French President Nicolas Sarkozy speaks at this year's World Economic Forum meeting in Davos the day before Sweden is due to present. Photo: Virginia Mayo / AP / SCANPIX

Can Sweden survive the new 2-speed economy?

"It's an enormous opportunity"
4:16 min

The annual meeting of the World Economic Forum in Davos kicked off earlier this week. With Swedish Prime Minister Fredrik Reinfeldt and finance minister Anders Borg arriving on Thursday, other countries have a huge interest in hearing Sweden's success story. But amidst larger undercurrents in the world economy, how secure is Sweden's position?

For some 40 years, the world's elite have flocked to the Alpine resort town of Davos, Switzerland, to discuss the global financial situation. With Sweden now ranked as the world's second-most competitive economy, other nations are lining up to hear the secret. 

"The room where Sweden and the other Nordic countries will have their presentation is fully booked, and they're now trying to get another room in order to accommodate a bigger audience," said Johan Schück, an economic columnist and reporter for the newspaper Dagens Nyheter, on the line from Davos.

But could a global trend soon tarnish Sweden's sheen?

"At the current juncture, we are realizing that the world is becoming a dual speed economy with high rates of growth in the emerging economies and relatively no or low rates of growth in the developed economies," Chanda Kochhar, co-chair of the meeting and CEO of India's largest private bank, said in a speech at Davos.

"That basically means that the emerging economies are going to be the future engines of growth for the world, and an economic rebalance taking place during this decade," she said. 

If all the action is moving to the developing world, where does this leave Sweden?

Johan Norberg, an author on global economic issues and senior fellow at the CATO institute, a conservative think tank, told Swedish Radio news that Sweden is better off than many other developed countries, since its economy is still more or less in tact and since it also relies heavily on its export industry.

"It's an enormous opportunity for export-dependent countries like Sweden," said Norberg. "I think that our trade is going to be rebalanced as well . . . , being much more interested in what Indian and Chinese and Brazilian consumers want in the future, rather than what American and German consumers are interested in."

Sweden's strength is basic infrastructure and heavy manufacturing, like getting systems in place for mining, machine engineering, and production processes for businesses, according to Norberg.

As for when the two-speed economy will even out again, Norberg said that the developing and developed worlds will converge a bit through the decade.  

"Sooner or later, I think that some of the best investment opportunities and the lowest hanging fruit in emerging economies," said Norberg, "where they can produce the most with the smallest changes, will run out. And so, growth rate is going to come down a little bit. We also see this demographic change in countries like China, where the workforce is aging."

But Norberg stressed that despite these changes, poorer countries will continue to be richer in terms of the economic opportunity they offer, for at least a half-century.

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