The Nordic model refers to the economic and social policies common to the Nordic
countries. This includes a combination of free market capitalism with a
comprehensive welfare state and collective bargaining at the national
level. Although there are significant
differences among the Nordic countries, they all share some common traits. These
include support for a "universalist" welfare state aimed specifically at
enhancing individual autonomy and promoting social mobility; a corporatist
system involving a tripartite arrangement where representatives of
labor and employers negotiate wages and labor market policy mediated by the
government; and a commitment to widespread private ownership, free
markets and free trade. Each of the Nordic countries has its own
economic and social models, sometimes with large differences from its
neighbours. While Sweden's neoliberal reforms have reduced the role of the
public sector over the last decades, and saw the fastest growth in inequality of
any OECD economy, Sweden's income inequality still remains lower than most
other countries'. Overview
"The Nordic Model - Embracing globalization and sharing risks"
characterises the system as follows: An elaborate social safety net in
addition to public services such as free education and universal healthcare.
Strong property rights, contract enforcement, and overall ease of doing
business. Public pension plans.
Low barriers to free trade. This is combined with collective risk sharing
which has provided a form of protection against the risks associated with
economic openness. Little product market regulation. Nordic
countries rank very high in product market freedom according to OECD
rankings. Low levels of corruption. In
Transparency International's 2014 Corruption Perceptions Index all five
Nordic countries were ranked among the 12 least corrupt of 176 evaluated
countries, and Denmark, Finland, Sweden and Norway all ranked within top 5.
High percentage of workers belonging to a labour union. In 2010, labour union
density was 69.9% in Finland, 68.3% in Sweden, and 54.8% in Norway. In
comparison, labour union density was 12.9% in Mexico and 11.3% in the United
States. The lower union density in Norway is mainly explained by the
absence of a Ghent system since 1938. In contrast, Denmark, Finland and Sweden
all have union-run unemployment funds. A partnership between employers, trade
unions and the government, whereby these social partners negotiate the terms to
regulating the workplace among themselves, rather than the terms being
imposed by law. Sweden has decentralised wage co-ordination, while Finland is
ranked the least flexible. The changing economic conditions have given rise to
fear among workers as well as resistance by trade unions in regards to reforms.
At the same time, reforms and favourable economic development seem to have
reduced unemployment, which has traditionally been higher. Denmark's
Social Democrats managed to push through reforms in 1994 and 1996.
Sweden at 56.6% of GDP, Denmark at 51.7%, and Finland at 48.6% reflect very
high public spending. One key reason for public spending is the large number of
public employees. These employees work in various fields including education,
healthcare, and for the government itself. They often have lifelong job
security and make up around a third of the workforce. Public spending in social
transfers such as unemployment benefits and early-retirement programmes is high.
In 2001, the wage-based unemployment benefits were around 90% of wage in
Denmark and 80% in Sweden, compared to 75% in the Netherlands and 60% in
Germany. The unemployed were also able to receive benefits several years before
reductions, compared to quick benefit reduction in other countries.
Public expenditure for health and education is significantly higher in
Denmark, Sweden, and Norway in comparison to the OECD average.
Overall tax burdens are among the world's highest; Sweden, Denmark, and
Finland The United Nations World Happiness
Report 2013 shows that the happiest nations are concentrated in Northern
Europe. The Nordics ranked highest on the metrics of real GDP per capita,
healthy life expectancy, having someone to count on, perceived freedom to make
life choices, generosity and freedom from corruption.
The Nordic countries received the highest ranking for protecting workers
rights on the International Trade Union Confederation's 2014 Global Rights
Index, with Denmark being the only nation to receive a perfect score.
Aspects = Labor market policy=
The Nordic countries share active labor market policies as part of a corporatist
economic model intended to reduce conflict between labor and the interests
of capital. The corporatist system is most extensive in Sweden and Norway,
where employer federations and labor representatives bargain at the national
level mediated by the government. Labor market interventions are aimed at
providing job retraining and relocation. The Nordic labor market is flexible,
with laws making it easy for employers to hire and shed workers or introduce
labor-saving technology. To mitigate the negative effect on workers, the
government labor market policies are designed to provide generous social
welfare, job retraining and relocation to limit any conflicts between capital
and labor that might arise from this process.
= Economic system= The Nordic model is underpinned by a
free market capitalist economic system that features high degrees of private
ownership with the exception of Norway, which includes a large number of
state-owned enterprises operating in a free market economy.
The Nordic model is described as a system of competitive capitalism
combined with a large percentage of the population employed by the public
sector. In 2013, The Economist described its countries as "stout free-traders who
resist the temptation to intervene even to protect iconic companies" while also
looking for ways to temper capitalism's harsher effects, and declared that the
Nordic countries "are probably the best-governed in the world". Some
economists have referred to the Nordic economic model as a form of "cuddly"
capitalism, with low levels of inequality, generous welfare states and
reduced concentration of top incomes, and contrast it with the more
"cut-throat" capitalism of the United States, which has high levels of
inequality and a larger concentration of top incomes.
