Even if the design of the Nordic system is clearly shown to be superior in one or more regards, it is in no way certain that the system can be “exported” (Programme on Welfare Research, Nordic Council

Programme plan

Programme on Welfare Research

Nordic welfare societies viewed in a European perspective

The purpose of this Research Programme is to examine the model of the Nordic welfare state in a European perspective. In order to do so, it is first necessary to clarify whether a specific Nordic model can be said to exist - and if so, within which areas - and then to study and analyze its relative success. Another important goal is to identify the specific areas in which the Nordic model has been successful (as well as areas where it has not) compared to other industrial nations, primarily the countries of Western Europe. Furthermore, it is important to try to identify potential areas in which the model needs to be brought up-to-date and adapted to the needs of a society based on other economic and social conditions than those that applied 20-30 years ago. It is of particular interest to distinguish how this model can be modernized in terms of maintaining and enhancing the social goals underlying a strong, Nordic cultural identity, in order to continue to develop the Nordic social structure. Such social goals include gender equality, reduced segregation, balanced regional distribution, and a high degree of equality between groups and individuals. Another typical aspect of the Nordic model is to combine these social goals with traditional economic objectives, designed to generate prosperity based on economic growth.

1 The Nordic model

The Nordic welfare model is characterized by a relatively high level of public services (which are financed through direct taxation), a relatively generous benefit scheme based on universal systems, and - when it comes to financing - a relatively high level of taxation. Key aspects of this model have been designated as successful in various comparative international studies: the Nordic countries are quite prosperous, employment levels among both men and women are high and the effort to achieve equalization of incomes has come fairly far. As regards gender equality, in the contexts in which it is usually measured, the Nordic countries have been front-runners for several decades, and are often ranked at or near the top of the list of international comparative studies. The same is the case for other social indicators, such as child mortality, average life expectancy, balanced regional distribution and popular political participation.

In addition come a variety of technological, educational-policy and economic factors. Various indicators in comparisons between countries, such as number of personal computers and cell phones per inhabitant, access to the Internet, university-level or other education, overall gross domestic product (GDP) and GDP per capita, tend to rank the Nordic countries very highly. In fact, it could be said that the combination of a generous overall welfare system and high economic and technical standards are the defining characteristics of the specifically Nordic model.

While it is useful to note the obvious successes for the Nordic welfare state model, it is also important to recognize the difficulties with which it has been faced in the past decade. These come in many different categories. Politically speaking, the validity of the model has come under question first and foremost because it is so dependent on high taxation levels that are based on political consensus. Economically, the model must cope with the challenges posed by the globalization of capital and enterprises. Additionally, the economic crisis that afflicted Finland and Sweden in the beginning of the 1990s had a severe impact for the duration of that decade. First, the dramatic rise in unemployment put pressure on the social welfare system, as it led to an unprecedented increase in the number of people in need of benefits combined with a decline in tax revenues. This in turn resulted in a rapidly accelerating budget deficit, which has forced authorities in both countries to lower benefit compensation levels and implement cutbacks in public services.

2 Four key viewpoints

The Nordic welfare state model and its relationship to its counterparts on the European continent can be examined from many different points of view. One is in terms of its stability. Is the model stable enough to be able to incorporate reasonable demands for economic efficiency and high growth, social and political consensus, etc.? For example is it true, as has often been claimed, that taxes in the Nordic countries must be lowered to the level of other EU countries to ensure continued growth and enhance competitiveness? And if this is the case, will it be possible to sustain the benefit schemes for unemployment, illness, old-age pensions and more, which in general are more substantial than in most of the rest of Europe?

This stability can be studied in an economic, social, and/or political perspective. In an economic perspective, the issue of whether stability affects efficiency and competitiveness will dominate. In social terms, questions involving incentives and their impact on supply and demand on the labour market should be given special consideration. In a political perspective, analysis could focus on EU requirements regarding free movement of goods and services and the opportunity this affords to move social benefits, and the degree to which this in turn may cause a kind of “social convergence” to emerge between the EU member states.

Studies do not have to be limited to the stability of the model as such. In cases where it is found that a particular policy (e.g. the size and scope of the unemployment benefit) needs to be changed, the study can seek further answers, posing the question of whether it is convergence that is needed or whether the specifically Nordic design must be changed. If convergence between the various systems is deemed necessary, it is just as feasible to consider adapting European policy to Nordic thinking as the reverse. The point is to achieve an optimally successful model.

Another viewpoint is the relative success of the Nordic model. Again, there are many different ways to approach this. Success can be studied in an economic perspective (e.g. in terms of growth, increased productivity, GDP levels, income distribution, etc.), a social perspective (e.g. matters pertaining to equality, segregation, social conflict, exclusion), or a political perspective (e.g. issues such as stability, balanced regional distribution, ability to influence world society). Here is it essential to take a close look at, and provide detailed discussion on, how the Nordic welfare state has achieved its objectives compared to welfare societies found on the Continent.

A third viewpoint involves the potential modernization or adaptation of the model. Like all welfare systems, the Nordic model is accompanied by a number of problems: fraudulent claims for benefits are difficult to detect, taxation gives rise to a burgeoning “black” economy, low-cost public services lead to exploitation, and more. Similar problems exist in all countries, and it is important to ask what amount and types of reforms or changes to the system will be required to decrease their scale. For example, what can be done to prevent people from ending up in “poverty traps”, i.e. situations in which the combined marginal effects (of benefits and taxation) make it financially unwise for them to increase the amount they work. Or, if such traps are unavoidable, what can be done (by means of appropriate legislation or otherwise) to guarantee that they retain only a modicum of economic significance. Equally important is the issue of whether the problems in the Nordic countries (e.g. as regards the “black” economy) are larger or smaller than those in countries with different welfare systems.

A fourth and final point of view concerns the model’s export value, i.e. to what degree can a specific Nordic solution be adapted to fit a broader European context. Even if the design of the Nordic system is clearly shown to be superior in one or more regards, it is in no way certain that the system can be “exported”. Other countries may base their systems on completely different political premises (also in the long-term), which would make it impossible to gain acceptance for aspects such as the taxation levels needed to support the Nordic model. Or to take another example: the Nordic model is firmly rooted in a policy of gender equality. A detailed examination of this will naturally comprise an important part of the Research Programme. However, even though the Nordic model has been relatively successful in this area, there is no guarantee that its success can be “exported”. It is possible that cultural or other differences would initially limit the acceptance of the Nordic model, and that change would only come about slowly in other countries. Such topics are obviously worth studying more closely.