Nordic model

The Nordic model has been characterized 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. • Free trade combined with collective risk sharing (welfare social programmes and labour market institutions) which has provided a form of protection against the risks associated with economic openness. • A partnership between employers, trade unions and the government, whereby these social partners negotiate the terms to regulating the workplace amongst themselves, rather than the terms being imposed by law. Sweden has decentralised wage co-ordination while Finland is ranked the least flexible. In 2019, trade union density was 90.7% in Iceland, 67.0% in Denmark, 65.2% in Sweden, 58.8% in Finland, and 50.4% in Norway; in comparison, trade union density was 16.3% in Germany and 9.9% in the United States. Additionally, in 2018, collective bargaining coverage was 90% in Iceland, 88.8% in Finland (2017), 88% in Sweden, 82% in Denmark, and 69% in Norway; in comparison collective bargaining coverage was 54% in Germany and 11.7% 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. Union density has declined in Denmark, Finland and Sweden, but is relatively stable, although at a lower level (about 50%), in the non-Ghent Norway. • The Nordic countries received the highest ranking for protecting workers rights on the International Trade Union Confederation 2014 Global Rights Index, with Denmark being the only nation to receive a perfect score. • Significant public spending, with Norway at 48.3% of GDP, Sweden at 49.4%, Iceland at 49.8%, Denmark at 50.8% and Finland at 55.8%. This is high even compared to the OECD average of 46.3%. • Overall tax burdens as a percentage of GDP are high, with 35.9%, 41.4%, 41.4%, 42.4% and 43.4% for Iceland, Norway, Sweden, Finland and Denmark respectively. This is compared to the OECD average of 33.9%. The Nordic countries also have a relatively progressive taxation system in place; this along with their generous welfare systems have made them among the least unequal countries in the world. • The United Nations World Happiness Reports show 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 place in the top 10 of the World Happiness Report 2018, with Finland and Norway taking the top spots. Economic system The Nordic model is underpinned by a mixed-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 and state ownership in publicly listed firms. like utilities, mail, rail transport, airlines, electrical power industry, fossil fuels, chemical industry, steel mill, electronics industry, machine industry, aerospace manufacturer, shipbuilding, and the arms industry. 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." As a result of the Sweden financial crisis of 1990–1994, Sweden implemented economic reforms that were focused on deregulation and the strengthening of competition laws. Despite this, Sweden still has the highest government spending-to-GDP ratio of all the Nordic countries, it retains national-level sectoral bargaining unlike Denmark and Iceland, with over 650 national-level bargaining agreements, and it retains the Ghent system unlike Norway and Iceland and consequently has the second-highest rate of unionization in the world. Despite being one of the most equal OECD nations, from 1985 to the 2010s Sweden saw the largest growth in income inequality among OECD economies. Other effects of the 1990s reforms was the substantial growth of mutual fund savings, which largely began with the government subsidizing mutual fund savings through the so-called Allemansfonder program in the 1980s; today 4 out of 5 people aged 18–74 have fund savings. Norway's particularities The state of Norway has ownership stakes in many of the country's largest publicly listed companies, owning 37% of the Oslo stock market Social democracy Social democrats have played a pivotal role in shaping the Nordic model, with policies enacted by social democrats being pivotal in fostering the social cohesion in the Nordic countries. According to sociologist Lane Kenworthy, the meaning of social democracy in this context refers to a variant of capitalism based on the predominance of private property and market allocation mechanisms alongside a set of policies for promoting economic security and opportunity within the framework of a capitalist economy as opposed to a political ideology that aims to replace capitalism. While many countries have been categorized as social democratic, the Nordic countries have been the only ones to be constantly categorized as such. In a review by Emanuele Ferragina and Martin Seeleib-Kaiser of works about the different models of welfare states, apart from Belgium and the Netherlands, categorized as "medium-high socialism", the Scandinavian countries analyzed (Denmark, Norway, and Sweden) were the only ones to be categorized by sociologist Gøsta Esping-Andersen as "high socialism", which is defined as socialist attributes and values (equality and universalism) and the social democratic model, which is characterized by "a high level of decommodification and a low degree of stratification. Social policies are perceived as 'politics against the market.'" They summarized the social democratic model as being based on "the principle of universalism, granting access to benefits and services based on citizenship. Such a welfare state is said to provide a relatively high degree of autonomy, limiting the reliance on family and market." Esa Mangeloja says that the revival movements helped to pave the way for the modern Finnish welfare state. During that process, the church lost some of its most important social responsibilities (health