= Nordic welfare model= The Nordic welfare model refers to the
welfare policies of the Nordic countries, which also tie into their
labor market policies. The Nordic model of welfare is distinguished from other
types of welfare states by its emphasis on maximizing labor force participation,
promoting gender equality, egalitarian and extensive benefit levels, the large
magnitude of income redistribution, and liberal use of expansionary fiscal
policy. While there are differences among
different Nordic countries, they all share a broad commitment to social
cohesion, a universal nature of welfare provision in order to safeguard
individualism by providing protection for vulnerable individuals and groups in
society, and maximizing public participation in social decision-making.
It is characterized by flexibility and openness to innovation in the provision
of welfare. The Nordic welfare systems are mainly funded through taxation.
Despite the common values, the Nordic countries take different approaches to
the practical administration of the welfare state. Denmark features a high
degree of private sector provision of public services and welfare, alongside
an assimilation immigration policy. Iceland's welfare model is based on a
"welfare-to-work" model, while part of Finland's welfare state includes the
voluntary sector playing a significant role in providing care for the elderly.
Norway relies most extensively on public provision of welfare.
Poverty reduction The Nordic model has been successful at
significantly ameliorating poverty. In 2011 poverty rates, before taking into
account the effects of taxes and transfers, stood at 24.7% in Denmark,
31.9% in Finland, 21.6% in Iceland, 25.6% in Norway, and 26.5% in Sweden.
After accounting for taxes and transfers the poverty rates for the same year
became 6%, 7.5%, 5.7%, 7.7%, and 9.7% respectively, for an average reduction
of 18.7 p.p. Compared to the US, which has a poverty level pre-tax of 28.3% and
post-tax of 17.4% for a reduction of 10.9 p.p., the effects of tax and
transfers on poverty in all the Nordic countries are substantially bigger. In
comparison to France and Germany, however, the taxes and transfers in the
Nordic countries are smaller on average. Reception
Jerry Mander has likened the Nordic model to a kind of "hybrid" system which
features a blend of capitalist economics and socialist values. According to
sociologist Lane Kenworthy, in the context of the Nordic model, "social
democracy" refers to a set of policies intended to improve capitalism as
opposed to a system to replace capitalism. Kenworthy advocates for the
U.S. to make a gradual transition to an economic system similar to those of the
Nordic countries. United States Senator Bernie Sanders, a self-described
democratic socialist, has been a strong proponent of the Nordic system. Nobel
Prize-winning economist Joseph Stiglitz has noted that there is higher social
mobility in the Scandinavian countries than in the United States, and argues
that Scandinavia is now the land of opportunity that the United States once
was. According to Naomi Klein, former Soviet
leader Mikhail Gorbachev sought to move the USSR in a similar direction to the
Nordic system, combining free markets with a social safety net — but still
retaining public ownership of key sectors — ingredients that he believed
would transform the USSR into "a socialist beacon for all mankind."
The Nordic combination of extensive public provision of welfare and a
culture of individualism has been described by Lars Trägårdh, of Ersta
Sköndal University College, as "statist individualism".
Criticism The socialist economists John Roemer and
Pranab Bardhan criticize Nordic-style social democracy and question its
effectiveness at promoting relative egalitarianism. They point out that
social democracy requires a strong labor movement to sustain its heavy
redistribution, noting that it is idealistic to think such redistribution
can be accomplished in other countries with weaker labor movements. They note
that even in the Scandinavian countries social democracy has been in decline
since the labor movement weakened, arguing that the sustainability of
social democracy is limited. Roemer and Bardham argue that changing enterprise
ownership and establishing a market socialist economy would be more
effective than redistribution at promoting egalitarianism.
See also Collective bargaining
Flexicurity Folkhemmet
Mixed economy Prostitution in Sweden
Social corporatism Social democracy
Social market economy Swedish welfare
Welfare capitalism = Lists=
Corruption Perceptions Index Democracy Index
Legatum Prosperity Index List of countries by inequality-adjusted
HDI List of countries by Social Progress
Index World Happiness Report
References Further reading
Bucken-Knapp, Gregg. Defending the Swedish Model: Social democrats, trade
unions, and labor migration policy reform. Lexington Books.
Christiansen, Niels Finn et al. The Nordic Model of Welfare
Hilson, Mary. The Nordic model: Scandinavia since 1945
Kenworthy, Lane. Social Democratic America. Oxford University Press USA.
ISBN 0199322511 Kvist, Jon, et al. Changing social
equality: The Nordic welfare model in the 21st century
Nik Brandal, Øivind Bratberg, Dag Einar Thorsen. The Nordic Model of Social
Democracy Pallgrave MacMillan. ISBN 1137013265
External links The Nordic Way — World Economic Forum.
Davos 2011 Utopia sustained: The Nordic model of
social democracy. Dag Einar Thorsen, Nik Brandal, Øivind Bratberg. Fabian
Society, 8 April 2013. The secret of their success. The
Economist. 2nd Feb 2013. What Can We Learn From Denmark? Bernie
Sanders, Huffington Post. 26 May 2013. What Is Scandinavia Doing Right? The New
York Times. September 25, 2013. What Makes Scandinavia Different? Rune
Møller Stahl & Andreas Møller Mulvad for Jacobin, August 4, 2015.