC90 SUV has a quintessentially Scandinavian design. But the cabling comes from Morocco, the catalysts from South Africa, the leather keys from Portugal and its plug-in hybrid batteries from South Korea. Oh, and its owners are Chinese.
When the Swedish car manufacturer was struggling to make ends meet at the height of the global financial crisis, the government in Stockholm made no effort to help even as countries from Germany to the U.S. supported their auto industries. Eventually, Volvo was sold to China’s Geely. Just a few years earlier, local politicians had stood by as the company was sold to Ford Motor Co.
The story of Volvo — which has suppliers from around 50 countries — reflects Sweden’s love affair with globalization. Most Swedish policy makers remain convinced that global competition and free trade are key to preserving the country’s status as one of the world’s most prosperous. It’s a world view worth comparing with that of President Donald Trump, who has blamed trade deals for making large swathes of blue-collar workers poorer than they were in a less globalized world.
For Sweden, competition from abroad means “our companies have been forced to adopt new ideas and new technologies, or risk going extinct,” said Johan Norberg, a Swedish author on globalization and a senior fellow at the Cato Institute in Washington. “That has been key to Sweden’s success.”
Modern Sweden may show little mercy for businesses that can’t compete, but its fabled welfare state, shaped by decades of Social Democratic rule, ensures that its workers are taken care of if they lose their jobs.
The high taxes needed to finance this safety net may have “had a negative effect on growth,” but it has also “created greater tolerance for the job losses caused by competition and free trade,” said Lars Jonung, an economics professor at Sweden’s Lund University.
Openness to change has helped replace old industries with international giants like Hennes & Mauritz and Ikea. Sweden has also emerged as one of the world’s biggest exporters of music and computer games, with Spotify and Minecraft now household names, thanks to an aggressive public policy encouraging computing ownership. All this in a small country of just 10 million people.
According to Norberg, the solution isn’t closing borders but reforming the economy. As for trade, Trump needs to reconsider his protectionist stance. Efforts to protect workers from wage competition merely ended up hurting its competitiveness, Norberg said.
It’s a view shared by Sweden’s minister for enterprise and innovation, Mikael Damberg.
“It’s a mistake if the United States turns its back to the world on trade,” Damberg said in a recent interview in London. “If you think you can defend the old world from technology and innovation, then over time, technology will run you over.”
As for Volvo Cars, its Chinese owners have turned losses into profits. After launching a raft of new models, the company last year reported a 66 percent increase in operating profit to 11 billion kronor as global sales hit a record of more than half a million cars. Its luxury XC90 SUV is still being built in Sweden.
“No one wants to produce all of the cars in the country where they’re selling them,” said Hakan Samuelsson, chief executive officer at Volvo Cars, last month in Stockholm. “Trade barriers will always drive up the cost for consumers. One should remember that.”