Social democracy - which seeks to blend individual freedom with social justice - is, more than ever, the answer not only to Sweden's but also to the West's problems, according to unrepentant Social Democrat Olof Palme, Sweden's prime minister.
Furthermore, this social democratic vision seeks a ''fair deal'' not only at home but also on a global scale. As long as the present international economic system is not reformed to provide for closer cooperation between rich and poor nations, industrial nations will not be able to find the way back to their own development and prosperity, Mr. Palme says.
Finally, he says, strengthening the United Nations and lending more muscle to both the Security Council and the UN secretary-general has become imperative at a time when a new nuclear-arms race looms, when a new cold war is being waged, and when mankind is threatened, in a very real way, with ultimate destruction.
In an exclusive interview with the Monitor, Olof Palme, who ran the Swedish government from 1969 to 1976 and who was voted back into office last fall, said he believed in the middle road more than ever - at a time when voters in other industrial countries seem to be reaching out to the far right or to the far left.
''The right - I think of (Ronald) Reagan and of (Margaret) Thatcher - had its attraction, with its dream of absolute freedom,'' says the prime minister. ''Also people were tired of strikes. But their policies failed when confronted with reality. They no longer express themselves in the triumphant tones they used when they came to power.
''On the left of the spectrum, communism has completely lost its appeal and failed as a model. Still on the left the French Socialists have also had to considerably dilute their policies and depart from their dogmas.
''The present social and economic difficulties do not lend themselves to rigid, ideological solutions, be they ultraconservative or ultraprogressive. A persistent, high unemployment rate is incompatible with the survival of democracy. People everywhere want both personal freedom and decent lives - food, shelter, work, medical care. Whenever an attempt is made by a government to increase the one at the expense of the other, people get frustrated and rebel.''
True, the Social Democrats have been voted out of office in West Germany, but the French Socialists have embarked on a social democratic path, as opposed to their earlier more extreme policies. In Spain Felipe Gonzalez, in Greece Andreas Papandreou, in Austria Bruno Kreisky, are taking a middle-of-the-road approach. The Social Democrats have come to power in Finland and may soon be back in power in Portugal. They play a strong role in Bolivia, Costa Rica, and in the Brazilian state of Rio de Janeiro.
''So, you see, social democracy is alive and kicking,'' says Mr. Palme with a wide grin.
Sweden has been hit by the combined and accumulated effects of world inflation in the late '70s and global recession more recently. Relatively speaking, it has not fared too badly. In 1982, under a non-Socialist government, inflation ran at 8.6 percent and unemployment was 3 percent. But Sweden's trade imbalance was close to $1 billion.
Since Palme's return to office, he has imposed strong measures on Sweden's economy - by devaluing the kroner 16 percent, freezing prices temporarily, and obliging industrialists to reinvest 20 percent of their earnings in capital goods. There are definite signs of improvement.
Although the gross national product is expected to decline by 1.4 percent in 1983, inflation should not exceed 4 percent. The trade balance has improved significantly in the last three months. When the price freeze was lifted, prices failed to soar.
A key component of Palme's plan to redress Sweden's economy is the formation of Wage-Earner Funds, which are rapidly gaining acceptance among workers and industrialists. An innovative project to stimulate basic investment, the funds would be taken from wages and are supposed to keep wage demands down and give companies better access to venture capital. They are intended, according to Palme, to restructure Sweden's industrial base, which has been severely eroded in the last 10 years.
Sweden's consensus, severely tested by the problem of nuclear energy (with pro- and anti-nuclear camps splitting parties and families), has been glued together again, Palme says. Twelve nuclear plants (providing 5 percent of Sweden's energy) will be put to work, but not one more.
What worries Palme, however, is the emergence of a tiny but vociferous ultraconservative group that takes its cue from Reagan and Thatcher. It is insignificant now, but it could threaten the Swedish consensus about the welfare state and neutrality in foreign politics, which six years of non-Socialist rule have left undisturbed.
With regard to foreign politics, Palme is apprehensive.
''Instead of a North-South dialogue, instead of an East-West dialogue, we have a litany of mutual accusations and recriminations. This does not lead to peace nor to stability,'' says Palme, who does not buy the trickle-down theory when applied either to the developed or to the developing nations.
''The North is dependent on the South for its jobs, its raw materials. If the developing nations find no outlet in the rich countries, we cannot expect to export to them. Urgent problems of mutual concern, such as the problem of the debt, the food and energy problems, the stabilization of prices of raw materials , must be addressed in a comprehensive way. Otherwise we are heading for utter chaos, protectionism, and international violence,'' he says.
Palme subscribes to recent calls by the nonaligned countries for a concerted North-South effort toward increased economic cooperation.
Without seeking to single out any villains, Palme is deeply troubled by the increasing East-West tensions, accompanied by a new escalation in the arms race and strident rhetoric coming out of Washington and Moscow.
