The Rise of Homeland Economics

On 9 April, the BSCC, together with Business Region Gothenburg, InPress, Invest in Skåne, and Stockholm Business Region, welcomed members and partners to the first seminar in our series of events addressing the complexities of the world ahead. Together with Niklas Persson, Executive Vice President and Managing Director for BU Grid Integration at Hitachi Energy, Alasdair Ross, Countries Editor at The Economist, and Pia Sandvik, CEO at Teknikföretagen, we discussed the rising focus on protectionism, explored the role of free markets in driving innovation and addressed the urgent need for change.

Some key takeaways from the seminar were:

The last two decades have seen several shocks to the unipolar world order and the liberal economic system,

• Following 9/11 in 2001, the War on Terror and the failed military objectives in the Middle East resulted in a massive blow to the West’s moral reputation.
• The 2008 financial crisis shook the foundations of the liberal economic model and decreased public trust in its financial system.
• The rise of populism led to isolationistic trends, such as the EU exit.
• The COVID-19 pandemic showed vulnerabilities in the global trade system, such as the disruptions in the ‘Just-in-time’ inventory management method due to closed borders and States putting their societies in lockdown.
• Ongoing conflicts in, for example, the Red Sea have resulted in further disruptions to supply chains and trade routes. Meanwhile, the Russian invasion of Ukraine and China’s claims to Taiwan have increased geopolitical tensions, thus making the markets more unpredictable for businesses.

Increased protectionism and the reshoring of industries will hamper development.

• Isolation of markets and economic zones and decreased cooperation will hamper economic growth due to the development of incompatible goods and services and decrease the intellectual exchange of best practices and efficient solutions. Such effects will lead to higher prices and fewer options for consumers and businesses.
• From a Swedish perspective, Sweden has always depended on free trade and the flow of workers and goods. The Swedish market alone is too small for its industries, and re-shoring production would lead to a massive workforce deficit (nearly an additional 2.4 million workers would be needed).

Several ongoing challenges to business and trade.

• The return of an ideological clash between authoritarianism and Democracy, with China no longer hiding their strength and Russia showing its expansionist ambitions, will cause geopolitical tensions. We have already witnessed its disruptive effects on supply chains, particularly in Energy and Food, leading to rising prices and inflation.
• Climate change will lead to massive shifts in market demands and migration, making the world volatile and unpredictable. States will have to increase their focus and investments in climate mitigation and adaptation. Furthermore, the race for the green transition and the need for critical materials such as rare-earth elements may cause further tensions and conflicts.
• The increased focus on minimising supply chain and trade disruptions is leading to a decreased focus on maximising efficiency.
• Digital technology and AI development will lead to massive shifts in the labour markets, with some jobs becoming obsolete and new opportunities appearing. Tensions and volatility can appear as states are in an AI regulation race to become leaders in AI and increase their influence in global trade.

Opportunities for business in the current geoeconomic landscape.

• Europe is becoming a central ground for the green transition and green energy solutions. Taking advantage of such developments opens up many opportunities.
• Sweden has, throughout history, always been dependent on free trade and has always needed to navigate the geoeconomic and geopolitical landscape. The success of Swedish industries is a testimony to Sweden’s success in doing so in the past. Sweden has always been supportive of its industry, yet there are challenges that the companies need to solve on their own. If companies are successful in their strategy and in navigating the global landscape, using smart and creative solutions, they will be very successful.

Calls for policy- and decisionmakers.

• Even though Sweden supports its industries, the bureaucracy in authorities’ and municipalities’ permitting processes is too rigid and slow. Action is urgently needed to make such processes faster and smoother for businesses to stay competitive in a global market.
• Overregulation is a problem in Sweden and the EU. More focus should be placed on creating stable regulatory frameworks to increase predictability for businesses and competitiveness. Moreover, regarding the green transition, companies want to be part of the development and also speed up the transition. Policymakers need to create the regulatory stability and preconditions needed for companies to do so.
• State aid for industries is becoming more common around the world to increase domestic industries’ competitiveness. Sweden does not have the possibility to compete with other greater powers in state aid; as such, there is a need to develop a Swedish model to improve the competitiveness of its industries.
• Sweden needs to focus on improving its infrastructure to stay competitive. Road infrastructure improvement is needed for the transport of goods, and digital and AI optimisations to improve the efficiency of the power grid are needed to meet the energy demand.
• To meet the increased demand for green energy, single solutions need to be avoided. Much focus today is on nuclear power, however, a roll-out of all green energy sources is needed. To foster investments in the energy sector, the EU need to make the Trans-European Network for Energy (TEN-E) more understandable and predictable for businesses, as today, the free flow of energy leads to uncertainties regarding the origins of future revenues.

We would like to express our gratitude to all the speakers and panellists for sharing their expertise and insights on these issues. We would also like to thank all our attendees for contributing to engaging discussions and for a lovely evening.

Please take time to answer a few questions about the event. Your feedback is highly valuable to us and will help us improve in the future.