Why is the Nordic social model so successful economically? And how has it been able to meet the new environmental challenges? In a recent publication a group of ten Nordic researchers from a variety of backgrounds present their assessments of the Nordic model as an alternative form of capitalism, prosperity and welfare.
In a recent publication a group of ten Nordic researchers from a variety of backgrounds present their assessments of the Nordic model as an alternative form of capitalism, prosperity and welfare.
“It is crucial that researchers with an eye for an interdisciplinary approach bring their perspectives to the debate,” says Anne Kjersti Fahlvik, Executive Director of the Division for Innovation at the Research Council of Norway, which funded the project.
Professor Atle Midttun at BI Norwegian School of Management and Research Professor Nina Witoszek of the University of Oslo headed the project.
Wealthy and equal
The Nordic model includes aspects that to many appear paradoxical:
- The Nordic countries rank among the highest in the world in terms of levels of both wealth and equality.
- The Nordic countries combine productive capitalism with extensive welfare provision.
- The Nordic countries manage to balance widespread collectivism with high levels of individual freedom.
“For several decades the Nordic model has provided the Nordic countries with a GDP per capita that has been at the forefront internationally,” states Professor Midttun.
In countries such as Norway and Sweden we trust that the state will help us when we need it. In many countries this is not the case. At the same time family has less significance in the Nordic countries than it does elsewhere in the world.
Is the Nordic model underpinned by deep-lying cultural values, values that cannot be exported to other parts of the world? Or is it a model that others could also benefit from adopting?
According to Carlos Joly, visiting professor at ESC Toulouse and former director at the large Norwegian financial company the Storebrand Group, it is a misunderstanding to think that there is a kind of Protestant work ethic underlying the Nordic model.
Instead he explains the phenomenon, saying, “In a country like Norway there is a general view that society should be based on equitable distribution. This was how Norway and the other Nordic countries responded to the major conflict that arose between capital and labour at the beginning of the previous century. Today this equity is built on foundations such as the collective agreements for workers and the state arbitration institutions.”
According to Professor Joly this provides the key to explaining why the Nordic countries have been able to come up with such a good alternative to the system of what he calls predator capitalism that is to be found in several other places in the world. He also emphasises the fact that the Nordic countries have strong control over their financial systems: “In the Nordic countries, for example, companies such as the investment banks Morgen Stanley and Goldman Sachs would have been more effectively monitored.”
Collective agreements provide the key
Per Ingvar Olsen, Associate Professor at BI Norwegian School of Management in Oslo, also points to the collective agreements for workers and the accompanying low levels of unemployment as important factors in explaining the economic success of the Nordic countries.
“More people working means more tax revenue for the government. The middle classes are subject to high rates of taxation and in this way acquire a stake in the state. This creates the basis for high levels of welfare.”
Individualism and solidarity
According to Lars Trägårdh, Professor at the Ersta Sköndal University College in Stockholm, the Nordic countries are home to some of the most individualistic people in the world. He believes that the strong emphasis on social solidarity in efforts to understand the Nordic model have meant that not enough attention has been given to this.
“In the Nordic countries most people are able to free themselves from both the family and the local community around them. We have become individualists. This has had huge significance, not least for the emancipation of women. Weak patriarchal structures and less dependence on others means that many people in the Nordic countries feel that they have control over their own lives,” states Professor Trägårdh.
“Studies show that this also makes many of us happy,” Professor Trägårdh points out.
“The Nordic model cannot be explained purely in terms of economic policy, specific institutions and good fortune. The model also has deep-lying cultural roots,” states Nina Witoszek.
Culture has a key role to play in how a society’s wealth is distributed. Professor Witoszek believes that for the Nordic countries this can be traced back to the unique type of Nordic modernity that arose at the end of the 1800s. This provided the population with a particular form of culture and education (Bildung), for which we can thank the great national educators. With reference to Norway, she mentions the writer Bjørnstjerne Bjørnson and the polar explorer, humanist and diplomat Fridtjof Nansen.
In Professor Witoszek’s view, the specific cultural roots that lie beneath the Nordic model may make it hard for others to adopt it.
Iceland is the exception
“Now Iceland is paying for the fact that the country abandoned the Nordic model ten years ago,” states Þröstur Olaf Sigurjónsson, Assistant Professor at Reykjavik University School of Business in Iceland.
At the turn of the millennium the Icelandic government embraced Thatcherism and sold off a lot of public assets. Thus, banks emerged in Iceland that controlled nearly ten times as much money as the Icelandic national budget.
“A few years ago in Iceland we viewed the welfare state as an outdated phenomenon. We also saw ourselves as more progressive than the rest of the Nordic countries. We introduced low taxes, downsized the welfare state and gave little consideration to the elderly or others who needed help.”
Then, in 2008, came the total collapse of the economy. The collapse of the banks in Iceland is the third largest in world history. And it happened in a country that has just 300 000 inhabitants.
According to Mr Sigurjónsson the people of Iceland are now turning towards the rest of the Nordic countries once again to see how they manage their societies.
According to Lennart Olsson, Professor at Lund University in Sweden, the Nordic model has played a key role in how the countries have tackled environmental challenges. By way of example he mentions the large nature reserves and the unique public right of access. The Nordic region was also the first in the world to appoint ministers to deal specifically with environmental issues.
The Nordic countries have not been nearly so successful when it comes to solving the major challenge of today – climate change. According to Professor Olsson, this is because the environmental challenges we are now facing are of a completely different type.
“It is now no longer a question of removing sulphur from petrol, which could easily be done. Now it is about the total ecological footprint we are leaving behind us. Today the Nordic countries are lagging behind the EU average in this respect. The inhabitants of the Nordic countries are major consumers of the world’s scarce resources. We have a level of consumption that is completely incompatible with sustainable development,” Professor Olsson warns.
Professor Atle Midttun sums up the dilemma the Nordic countries are facing: “If you share a billion crowns equitably between a thousand people, the likelihood is that it will lead to greater environmental damage than if you allow one individual to have all the money.”
In the view of several researchers involved in the project, the solution for the Nordic countries is not to halt economic growth. That would probably lead to a multitude of problems. Instead we have to redefine growth and find smarter ways to consume.
“There is a strong will in the Nordic countries to take the lead, including when it comes to environmental issues,” says Professor Olsson. He believes that many others are following developments in the Nordic countries to see what they are doing in this area.