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Published on July 26th, 2012 | by Harry Evans
Image © [caption id="" align="alignnone" width="566"] Viking ship sculpture © Dave Hitchborne[/caption]   The 'Nordic Model' is a term that is akin to a fashion. It has very loose boundaries, and is often applied here and there without much explanation of what it means. In addition, it seems to cycle in and out of favour, depending on how well certain Nordic economies are doing. Recently, with the controlled implosion of the Eurozone (of which, among Nordic countries, only Finland is a member), it is rather favourably looked upon. It is worth reflecting on what the 'Nordic Model' is, and how it should be applied. Broadly speaking, the 'Nordic Model' refers to a certain economic-welfare relation. The Nordic taxpayer pays a high average tax bill. A very high average tax bill. In some cases it can be over 60% of income. In return, the people are treated to world-class healthcare, pensions and education. A benefit of this is that unemployment is very low (especially in Denmark and Finland). In this sense, the 'Nordic Model' is a very general idea of high taxes matched with a thrifty welfare state and openness to globalisation. However, the term has become more general. In recent months it has been recommended, for instance, that Canada adopt the Nordic Model with regards to prostitution. This may – or may not - be the case, however, we should be wary of moving from general praise of the Nordic system to using it as an excuse in itself to adopt every individual policy that is instantiated by the region. Nordic culture cannot be taken wholesale and implemented in foreign countries simply because there are benefits to its welfare system. A clear cut case needs to be made for each individual package of import from the Nordic countries. This is where the 'fashion' cycle has originated in the past. In the years running up to the financial crash and for some years after it, the trend was against Nordic ideas being implemented abroad. A period of relative decline in growth from the area led to a damning study suggesting that 'politicians should shun the Scandinavian recipes.' The report attacks the high taxes, showing them to have stagnated growth during the 1990s. The study from 2007 holds up Ireland as a beacon for how cutting taxes can lead to a boom in growth: the irony of which will not be lost on the reader. The traditional attacks on the Nordic Model tend to be that there is an anti-government and anti-immigrant sentiment that is growing in the area. The latter is a problem, and needs to be addressed, especially given the rise of the far right in recent years. The former stems from what the people see as 'bloated' spending. It is, of course, unsurprising that countries that pay so much tax keep a beady eye on those who are spending it. This is not a bad thing. Election turnout is high in the Nordic countries and the government is held to account for spending that the public consider to be overindulgent. It is certainly important to be cautious when critically assessing models. There is much talk these days about 'being more like Germany' or 'adopting a South Korean work ethic'. Such exercises are rarely explicitly attempted, and when they are, seldom succeed. A recent suggestion of the way that the 'Nordic Model' may be of use in Britain has been to adopt pensions. In fact, significantly, the 'Nordic Model' is not mentioned. It is specifically the Danish system that is being looked at. Pensions in Britain are currently in a bad state. The returns on pension pots tend to rarely exceed the gains of privately saving the money in a regular high-interest account. In Denmark, however, the ten-year average return has been 10.3%, yielding a much better deal for people in their old age. This occurs because Danes are signed up to a private scheme (regardless of their wishes) and the scheme is then guaranteed by the government to a certain level of return. There are pros and cons to implementing this in Britain. For instance, a large proportion of the country is elderly, and so it would involve the government taking a large amount of risk in guaranteeing the pots. However, I suggest that this is a good means of applying the 'Nordic Model', in the sense that it offers real tangible reforms that are not tied to a specific set of circumstances that exist in Denmark. That is to say, we can extract aspects of the pensions system that work well, and use them as a basis for restructuring the system in Britain. This method of considering the 'Nordic Model' gives proper credence to the highs and lows of economies, and is not focussed on results. Instead it is focussed on getting the best quality of welfare state, at minimum cost. The 'Nordic Model' as an abstract idea is not something that should be idolised or castigated. The countries in Northern Europe have their fair share of economic problems. However, like any country, when they are doing something right it should be taken into account. When what they are doing right appears to have a tangible source that can be extracted from circumstantial factors, the rest of Europe should work hard to see if it is something that would work for them. The term 'Nordic Model' has oversimplified the system: it's too easy for people to agree or disagree with it, without considering the parts individually. The 'Nordic Model' is not something to look to for inspiration, but the Nordic states are.

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Inspiration from the Norse Gods?

Viking ship sculpture © Dave Hitchborne

 

The ‘Nordic Model’ is a term that is akin to a fashion. It has very loose boundaries, and is often applied here and there without much explanation of what it means. In addition, it seems to cycle in and out of favour, depending on how well certain Nordic economies are doing. Recently, with the controlled implosion of the Eurozone (of which, among Nordic countries, only Finland is a member), it is rather favourably looked upon. It is worth reflecting on what the ‘Nordic Model’ is, and how it should be applied.