care, education, and social work) as these tasks were assumed by the secular Finnish state. Pauli Kettunen presents the Nordic model as the outcome of a sort of mythical "Lutheran peasant enlightenment", portraying the Nordic model as the result of a sort of "secularized Lutheranism"; however, mainstream academic discourse on the subject focuses on "historical specificity", with the centralized structure of the Lutheran church being but one aspect of the cultural values and state structures that led to the development of the welfare state in Scandinavia. Labour market policy The Nordic countries share active labour market policies as part of a social corporatist economic model intended to reduce conflict between labour and the interests of capital. This corporatist system is most extensive in Norway and Sweden, where employer federations and labour representatives bargain at the national level mediated by the government. Labour market interventions are aimed at providing job retraining and relocation. The Nordic labour market is flexible, with laws making it easy for employers to hire and shed workers or introduce labour-saving technology. To mitigate the negative effect on workers, the government labour market policies are designed to provide generous social welfare, job retraining and relocation services to limit any conflicts between capital and labour that might arise from this process. The Swedish model (Swedish:"den svenska modellen") is a labour market concept where working terms and pay are agreed upon through collective agreements between trade unions and employee organisations without the government's involvement. The idea is that workers agree to not strike while employers agree to not do a lockout. This means that everything is decided through cooperation and understanding without the need of the government. While some laws regulate basic labour rights, there is no law for minimal pay. A law-required wage would mean that companies could refuse workers a higher pay, with the Swedish model the pay is instead regulated through the agreement. Additionally, it would mean that a strike would be harder to do as the employer can claim refusal to work if the trade union went on strike for better pay. When a collective agreement is formed neither the trade union nor the employer is allowed to take any labour action such as strike or lockout until the agreement expires (usually up to three years) which is called industrial peace. The two biggest trade unions are Landsorganisationen (LO) and SACO. Both are umbrella organisations with 34 trade unions in the lower and middle class such as bus and train drivers, constructions workers, teachers, industrial workers, engineers and more. There are multiple employee organisations but the main ones are Sveriges Kommuner och Regioner (SKR) and Svenskt Näringsliv who maintain companies in the public sector respectively the private and business sector. Nordic welfare model The Nordic welfare model refers to the welfare policies of the Nordic countries, which also tie into their labour market policies. The Nordic model of welfare is distinguished from other types of welfare states by its emphasis on maximising labour 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 the 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 maximising 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" (see workfare) 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. with less than 8 points in all Nordic countries according to International Labour Organization standards. They have been at the front of the implementation of policies that promote gender equality; the Scandinavian governments were some of the first to make it unlawful for companies to dismiss women on grounds of marriage or motherhood. Mothers in Nordic countries are more likely to be working mothers than in any other region and families enjoy pioneering legislation on parental leave policies that compensate parents for moving from work to home to care for their child, including fathers. Although the specifics of gender equality policies in regards to the work place vary from country to country, there is a widespread focus in Nordic countries to highlight "continuous full-time employment" for both men and women as well as single parents as they fully recognize that some of the most salient gender gaps arise from parenthood. Aside from receiving incentives to take shareable parental leave, Nordic families benefit from subsidized early childhood education and care and activities for out-of-school hours for those children that have enrolled in full-time education. Poverty reduction The Nordic model has been successful at significantly reducing 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 United States, 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 (27 p.p. reduction) and Germany (24.2 p.p. reduction), the taxes and transfers in the Nordic countries are smaller on average. == History ==

