Nordic model
Encyclopedia
The Nordic model refers to the economic and social model
s of the Nordic countries
(Denmark
, Iceland
, Norway
, Sweden
and Finland
). This particular adaptation of the mixed market 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. It 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, large magnitude of redistribution, and liberal use of expansionary fiscal policy. The Nordic Model however is not a single model with specific components or rules; each of the Nordic countries has its own economic and social models, sometimes with large differences from its neighbours.
Social Model
A social, or socioeconomic, model, is the value system associated with the structure of a nation's political economy. There are no set rules that define a social model, only loose definitions characterized by certain attributes.-Taxation:...
s of the Nordic countries
Nordic countries
The Nordic countries make up a region in Northern Europe and the North Atlantic which consists of Denmark, Finland, Iceland, Norway and Sweden and their associated territories, the Faroe Islands, Greenland and Åland...
(Denmark
Denmark
Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark...
, Iceland
Iceland
Iceland , described as the Republic of Iceland, is a Nordic and European island country in the North Atlantic Ocean, on the Mid-Atlantic Ridge. Iceland also refers to the main island of the country, which contains almost all the population and almost all the land area. The country has a population...
, Norway
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
, Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
and Finland
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
). This particular adaptation of the mixed market economy
Mixed economy
Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety...
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
Human rights
Human rights are "commonly understood as inalienable fundamental rights to which a person is inherently entitled simply because she or he is a human being." Human rights are thus conceived as universal and egalitarian . These rights may exist as natural rights or as legal rights, in both national...
and stabilising the economy. It is distinguished from other welfare states with similar goals by its emphasis on maximising labour force participation, promoting gender equality, egalitarian
Egalitarianism
Egalitarianism is a trend of thought that favors equality of some sort among moral agents, whether persons or animals. Emphasis is placed upon the fact that equality contains the idea of equity of quality...
and extensive benefit levels, large magnitude of redistribution, and liberal use of expansionary fiscal policy. The Nordic Model however is not a single model with specific components or rules; 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:- An elaborate social safety netSocial safety netSocial safety nets, or "socioeconomic safety nets", are non-contributory transfer programs seeking to prevent the poor or those vulnerable to shocks and poverty from falling below a certain poverty level. Safety net programs can be provided by the public sector or by the private sector...
in addition to public services such as free educationFree educationFree education refers to education that is funded through taxation, or charitable organizations rather than tuition fees. Although primary school and other comprehensive or compulsory education is free in many countries, for example, all education is mostly free including...
and universal healthcare. - Strong property rights, contract enforcement, and overall ease of doing business.
- Public pensionPensionIn general, a pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. Pensions should not be confused with severance pay; the former is paid in regular installments, while the latter is paid in one lump sum.The terms retirement...
schemes. - Low barriers to free tradeFree tradeUnder a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
. This is combined with collective risk sharing (social programmesWelfareWelfare refers to a broad discourse which may hold certain implications regarding the provision of a minimal level of wellbeing and social support for all citizens without the stigma of charity. This is termed "social solidarity"...
, labour market institutions) which has provided a form of protection against the risks associated with economic openness. - Little product marketProduct marketProduct market is a mechanism that allows people to easily buy and sell products. Services are often included in the scope of the term. Product market regulation is an economic term that describes restrictions in the market....
regulation. Nordic countries rank very high in product market freedom according to OECD rankings. - Low levels of corruption. In Transparency International's 2010 Corruption Perceptions IndexCorruption Perceptions IndexSince 1995, Transparency International publishes the Corruption Perceptions Index annually ranking countries "by their perceived levels of corruption, as determined by expert assessments and opinion surveys." The CPI generally defines corruption as "the misuse of public power for private...
all five Nordic countries were ranked among the 11 least corrupt of 178 evaluated countries. - 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.
- 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 DemocratsSocial Democrats (Denmark)The Social Democrats , is a Danish political party committed to the political ideology of social democracy. It is the major coalition partner in Denmark's government since the 2011 parliamentary election, and party leader Helle Thorning-Schmidt is the current Prime Minister of Denmark...
managed to push through reforms in 1994 and 1996. (See FlexicurityFlexicurityFlexicurity is a welfare state model with a pro-active labour market policy. The term was first coined by the social democratic Prime Minister of Denmark Poul Nyrup Rasmussen in the 1990s....
). - Sweden at 56.6% of GDP, Denmark at 51.7%, and Finland at 48.6% reflects very high public spending. 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. Public spending in social transfers such as unemployment benefits and early-retired 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 burden are among the world's highest; 51.1% of GDP in Sweden, and 43.3% in Finland, compared to 34.7% in GermanyGermanyGermany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, 33.5% in CanadaCanadaCanada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, and 30.5% in IrelandIrelandIreland is an island to the northwest of continental Europe. It is the third-largest island in Europe and the twentieth-largest island on Earth...
.
See also
- Social ModelSocial ModelA social, or socioeconomic, model, is the value system associated with the structure of a nation's political economy. There are no set rules that define a social model, only loose definitions characterized by certain attributes.-Taxation:...
- Social DemocracySocial democracySocial democracy is a political ideology of the center-left on the political spectrum. Social democracy is officially a form of evolutionary reformist socialism. It supports class collaboration as the course to achieve socialism...
- Nordic countriesNordic countriesThe Nordic countries make up a region in Northern Europe and the North Atlantic which consists of Denmark, Finland, Iceland, Norway and Sweden and their associated territories, the Faroe Islands, Greenland and Åland...
- Swedish welfareSwedish welfareSocial welfare in Sweden is made up of several organizations and systems dealing with welfare. It is mostly funded by taxes, and executed by the public sector on all levels of government as well as private organisations...
- FolkhemmetFolkhemmetFolkhemmet is a political concept that played an important role in the history of the Swedish Social Democratic Party and the Swedish welfare state. It is also sometimes used to refer to the long period between 1932-76 when the Social democrats were in power and the concept was put into practice...
- Constitutional economicsConstitutional economicsConstitutional economics is a research program in economics and constitutionalism that has been described as extending beyond the definition of 'the economic analysis of constitutional law' in explaining the choice "of alternative sets of legal-institutional-constitutional rules that constrain the...
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)
External links
- The Nordic Model - Analysis of the Nordic Model
- The Nordic Way — World Economic ForumWorld Economic ForumThe World Economic Forum is a Swiss non-profit foundation, based in Cologny, Geneva, best known for its annual meeting in Davos, a mountain resort in Graubünden, in the eastern Alps region of Switzerland....
Davos 2011