Broadly speaking, the ‘Nordic Model’ refers to a certain economic-welfare relation. The Nordic taxpayer pays a high average tax bill. A very high average tax bill. In some cases it can be over 60% of income. In return, the people are treated to world-class healthcare, pensions and education. A benefit of this is that unemployment is very low (especially in Denmark and Finland). In this sense, the ‘Nordic Model’ is a very general idea of high taxes matched with a thrifty welfare state and openness to globalisation.

However, the term has become more general. In recent months it has been recommended, for instance, that Canada adopt the Nordic Model with regards to prostitution. This may – or may not – be the case, however, we should be wary of moving from general praise of the Nordic system to using it as an excuse in itself to adopt every individual policy that is instantiated by the region. Nordic culture cannot be taken wholesale and implemented in foreign countries simply because there are benefits to its welfare system. A clear cut case needs to be made for each individual package of import from the Nordic countries.

This is where the ‘fashion’ cycle has originated in the past. In the years running up to the financial crash and for some years after it, the trend was against Nordic ideas being implemented abroad. A period of relative decline in growth from the area led to a damning study suggesting that ‘politicians should shun the Scandinavian recipes.’ The report attacks the high taxes, showing them to have stagnated growth during the 1990s. The study from 2007 holds up Ireland as a beacon for how cutting taxes can lead to a boom in growth: the irony of which will not be lost on the reader.

The traditional attacks on the Nordic Model tend to be that there is an anti-government and anti-immigrant sentiment that is growing in the area. The latter is a problem, and needs to be addressed, especially given the rise of the far right in recent years. The former stems from what the people see as ‘bloated’ spending. It is, of course, unsurprising that countries that pay so much tax keep a beady eye on those who are spending it. This is not a bad thing. Election turnout is high in the Nordic countries and the government is held to account for spending that the public consider to be overindulgent.

It is certainly important to be cautious when critically assessing models. There is much talk these days about ‘being more like Germany’ or ‘adopting a South Korean work ethic’. Such exercises are rarely explicitly attempted, and when they are, seldom succeed. A recent suggestion of the way that the ‘Nordic Model’ may be of use in Britain has been to adopt pensions. In fact, significantly, the ‘Nordic Model’ is not mentioned. It is specifically the Danish system that is being looked at.

Pensions in Britain are currently in a bad state. The returns on pension pots tend to rarely exceed the gains of privately saving the money in a regular high-interest account. In Denmark, however, the ten-year average return has been 10.3%, yielding a much better deal for people in their old age. This occurs because Danes are signed up to a private scheme (regardless of their wishes) and the scheme is then guaranteed by the government to a certain level of return.

There are pros and cons to implementing this in Britain. For instance, a large proportion of the country is elderly, and so it would involve the government taking a large amount of risk in guaranteeing the pots. However, I suggest that this is a good means of applying the ‘Nordic Model’, in the sense that it offers real tangible reforms that are not tied to a specific set of circumstances that exist in Denmark. That is to say, we can extract aspects of the pensions system that work well, and use them as a basis for restructuring the system in Britain. This method of considering the ‘Nordic Model’ gives proper credence to the highs and lows of economies, and is not focussed on results. Instead it is focussed on getting the best quality of welfare state, at minimum cost.

The ‘Nordic Model’ as an abstract idea is not something that should be idolised or castigated. The countries in Northern Europe have their fair share of economic problems. However, like any country, when they are doing something right it should be taken into account. When what they are doing right appears to have a tangible source that can be extracted from circumstantial factors, the rest of Europe should work hard to see if it is something that would work for them. The term ‘Nordic Model’ has oversimplified the system: it’s too easy for people to agree or disagree with it, without considering the parts individually. The ‘Nordic Model’ is not something to look to for inspiration, but the Nordic states are.

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About the Author

Harry Evans

Harry is a recent Philosophy graduate from the University of York. He is taking a Master’s in European Studies next year at UCL and has a particular interest in Scandinavian politics and economy. His time is currently spent undertaking an internship, researching and writing a history of the University of York Philosophy department. At University, he was editor of the student Philosophy journal, and has been published by the Club of PEP journal. Harry is hoping to make a career in International Relations and Journalism, and writes for Catch21 in this capacity. For more information and updates follow @hevans567 or find him on LinkedIn. You can also read more from this author on their personal blog.



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