The term 'peasant republic' is sometimes applied to certain communities in Scandinavia during the Viking Age and High Middle Ages, especially in Sweden, where royal power seems to have been initially somewhat weak, and in areas of modern day Sweden that were not under the rule of the Swedish king yet, as well as in Iceland where the Icelandic Commonwealth serves as an example of an unusually large and sophisticated peasant republic building on the same democratic traditions. Some historians have also argued that Gotland was a peasant republic before the attack by the Danes in 1361. Central for the old Scandinavian democratic traditions was the assemblies called the Thing or Moot. The Nordic model traces its foundation to the "grand compromise" between workers and employers spearheaded by farmer and worker parties in the 1930s. Following a long period of economic crisis and class struggle, the "grand compromise" served as the foundation for the post-World War II Nordic model of welfare and labour market organization. The key characteristics of the Nordic model were the centralized coordination of wage negotiation between employers and labour organizations, termed a social partnership, as well as providing a peaceful means to address class conflict between capital and labour. Magnus Bergli Rasmussen has challenged that farmers played an important role in ushering Nordic welfare states. A 2022 study by him found that farmers had strong incentives to resist welfare state expansion and farmer MPs consistently opposed generous welfare policies. Although often linked to social democratic governance, the Nordic model's parentage also stems from a mixture of mainly social democratic, centrist, and right-wing political parties, especially in Finland and Iceland, along with the social trust that emerged from the "great compromise" between capital and labour. The influence of each of these factors on each Nordic country varied as social democratic parties played a larger role in the formation of the Nordic model in Sweden and Norway, whereas in Iceland and Finland, right-wing political parties played a much more significant role in shaping their countries' social models. However, even in Iceland and Finland, strong labour unions contributed to the development of universal welfare. Social security and collective wage bargaining policies were rolled back following economic imbalances in the 1980s and the financial crises of the 1990s which led to more restrictive budgetary policies that were most pronounced in Sweden and Iceland. Nonetheless, welfare expenditure remained high in these countries, compared to the European average. Denmark Social welfare reforms emerged from the Kanslergade Agreement of 1933 as part of a compromise package to save the Danish economy. Iceland According to analyst Harpa Njálsdóttir, Iceland in the late 2010s moved away from the Nordic model towards the economic liberal model of workfare. She also noted that with the large changes having been made to the social security system, "70% of elderly people now live well below national subsistence criteria, while about 70% of those who live alone and in bad conditions are women." Despite this, as of 2021, Iceland has the lowest poverty rate in the OECD of only 4.9%. Norway Norway's "grand compromise" emerged as a response to the crisis of the early 1930s between the trade union confederation and Norwegian Employers' Association, agreeing on national standards in labour–capital relations and creating the foundation for social harmony throughout the period of compromises. For a period between the 1980s and the 1990s, Norway underwent more neoliberal reforms and marketization than Sweden during the same time frame, while still holding to the traditional foundations of the "social democratic compromise" that was specific to Western capitalism from 1945 to 1973. Norway was the Nordic country least willing to join the European Union. While Finland and Sweden suffered greatly from the 1990s recession, Norway began to earn enough revenue from their oil. Sweden In Sweden, the grand compromise was pushed forward by the Saltsjöbaden Agreement signed by employer and trade union associations at the seaside retreat of Saltsjöbaden in 1938. This agreement provided the foundation for Scandinavian industrial relations throughout Europe's Golden Age of Capitalism. The Swedish model of capitalism developed under the auspices of the Swedish Social Democratic Party which assumed power in 1932 and retained uninterrupted power until 1976. Initially differing very little from other industrialized capitalist countries, the state's role in providing comprehensive welfare and infrastructure expanded after the Second World War until reaching a broadly social democratic consensus in the 1950s which would become known as the social liberal paradigm, According to Phillip O'Hara, "Sweden eventually became part of the Great Capitalist Restoration of the 1980s and 1990s. In all the industrial democracies and beyond, this recent era has seen the retrenchment of the welfare state by reduced social spending in real terms, tax cuts, deregulation and privatization, and a weakening of the influence of organized labor." In the 1950s, Olof Palme and the prime minister Tage Erlander formulated the basis of Swedish social democracy and what would become known as the "Swedish model", drawing inspiration from the reformist socialism of party founder Hjalmar Branting, who stated that socialism "would not be created by brutalized...slaves [but by] the best positioned workers, those who have gradually obtained a normal workday, protective legislation, minimum wages." Arguing against those to their left, the party favored moderatism and wanted to help workers in the here and now, and followed the Fabian argument that the policies were steps on the road to socialism, which would not come about through violent revolution but through the social corporative model of welfare capitalism, to be seen as progressive in providing institutional legitimacy to the labour movement by recognizing the existence of the class conflict between the bourgeoisie and the proletariat as a class compromise within the context of existing class conflict. This Swedish model was characterized by a strong labour movement as well as inclusive publicly funded and often publicly