''As the gap widens between East and West, North and South, the role of the UN must be strengthened, and all the small and middle-sized nations must give full support to the United Nations in their own interest,'' Palme says.
To underline its commitment to the UN, Sweden invited UN Secretary-General Javier Perez de Cuellar to address the Swedish Riksdag (parliament) on April 19. Before that, no other foreign statesman had ever been allowed to address the Swedish parliament.
Sweden's per capita financial contribution to the UN system ($30 per year per Swede) is second only to Norway's ($39). Sweden's active role in trying to narrow gaps between the various ideological factions at the UN is well known to UN observers.
''Preventive diplomacy by the UN secretary-general could defuse many armed conflicts, provided the permanent members of the Security Council abide by the spirit of the UN Charter and don't block its implementation,'' says Palme.
On specific issues Palme cannot bring himself to be optimistic. He does not consider Reagan's plan for the Middle East to be dead and his recent talks with Yasser Arafat lead him to believe the PLO leader intends to stick to a moderate course. Mr. Arafat still longs for a dialogue with the US and ultimately aims at setting up a Palestinian state on the West Bank to coexist with Israel, Palme says. But Palme also feels Israeli intransigence could lead to the formation of Palestinian territories like South Africa's Bantustans and to more bloodshed.
Palme is continuing his efforts on behalf of Perez de Cuellar to bring the Iran-Iraq war to an end. ''I see the beginning of the end. It may still take some time. I feel not yet optimistic but already hopeful,'' he says, without being more specific for fear of upsetting the apple cart.
After recent talks with Perez de Cuellar, Palme believes the USSR is seeking an honorable way out of Afghanistan.
''Not at any price, but under certain conditions related to its national interest.'' (From independent sources, the Monitor has learned that Soviet officials have been in contact with the former King of Afghanistan who lives in Rome. An envisaged package solution would allow for Afghan refugees to return home, for the present Kabul regime to stay in place without Babrak Karmal but with a broadened base, under the umbrella of the King. The package would have Afghanistan become nonaligned.
(Some movement toward a calendar linking the withdrawal of Soviet troops and the safe return of the Afghan refugees to their country has been reported at the current Geneva talks by proxy between Afghanistan and Pakistan. Even though ''the end of the tunnel is not yet in sight,'' according to these sources, there is some evidence of political will on the part of all the parties concerned to strike a deal.)
On Central America Palme is outspoken.
''A horrifying mass murder is occurring there. More than 100,000 innocent civilians have been killed in Guatemala and in Salvador, mostly by right-wing forces. The only way to stop this violence is to get the contending factions to the negotiating table. There can be no military solution to the deep social and economic problems that affect these countries. Sweden strongly supports the efforts of Mexico, Colombia, Panama, and other countries of the region to work out a political solution and to bar outside military intervention.''
Regarding the US-Soviet negotiations on medium-range and strategic arms in Geneva, Palme questions the fundamental approach to the problem of security that both sides are taking.
''The great powers arm to attain security. The search for invulnerability is the driving force behind the nuclear-arms race. Spectacular military innovations seem to promise a more secure defense, a more certain ability to destroy.
''But ever, the result is that nuclear weapons now wander eternally in the seas, in the earth, and in the skies, even in the darkest recesses of the seas, from silo to silo, never beyond the power of 'the other evil empire,' in the words of Prof. Emma Rothschild.
''The search for security leads to even greater insecurity. The concept that peace can be achieved through deterrence is another way of saying that peace must be built on fear. Thus, fear will spread and increase. We in Sweden feel that security can only mean common security. That means a truly universal process of disarmament in both nuclear and conventional weapons must be set on foot.''
Palme is not too hopeful regarding his efforts toward a Nordic nuclear-weapons-free zone, but Sweden's more recent proposals to set up in Central Europe a narrow nuclear-free corridor are attracting wide international interest if not acceptance.
''Sweden's idea is to remove a tripwire, to reduce the chances of war being started by mistake. It is a confidence-building measure,'' Palme says. Summing up his views on the matter of East-West military balance, he says, ''We feel that rough military parity exists now, that it should be maintained but at a much lower level than at present.''
Sweden has been at peace for 170 years, thanks to its policy of neutrality, he says.
''We do not equate neutrality with indifference to developments in other countries,'' says Palme. Indeed, it may be pointed out that Dag Hammarskjold, Folke Bernadotte, and Raoul Wallenberg died as they tried to save lives and prevent violence in the Congo, in the Middle East, in Hungary under Nazi rule, respectively. Furthermore, Sweden puts its money where its mouth is and currently spends slightly more than 1 percent of its GNP in assistance to the third world.
Sweden has every intention of fighting to protect its neutrality, according to a highly placed official. The findings of an independent commission regarding recent intrusions into Swedish waters by foreign, presumably Soviet, submarines will be made public next week. Sweden has modified its regulations and given its armed forces greater latitude to strike back at submarines that come close to its coastline. According to informed sources, it is strengthening its military technology, enabling its forces to detect such intruders.