5: Differences between the Nordic countries
Some argue that, despite all the similarities, there are such great differences between the Nordic countries’ systems that it is difficult to speak of a “Nordic model”. The degree of organization (proportion of trade unions) is, for example, significantly higher in Sweden, Denmark and Finland than it is in Norway. In addition, more of the wage negotiations take place locally in Sweden and Denmark compared with Norway.
Finland and Iceland stand out by having an extensive use of generalization of collective agreements . This means that the results of the negotiations are applied to everyone – regardless of whether the employees are covered by a collective agreement or not. In Norway, generalization of collective agreements has been used in some industries (construction, shipyards, agriculture and cleaning).
In Sweden and Denmark, according to estatelearning.com, contract regulation is more common than laws in the field of working life than it is in Norway (for example, rules for job security and temporary employment). The state also has a more secluded role when it comes to dispute resolution and revenue policy in Sweden than in Denmark and Norway.
In their relations with the EU, the Nordic countries have chosen a different approach. Sweden, Denmark and Finland are members. Norway and Iceland are affiliated to the EU through the EEA agreement. Finland has also adopted the EU’s common currency, the euro . Over the years, the countries have also been ruled by parties with different ideologies, but this has so far not shaken the basic features of the Nordic model.
6: Will the Nordic model survive?
In the 1980s and 1990s, the Nordic model was heavily criticized from several quarters. It was argued that this way of organizing society hindered economic change and weakened the competitiveness of companies. Critics pointed out that they thought it was too large a public sector, too high taxes and too extensive government regulations. Reforms were therefore implemented in all countries, not least in connection with adaptations to the EU’s internal market and during the economic crisis of the 1990s. At the same time, there were prophecies about the collapse of the model , partly because critics believed it was not equipped for the globalized economy. It turned out that the model passed the trials during the 1980s and 1990s and beyond in the 2000s.
Towards the end of 2008, the global financial crisis spread rapidly around the world. Pretty soon, it turned into a real economic crisis with uncertain scope and duration. The financial crisis led to a fall in GDP and rising unemployment also in the Nordic countries.
To mitigate the negative effects, the crisis was met with strong measures, including interest rate cuts and various banking and credit packages. Immediately after the financial crisis began, Norwegian and Swedish kroner weakened relatively much in relation to the major currencies such as the euro, dollar and Swiss franc. This contributed to Norwegian and Swedish export goods becoming cheaper, and probably to the fall in exports being less than feared. Danish kroner is at a fixed exchange rate to the euro and immediately experienced the opposite.
After the subsequent debt crisis in Europe weakened both the euro and the Danish krone – it has gradually become somewhat easier for Denmark to sell goods abroad. In the wake of the crisis, Finland has seen a fairly sharp rise in unemployment. In sum, however, the Nordic countries have done relatively well during the crisis, with the exception of Iceland. In Iceland, people experienced a total economic collapse. Among other things, the three largest banks in the country were declared bankrupt. This has led to several of the basic welfare schemes, for which the Nordic model is known, being weakened in the country in recent years.
It is still uncertain how the debt and euro crisis in the EU will affect European integration, and what kind of consequences the changes may have for the Nordic countries.
According to several research communities, the “stress test” for the Nordic model will be how countries manage to cope with the combination of climate challenges , increasingly globalized markets and increasing labor immigration . For example, a high proportion of labor immigrants from Eastern European countries, who are satisfied with worse conditions than is usual in the Nordic countries, can challenge our schemes (wages, working hours, etc.).
Decline in the degree of organization, weakening of the bargaining system and increasing wage differences are also seen as a possible threat to the model. Sweden and Denmark have in recent years had a sharp decline in the degree of organization, while it has been relatively stable in Norway. Another challenge is the growth in the proportion of older people, which entails major changes in the welfare state’s benefits, expenditure and financing.
What is the Nordic model?
The Nordic countries – Norway, Sweden, Denmark, Finland and Iceland – have a common history and a fairly similar way of organizing societies. This applies, among other things, to well-developed welfare states and strong organizations in working life . This has created the term «the Nordic model». The countries also score highly in international comparisons in the economic field. This combination of security for the inhabitants and a solid economic development appears to some as a paradox.