administered welfare institutions. A type of wage earner funds, though different from the Meidner Plan, was implemented following the success of the Social Democrats in the 1982 election. They were controversial and disbanded after the 1991 election when the conservatives came to power. Upon returning to power in 1982, the Social Democratic party inherited a slowing economy resulting from the end of the post-war boom. The Social Democrats adopted monetarist and neoliberal policies, deregulating the banking industry, and liberalizing currency in the 1980s. The economic crisis of the 1990s saw greater austerity measures, deregulation, and the privatization of public services. Into the 21st century, it greatly affected Sweden and its universalistic welfare state, although not as hard as Finland. Sweden remained more Eurosceptic than Finland, and its struggles affected all the other Nordic countries, as it was seen as "the guiding star of the north", and with Sweden fading away, other Nordic countries also felt like they were losing their political identities. When the Nordic model was then gradually rediscovered, cultural explanations were sought for the special features of the Nordic countries. == Reception ==

The Nordic model has been positively received by some American politicians and political commentators. Jerry Mander has likened the Nordic model to a kind of "hybrid" system which features a blend of capitalist economics with socialist values, representing an alternative to American-style capitalism. Vermont Senator Bernie Sanders has pointed to Scandinavia and the Nordic model as something the United States can learn from, in particular with respect to the benefits and social protections the Nordic model affords workers and its provision of universal healthcare. Scandinavian political scientist Daniel Schatz argued that Sanders is wrong, saying that "the success of Nordic countries like Swedenas measured by relatively high living standards accompanied by low poverty, with government-funded education through university, universal health coverage, generous parental-leave policies and long life spansprecedes the contemporary welfare state.", adding that "Research has suggested that the Northern European success story has its roots in cultural rather than economic factors. The Scandinavian countries ... historically developed remarkably high levels of social trust, a robust work ethic and considerable social cohesion". According to Luciano Pellicani, the social and political measures adopted in countries like Sweden and Denmark are the same that some other European left-wing politicians theorised to combine justice and freedom, referring to liberal socialism and movements like Giustizia e Libertà and Fabian Society. According to Naomi Klein, former Soviet leader Mikhail Gorbachev sought to move the Soviet Union in a similar direction to the Nordic system, combining free markets with a social safety net, but still retaining public ownership of key sectors of the economyingredients that he believed would transform the Soviet Union into "a socialist beacon for all mankind." The Nordic model has also been positively received by various social scientists and economists. American professor of sociology and political science Lane Kenworthy advocates for the United States to make a gradual transition toward a social democracy similar to those of the Nordic countries, defining social democracy as such: "The idea behind social democracy was to make capitalism better. There is disagreement about how exactly to do that, and others might think the proposals in my book aren't true social democracy. But I think of it as a commitment to use government to make life better for people in a capitalist economy. To a large extent, that consists of using public insurance programsgovernment transfers and services." Nobel Prize-winning economist Joseph Stiglitz says that there is higher social mobility in the Scandinavian countries than in the United States and posits that Scandinavia is now the land of opportunity that the United States once was. American author Ann Jones, who lived in Norway for four years, posits that "the Nordic countries give their populations freedom from the market by using capitalism as a tool to benefit everyone" whereas in the United States "neoliberal politics puts the foxes in charge of the henhouse, and capitalists have used the wealth generated by their enterprises (as well as financial and political manipulations) to capture the state and pluck the chickens." Economist Jeffrey Sachs is a proponent of the Nordic model, having pointed out that the Nordic model is "the proof that modern capitalism can be combined with decency, fairness, trust, honesty, and environmental sustainability." 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." A 2016 survey by the think tank Israel Democracy Institute found that nearly 60 percent of Israeli Jews preferred a "Scandinavian model" economy, with high taxes and a robust welfare state. Criticism Socialist economists Pranab Bardhan and John Roemer criticize Nordic-style social democracy for its questionable effectiveness in promoting relative egalitarianism as well as its sustainability. They posit that Nordic social democracy requires a strong labour movement to sustain the heavy redistribution required, arguing that it is idealistic to think similar levels of redistribution can be accomplished in countries with weaker labour movements. They say that even in the Scandinavian countries social democracy has been in decline since the weakening of the labour movement in the early 1990s, arguing that the sustainability of