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Nordic model

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For the social and economic policies in continental Europe and Germany in particular, see Rhenish model.

The Nordic model refers to the economic and social models of the Nordic countries (Denmark, Iceland, Norway, Sweden and Finland). This particular adaptation of the mixed economy is characterised by "universalist" welfare states (relative to other developed countries), which are aimed specifically at enhancing individual autonomy, ensuring the universal provision of basic human rights and stabilising the economy. The Nordic model is distinguished from other welfare states with similar goals by its emphasis on maximising labour force participation, promoting gender equality, egalitarian and extensive benefit levels, the large magnitude of wealth redistribution, and liberal use of expansionary fiscal policy.[1] The Nordic Model however is not a single identical set of policies and rules in every country; each of the Nordic countries has its own economic and social models, sometimes with large differences from its neighbours.

Overview

Economic publications, such as "The Nordic Model - Embracing globalization and sharing risks", characterize the system as follows:[2]

  • An elaborate social safety net in addition to public services such as free education and universal healthcare.[2]
  • Strong property rights, contract enforcement, and overall ease of doing business.[3]
  • Public pension schemes.[2]
  • Low barriers to free trade.[3] This is combined with collective risk sharing (social programmes, labour market institutions) which has provided a form of protection against the risks associated with economic openness.[2]
  • Little product market regulation. Nordic countries rank very high in product market freedom according to OECD rankings.[2]
  • Low levels of corruption.[2] In Transparency International's 2010 Corruption Perceptions Index all five Nordic countries were ranked among the 11 least corrupt of 178 evaluated countries.[4]
  • High degrees of labour union membership. In 2008, labour union density was 67.5% in Finland, 67.6% in Denmark, and 68.3% in Sweden. In comparison, union membership was 11.9% in the United States and 7.7% in France.[5]
  • 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.[6]
  • Sweden has decentralised wage co-ordination, while Finland is ranked the least flexible.[2] The changing economic conditions have given rise to fear among workers as well as resistance by trade unions in regards to reforms.[2] 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. (See flexicurity.)
  • Sweden at 56.6% of GDP, Denmark at 51.7%, and Finland at 48.6% reflects very high public spending.[3] One key reason for public spending is the very 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 (more than 38% in Denmark). The public sector's low productivity growth has been compensated by an increase in the private sector’s share of government financed services which has included outsourcing.[2] 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.[7]
  • Overall tax burdens (as a percentage of GDP) are among the world's highest; Sweden (51.1%), Denmark (46% in 2011),[8] and Finland (43.3%), compared to non-Nordic countries like Germany (34.7%), Canada (33.5%), and Ireland (30.5%).

See also

References

  1. ^ Esping-Andersen, G. (1991). The three worlds of welfare capitalism. Princeton, NJ: Princeton University Press.
  2. ^ a b c d e f g h i ETLA: The Nordic Model
  3. ^ a b c Index of Economic Freedom
  4. ^ "CPI 2010 table". Transparency International. Retrieved 2010-10-26.
  5. ^ "Trade Union Density" OECD StatExtracts. 2009. Accessed: 11 February 2011.
  6. ^ http://www.nordiclabourjournal.org/i-fokus/in-focus-2001/the-nordic-model
  7. ^ OECD. Growing Unequal? Income Distribution and Poverty in OECD Countries. Organisation for Economic Co-Operation and Development. 2008. p. 232, p. 233
  8. ^ "Skattetrykket". Danish Ministry of Taxation. Retrieved 2012-06-24.

Further reading

  • Christiansen, Niels Finn et al. The Nordic Model of Welfare (2006)
  • Hilson, Mary. The Nordic model: Scandinavia since 1945 (2008)
  • Kvist, Jon, et al. Changing social equality: The Nordic welfare model in the 21st century (2011)
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