social democracy is limited. Roemer and Bardham posit that establishing a market-based socialist economy by changing enterprise ownership would be more effective than social democratic redistribution at promoting egalitarian outcomes, particularly in countries with weak labour movements. Historian Guðmundur Jónsson said that it would be historically inaccurate to include Iceland in one aspect of the Nordic model, that of consensus democracy. Addressing the time period from 1950 to 2000, Jónsson writes that "Icelandic democracy is better described as more adversarial than consensual in style and practice. The labour market was rife with conflict and strikes more frequent than in Europe, resulting in strained government–trade union relationship. Secondly, Iceland did not share the Nordic tradition of power-sharing or corporatism as regards labour market policies or macro-economic policy management, primarily because of the weakness of Social Democrats and the Left in general. Thirdly, the legislative process did not show a strong tendency towards consensus-building between government and opposition with regard to government seeking consultation or support for key legislation. Fourthly, the political style in legislative procedures and public debate in general tended to be adversarial rather than consensual in nature." In a 2017 study, economists James Heckman and Rasmus Landersøn compared American and Danish social mobility, and found that social mobility is not as high as figures might suggest in the Nordic countries, although they did find that Denmark ranks higher in income mobility. When looking exclusively at wages (before taxes and transfers), Danish and American social mobility are very similar; it is only after taxes and transfers are taken into account that Danish social mobility improves, indicating that Danish economic redistribution policies are the key drivers of greater mobility. Additionally, Denmark's greater investment in public education did not improve educational mobility significantly, meaning children of non-college educated parents are still unlikely to receive college education, although this public investment did result in improved cognitive skills amongst poor Danish children compared to their American peers. There was evidence that generous welfare policies could discourage the pursuit of higher-level education due to decreasing the economic benefits that college education level jobs offer and increasing welfare for workers of a lower education level. Some welfare and gender researchers based in the Nordic countries suggest that these states have often been over-privileged when different European societies are being assessed in terms of how far they have achieved gender equality. They posit that such assessments often utilise international comparisons adopting conventional economic, political, educational, and well-being measures. By contrast, they suggest that if one takes a broader perspective on well-being incorporating, such as social issues associated with bodily integrity or bodily citizenship, then some major forms of men's domination still stubbornly persist in the Nordic countries, e.g. business, violence to women, sexual violence to children, the military, academia, and religion. While praising the Nordic model as a "clear and compelling contrast to the neoliberal ideology that has strafed the rest of the world with inequality, ill-health and needless poverty," economic anthropologist Jason Hickel sharply criticizes the "ecological disaster" that accompanies it, noting that data shows the Nordic countries "have some of the highest levels of resource use and CO2 emissions in the world, in consumption based terms, drastically overshooting safe planetary boundaries," and rank towards the bottom of the Sustainable Development Index. He argues that the model needs to be updated for the Anthropocene, and reduce overconsumption while retaining the positive elements of progressive social democracy including universal healthcare and education, paid vacations and reasonable working hours, which have resulted in much better health outcomes and poverty reduction compared to overtly neoliberal countries like the United States, in order to "stand as a beacon for the rest of the world in the 21st century." Swedish economist John Gustavsson, writing for American conservative magazine The Dispatch, criticized the Nordic model for its high taxation rates, including on the middle class and poor people. Political scientist Michael Cottakis has noted the rise of right-wing populist and anti-immigration sentiment in the Nordic countries, arguing that these countries, in particular Sweden, have failed to handle immigration effectively. Misconceptions George Lakey, author of Viking Economics, says that Americans generally misunderstand the nature of the Nordic model, commenting: "Americans imagine that 'welfare state' means the U.S. welfare system on steroids. Actually, the Nordics scrapped their American-style welfare system at least 60 years ago, and substituted universal services, which means everyonerich and poorgets free higher education, free medical services, free eldercare, etc." In a speech at Harvard's Kennedy School of Government, Lars Løkke Rasmussen, the centre-right Danish prime minister from the conservative-liberal Venstre party, addressed the American misconception that the Nordic model is a form of socialism, which is conflated with any form of planned economy, stating: "I know that some people in the US associate the Nordic model with some sort of socialism. Therefore, I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy." == See also ==